Taxing situation for growing cities, schools averted

Failure by lawmakers to agree on the threshold of property tax reform led to the death of Senate Bill 1 prior to the end of Texas’ legislative special session Aug. 15.

But even with a small victory under their belts, local city leaders believe discussions on property tax won’t be going away anytime soon.

SB 1, filed by State Sen. Paul Betancourt (R-Houson), would have required cities to obtain voter approval in order to increase property tax rates.

The measure initially failed to be acted upon during the Texas Legislature’s 85th regular session. Texas Gov. Greg Abbott selected SB 1 as one of 20 items he placed into a special session.

SB 1 made its way through the Texas House with a split vote, but the measure didn’t pass through the Texas Senate prior to Sine Die on Aug. 14. One of the primary issues was the threshold triggering an election. The senate opted for a four percent property tax rate increase, while the house wanted a six percent increase.

Buda Mayor Todd Ruge said he was not in favor of the bill as state lawmakers talk about having more local control, but they “don’t follow what they preach.”

But Ruge felt the bill could also hamper growing cities such as Buda and Kyle from obtaining the needed revenue to provide necessary services. While he said Buda has done a good job of handling its duties as far as taxation, the proposed bill could have posed a problem during a weaker economy.

“We have to provide public safety and sanitation and roads,” Ruge said. “People want to see clean parks when they go there. With the ability to control property taxes, those programs may have been cut. Not just in Buda, but maybe other cities.”

Kyle Mayor Todd Webster said he was disappointed in the anti-city rhetoric that was coming from the capitol this session. However, his concern extends to the state shifting the burden of infrastructure, primarily roads, onto cities. The result is cities have to increase property taxes to pay for more infrastructure.

If the bill had been passed, Webster said cities would have been reliant on Municipal Utility Districts and Public Improvement Districts to construct development.

But Webster, a lobbyist for a school district in the Houston area, believes fixing the state’s school finance problem is the “only meaningful way” to deal with the property tax problem.

Currently, Texas relies on the local property tax system to fund its public schools. As property values go up in a school district, the state holds back funding, which in turn forces school districts to rely on property tax rates.

Webster said the state’s school finance system negatively impacts districts that have “huge numbers” of economically disadvantaged students.

“It’s really hard for people who aren’t impacted to understand what’s experienced by recapture school districts,” Webster said. He added the system has outlived its design, to where Austin ISD could soon pay over $1 billion in recapture in short order.

Recapture, also known as the Robin Hood Plan, forces property-weathy school districts to share revenue with property-poor districts.

During the course of the legislative session, lawmakers attempted to tackle school finance reform, but political infighting led to the death of the bills before session’s end.

Webster said future attempts at fixing property tax and school finance are “real,” but it’s too early to say if there is a fix.

Ruge agreed fixing the state’s school finance system goes hand in hand with property tax reform.

“It needs to be tackled first to get state funding for schools in order,” Ruge said.

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