Understanding Texas Property Taxes

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1 Understanding Texas Property Taxes { Cheryl E. Johnson, PCC Galveston County Tax Assessor /Collector Property taxes are the primary* funding source for most local governments *Funding may also be secured by voter approval of local sales and use tax (Section , Health & Safety Code) Texas Constitution, Article XIII Defines property taxes as being assessed in proportion to value on all real and personal property held or used for the production of income Article III, Section 48-e Provides for creation of Emergency Services Districts and authorizes levy of a tax on real property not to exceed $0.10/$100 of value (unless approved by voters as provided by the Health and Safety Code Section ) 1

2 Codes Affecting Property Tax Processes Health & Safety Code Property Tax Code Who s Who? County Appraisal District Chief Appraiser Locate, list and appraise all real and personal property in county Appraisal Review Board (ARB) Board of Directors Appointed by county, city, ISD & community college officials (voting power based on levy) Certified/regulated by TDLR Reviewed by Comptroller via Ratio study & MAP Review (Methods & Assistance Program) Appointed by State District Administrative Judge Who s Who? County Tax Office County Tax Assessor Collector elected by voters Other options for most local governments (not ESDs): Contract for assessment & collections with CAD, other government, private firm or hire staff tax collector (these are required to be certified/regulated by TDLR Governments may use County delinquent law firm or contract with own firm (15% to 20% rate negotiated) 2

3 Property Tax Year Phases Appraisal January - April CAD locates, lists and appraises property in county as of January 1; administers exemptions, delivers appraisal notices and updates & maintains property records (the preliminary certified roll must be provided to the TAC by April 30) Equalization May - July CAD appraisers hold informal meetings with property owners; ARB hears valuation disputes & certifies appraisal roll no later than July 25 th Note: Tax units must adopt optional exemptions no later than July 1 (the earlier the better!) Appraisal & Equalization From the perspective of our constituents Value for Resale Value for Taxes Property Tax Year Phases Assessment July - October Collection October - January TAC receives appraisal roll, submits taxable values, total taxable of new property and collection rate to governing bodies by August 1 (or when practicable), assists with tax rate calculation, publication and adoption and mails statements TAC collects current year taxes Delinquent collections begin in February with notification of late quarter & notification of payment agreements May notices July Delinquent roll turned over to delinquent law firms 3

4 Property Tax Year Phases Appraisal January - April Equalization May - July Assessment July - October Collection October - January Assessment Phase July 25 October 1 Truth in taxation process Tax rates proposed & adopted Tax roll created Tax bills mailed Assessment Phase Truth in Taxation Embodied in the Texas Constitution and Tax Code, local governments are required to make property owners (taxpayers) aware of tax rate proposals and to give them the opportunity to be involved and to roll back or limit tax increases 4

5 Assessment Phase Truth in Taxation Different taxing units have different requirements but if you fail to comply in good faith, a property owner may seek an injunction to stop bills from being sent until a State District Court judge is convinced the entity has complied. (This does not apply to water districts or small taxing units.) Truth In Taxation for Emergency Service Districts 5

6 A small taxing unit has a rate less than $0.50 and imposes $500,000 or less in tax revenue (both conditions must be met). A small taxing unit is required to calculate the effective and rollback tax rates and publish Notice of Calculated Rates but is not required to hold a public hearing before adopting a tax rate. Assessment Phase Tax Office receives certified appraisal roll and estimated value of properties under protest from CAD Assessment Phase Tax Office receives certified appraisal roll and estimated value of properties under protest from CAD Tax Office additionally uses most current Supplemental Totals from prior year 6

7 85% of Under Review Assessment Phase Tax Office receives Effective Tax Rate Report from CAD 7

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9 Steps 1 through 24 develop the effective tax rate (the rate that will generate the same amount of taxes if applied to the same properties) Steps 26 through 39 develop the rollback tax rate Effective M & O Rate + 8% (R/B M&O Rate) + I & S (debt service) 9

10 Publish Notice of Calculated Rates By August 7 th (or soon after) mail to each property owner or publish ¼ page ad in newspaper of general circulation (may be published at same time as Notice of Public Hearing) Includes ETR, RBR, statement of increase/decrease, unencumbered fund balance & description of debt service to be paid Publish Notice of Calculated Rates By August 7 th (or soon after) mail to each property owner or publish ¼ page ad in newspaper of general circulation (may be published at same time as Notice of Public Hearing) Includes ETR, RBR, statement of increase/decrease, unencumbered fund balance & description of debt service to be paid If adopting ETR or less, no additional publications or hearings necessary (except to hold a meeting, adopt the budget and then the tax rate) Publish Notice of Public Hearing on Tax Increase If exceeding rollback or effective tax rates, must hold two public hearings and mail notice to each property owner or publish ¼ page ad at least 7 days before the hearings. Notice includes dates, times and location of public hearings 10

11 Publish Notice of Revenue Increase After public hearings and 7 days before meeting to adopt. Language includes percentage by which rate exceeds the lower of the ETR or RBR, the dates of the public hearings and the date, time and location of meeting to adopt. All notices must also be published 7 days in advance of hearings & meetings on unit s website. Final Step in TNT Adopt rate (by September 30) Prepare Order to Levy Tax Certificate of Order Final Step in TNT Adopt rate (by September 30) Prepare Order to Levy Tax Certificate of Order 11

12 Assessment Phase Tax Office creates tax roll Prepares & mails statements Rollback Election? If you exceed the rollback rate, voters have 90 days from date rate is adopted to petition for an election Petition requirements: If $5M or more M&O 7% of voters If less than $5M M&O 10% of voters Petition must be validated within 20 days and election called if petition is valid. Election held. If passes, rate rolled back to R/B rate, statements redone and refunds issued. Very costly! Collection Phase October 1 & throughout that & following year Receive & process payments Deposit & remit funds to entities Calculate penalty & interest Administer delinquent collections 12

13 Questions? The Last Word(s) The only difference between a tax man and a taxidermist is the taxidermist leaves the skin. Mark Twain 13