April 17, 2007

Texas House Backs Potential Tax Cut
with Vote to Give Appraisers a Break

By Mike Hailey
Capitol Inside Editor

In another curious twist in an increasingly eccentric session,.the Texas House on Monday gave preliminary approval to a potential $1 billion property tax cut without promoting it, bragging about it or even calling it that.

The House voted 87-53 for a bill that could cost the state $161 million over the next two years and an estimated $930 million in the following biennium by giving local appraisers more flexibility when estimating how much property is worth for school, city and county tax rolls. The measure would allow appraisers to come within 10 percent of a standard that the state comptroller sets in an annual study of school district property values. Under current law, school districts can be penalized with a loss of state funding if property values are more than five percent lower than the amount that the comptroller says they should be for two consecutive years.

The vote on House Bill 216 reflected no quickly discernible trends with Republicans and Democrats, urban and rural members and representatives of every ethnic classification split fairly evenly on the legislation.

The Republican House leadership was divided on the issue as well - with State Rep. John Otto of Dayton defending the measure as its sponsor and State Rep. Warren Chisum of Pampa leading the unsuccessful fight to kill it.

Otto, a certified public accountant who's generally regarded as the House's resident technical expert on taxes, argued that the legislation would remove some of the pressure that he said appraisers feel to hit the target that the comptroller's annual report establishes for each school district in Texas. As a result, Otto and other HB 216 supporters contended that valuations in some areas of the state are artificially high and forcing some taxpayers to pay more than they should.

But Chisum - the chairman of the House Appropriations Committee - battled the proposal on the grounds that it would take money from other state needs while rewarding appraisal districts that are doing a sloppy job at the expense of districts that have been assessing property at 100 percent of market value as required by state law.

Chisum warned that the bill would force counties into bankruptcy while providing a benefit to no one other than those who own major commercial property such as skyscrapers and other tall buildings in cities that are large enough to have them. Chisum said the bill could force the state into a $3 billion hole in four years - about three times more than the Legislative Budget Board predicted in the fiscal note. "We're going to have distorted property values all over the state," Chisum said.

While the LBB estimated that local governments could lose hundreds of millions of dollars over a five-year period if tax appraisals fell the full amount that the legislation would allow, the victory may have been sealed when it received the blessings of State Rep. Fred Hill, a Richardson Republican who's been the chief guardian in the lower chamber for cities and counties in the face of moves to lower appraisal and revenue caps. In the case of HB 216, Hill suggested that the opportunity to help taxpayers outweighed worst-case scenarios that he and others do not expect to materialize.

Otto noted that the Texas Municipal League and the Texas Association of Counties had not fought the measure. The Center for Public Policy Priorities and the Texas Taxpayers and Research Association opposed the bill at a Ways & Means Committee hearing while the Texas Conference of Urban Counties, the Texas Apartment Association and the Texas Association of Builders had supported the proposal. The tax appraiser in Liberty County where Otto lives also testified in favor of HB 216 when it was in committee.

State Rep. Mark Strama of Austin - one of 23 Democrats to vote for HB 216 on second reading - pointed out the contradictions inherent in Chisum's assertions that the bill wouldn't lower property taxes but would cost the state revenue when appraisals were allowed to fall even further below the property values set by the comptroller each year.

But State Rep. John Smithee, an Amarillo Republican, called the proposal a "gimmick" and suggested that it would give lawmakers the ability to trumpet another tax cut on their resumes without having anything tangible to support such a claim. Democratic State Rep. Sylvester Turner of Houston argued against the measure because he feared it would force legislators over the course of the next few years to cut critical services in order to make up for funds that school districts would stand to lose if the bill becomes law.

Fifteen Republicans including six GOP committee chairs cast votes against the Otto bill.

The legislation would give local appraisers the ability to undervalue taxable property as much as $138 billion without subjecting any school districts to financial sanctions - based on the findings of the comptroller's property tax value study for 2006.

While lobbyists close to the discussions on HB 216 said that Comptroller Susan Combs' office opposed the measure, a spokesman for the comptroller said she'd not taken an official position on it.