City, county taxes could climb 8 percent under emergency declaration

A provision included in the Texas Legislature’s “property tax transparency” bill could offer jurisdictions across the state, including the city of Austin, the financial flexibility necessary to deal with some of the economic impacts of COVID-19.

According to an update from the Texas Municipal League, when Gov. Greg Abbott declared a statewide disaster on March 13, he activated a condition in Senate Bill 2 allowing local governments in the year of a disaster to designate the property tax rate increase at 8 percent, the previous tax rate increase cap before the 3.5 percent limit went into effect this year.

With a disaster declared in each of the state’s 254 counties, the 8 percent cap will be an option across Texas for at least two years. If the total taxable value of property in a particular area does not recover in the first two years, that local government will be able to set the rollback rate at 8 percent for a third year.

“Essentially,” the update states, “this means that a city using this disaster exemption to calculate the voter-approval tax rate will be using the same basic formula as the city used for the rollback tax rate prior to SB 2’s passage and effective date.”

As would be the case under a 3.5 percent cap, local bodies would have to ask voters to exceed an 8 percent increase, but another of the bill’s items could waive the need for an election to go beyond that 8 percent for the year following the disaster, as long as the tax increase is used for the sole purpose of responding to the disaster.

The Texas Municipal League update claims that Abbott’s declaration also triggers this condition, meaning that Austin and other cities could increase property taxes by more than 8 percent when it sets the rollback rate in 2021 without being required to hold an election in November.

Council Member Kathie Tovo told the Austin Monitor she was aware of the possibility of going to 8 percent because of a memo Council received, but it had not yet been discussed.

City spokesperson David Green told the Monitor that the city hasn’t yet analyzed whether or not the declaration will impact the city’s requirement to hold a tax rate election to go above 8 percent. “We’re mostly focused on the immediate response at the moment,” he said.

“The city is in the process of assessing the potential impacts on the local economy and city revenues resulting from COVID-19,” Green said. “At this time, we do not have an estimate of the tax rate that will be needed to support city services and maintain a balanced budget.”

Elected leaders of both Travis County and the city of Austin fought against the property tax bill during the 2019 legislative session, arguing that it would provide only minimal property tax relief to individual homeowners while severely limiting the ability of local governments to provide essential services like criminal justice and public safety.

In order to brace for a future under a 3.5 percent rollback rate cap, the city opted to raise property taxes by the full 8 percent for Fiscal Year 2019-20. Property taxes contribute just under half of the city’s $1.1 billion General Fund and 18 percent of the city’s entire $4.2 billion budget for FY 2019-20.

To help local governments deal with the immediate crisis, Abbott sent a letter to President Donald Trump March 23 requesting federal assistance to respond to COVID-19 with financial aid. Trump approved that request Wednesday and issued a Major Disaster Declaration for Texas. The aid will be used for medical equipment, testing supplies, hospital beds, and medical personnel. As of March 21, Abbott said the state had spent over $50 million related to COVID-19.

“Texas is aggressively pursuing and implementing all necessary strategies to limit the impact of COVID-19, and I thank President Trump for his swift action,” said Abbott. “The president’s declaration opens up new sources of funding for individual and public assistance that will help Texas respond to this public health emergency and protect public health and safety.”

Photo by Daniel Mayer/CC BY-SA 3.0.

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