Senate's new tactic: carving out rural areas from reform bills

Senators gather around Lt. Gov. Dan Patrick, left, during debate in the Texas Senate. AP photo.

Texas senators have a new strategy to pass some controversial bills - carving out rural counties and smaller taxing entities, so those bills would apply differently to them. But that new strategy is already backfiring, by not swaying the bills' staunchest opponents, and leaving grassroots groups angry that most Texas counties wouldn't receive the same property tax protections as the biggest ones.

Senate Bill 1, the property tax reform bill, says taxing entities that raise their property tax rate 4 percent must hold a referendum. The current "rollback" threshold is 8 percent, and a rollback election is only held if taxpayers mount a successful petition drive.

But a late amendment to SB1, from Sen. Charles Perry, R-Lubbock, makes the new rules apply only to taxing entities that collect $20 million or more per year (property tax plus sales and use taxes).

The city of Tyler, as an example, collected $17.7 million in property tax revenues last year. When sales and use tax revenues of $27 million are added, Smith County would be well above that threshold.

The city of Bullard, on the other hand, collected $597,600 in property taxes last year, along with about $275,000 in sales and use taxes.

The rollback threshold for smaller entities such as Bullard is 8 percent, according to the Perry amendment. There is an amendment to that amendment that allows smaller counties to "opt-in" to the lower threshold in a May election.

As a strategy, the Perry amendment seems to be a response to the objections of the Texas Municipal League and the Texas Association of Counties, which argue that smaller entities wouldn't be able to respond to budget crises without cumbersome elections.

In the floor debate last week, Perry said smaller counties - particularly those highly dependent on the beleaguered oil and gas industry - would find their hands tied if they needed to raise taxes to make up for declining revenues.

"I wish we had the consistency, as far as economic drivers," he said.

He cited Garza County, with a population of less than 7,000. That county has seen its revenues drop along with oil prices.

"They are automatically at a rollback rate just to maintain one sheriff and one county judge," Perry said. "These kinds of policies accommodate the diversity of Texas. Does everybody want property tax reform? Absolutely. Is it relevant to a district where a penny (on the tax rate) gets them $20,000? Absolutely not. We are not a cookie-cutter state. Every county is unique."

But Sen. Konni Burton, R-Colleyville, says all Texans deserve those protections.

"I want to treat all of them the same," she said. "I'm going to go back to my district and tell them that I fought for each and every one of those residents equally. I want them all to get relief."

Stacy McMahan, president and executive director of East Texans for Liberty, asks why bigger counties and cities would receive protections that smaller ones wouldn't.

"This amendment is very disappointing to me," she said. "My husband and I live in Upshur County now. Upshur's property appraisals are rising every year."

Ms. McMahan's representative in the House is state Rep. Jay Dean, R-Longview.

"Before his freshman term, Jay was the mayor of Longview," she said. "For 10 years, while mayor, Jay will tell you that he never raised taxes to even 3 percent. And on particular projects that he and the City Council sought for Longview, those measures were sent to the taxpayers for a vote. We simply want the same thing."

State Sen. Bryan Hughes voted against the rural carve-out amendment to SB1. He said that in some cases, the cost of holding a referendum on tax rate hikes could gobble up all or most of the new revenue. But even so, he said, if voters in larger counties have a say, then voters in smaller counties should, too.

"I voted ‘no' because it seems to us that if we're going to be offering property tax reform, it ought to go to everybody," he said.

There's also a rural carve-out for Senate Bill 6, which deals with forced annexation by cities. Under SB6, residents of areas proposed for annexation would be able to vote on the matter - unless the county is under 125,000 in population.

"There's a similar analysis here," Hughes said. "Everyone should be treated equally, whether you live in a rural area or an urban area."

On the House side, state Rep. Matt Schaefer, R-Tyler, says he's also against those rural carve-outs.

"Property taxes can get out of control in very small communities and rural areas, just the same as highly populated areas," he said. "I can see a need to customize a reform package to deal with very small entities, but not to the point where we don't give taxpayers the same type of protections we would for a large city. That goes for annexation reform, too. I say leave no property owner behind."

Schaefer says there's plenty of pressure on lawmakers from cities and county officials.

"What happened in the Senate with the Perry amendment wasn't about the House," he said. "It was the influence of city and county government officials working very hard to weaken the property tax reform bill. The Texas Municipal League is their organizer-in-chief."

Some grassroots groups oppose the carve-outs.

"According to the (property tax) bill, only about 50 Texas counties will have that automatic trigger," said Teresa Beckmeyer, who chairs the Mitchell County Republican Party. "That leaves out the other 204 counties. And that opt-in election is scheduled for May, during the municipal elections, so I foresee some difficulty in getting the message out. I just don't understand why the Senate would do it this way."

JoAnn Fleming, executive director of Tyler-based Grassroots America-We the People, agrees.

"Some officials seem to think the world is going to come to an end if taxpayers get to have a say in how much they pay," she said. "This is about some of the senators trying to appease both local officials and taxpayers at the same time. But when you try go down the middle of the road like that, you sometimes become road kill. There should be no distinction between rural and urban areas. We're all taxpayers."


SB1 and SB6, the annexation bill, do face fierce resistance from cities and counties, including Tyler. The rural carve-outs haven't changed that; opponents remain unmoved, as the House takes up those bills.

"We're appreciative of being exempted in the proposed legislation, but still question the expectations that this bill is setting," said Ed Broussard, Tyler's city manager, of SB1. "The upcoming savings for any Texas home or business is still $0 in the coming years under this bill. This is why Texas counties and cities leaders have pleaded with the Legislature to deal with the school funding issue - as this is the primary reason that property tax levies have increased."

As city leaders said before the regular session started in January, Broussard contends this is a struggle between local control and state rule-making.

"Unlike most other states in this nation, Texas cities have valued their independence and ability to generate the revenues needed to meet their citizens' expectations," he said. "The more that the state takes on management of local issues, the more difficult it is for local leadership to govern based on their community's values."

The Tyler City Council heard a presentation on Wednesday from its consultant on legislative matters. Brandon Aghamalian of Focused Advocacy said it was a "difficult" regular session.

"If 2015 was the year local control began to lose its luster as a governing principle, the 2017 session saw the culmination of this trend," he said.

Aghamalian blamed national think tanks and the politicization of city government.

Cities should "closely analyze future needs to annex, issue debt, generate revenue, regulate (anything) via ordinance, (and) execute economic development agreements. … And act soon because the Legislature is about to limit that authority."


As for the chances that either bill - SB1 or SB6 - will pass in the House, Schaefer is pessimistic.

"The rollback provision was dead on arrival in the House during the regular session," he noted. "Despite pressure from Gov. Abbott, I haven't seen anything happen that might increase the odds of passage. Chances remain low."

Twitter: @tmt_roy


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