The Hidden Property Tax

Property taxes in Texas keep going up. Some property owners are even being forced to sell because they can't afford the growing annual cost. From 2004 to 2013, local property taxes increased dramatically. For example, local property tax revenue for Special Purpose Districts (MUDs, PUDs, hospital districts, etc.) increased by 64%—or $2.16 billion—over this time period. Similar increases can also be attributed to counties, cities, and school districts. Overall statewide, local property tax revenue increased by 46%—or $14.29 billion—for property owners over this same period.

Part of the increase in local property tax revenue can be attributed to new property added to the appraisal roll and higher property values. However, an increase in property value should not be an automatic increase in property tax revenue. A more honest and transparent conversation needs to occur so taxpayers completely understand why more tax revenue is needed. But the current system is confusing, and it ends up with more Texans seeing a hidden property tax increase.

First, the county's central appraisal district (CAD) uses a mass-appraisal process to set the market value of every property as of January 1st. Then, CADs send notices of appraised value to property owners in the spring.

If a property owner believes his property was appraised incorrectly - for example, too high or using incorrect information - he can protest the appraised value to a panel of appointed county residents known as the appraisal review board (ARB). The ARB may lower the appraisal, keep it as is, or possibly raise it. Once all appraised values are finalized, the CAD certifies its appraisal roll for all properties in the county.

Meanwhile, local taxing entities - cities, counties, school districts, and special districts, such as hospital, fire, and water districts - are drafting their budgets for the coming year. Every local taxing entity will propose a tax rate it will use to collect revenue from taxpayers within its jurisdiction. The rate is typically shown as an amount per $100 of property value. For example, a tax rate of $1.03 per $100 of valuation on a home appraised for $250,000 would translate to a tax levy of $2,575 ($250,000 / $100 x $1.03) for that one taxing entity.

Depending on where a property is located, it may be in multiple taxing entities, each with its own tax rate.

As part of this process, the local taxing entities are legally required to schedule public hearings and publish certain information for the public, including:

• Proposed Tax Rate: This is the rate local taxing entities seek to adopt. It is the rate that will allow the entity to generate the revenue required to cover their budget. (Value of all appraised properties in the taxing entity) x (Tax rate) = Budget.
• Effective Tax Rate: The tax rate that would generate the same amount of revenue as the previous year for the taxing entity. This rate fluctuates as appraised values increase or decrease. In most cases, the effective tax rate is lower than the proposed tax rate if property values have increased over the previous year.
• Rollback Tax Rate: The tax rate that would generate 8% more revenue than the previous year for the taxing entity. A local taxing entity may not exceed the rollback tax rate without allowing its voters to petition for a reduced rate. This applies to all local taxing entities except school districts, which must hold an automatic rollback tax rate election if the proposed tax rate exceeds the rollback tax rate.

Finally, the county tax assessor - collector mails property-tax bills in October to every property owners with a January 31st payment deadline, and the annual cycle begins again.

Tax rates are not being lowered enough to offset higher property values to keep taxes from going up without explanation.

Texas properties are in high demand, which translates to increased market value and higher appraisals. And because appraisals are one factor that influences a property owner's property-tax bill, some people may want to attribute to the rise in property taxes to higher property values.

This variable plays a key role in determining property-tax equation: the tax rate. Tax rates aren't being lowered enough to offset higher property values, and stating again, an increase in property value should not be an automatic increase in property tax revenue. A more honest and transparent conversation needs to occur so taxpayers completely understand why more tax revenue is needed.

You may even hear local elected officials saying, "We haven't raised your taxes." That's not exactly true. While they may have kept the tax rate the same or even lowered it slightly - if local taxing entities aren't adopting the effective tax rate, property-tax bills will go up due to higher appraisals.

The Texas Association of REALTORS® believes that local taxing entities have been relying on increased appraisals to generate revenue rather than making adjustments in their tax rates to compensate for higher values.

When local taxing entities hide behind increased appraisals to fund their increased budgets, we call this the Hidden Property Tax.

Local taxing entities may need to increase their services, and that takes additional funds. However, a more transparent process should take place to inform taxpayers about why these funds are needed rather than just allowing property-tax bills to increase automatically.

If local taxing entities aren't adopting the effective tax rate, property-tax bills will go up due to higher appraisals.

Both Gov. Greg Abbott and Lt. Gov. Dan Patrick have said it’s a priority to pass legislation requiring local governments to hold automatic tax rate elections whenever they have proposed property revenue increases over a certain threshold.

The public hearings for the 2017 Tax Year Proposed Property Tax Rate for Travis County, Texas was held September 19th and 22nd at 9:00 a.m. at the Commissioners Court Room, First Floor, 700 Lavaca Street, Austin, Texas 78701.

A tax rate of $0.3690 per $100 valuation has been proposed by the governing body of Travis County, Texas. This rate exceeds the lower of the effective or rollback tax rate, and state law requires that two public hearings be held by the governing body before adopting the proposed tax rate.

The governing body of Travis County proposes to use revenue attributable to the tax rate increase for the purpose of housing inmates, supporting public health and safety, maintaining County roads, preserving the area’s unique natural resources and investing in the County’s workforce.

The proposed rollback tax rate is the highest tax rate that Travis County, Texas may adopt before voters are entitled to petition for an election to limit the rate that may be approved to the rollback rate.

If you believe your effective tax rate and property-tax bills are too high you can learn more at The Hidden Property Tax.

• Bastrop County Appraisal District
• Burnet County Appraisal District
• Caldwell County Appraisal District
• Hays Appraisal District
• Llano Central Appraisal District
• Travis County Appraisal District
• Williamson County Appraisal District

Homestead exemptions remove part of your home's value from taxation. If you want to receive a homestead exemption for the taxes on your home, the home must be your principal residence on January 1 of the year in which you are applying. This is something only the homeowner can apply for and use.

Remember that your tax-assessed value is different than the market value of your home. Many people confuse the two and it is likely that the two values on your home are different. The tax-assessed value is what the county believes your home is worth. While the county does attempt to set their values at a market value, the county does not evaluate comparable properties nor perform individual market analysis on each home. A Realtor® can perform a Comparable Market Analysis (CMA) or you can hire a licensed appraiser to perform an appraisal to assess the market value of your home. The county simply values your home according to the area, not the house. Meaning, the value may be too high or too low, depending on the size, location, amenities and condition of your specific home.

As most property taxes in Texas keep going up because appraised values are rising so quickly there are some actions you can take.

1. Communicate with your state legislators about passing legislation to remove the Hidden Property Tax.
2. Look up your appraised value and tax rate for your property. Protest your tax appraisal value, if appropriate.
3. Attend public hearings for the upcoming tax year's tax rate hearings, generally August and September.
4. Make sure you have taken advantage of all the exemptions allowable to you.