Chapter 26 of the Property Tax Code requires taxing units to comply with truth-in-taxation laws in adopting their tax rates. The laws have two purposes:2000 Tax Year Changes
- to make taxpayers aware of tax rate proposals and
- to allow taxpayers, in certain cases, to roll back or limit a tax increase.
The State Comptroller’s office publishes this guide to help local governments set property tax rates. Some aspects of truth-in-taxation, however, do not apply to every type of local government. This guide will identify those parts of the law and discuss their application to the appropriate taxing units.
There are four principles to truth-in-taxation:
- Property owners have the right to know of increases in their properties’ appraised value and to be notified of the taxes that could result from the new value.
- A taxing unit (other than a school district) must calculate and publish its effective and rollback tax rates before adopting an actual tax rate. A school district must calculate and publish its proposed tax rate, rollback tax rate and other specific information with its budget hearing notice.
- A taxing unit (other than a school district) must publish special notices and hold a public hearing before adopting a tax rate that exceeds the lower of the rollback rate or 103 percent of the effective tax rate. A school district is not subject to this requirement but must publish a budget and proposed tax rate hearing notice.
- If a taxing unit adopts a rate that exceeds the rollback rate, voters may petition for an election to limit the rate to the rollback rate. For school districts, no petition by taxpayers is required for rollback elections to ratify tax increases above the rollback rate.
2001 Tax Year ChangesWhen setting their 2000 property tax rate, some taxing units will see changes in the truth-in-taxation process. These changes vary by type of taxing unit. Some changes do not apply to school districts and small taxing units. Small taxing units are those units that propose a tax rate of $0.50 or less to generate $500,000 or less in taxes.
All taxing units
Effective January 1, 2000, Senate Bill (S. B.) 1118 requires all taxing units to adopt their tax rates by a certain date. The deadline to adopt is before the later of September 30 or the 60th day after the taxing unit receives the appraisal roll.
Failure to adopt a tax rate by the deadline will result in the taxing unit adopting the effective tax rate or last year’s rate, whichever is lower, as its tax rate for the current year.
All taxing units other than small units and school districts
Effective January 1, 2000, House Bill (H. B.) 954 changed what triggers the public hearing and publishing notices for a proposed tax increase. Beginning with the 2000 tax rate, Section 26.05(d) returns the law that was in effect before the 1998 tax year. A taxing unit will be required to hold a public hearing and publish newspaper ads before adopting a tax rate that exceeds the lower of the rollback rate or 103 percent of the effective tax rate. The first quarter-page notice has changed to reflect different wording for this new law.
(For tax years 1998 and 1999, taxing units were required to hold the hearing and publish notices if the proposed tax rate resulted in any increase in total property tax revenues from the preceding year.)
H. B. 954 also requires taxing units to publish a new statement with the effective and rollback rates. The taxing unit includes a statement that adopting a tax rate equal to the effective tax rate would result in an increase or decrease in the unit’s taxes compared to last year’s taxes, and the amount of the increase or decrease.
Taxing units with indigent health care costs
Beginning with a tax rate adopted on or after January 1, 2000, H. B. 1398 allows a taxing unit to increase its effective maintenance and operations (M&O) rate to reflect enhanced indigent health care expenditures.
The enhanced expenditures are defined as the amount spent by the taxing unit for M&O costs of providing indigent health care at the increased minimum eligibility standards under Health and Safety Code Section 61.006. Those standards were effective on or after January 1, 2000.
School districts
Effective for tax year 2000, S. B. 4 changed a school district’s rollback tax rate calculation to add 6 cents, rather than the 3 cents added to the 1999 rollback rate. The majority of school districts (those that fall under Education Code Chapter 42) will add 6 cents. For the wealthy school districts (Chapter 41), those districts should consult their legal counsel about adding 3 cents or 6 cents in the rollback rate calculation for tax year 2000.
School districts also have an additional reduction in the rollback rate calculation for additional state assistance received by some school districts that offer the optional percentage homestead exemption, if state funds are available.
As in previous tax years, the Texas Education Agency (TEA) has a worksheet entitled Worksheet to Assist Districts in Calculating Rollback Rate for school districts to use in computing how much state funds they will receive. For the 2000 rollback rate, all school districts will use the same worksheet. [For the 1999 tax rate, TEA had two worksheets – one for Education Code Chapter 42 school districts (the majority of districts) and one for Chapter 41 school districts (those districts required to reduce their taxable wealth per student). The two types of school districts had different steps for calculating their 1999 rollback tax rates.]
Changes to a school district’s hearing notice for the budget and proposed tax rate, required by H. B. 2075 for the 1999 tax rate, are removed from the notice for the 2000 rate. The "NOTICE OF PUBLIC MEETING TO DISCUSS BUDGET AND PROPOSED TAX RATE" has several items deleted.
When setting their 2001 property tax rate, many taxing units will see a law change in the truth-in-taxation process.
All taxing units other than small units and school districts
Effective January 1, 2001, H. B. 954 requires a supplemental notice for the hearing on a tax rate increase. If the taxing unit owns, operates or controls an Internet website, the unit shall post on its website an additional notice of the public hearing at least seven days immediately before the hearing on the proposed tax rate increase. The unit also shall post at least seven days immediately before the date of the vote on the proposed tax rate.
If the taxing unit has free access to a television channel, the unit shall request that the station carry a 60-second notice of the public hearing at least five times a day between 7 a.m. and 9 p.m. The notice will run for at least seven days. This posting is both immediately before the public hearing on the proposed tax rate increase and before the vote on the proposed tax rate.
The additional public hearing notice must contain substantially the same information that is in the quarter-page notice published by the taxing unit.
This new additional notice does not apply to a taxing unit that is unable to comply because of the failure of an electronic or mechanical device (including a computer or server) or due to other circumstances beyond its control.
A property owner is not entitled to an injunction restraining the collection of the taxing unit’s taxes if the unit has, in good faith, attempted to comply with the new additional notice requirement.
All taxing units
For tax rates in 1999 and 2000, S. B. 1804 provided for increasing and decreasing the rollback tax rates of taxing units that agree by written contract to transfer a portion of the responsibility for funding departments, functions or activities. That provision will expire January 1, 2001.
The law will still allow for the transfer of all of a responsibility, not a portion.
Important Points to Remember for Tax Year 2000
Effective Tax Rate
Rollback Tax Rate
Proposed Tax Increase
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Texas Constitution Provisions
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The Texas Constitution sets out the general requirements for truth-in-taxation. The Texas Legislature amended Chapter 26, Property Tax Code, to set out the specifics. Article VIII, Section 21. Increase in Total Property Taxes; Notice and Hearing; Calculation. (a) Subject to any exceptions prescribed by general law, the total amount of property taxes imposed by a political subdivision in any year may not exceed the total amount of property taxes imposed by that subdivision in the preceding year unless the governing body of the subdivision gives notice of its intent to consider an increase in taxes and holds a public hearing on the proposed increase before it increases those total taxes. The Legislature shall prescribe by law the form, content, timing and methods of giving the notice and the rules for the conduct of the hearing. (b) In calculating the total amount of taxes imposed in the current year for the purposes of Subsection (a) of this section, the taxes on property in territory added to the political subdivision since the preceding year and on new improvements that were not taxable in the preceding year are excluded. In calculating the total amount of taxes imposed in the preceding year for the purposes of Subsection (a) of this section, the taxes imposed on real property that is not taxable by the subdivision in the current year are excluded. (c) The Legislature by general law shall require that, subject to reasonable exceptions, a property owner be given notice of a revaluation of his property and a reasonable estimate of the amount of taxes that would be imposed on his property if the total amount of property taxes for the subdivision were not increased according to any law enacted pursuant to Subsection (a) of this section. The notice must be given before the procedures required in Subsection (a) are instituted. |
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