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The ad valorem or property tax is the
single most important source of local government revenue.
Property taxes totaling nearly $31
billion were levied in Texas during 2004, the most recent year for
which statistics are available, by approximately 3,800 local taxing
units. More than 50% if the total property tax levy was imposed by
school districts.
Much of the current dissatisfaction with
the property tax system is driven by the high level of taxation as
opposed to problems with the appraisal process, and the legislature's
recent action in lowering the school property tax burden should reduce
the level of discomfort.
The Republic of Texas levied its first
property tax in 1837, one year after the fall of the Alamo. When Texas
achieved statehood in 1845, the first state constitution allowed state
property taxes to support the new system of public education. Property
taxes have continued to be an important part of the state’s financial
system. One key feature of the Texas system is that the state’s
constitution contains a number of provisions governing the rights and
responsibilities of property owners and officials. These provisions
are discussed below.
A second key feature of the Texas system
is separation of responsibility. This separation is designed to ensure
equality of treatment under the tax system, and involves separation of
the appraisal process from the political process.
Before 1979, Texas law provided that each
local taxing unit was responsible for making its own property tax
appraisals. When the Texas Property Tax Code was enacted in 1979,
there were serious problems with equality and uniformity across the
state. At that time, there were no appraisal districts, and no
appraisal review boards. There were no requirements that property tax
appraisers hold professional certifications. Each taxing unit was
responsible for setting its own appraisals. The frequency with which
properties were reappraised and the values they received had more to
do with politics than with good appraisal practice.
In some areas, residential properties
were appraised at a tiny fraction of their true value while business
properties were appraised at a much higher fraction. In others, farm
properties were appraised low and residences appraised high. In many,
property would be reappraised if it sold to a new buyer, while
properties that did not sell would stay the same. In some areas, your
ethnicity was as important as your property in determining the amount
of property tax you paid. If the jurisdiction did have a reappraisal,
it was generally because the jurisdiction wanted more revenue.
Under such reappraisal schemes, business
property, property owned by people who lived outside the area, and
property sold to new buyers carried an unfairly large share of the tax
burden. Many jurisdictions made no effort to discover and list all
property. Taxpayers filed renditions and exemption applications with
many taxing units, and protested to multiple boards of equalization.
In 1979, the legislature made massive
changes to the tax laws when it enacted Senate Bill 621, the Property
Tax Code. Since 1979, the legislature has continued to revise and
refine the Property Tax Code.
Among the more significant portions of
the code are sections which:
• established a central appraisal
district in each county, which is charged with valuing all property
for tax purposes and providing that value to each taxing unit in the
district;
• require the chief appraiser to appraise
property regularly and reappraise real property at least once every
three years;
• eliminated assessment ratios or
fractional assessments, requiring appraisal of property at full market
value throughout the state;
• provide a single appraisal review board
which is empowered to hear taxpayer appeals on a wide range of matters
rather than just questions of value;
• make it possible for taxpayers to file
all exemption applications and personal property renditions with one
office rather than with multiple taxing units;
• permit one-time applications for
homestead exemptions and open-space land valuation, rather than annual
applications as previously required; and
• provide a method for taxpayers to limit
tax increases through a referendum, or rollback process.
Appraisal District Governance
A board of directors that is selected by
the taxing units within the appraisal district governs each appraisal
district. The directors, who serve without pay, can be elected
officials (but not employees or contractors) for a taxing unit.
Most appraisal districts have a
five-member board of directors, chosen by the taxing unit governing
bodies using a weighted levy formula to determine the number of votes
cast by each taxing unit. In Comanche county, members of the board
other than the county assessor-collector serving as a nonvoting
director, are appointed by vote of the governing bodies of the
incorporated cities, the school districts and the county.
Statewide, most board members are citizen
appointees of the taxing units within the appraisal district, but
almost 40 percent are taxing unit officials.
Some people have advocated that at least
some of the appraisal district directors be popularly elected. The
principal argument against such a change is politicization of the
appraisal process, which would signal a return to the highly political
and unfair system of appraisal that predated the 1979 legislation
establishing appraisal districts in Texas.
If a taxing unit does not appoint the
county tax assessor-collector to the appraisal district board, then
the county assessor serves as a non-voting appraisal district
director. County assessors are ineligible to serve, however, if they
are chief appraisers or if the county commissioners’ court contracted
for county taxes to be collected by another taxing unit or by the
appraisal district.
The board of directors establishes the
goals and policies of the appraisal district and is responsible for
selecting the chief appraiser and appointing members of the appraisal
review board. The board also is responsible for approving the
appraisal district’s annual budget.
In Comanche County, the five member Board
of Directors consists of Gayle Graham (Comanche), Chairman; Billy Ray
Evans (Proctor), Vice Chairman; and members Garry Davis (Comanche),
Royce Lesley (Downing) and Rachel Hilliard (Comanche). The County’s
Appraisal Review Board consists of Don Brown (DeLeon), Weldon Turner
(Comanche) and Jackie Pounds (DeLeon).
Appraisal district boards of directors
don't push the chief appraiser to raise values to benefit one or more
taxing units, and numerous provisions in the Property Tax Code serve
to ensure the independence of the appraisal district board of
directors, including prohibitions against service by taxing unit
employees, persons who contract with a taxing unit, or individuals who
are related to the chief appraiser, appraisal district employees, or
persons who represent taxpayers before the appraisal district for
compensation. A director is also ineligible to serve if he or she owes
delinquent taxes for more than 60 days.
Appraisal District’s Methodology in
Arriving at Appraised Values
The purpose of the appraisal process is
to allocate the burden of taxation equally to all property owners.
With limited exceptions, the Texas
Constitution and Property Tax Code require the appraisal district to
appraise all taxable property at its January 1 market value.
Special provisions provide for appraisal
of open-space agricultural and timber land at its productivity value,
and for special below-market appraisal of public access airport
property, and certain deed restricted recreational, park and scenic
land.
There are also provisions that the
appraised value of a residence homestead may not increase by more than
10% for each year since the last year in which the property was
appraised.
The inventories of motor vehicle,
recreational vehicle, boat, and heavy equipment dealers are appraised
using statutory formulas that consider retail sales of these
inventories in the prior year.
The chief appraiser, who is appointed by
the appraisal district board of directors, is responsible for
valuation of all taxable property, equalization of values, and the
administration of exemptions and the business personal property
rendition process. The chief appraiser and all appraisal district
appraisers must meet training and certification requirements imposed
by the Board of Tax Professional Examiners.
The chief appraiser must prepare all
appraisal records and present them to the appraisal review board. He
or she must notify owners of increases in value, and must defend these
actions against challenges by taxpayers before the appraisal review
board.
The Property Tax Code requires an
appraisal district to reappraise real property at least once every
three years. Many districts reappraise every year, and there are two
reasons for this. First, in a changing market, frequent reappraisal is
necessary to keep values equalized at the constitutionally required
January 1 market value standard. Secondly, failure to reappraise
regularly is likely to result in the appraisal district failing the
comptroller’s annual study of appraisal district and school district
values.
In determining value, the chief appraiser
is required to comply with the Uniform Standards of Professional
Appraisal Practice (USPAP), and to follow statutory provisions adopted
by the legislature. Appraisal districts utilize generally accepted
methods of value determination including the market comparison, cost,
and income approaches to value. These various approaches are used to
build and calibrate mass appraisal models, from which individual
property appraisals are generated.
To ensure adherence with generally
accepted appraisal practices, the 79th Legislature enacted Senate Bill
1652 requiring the directors of an appraisal district to annually
develop a written plan for the periodic reappraisal of all property
within the boundaries of the district, and to hold a public hearing to
consider the proposed language. The plan must be adopted no later than
September 15 of each even-numbered year.
To ensure that appraisal districts
correctly perform their duties and that state funding to school
districts is distributed in accordance with taxable wealth in each
school district, Texas law for many years has required the state to
independently study and report on appraisal district performance and
school district values.
Originally, during Governor Briscoe’s
administration, the Governor’s Office of Education Resources conducted
the school district value study. In 1977 the legislature created the
School Tax Assessment Practices Board that, the State Property Tax
Board (SPTB) replaced effective January 1, 1980. The new STPB also
took on property tax-related functions previously performed by the
comptroller’s Ad Valorem Tax Division.
In addition to conducting the annual
study of appraisal district and school district values, the State
Property Tax Board was responsible for adopting rules establishing
minimum standards for administration and operation of appraisal
districts and county assessor-collector offices; offering curricula
and instruction on property appraisal and tax administration;
preparing and issuing appraisal manuals and other technical and legal
materials for use by local tax officials, and issuing news and
reference bulletins on the subject of property taxation; publishing
pamphlets explaining the remedies available to a dissatisfied
taxpayer, and advising taxpayers on how to prepare and present appeals
on values; prescribing property tax forms and a uniform records
system; providing professional and technical assistance to local tax
officials at local expense, upon request; and publishing an annual
report of its operations and of the operations of appraisal districts
and county assessor-collectors.
In 1991, the State Property Tax Board was
abolished and many of its duties transferred to the comptroller.
Today, the comptroller conducts an annual
study, Property Value Study (PVS), in each appraisal district to
determine the degree of uniformity of and the median level of
appraisals by the appraisal district within each major category of
property. The comptroller also estimates the true taxable wealth of
each school district. An appraisal district or school district has the
right to appeal an adverse finding in the comptroller’s study.
Generally, the comptroller has found that
appraisal districts in Texas continue to appraise property with
uniform results and close to market value. According to the
comptroller’s 2004 Final Property Value Study, appraisal districts
achieved a study result of 99 percent of market value. There are,
however, instances, where locally generated values in a school
district may fall outside the study’s statistical margin of error.
A school district whose appraisal
district determined values are found to be outside the study’s margin
of error in two consecutive years is penalized by having its state
funding reduced.
In cases of study failure, the
comptroller is required to review the appraisal standards, procedures,
and methodology used by each appraisal district that appraises
property for an eligible school district to determine compliances with
generally accepted appraisal standards and practices. |
