Local NewsTaxes & SpendingHarris County To Consider Disaster Declaration “Loophole” To Raise Property Tax Rate Above SB 2 Limit

The Harris County Commissioners Court did not make a final decision on next year's property tax rate, but are considering four options — three of which will raise taxes.
August 6, 2020
During a special meeting of the Harris County Commissioners Court Thursday, new Budget Management Executive Director David Berry provided information on four possible tax rate scenarios. It included a plan to take advantage of a potential loophole in Texas law that could allow the county to raise property taxes by nearly eight percent.

According to Senate Bill 2 (SB 2), passed by the Texas Legislature in 2019, the county can only increase it’s Maintenance and Operations tax rate by 3.5 percent without voter approval, but the measure includes an exception for areas under a “disaster declaration.”

Berry, and First Assistant County Attorney Robert Soard advised commissioners that adopting the eight percent increase would likely trigger taxpayer lawsuits.

“I think there are some risks in taking the position that we can go all the way up to eight percent,” said Berry. “The governor for example, has said in public that he doesn’t agree. So, it would be logical to assume it would be litigated.”

Earlier this year, Governor Greg Abbott stated that the disaster exception only applied to regions with physical damage. Attorney General Ken Paxton also issued an opinion affirming that economic damage inflicted by the coronavirus pandemic does not trigger an exception to SB 2.

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If the county does assume that an eight percent increase without voter approval is allowable, Soard warned that any taxpayer could file suit and possibly halt all tax collections until the case is decided.

County tax rate considerations usually take place in October, but Berry and Soard said if the court wanted to seek an increase that required voter approval, they needed to begin the process immediately. Among other requirements, the county clerk would need to be notified by August 18 to place a measure on the November ballots.

Berry also cautioned that the Harris County Appraisal District (HCAD) could not yet provide complete property valuation numbers since some 15 percent were still under protest. Final numbers and a Budget Management office analysis will not be ready until early September.

In addition to a plan that would increase tax rates by nearly eight percent, Berry presented information on adoption of a “no-new-revenue” plan that would reduce rates for many property owners.

According to the preliminary numbers from HCAD, the “no-new-revenue” plan could result in a budget shortfall of approximately $10 million, since actual revenue fell short for the previous fiscal year.

Commissioner Jack Cagle (R-Precinct 4) echoed the concerns of guest speakers who objected to tax rate increases and announced that he would be arguing for Option 1, with no new revenue.

“This is not the time to be increasing taxes on our constituents, because these are difficult times, especially coming after [Hurricane] Harvey.”

County Judge Lina Hidalgo (D) suggested that under the circumstances “people need more of us,” but that the county would need more funds to provide additional services. She also expressed concern that without additional revenue they might have to lay off employees.

Commissioner Steve Radack (R-Pct. 3) said during previous downturns the county did have to adjust spending and employee schedules, but were still able to provide necessary services.

“I think it’s extremely important that…businesses and homeowners have confidence in a taxing authority…to understand the pain of the people who are paying for government,” Radack specified.

Berry also reported that the county held $108 million in reserve funds, not including expected reimbursements from the federal CARES Act and FEMA.

The other two scenarios presented by Berry included raising rates within ranges allowed by the normal provisions of SB 2. Option 2 would increase the county rate by 2.8 percent, the Flood Control District rate by 2.6 percent, and the Hospital District rate by 6.7 percent.

Special districts like the hospital district are exempt from the 3.5 percent limit set by SB 2, and may increase rates up to eight percent without voter approval.

Option 3, would keep Maintenance and Operation rates unchanged from last year, but allow debt service rates to climb, resulting in a county rate increase of 2.9 percent, a Flood Control District increase of 3.5 percent, and a Hospital District increase of 2.5 percent.

Option 2 would give the county estimated additional revenues of $43.7 million, and Option 3 would provide an additional $44.8 million.

If the county were successful in applying the possible SB 2 “loophole,” increasing rates by nearly eight percent, county revenues would soar by an estimated $113.8 million, and would see an additional $8.5 million for the flood control and $50.5 million for the hospital district.

Last year, Radack and Cagle skipped a scheduled meeting at which commissioners were to vote on Hidalgo’s proposal to raise property taxes by the eight percent allowable before SB 2 took effect. Without the necessary quorum, the county instead reverted to the “effective rate,” or “no-new-revenue rate.”

Commissioners voted to delay setting the tax rates until after they had received complete data from HCAD and a new analysis from the Budget Management office, leaving only rates not subject to voter approval as options for the upcoming fiscal year.

Harris County commissioners also recently approved spending at least $1 million for a media campaign to educate the public about coronavirus prevention. Hidalgo said the expenditure would cover design, message testing, and an initial launch, but that the effort would likely need additional funding later.

During the special meeting, the court also approved “COVID-19 Hazard Pay” for all county employees. The county expects reimbursement for hazard pay for public safety employees from CARES Act funds, but must cover the costs of hazard pay for all other employees. The initial cost to county taxpayers is an estimated $8.3 million.


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Holly Hansen

Holly Hansen is a regional reporter for The Texan living in Harris County. Her former column, “All In Perspective” ran in The Georgetown Advocate, Jarrell Star Ledger, and The Hill Country News, and she has contributed to a variety of Texas digital media outlets. She graduated summa cum laude from the University of Central Florida with a degree in History, and in addition to writing about politics and policy, also writes about faith and culture.

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