In April, The Texan reported a possible loophole in Senate Bill 2 (SB 2) — the state legislature’s property tax reform bill passed in 2019 — that could allow cities and counties to raise property taxes above the new 3.5 percent increase caps set by the 86th Legislature.
The statute provides an exemption to localities if a disaster declaration is made in their area. But after Governor Abbott declared a statewide disaster due to COVID-19, entities like the Texas Municipal League (TML) believe all cities and counties qualify for the exemption, enabling an up-to 8 percent property tax increase without triggering a referendum election by voters.
The Legislative Budget Board did confirm to The Texan at the time that this loophole applies to every city and county due to the governor’s statewide declaration.
However, Republican state leaders, including Governor Abbott himself, say this exemption only applies to physical damage (such as from a natural disaster) and not economic damage that has accompanied the COVID-19 fallout.
An opinion issued by Attorney General Ken Paxton’s office reiterates this assertion, adding that nothing in the statute describing levels of qualified property damage “evidences an intent on the part of the Legislature to address non-physical damage to property by allowing an exemption in such circumstances.”
And thus, state leaders assert cities and counties across the state must adhere to the new 3.5 percent voter-approval.
However, SB 2’s House and Senate authors — Rep. Dustin Burrows (R-Lubbock) and Sen. Paul Bettencourt (R-Houston) — have a plan to reprimand any localities who choose to utilize the loophole.
On Lubbock radio host Chad Hasty’s show Monday, Burrows said that he and Bettencourt have discussed a penalty for any locality that takes advantage of the disaster exemption. That penalty, Burrows stated, is legislation offered in the 87th Legislature that would force a lower property tax rate on any locality that circumvents the new limits this year.
Just as specific localities benefit from the de minimis rate, legislation could be crafted to focus on certain localities and specifically the ones who circumvent the SB 2 limits. That could come in the form of a post hoc voter-approval rate adjustment the following year by the legislature for those specific entities.
Rep. Burrows told The Texan, “While I think the spirit of SB 2 clearly intends to stop cities and counties from exceeding the 3.5 percent rate without a vote of the people — virus or no virus — the Texas Municipal League keeps pushing cities to go up to eight percent.”
“As long as they’re pushing, or if they’re successful, I will push for a like-kind decrease in the voter-approval rate for 2021-2022 to offset these hikes and penalize those trying to impose massive tax hikes on Texans when they can afford it the least,” he concluded.
The pair of legislators, as well as the rest of state leadership, is hoping to avoid the situation entirely by insisting the localities stick to the SB 2 limits.
The City of Dallas recently considered the option but voted it down overwhelmingly — a decision which Bettencourt and Burrows applauded in a joint press release afterward.
Sen. Bettencourt reacted to Burrows’ comments in a tweet, saying, “Chair [Burrows] is correct that TML is wrong to be pushing high 8% voter approved limit vs SB2 3.5%. Maybe future penalties & other options on table now. [Dallas Mayor Eric Johnson] rejects TML resolution to raise [property taxes] massively during COVID-19! Down in flames 11 to 3!!”
Public pressure helped spur the Dallas City Council into voting down the option to consider a higher rate increase, and Burrows and Bettencourt are speaking out on this to try and disincentivize other cities and counties from exploring this option.
This issue could find its way into the courts for resolution on the statutory question.
By urging others to emulate Dallas and decline consideration of the possible loophole, state leaders hope to head off large property tax increases at the pass at a time when unemployment in Texas has drastically risen.
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Brad Johnson is an Ohio native who graduated from the University of Cincinnati in 2017. He is an avid sports fan who most enjoys watching his favorite teams continue their title drought throughout his cognizant lifetime. In his free time, you may find Brad watching and quoting Monty Python productions.