Transcript Property Taxes: Boon or Bane?

Thursday, May 26, 2011
Hilton Anatole Hotel
Texas Property Taxes
Presented by
W. Ken Parsons, Senior Vice President
Foy Mitchell Jr., Vice President
Marvin F. Poer and Company
Jason Marshall
The Marshall Firm PC
Ken Nolan, Chief Appraiser/Executive Director
Dallas Central Appraisal District
Overview
• Overview of the Appraisal District
Ken Nolan
• The Property Tax Protest Process
Jason Marshall
• Property Taxes; Why We Should Like Them!
Foy Mitchell
3
OVERVIEW OF THE APPRAISAL
DISTRICT
Ken Nolan, Chief Appraiser/Executive Director
Dallas Central Appraisal District
4
Overview of the Appraisal District
• Who Governs the Local Appraisal District
• How are they Chosen
• Three-fourths Rule
• Responsibilities of the Board of Directors
• How is the Appraisal District Funded
• Duties of the Appraisal District
5
Mass Appraisal
• What it is
• Universe of the Dallas Central Appraisal District
• Characteristics of Mass Appraisal in Dallas
6
Market Value
• How it is Defined
• Limitation on Appraised Value
• Various Approaches to Value
• DCAD Appraisal Techniques
• Audits
7
THE PROPERTY TAX
PROTEST PROCESS
Jason Marshall
The Marshall Law Firm PC
8
The Property Tax Protest Process
• Introduction
• Background
• Appraisal District
• Appraisal Review Board
9
The Property Tax Protest Process
• What May Be Protested
• Who May Protest
• How Do You Protest
10
The Property Tax Protest Process
• Late Protests and Motions to Correct
• Protest Hearing
• Appeal of ARB Decisions
• Appeal to District Court
• Other Appeal Options
• Important Property Tax Protest Dates
11
PROPERTY TAXES;
WHY WE SHOULD LIKE THEM!
Foy Mitchell, Jr., Vice President
Marvin F. Poer and Company
12
Texas Property Taxes:
Where We Rank and Where
We are Going
• How Important are Property Taxes to Texas?
• How Does Texas Compare to Other States?
• What Are Solutions to Rising Property Taxes?
• What is on the Horizon?
Revenue Sources for State of Texas
Other Revenue:,
$7,806,601,823
Investments:,
$7,433,179,523
Federal Income:,
$41,444,134,342
Sales Tax:,
$19,630,305,704
Bond and Note
Proceeds:,
$16,355,280,084
Total Texas Tax Collections
for All Sources
Property Tax ,
$40,034,355,798
Total Taxes,
$83,760,378,988
State Sales Tax,
$21,014,065,089
Other State
Taxes,
$16,808,387,924
Local Sales
Taxes,
$5,903,570,177
Per Capita State & Local Taxes Paid by Texans, 1989-2009
Year
Rate
Rank
Per Cap Per Cap Total
Local
Other
Per Cap
Income
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
8.0%
8.0%
8.1%
8.3%
8.3%
8.4%
8.2%
8.0%
7.7%
7.4%
7.3%
7.1%
7.2%
7.6%
7.7%
7.7%
7.5%
7.5%
7.6%
7.6%
7.9%
43
43
44
44
44
44
44
44
45
45
45
45
45
44
45
45
45
47
45
46
45
$964
$1,023
$1,088
$1,147
$1,203
$1,284
$1,327
$1,353
$1,403
$1,468
$1,545
$1,596
$1,688
$1,745
$1,769
$1,866
$1,873
$1,958
$2,155
$2,178
$2,248
$17,534
$18,403
$19,096
$19,704
$20,639
$21,429
$22,498
$23,607
$25,368
$27,488
$29,102
$30,964
$32,077
$31,141
$31,232
$33,041
$35,803
$38,906
$40,927
$41,866
$40,498
$434
$448
$460
$480
$501
$510
$527
$527
$549
$574
$590
$618
$636
$610
$635
$667
$824
$951
$959
$1,014
$949
$1,399
$1,470
$1,548
$1,627
$1,704
$1,794
$1,854
$1,880
$1,952
$2,043
$2,134
$2,214
$2,324
$2,355
$2,403
$2,533
$2,698
$2,908
$3,114
$3,192
$3,197
Legislation Passed in 2006-2007*
(We’re from Government and
we’re here to help you!)
• HB 1: Cuts School Tax Rate over 2 year period from
$1.50 to $1.00 for maintenance and operations.
• HB 3: Establishes “Margins Tax”
* (And why this matters in 2011)
What Really Happened? *
• Tax Rate Cut: Required 50 cent reduction in
operations tax rate over two years (2006-2007) with
a provision allowing a 4 cent increase over the
required rate cut in 2006 and a 6 cent increase in
2007. Many schools exercised this option
• Other tax agencies (cities, counties, etc.) have
absorbed some of the tax savings!
*(And why this matters in 2011)
State of Texas Revenue Sources, 2010
Sales Tax
$19,630,305,704
22.5
(6.6)
Motor Vehicle
Sales/Rental Taxes
2,630,137,405
3.0
1.1
Motor Fuels Taxes
3,041,973,016
3.5
0.3
Franchise Tax
3,856,865,935
4.4
(9.3)
Insurance Taxes
Natural Gas
Production Tax
Cigarette and Tobacco
Taxes
Alcoholic Beverages
Taxes
1,324,703,043
1.5
5.4
725,538,388
0.8
(48.5)
1,388,764,873
1.6
(10.8)
809,233,737
0.9
1.5
Oil Production Tax
1,008,664,357
1.2
14.0
Inheritance Tax
81,458
0.0
(95.9)
Utility Taxes
Hotel Tax
Other Taxes
478,742,739
330,809,436
143,080,974
0.5
0.4
0.2
(7.7)
(3.7)
(8.6)
Total Taxes
$35,368,901,064
40.5
(6.5
Why This Matters
• Current Texas budget shortfall will cause
drastic budget cuts to school districts.
• The state will use some of its $9.5 billion rainy
day fund to offset some of the budget needs,
but local schools will be faced with one of two
choices!
– Cut staff
– Raise Taxes (after the Legislature rescinds the cap
on Maintenance & Operations previously invoked
with the passage of the Margins Tax). Who do you
think gets blamed for the local tax increase??
We’re for “Good Government”!
• The very best environment for economic growth is in a
community or state that provides necessary public
services and benefits to its citizens :
– In a cost effective manner
– When and where the services/benefits are needed
– And at a responsible level
• When these needs are met, private enterprise can
flourish and prosper
• Tax burdens are minimized
• Job growth will occur
Solutions to Rising Property Taxes
• Appraisal Caps
• Revenue Limits for Local Government
• Substitution of Sales Tax for Property Tax
• Statewide Income Tax
Appraisal Caps
• Unintended Consequences of (Based on Historic Performance in
States Where Applied):
– Redistributes tax burden to those least able to pay
– Creates dramatic economic inequities among classes of
property
– Penalizes new ownership
– Discourages property development
– Hampers local governments ability to provide expected
services
– Fails to deliver on promise to control rising taxes
– Encourages local governments to levy multitudes of additional
fees for services
Revenue Limits on Local Governments
• Local governments must have funds to provide
services either required and/or demanded
• Some cost of local governments are outside their
control (Inflation impacts them too)
• But, historic performance indicates they :
(1.) do use the appraisal process for a revenue
generator, (2.) have not historically emphasized
budgetary responsibility
• Sensible legislation that provided for access to funds
to offset legitimate cost increases, adjustments for
inflation and changes in population could provide
some control of rising local property taxes
Appraisal Caps Can Be Dangerous
25
Sales Taxes as an Alternative to
Property Taxes
• Texas has one of the highest sales taxes in the
nation
• Sales taxes do not distribute the burden equally,
falling hardest on the poor
• Sales taxes currently yield $19.63 billion in
revenue to the State and $5.9 billion to local
government; property taxes yield $40.08 billion
or roughly 157% of total state and local sales tax
collections. What sales tax rate would be
required to reduce property taxes?
This building paid an estimated $3,555,457
in local property taxes in 2010.
It is owned by a company outside Texas!
If we substitute a sales tax for the property tax, we give alien owners a
$3.5 million tax break while passing the new sales tax burden to Texans!
Statewide Income Tax in Lieu of
Property Taxes
• An income tax is probably the most equitable
method of levying taxes
• The first member of the Legislature that seriously
introduces this concept can count the number of
days left in his term as the end of his political
career. Texans appear to be that adamant about
this subject
Summary of “Solutions”
• There is no simple nor easy solution to rising property taxes
• Property taxes have been in existence for over 6,000 years
and will continue for some time to come
• To control rising property taxes we must:
– Quit relying on them so much!
– Insist on accountability and responsibility from our elected officials for
their use with legislation that will insure that local tax entities must
report factually and clearly of their intentions to raise taxes
– Provide initiative and referendum in cases where irresponsible
spending of local taxes has occurred
– Insure that the property appraisal process is managed by capable and
knowledgeable persons
– Improve state oversight of the appraisal process
– Provide for a fairer, easier, less costly appeals process with access to
the court system when abuses have occurred
– Demand that a fair balance in taxation exist between classes of
property
What is on the Horizon During the
Next Legislature?
•
•
•
•
•
•
Continued Push for Appraisal Caps
Revenue Limits
Sales Disclosure
Continued Attention to the Appraisal Process
Continued Attention to the Appeals Process
More Focus on Truth in Taxation