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Coronavirus in Texas

Analysis: Coronavirus could threaten local property tax limits

The coronavirus disaster could have a side effect in a seemingly unrelated area: New limits on increases in local property taxes can be suspended when disasters strike. And epidemics, under state law, are disasters.

An almost empty freeway in Houston on April 1, 2020.

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You haven’t heard everything yet: The coronavirus could ignite a fight over local government taxes in Texas.

A law passed less than a year ago requires cities and counties to get approval from voters any time they’re increasing property tax revenue by more than 3.5%. The old restriction was 8% — an increase that lawmakers decided was too generous, especially at a time when voters were boiling mad about rising property taxes.

They did leave open some exceptions, though. Local governments don’t have to seek voter approval for increases of more than 3.5% that are attributable to disasters.

It’s not limited to hurricanes and tornadoes, either.

The pandemic is a disaster, officially speaking. It says so right there in Gov. Greg Abbott’s mid-March proclamation, the one where the governor said, “In accordance with the authority vested in me by Section 418.014 of the Texas Government Code, I hereby declare a state of disaster for all counties in Texas.”

That same government code includes a handy definition: “‘Disaster’ means the occurrence or imminent threat of widespread or severe damage, injury, or loss of life or property resulting from any natural or man-made cause, including fire, flood, earthquake, wind, storm, wave action, oil spill or other water contamination, volcanic activity, epidemic, air contamination, blight, drought, infestation, explosion, riot, hostile military or paramilitary action, extreme heat, cybersecurity event, other public calamity requiring emergency action, or energy emergency.”

You saw it, right? Up there between “volcanic activity” and “air contamination?”

Epidemic.

State Sen. Paul Bettencourt, R-Houston, one of the authors of that legislation, doesn’t believe the coronavirus triggers that exception. He points to something the governor said when the disaster proclamation came out.

“We’ll have to take a look at it,” Abbott said then. “Pretty much the only type of governmental entity that would be affected would be a hospital district, and they weren’t subject to having the rollback rate change.”

That was before the pandemic ripped into the economy. All levels of government — much like all levels of business — face severe financial shock.

It’s not clear any of the local governments want to raise property taxes. At the moment, government folk, like the residents they serve, are wondering how bad the economy will get. City budget years start in October; it will be September before they know what they want to spend, whether that means an increase in property taxes and, if so, how much.

Like the state government, they’re watching business activity — or the lack of it — and waiting to see how bad things really are. Comptroller Glenn Hegar said earlier this month that he’ll revise his estimates of state revenues in midsummer. He didn’t put a number to it, but said lawmakers will have billions of dollars less than they thought in the budget.

“The only way out of the ditch is to get everybody back to work,” Bettencourt said Thursday. “The question is what will be the length of the ditch.”

As sales have fallen, so have state and local sales taxes. It will be another month and a half before Hegar has a hard look at the full extent of lost sales and lost sales taxes. Local officials, who depend on the local portion of that tax, will get a look at the same time.

That’s when they’ll start figuring out what the coronavirus has cost in extra services, how hard it has hit their revenues and what they need to spend to help their communities recover. That will tell them whether they need to raise property taxes to compensate.

At some point, this question about rollbacks — about how much property taxes can increase without voter approval — will come up. Bettencourt says 3.5% is the cap. The association that represents city governments in Austin says it’s 8%.

“It’s clear to us,” said Bennett Sandlin, executive director of the Texas Municipal League. “That’s different than saying we think cities should raise taxes; it’s not like this is a field day. But the way the bill is written, it’s clear that the [3.5%] rollback is suspended.”

Expect a debate. Bettencourt acknowledges as much, but he said it will come after state and local officials have seen the numbers, see the extent of the economic and public health damage, and get around to writing budgets and setting tax rates.

“The debate can wait until fall,” he said. “I don’t see the need for it right now.”

Disclosure: The Texas Municipal League has been a financial supporter of The Texas Tribune, a nonprofit, nonpartisan news organization that is funded in part by donations from members, foundations and corporate sponsors. Financial supporters play no role in the Tribune's journalism. Find a complete list of them here.

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