Honorable Paul Bettencourt, Chair, Senate Committee on Local Government
FROM:
Jerry McGinty, Director, Legislative Budget Board
IN RE:
HB1869 by Burrows (Relating to the definition of debt for the purposes of calculating certain ad valorem tax rates of a taxing unit.), As Engrossed
No fiscal implication to the State is anticipated.
This bill would amend Chapter 26 of the Tax Code, regarding property tax assessment, to restrict the definition of debt used in truth-in-taxation property tax rate calculations to debt that meets certain requirements specified in the bill. The bill provides definitions for designated infrastructure, refunding bonds and self-supporting debt. The bill would allow certain taxing units located in the following counties to include as debt a payment made under contract to secure indebtedness issued by another political subdivision on behalf of the taxing unit: Bexar, Travis, El Paso, San Patricio, Jim Wells, Kleberg, Bee, Nueces, and Tarrant.
Limiting the definition of debt could create a cost for taxing units contingent on the amount and frequency they use debt obligations other than as described in the bill. A taxing unit's debt rate is a key component in calculating the voter-approval tax rate, which is the calculated maximum tax rate a taxing unit may adopt without voter approval and triggers certain notices and hearings for tax rate adoption. The bill's specified definition of debt could establish a lower voter-approval tax rate depending on the amount of debt a taxing unit uses debt obligations that would not fit this new definition. This could make it more difficult for taxing units to increase tax rates. The amount and frequency that taxing units would issue future debt obligations not specified in the bill is unknown. Consequently, fiscal effect on taxing units cannot be estimated.
The bill would take effect September 1, 2021.
Local Government Impact
The more limited definition of debt in the bill could establish a lower voter-approval tax rate depending on the amount of debt a taxing unit uses debt obligations that would not fit this new definition. This could make it more difficult for taxing units to increase tax rates, which would reduce property tax revenue. As a result, ad valorem tax revenue for units of local government could be reduced.