BILL ANALYSIS H.B. 1537 By: Craddick (Brown) Finance 05-16-95 Senate Committee Report (Unamended) BACKGROUND A city sets its tax rate and develops its budget based on anticipated collection of tax revenues. Corrections to the tax roll, allowed under current law, take place after a city has completed its tax and budget process. Consequently, a city's budgeting may be based on revenues that will not exist because some revenues will be deducted as a result of corrections. The process of calculating the effective tax rate creates a deficit for subsequent tax years. Currently, the effective tax rate is defined as the tax rate that would need to be levied to raise the same amount of property tax revenue as was raised in the previous year. If the tax rate in any given year is incorrect and causes a budget deficit, the calculation for the next year will necessarily be based on an incorrect figure. PURPOSE As proposed, H.B. 1537 reformulates the calculation of the effective tax rate and rollback tax rate which allows a taxing unit to add corrections and property tax refunds for the previous year to the tax rolls. RULEMAKING AUTHORITY It is the committee's opinion that this bill does not grant any additional rulemaking authority to a state officer, institution, or agency. SECTION BY SECTION ANALYSIS SECTION 1. Amends Section 26.012(11), Tax Code, as follows: (11) Defines "last year's debt levy" as the total of the amount of taxes that would be generated by multiplying the total taxable value of property on the appraisal roll for the preceding year, other than corrections made under Section 25.25(d) of this code, by the debt rate; and the amount of debt taxes refunded by the taxing unit in the preceding year for tax years before that year. SECTION 2. Amends Section 26.012(13), Tax Code, to make conforming changes to the definition of "last year's levy." SECTION 3. Amends Section 26.012(14), Tax Code, to make conforming changes to the definition of "last year's total value." SECTION 4. Amends Section 26.08, Tax Code, by adding Subsection (i), as follows: (i) Requires, for the purposes of this section, increases in taxable values and tax levies occurring within a reinvestment zone under Chapter 311, in which a school district is a participant, to be eliminated from the calculation of the tax rate adopted by the governing body of the school district. SECTION 5. Emergency clause. Effective date: 90 days after adjournment.