LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE, 77th Regular Session March 13, 2001 TO: Honorable Rene Oliveira, Chair, House Committee on Ways & Means FROM: John Keel, Director, Legislative Budget Board IN RE: HJR7 by Brown, Betty (Proposing a constitutional amendment to authorize a county or a city or town to establish an ad valorem tax freeze on residence homesteads of the elderly and their spouses.), As Introduced ************************************************************************** * No significant fiscal implication to the State is anticipated, * * other than the cost of publication. * * * * The cost to the state for publication of the resolution is $80,000. * ************************************************************************** The resolution would propose a constitutional amendment to allow cities and counties to adopt a local property tax limitation or "tax freeze" for persons who receive a 65-and-over homestead exemption. The proposed limitation would include survivor benefits to a surviving spouse and legislative authorization to allow transfer of the freeze to a subsequent homestead within the same city or county. The limitation either could be adopted by the governing body or installed through an election ordered by the governing body following the receipt of a petition signed by 5 percent of the registered voters of the city or county. The proposed freeze is similar to the existing mandatory freeze applicable to school district property taxes. If adopted, the proposed amendment, by itself, would have no fiscal impact on local governments. Local Government Impact Cities and counties choosing to adopt a property tax freeze for 65-and-over homestead owners would experience a loss of local property tax revenue. The amount of such loss would depend on the number of entities adopting the limitation, the number of 65-and-over recipients, and the appraised value of those recipients' homesteads. The Comptroller's 2001 publication Tax Exemptions & Tax Incidence includes estimates that the 65-and-over school district tax freeze on homesteads costs the state (reimbursing school districts for prior year exemption losses) approximately $300 million per year. It is not known how many cities and counties might hold an election and vote to adopt a property tax freeze for 65-and-over homestead owners. For purposes of this analysis it was assumed that all taxing jurisdictions would provide the exemption. Based on the cost to the state of approximately $300 million per year for school districts and the average tax rate of cities and counties, if all adopted the tax freeze, cities could be expected to lose approximately $117 million per year in tax levies, while counties would experience a reduction of approximately $70 million per year. Note: Counties or cities would not be reimbursed or "held harmless" by the state for exemption costs. Source Agencies: 307 Secretary of State, 304 Comptroller of Public Accounts LBB Staff: JK, SD, WP, BR