| TO: | Honorable Jim Keffer, Chair, House Committee on Ways & Means |
| FROM: | John S. O'Brien, Deputy Director, Legislative Budget Board |
| IN RE: | HB65 by Wong (Relating to authorizing the governing body of a taxing unit to establish for purposes of ad valorem taxation by the taxing unit a limit on increases in the appraised value of residence homesteads in the taxing unit of not less than five percent.), As Introduced |
| Fiscal Year | Probable Net Positive/(Negative) Impact to General Revenue Related Funds |
|---|---|
| 2007 | $0 |
| 2008 | $0 |
| 2009 | ($96,059,000) |
| 2010 | ($181,653,000) |
| 2011 | ($343,522,000) |
| Fiscal Year | Probable Savings/(Cost) from FOUNDATION SCHOOL FUND 193 |
Probable Revenue Gain/(Loss) from School Districts |
Probable Revenue Gain/(Loss) from Counties |
Probable Revenue Gain/(Loss) from Cities |
|---|---|---|---|---|
| 2007 | $0 | $0 | $0 | $0 |
| 2008 | $0 | ($96,059,000) | ($22,944,000) | ($21,154,000) |
| 2009 | ($96,059,000) | ($85,594,000) | ($43,687,000) | ($39,994,000) |
| 2010 | ($181,653,000) | ($161,869,000) | ($83,170,000) | ($75,611,000) |
| 2011 | ($343,522,000) | ($178,916,000) | ($127,684,000) | ($115,287,000) |
The bill would amend Section 23.23 of the Tax Code to authorize taxing unit governing bodies to adopt a limit of not less than five percent on the maximum annual percentage increase in the appraised value of a residence homestead.
This bill would take effect on January 2, 2007, contingent on passage of a proposed constitutional amendment submitted to voters at an election to be held November 7, 2006.
Current law limits maximum annual percentage increases in the appraised value of a residence homestead to 10 percent; this bill would grant taxing authorities the option of using a percentage of not less than five percent in lieu of the 10 percent limit.
For illustrative purposes, the following methodology was used to provide a hypothetical fiscal impact assuming that all taxing units adopted the five percent limit:
The bill would allow taxing units to reduce the limit on the growth in the appraised value of a homestead from 10 percent to any percentage below 10 percent, but not below five percent per year since the last reappraisal. This analysis assumes that the value used for the last reappraisal would be set at the tax year 2006 value. The analysis also assumes that all taxing units would adopt the reduced appraisal limit at five percent, contingent on passage of the conforming constitutional amendment.
The analysis was based on appraisal roll information reported electronically by appraisal districts. The year-to-year percent change in value for each of 5.6 million properties that were listed on the appraisal roll in both years was calculated, and the results were sorted by percent change. The value loss resulting from the proposed limitation was calculated for homesteads that increased in value more than five percent. Value lost to the existing 10 percent value limitation on homestead property was excluded. The value loss was adjusted in the second and succeeding years of the analysis to reflect multi-year appraisal cycles and the holdover of capped property from one year to the next based on historical data from the existing 10 percent cap.
This analysis assumes all taxing units would adopt the reduced appraisal limit at five percent. Because of the operation of the school funding formula, school district losses would be incurred by the state after a one-year lag. After the first year, school districts would incur only each year's incremental loss. The projected city, county, and school district tax rates were applied to the value losses in each year to estimate their respective levy losses.
| Source Agencies: | 304 Comptroller of Public Accounts
|
| LBB Staff: | JOB, SD, SJS
|