| TO: | Honorable Rene Oliveira, Chair, House Committee on Ways & Means |
| FROM: | John S. O'Brien, Director, Legislative Budget Board |
| IN RE: | HJR104 by Merritt (Proposing a constitutional amendment authorizing the legislature to limit increases in the appraised value of a residence homestead for ad valorem tax purposes based on the inflation rate and to limit the frequency of reappraisals of residence homesteads.), As Introduced |
Estimated Two-year Net Impact to General Revenue Related Funds for HJR104, As Introduced: a negative impact of ($60,216,882) through the biennium ending August 31, 2011.
The fiscal implications in the table below (other than the cost of publication) are contingent on passage of the constitutional amendment in an election that would be held November 3, 2009. The cost to the state for publication of the resolution is $90,882.
| Fiscal Year | Probable Net Positive/(Negative) Impact to General Revenue Related Funds |
|---|---|
| 2010 | ($90,882) |
| 2011 | ($60,126,000) |
| 2012 | ($128,945,000) |
| 2013 | ($302,634,000) |
| 2014 | ($440,992,000) |
| Fiscal Year | Probable Savings/(Cost) from Foundation School Fund 193 |
Probable Revenue Gain/(Loss) from School Districts - Net Impact |
Probable Revenue Gain/(Loss) from Counties |
Probable Revenue Gain/(Loss) from Cities |
|---|---|---|---|---|
| 2010 | ($90,882) | $0 | $0 | $0 |
| 2011 | ($60,126,000) | ($20,004,000) | ($23,514,000) | ($26,849,000) |
| 2012 | ($128,945,000) | ($36,332,000) | ($48,143,000) | ($54,825,000) |
| 2013 | ($302,634,000) | ($92,463,000) | ($114,223,000) | ($129,735,000) |
| 2014 | ($440,992,000) | ($120,676,000) | ($161,138,000) | ($182,549,000) |
The bill would propose a constitutional amendment to Section 1, Article VIII of the Texas Constitution to authorize the Legislature to require that residence homesteads be appraised at no more than their market value for the year after they are acquired, and increased each year thereafter at the rate of consumer price inflation in Texas (as determined by the Comptroller) plus the market value of any new improvements to the property until the property changes ownership. The bill would define "new improvement" for the purpose of this appraisal procedure.
The proposed amendment would require that the Comptroller determine and publicize the percentage by which the appraised value of residence homesteads could be increased under this amendment and require each appraisal office to use these inflation percentages. For the purposes of this new appraisal provision, the owner of a residence homestead on January 1, 2010 would be considered to have acquired the property in the 2009 tax year.
The proposed amendment would permit the Legislature to limit the frequency with which an appraisal office could reappraise a residence homestead.
The proposed amendment would take effect on January 1, 2010, subject to passage in an election that would be held November 3, 2009.
The proposed constitutional amendment's provision limiting homestead reappraisal frequency is permissive and any fiscal impact would depend on the passage of implementing legislation.
The amendment's provisions related to homestead reappraisal are self-enacting and would require appraisal districts to reduce the limit on the growth in the appraised value of a residence homestead from 10 percent to the rate of inflation each year until the homestead's ownership changes. The analysis was based on appraisal roll information reported electronically by appraisal districts. The year to year percent change for homestead values that were listed on the appraisal roll in each of the two most recent 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 the projected rate of inflation. Any value growth over 10 percent was excluded from the calculations. The value loss was reduced by the provision that a property that changes ownership is appraised at market value.
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. The value loss was also reduced to reflect the expected slowdown of growth in the housing market in fiscal 2010 and 2011 and then increased to reflect housing market recovery. The projected city, county, and school district tax rates were applied to the value losses in each year to estimate their respective levy losses.
Because of the operation of the hold harmless provisions of HB 1, 79th Legislature, Third Called Session (2006), the portion of the cost related to school district compressed rates is transferred to the state. A portion of the school district debt (facilities funding) and enrichment costs is also transferred to the state after a one-year lag because of the operation of the funding formulas. All costs were estimated over the five year projection period. These fiscal impacts would occur only if the constitutional amendment passes.
The cost to the state for publication of the resolution is $90,882.
| Source Agencies: | 304 Comptroller of Public Accounts, 701 Central Education Agency
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| LBB Staff: | JOB, MN, SD, SJS
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