LEGISLATIVE BUDGET BOARD
Austin, Texas
 
FISCAL NOTE, 82ND LEGISLATIVE REGULAR SESSION
 
March 18, 2011

TO:
Honorable Steve Ogden, Chair, Senate Committee on Finance
 
FROM:
John S O'Brien, Director, Legislative Budget Board
 
IN RE:
SB129 by Patrick (Relating to the limitation on increases in the appraised value of a residence homestead for ad valorem taxation.), As Introduced



Estimated Two-year Net Impact to General Revenue Related Funds for SB129, As Introduced: a negative impact of ($19,705,000) through the biennium ending August 31, 2013.

The bill would make no appropriation but could provide the legal basis for an appropriation of funds to implement the provisions of the bill.



Fiscal Year Probable Net Positive/(Negative) Impact to General Revenue Related Funds
2012 $0
2013 ($19,705,000)
2014 ($43,264,000)
2015 ($114,359,000)
2016 ($195,933,000)




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
2012 $0 $0 $0 $0
2013 ($19,705,000) ($6,902,000) ($7,667,000) ($8,567,000)
2014 ($43,264,000) ($10,994,000) ($15,585,000) ($17,361,000)
2015 ($114,359,000) ($33,153,000) ($42,183,000) ($46,911,000)
2016 ($195,933,000) ($48,668,000) ($69,639,000) ($77,316,000)

Fiscal Analysis

The bill would amend Chapter 23 of the Tax Code, regarding property taxation, appraisal methods and procedures, to change the limit on the annual increase in appraised value for ad valorem taxation of a residence homestead from 10 percent to 5 percent.
 
The bill would take effect January 1, 2012, contingent on the passage of a constitutional amendment.    

Methodology

Contingent on the passage of a constitutional amendment, the bill would require appraisal districts to reduce the limit on the growth in the appraised value of a homestead from 10 percent to 5 percent per year creating a fiscal impact on the state and units of local government. The analysis was based on appraisal roll information reported electronically by appraisal districts. The year to year percent change in value for a large random sample of homesteads 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 five percent. Value lost to the existing 10 percent value limitation on homestead property was excluded. The results were extrapolated to all Texas homesteads.

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 adjusted to reflect a moderate housing market recovery.
 
Projected tax rates were applied to estimate the levy loss to cities and counties, and to estimate the initial school district loss. Because of the operation of the hold harmless provisions of HB 1, 79th Legislature, the school district cost related to the compressed rate is transferred to the state. The enrichment cost and a portion of the school district debt (facilities) cost are transferred to the state after a one-year lag because of the operation of the enrichment and facilities funding formulas. All costs were estimated over the five year projection period.

Local Government Impact

The estimated fiscal implication to units of local government is reflected in the above table.


Source Agencies:
304 Comptroller of Public Accounts
LBB Staff:
JOB, KK, SD, SJS