Honorable Paul Bettencourt, Chair, Senate Committee on Local Government
FROM:
Jerry McGinty, Director, Legislative Budget Board
IN RE:
SB2526 by Campbell (Relating to the appraisal and ad valorem taxation of Type 1 Municipal Solid Waste Landfills), As Introduced
No significant fiscal implication to the State is anticipated.
The bill would amend Chapter 23 of the Tax Code to direct the chief appraiser to use the market data comparison method using comparable sales data of unimproved land divided by 12 when appraising Type 1 Municipal Solid Waste Landfill real property comprising a regulatory "buffer zone" or similar real property surrounded by a regulatory “buffer zone”.
The bill would change the appraisal method applied to all real property of a landfill facility and related buffer zone. Per Texas Administrative Code Title 30, Section 330.3, the facility includes all contiguous land and structures, other appurtenances, and improvements on the land used for the storage, processing, or disposal of solid waste, and the buffer zone is a zone free of municipal solid waste processing and disposal activities within and adjacent to the facility boundary on property owned or controlled by the owner or operator.
Currently the most common approach to appraising operating landfills is using the income approach with a medium to high discount rate applied. The bill would base the value comparison on market value but requires this type of property to be appraised against unimproved land whose determined value is divided by 12, or 1/12th the value of the unimproved land. The comparison to “unimproved” land could be to vacant lots or possibly land under agricultural special appraisal or wildlife management use. The division by 12 is not based on standard appraisal practice.
Under the provisions of the bill, all real property, both land and improvements, whether part of the facility or the buffer zone, would be appraised as though unimproved land, at 1/12 the value of unimproved land. The appraisal procedure provided by the bill would significantly decrease current appraised property values for landfills. Under provisions of the Education Code, the school district tax revenue loss is partially transferred to the state. However, the cost is not anticipated to be significant.
Local Government Impact
Passage of the bill would change the appraisal method applied to all real property of a landfill facility and related buffer zone, such that all land and improvements would be appraised as though unimproved land, at 1/12 the value of improved land. As a result, taxable property value could decrease. However, the no-new-revenue and voter-approval tax rates as provided by Section 26.04, Tax Code could be higher as a consequence of the reduction in taxable property value proposed by the bill. Under provisions of the Education Code, the school district tax revenue loss would be partially transferred to the state.