As the Texas economy continues to boom and newcomers flock to the state for many reasons, one is the perception of Texas as a low-tax state.
While it’s true that Texas does not have an income tax and that is considered a benefit by some, the pervasive affordability problem and rising property tax bills has been a continued topic of concern for state policymakers.
Governor Greg Abbott designated rising property bills as an emergency item for the ongoing legislative session, as he has in past sessions.
Maybe nobody in Texas has more experience and knowledge of the issue of property taxes than James Quintero. Quintero, a graduate of the University of Texas at Austin, has been with the Texas Public Policy Foundation for 17 years, working on issues of local government, taxes, spending, and debt. He currently is the policy director for the foundation’s Taxpayer Protection Project.
“I am an absolute dinosaur around this place,” Quintero says when reflecting on his years of experience at the Texas Capitol. “I’ve seen a lot. I’ve had the privilege of doing a lot but I feel like there’s so much more to do. I believe we are on the cusp of some truly transformational changes at the legislature.”
While Quintero was optimistic about the potential for more solutions, he understood the frustration many Texans were feeling about their property tax bills.
Just two years ago, the Texas Legislature passed one of, if not, the largest property tax relief package in Texas history. The $18 billion tax relief package was projected to lower the average tax bill by about $1,300 per year and there were hopes for more lasting relief.
“In year one, we actually saw tax bills go down in a fairly dramatic fashion,” Quintero says. “What happened in year two is that all of that savings went away for the most part.”
Quintero says that local entities like cities, counties, school districts, and special purpose districts found ways to counter the efforts of the state to reduce property taxes, ultimately, erasing much of the savings.
“For example, cities and counties, in particular, went into debt without voter approval,” he says. Certificates of obligation are one such method of going into debt without an election, and as Quintero says, “those certificates put upward pressure on people’s tax bills.”
Another example Quintero pointed out was the case of Austin’s light-rail plan.
“What the city of Austin has done here is they’ve tangled up maintenance and operations revenues with I&S, which is supposed to pay for debt service,” says Quintero.
Instead of going to voters and asking them to approve a bond with a fixed amount and duration, the city of Austin is instead transferring general fund revenues, typically used for the day-to-day operations of a city or county, to a non-profit, local government corporation to convert that revenue into long-term debt to fund the project.
“They’ve taken those monies that are generated annually, shuffled them off through some opaque system to this local government corporation, which is now trying to use that revenue stream to take on large amounts of debt,” Quintero says.
If allowed by the courts or the legislature, this one-time 21% increase in property taxes could be converted into an undetermined amount of property tax debt reaching into the billions of dollars.
Quintero says that some of these efforts to find creative new ways to generate revenues at the local level are, in part, a response to past efforts by the legislature to slow down increases in Texans’ property tax bills, such as Senator Bettencourt’s 2019 Senate Bill 2.
“What the 2019 legislation did is it created a trigger on the revenue portion so that some cities, counties, and special purpose districts can’t exceed a 3.5% increase without voter approval,” says Quintero. The previous trigger was 8%.
Quintero points out that not all local governments have to adhere to the lower 3.5% standard and were exempted out by the legislature and are still able to raise property tax revenues by 8% without voter approval. Quintero says he would be supportive of the idea of making that number lower and applying it to all local municipalities.
While past efforts have been important, Quintero says there are a lot of opportunities to make further progress on property taxes. Recently, he submitted a list of 35 ideas to the Texas House Ways & Means Committee. “I thought I’d put pen to paper and sketch out a few different concepts,” he says.
One of his proposals is to improve transparency in bond elections by putting the impact of the bond on property tax bills on the ballot. “People ought to be provided with a specific price tag, if you will, that says if you vote for this thing, it’s going to cost the average person in your community X number of dollars.”
Quintero says he also supports Governor Greg Abbott’s idea to raise the threshold for approving bond elections or tax rate increases from a simple majority to a super majority.
“I think that it’s a much better approach to commit people to a large tax increase in perpetuity, you ought to be certain that a large portion of taxpayers are on board,” he says.
Another crucial aspect for Quintero is ending the emergency declaration “loophole” that allows local governments to institute larger property tax increases than they otherwise would be allowed under state law. “The disaster declaration exception is being abused,” says Quintero.
Finally, Quintero says that he is supportive of the state continuing to be more prescriptive about what local governments can or cannot do, even on the spending side.
“Too many cities are either engaged in progressive activism or they want to do all these extra things above the core functions of a city,” Quintero says. He says they should instead focus on “filling potholes, policing the streets, and putting out fires.”
“We need to put in place some strong protections that force our cities, counties, and school districts to prioritize according to need, not want,” Quintero says.