Work collaboratively with neighboring school districts, the city, county and other taxing jurisdictions. School district property taxes are the bulk of the property taxes paid by most homeowners and businesses and might be affectionately known as “the 800 pound gorilla” in the property tax arena. City, county and special district property taxes, when combined, typically do not add up to even one-third of the taxes assessed by a school district. This can lead to friction between the jurisdictions, competition for the pennies of tax that a community can reasonably sustain and unwillingness among the players to regularly cooperate or, at least, communicate.
While cities, counties and other taxing jurisdictions may have different or even competing agendas, as the major player, the school district carries extra responsibility for keeping the lines of communication open. There are at least three things that a school district can do to improve the working relationship between these groups:
- regularly meet to discuss current and common issues, challenges and upcoming events;
- compare policies and procedures used by each group and determine if there are conflicts or areas where adjustments might produce a more uniform system for taxpayers; and
- establish a system of communication and agree to alert each other when events transpire that will impact the group positively or negatively.
Most school superintendents in a region meet at least once a month at their Regional Education Service Center to discuss common issues. While tax rates and the current system of school finance may be discussed, and lamented, in these settings, the issue of rising or falling property appraisals, tax collection rates and the technical side of the tax collection system are not always a high priority.
Another reason to work collaboratively is the legislation pertaining to properties that overlap taxing jurisdictions (discussed earlier). House Bills 730 and 1082, 78th Regular Session, require appraisal districts to negotiate a property value that is consistent, or where agreements cannot be reached, the property is to be valued at the lowest value.
Socorro ISD (SISD) worked collaboratively with surrounding tax units, eventually working out a deal with the city of El Paso to collect its taxes while using a delinquent tax attorney to pursue tax delinquency. SISD downsized its in-house tax operation while receiving an overall performance boost from the city’s collection operations—it receives daily reports on taxes collected and daily deposits to its bank accounts. School district residents receive one consolidated tax statement. Some 20 taxing jurisdictions now participate cooperatively. An advisory board, consisting of the mayor, county judge, city council, county commissioner and other representatives of the jurisdictions, was established to deal with any problems. This is an effective demonstration of the advantages of collaboration.
Since 1979 when the Texas Legislature established appraisal districts, fewer school districts have their own tax offices and only those contracted to carry out the duties of the appraisal district have appraisal staff. Appraising property and granting exemptions are now carried out exclusively by the appraisal district. While no longer performing appraisals themselves, accurately appraising property is still vital to a school district’s operations. The law provides rules and a calendar for many appraisal activities.
Both schools districts and appraisal districts must actively communicate to be successful since tax rolls are no longer static. The law allows late protests, late exemption applications and property tax litigation after tax rate adoption. Such changes may reduce property values and, therefore, tax dollars to the school district. Depending on the size of these adjustments, a school district might have to amend its adopted budget to account for fewer tax dollars.
Two important factors that affect the financial well being of a school district are its weighted average daily attendance (WADA) and its total taxable value. If either of these is in flux, the school district must know immediately and must prepare contingency plans to deal with impending changes.
Property taxes are based on the market characteristics of real and personal property. Almost all markets are dynamic, with very few having static value. Markets either move up or down, depending on the economy, population movement and activity in the business climate. Residential markets, for the most part, always move upward—although at different rates depending on location. Other categories of property are more volatile. Oil and gas property values, for instance, are extremely sensitive to price fluctuation. Changes in patterns of consumption, such as with an unusually cold winter and changes in production can alter prices quickly. A small change in the future price of crude oil and natural gas can produce huge differences in value from one year to the next. Industrial property can see sudden changes in total value depending on corporate decisions affecting a plant or a manufacturing facility.
Major losses in property value can come from litigation. For a property under litigation, the owner’s school district tax bill is based on the value approved by the ARB. The property owner only pays the amount not in dispute. Until the court decides the property’s value, no additional payment is required. Depending on the disputed amount, the school district may have to amend its adopted budget to account for that non-payment. These low taxpayer estimates of values or major taxpayer bankruptcy can adversely affect the collection rate submitted by the school district and used by TEA in the school funding formula. School districts who work well with appraisal districts understand how the CAD operates and ensure values assessed by the appraisal district can stand up to challenges.
All of the above information emphasizes the importance of good communications between school districts and appraisal districts. So, what are some ways to create and maintain communications?
- Superintendents and business managers should attend appraisal district board of directors meetings on a regular basis to keep up with appraisal issues.
- Invite the chief appraiser to report to the school district’s board of trustees at regular intervals (remember the status of the tax roll can change drastically in a short period of time).
- Require that the school district’s appointed CAD director report to the school board about CAD operations (remember CAD directors do not have any authority over property values, only CAD operations).
- If the chief appraiser does not already hold regular meeting with taxing units, suggest he or she do so.
The most important thing is to create and maintain effective communication, either formally or informally, among the school district, other taxing units and the CAD to ensure the school district is never caught off guard and that the appraisal district always takes the school district’s needs into account whenever making appraisal decisions.
