Introduction
The Texas Constitution (Exhibit 1), Tex. Tax Code and Tex. Education Code embody the concepts of truth-in-taxation to require school districts to comply with certain steps in adopting their tax rates.
The truth-in-taxation laws have two purposes:
- to make taxpayers aware of tax rate proposals; and
- to allow taxpayers, in certain cases, to roll back or limit a tax increase.
The Texas Comptroller of Public Accounts is authorized to issue publications concerning the administration of the local property tax.[1] The Comptroller's office prepared this guide to tax rate setting, also known as "truth-in-taxation," as a public service to school districts in the state that will hold public hearings, consider budgets and set rates to impose property taxes. This guide is specifically intended to help school districts set 2010 tax rates.
By publishing this guide and by conducting seminars to instruct tax assessor collectors, budget officers and elected officials, the Comptroller's office is providing technical assistance. It is not offering legal advice. Interpretations of law must be made by lawyers representing governmental entities. Questions about the meaning of the statutes, notice requirements and other matters that are unclear in the law and in this manual should be posed to lawyers and not to the Comptroller's Property Tax Assistance Division staff.
There are four principles to truth-in-taxation as it relates to school districts:
- Property owners have the right to know of increases in their properties' appraised value and to be notified of the estimated taxes that could result from the new value.
- A school district must publish its proposed tax rate, rollback tax rate and other specific information about its proposed taxes.
- A school district must publish a budget and proposed tax rate hearing notice and hold a public hearing to provide an opportunity for citizen input concerning these issues.
- A school district must hold an election to ratify a tax rate adopted above its rollback rate.
After the appraisal district certifies appraised values, school districts take the first step toward adopting a tax rate by calculating the effective, effective maintenance and operations (M&O) and rollback tax rates.
The effective tax rate is a calculated rate that would provide the school district with about the same amount of revenue it received in the year before, on properties taxed in both years. If property values rise, the effective tax rate will go down and vice versa.
The effective maintenance and operations rate is $1.50, or the 2005 adopted maintenance and operations rate if voters approved a rate higher than $1.50, times the compression rate of 0.6667.
The rollback rate is a calculated maximum rate allowed by law without voter approval. More specifically, it is the lesser of:
- the effective maintenance and operations rate, plus 4 cents, plus the rate that is equal to the sum of any differences between the adopted tax rate and the rollback tax rate approved by the voters for 2006 and subsequent years, plus the current debt rate; or
- the effective maintenance and operations rate, plus 4 cents, plus the current debt rate.
In future years, the Texas commissioner of education may determine a different compression percentage. If a school district adopts a tax rate that is higher than the rollback rate, school board trustees must hold an election to ask voters to approve the rate.
School districts must publish their rollback rates in local newspapers, along with other information about budget and tax revenues in a notice titled Notice of Public Meeting to Discuss Budget and Proposed Tax Rate.
If taxpayers believe that the school district has not calculated these rates, published the required notice or otherwise complied with other tax rate adoption laws in good faith, they may ask a district court to stop the school from adopting a tax rate until it complies with the laws.