Ord. 1156 03-08-04 TabledTabled 3/8/04
No Action Taken
ORDINANCE NO. 1156
AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF
PEARLAND, TEXAS, AMENDING ARTICLE II, OF CHAPTER 28,
"TAXATION" OF THE PEARLAND CODE OF ORDINANCES, BY
ADDING SECTION 28.1.2 RELATING TO AN AD VALOREM TAX
FREEZE FOR RESIDENTIAL HOMESTEAD PROPERTY OWNERS
WHO ARE DISABLED OR 65 YEARS OF AGE OR OLDER;
PROVIDING THAT THIS ORDINANCE SHALL BE CUMULATIVE OF
ALL ORDINANCES; PROVIDING A SEVERABILITY CLAUSE; AND
PROVIDING AN EFFECTIVE DATE.
WHEREAS, the City of Pearland, Texas is a home rule city acting under its
charter adopted by the electorate pursuant to Article XI, Section 5 of the Texas
Constitution and Chapter 9 of the Local Government Code; and
WHEREAS, as approved by the voters of the State of Texas at an election held
on September 13, 2003, Article VIII, Section 1-b, subsection h, of the Texas Constitution
allows municipalities and certain other taxing entities to establish an ad valorem tax
freeze on residence homesteads of disabled individuals or individuals age sixty-five or
older; and
WHEREAS, effective January 1, 2004, Section 11.261 of the Texas Tax Code
governs the circumstances under which an individual is entitled to an ad valorem tax
freeze; and
WHEREAS, the City Council believes it would be in the best interest of the
citizens of Pearland to provide a tax freeze on the amount of property taxes on the
homesteads of disabled individuals or individuals age sixty-five or older, beginning with
tax year 2005, now therefore
BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF PEARLAND, TEXAS:
SECTION 1. Chapter 28, "Taxation", of the Code of Ordinances is hereby
amended to add section 28.1.2", which shall read as follows: "Sec. 28.1.2. Residence
Homestead tax freeze for elderly or disabled people.
ORDINANCE NO. 1156
(a) Effective with tax year 2005, the total amount of ad valorem taxes imposed on
the residence homestead of a person who is disabled or is sixty-five years of age or
older shall not be increased while it remains the residence homestead of that person or
that person's spouse who is disabled or sixty-five years of age or older.
(b) If the person who is disabled or is sixty-five years of age or older dies in a
year in which the person received a residence homestead exemption, the total amount
of ad valorem taxes imposed on the residence homestead shall not be increased while
it remains the residence homestead of that person's surviving spouse if the spouse is
fifty-five years of age or older at the time of the person's death.
(c) Notwithstanding subsections (a) and (b), taxes on the residence homestead
may be increased to the extent the value of the homestead is increased by
improvements other than repairs and other than improvements made to comply with
governmental requirements."
SECTION 2. The City Secretary shall forward to the Comptroller of the State of
Texas by United States Certified Mail a certified copy of this ordinance.
SECTION 3. This ordinance shall be cumulative of all provisions of ordinances
and of the Code of Ordinances of the City of Pearland, Texas, as amended, except
where the provisions of this ordinance are in direct conflict with the provisions of such
ordinances and such Code, in which event the conflicting provisions of such ordinances
and such Code are hereby repealed.
SECTION 4. It is hereby declared to be the intention of the City Council that the
phrases, clauses, sentences, paragraphs, and sections of this ordinance are severable,
and if any phrase, clause, sentence, paragraph or section of this ordinance shall be
declared unconstitutional by the valid judgment or decree of any court of competent
jurisdiction, such unconstitutionality shall not affect any of the remaining phrases,
clauses, sentences, paragraphs and sections of this ordinance, since the same would
2
ORDINANCE NO. 1156
have been enacted by the City Council without the incorporation in this ordinance of any
such unconstitutional phrase, clause, sentence, paragraph or section.
SECTION 5. This Ordinance shall take effect on January 1, 2005, and applies
only to ad valorem taxes imposed on or after that date.
PASSED, APPROVED and ADOPTED on FIRST Reading this the day of
, A.D., 2004.
TOM REID
MAYOR
ATTEST:
YOUNG LORFING, TRMC
CITY SECRETARY
APPROVED AS TO FORM:
DARRIN M. COKER
CITY ATTORNEY
PASSED and APPROVED ON SECOND AND FINAL READING this the day of
, A. D., 2004.
TOM REID
MAYOR
3
ORDINANCE NO. 1156
ATTEST:
YOUNG LORFING, TRMC
CITY SECRETARY
APPROVED AS TO FORM:
DARRIN M. COKER
CITY ATTORNEY
4
February 18, 2004
Number 3
CALL TO ACTION: CITY OFFICIALS SHOULD
CONTACT LEGISLATORS
As recent editions of the TML Legislative Update have warned, school finance reform poses
serious threats to city finances. Not a day goes by without new reports of proposals by key state
officials to limit the ability of cities and counties to raise revenue. The conventional wisdom in
some Capitol offices seems to be that the moment school property taxes are reduced or replaced,
cities and counties will rush to fill the void with higher taxes of their own. This is an unfounded
fear based on the belief that local officials are anxious to gouge the taxpayers.
City officials should now meet with their local legislators about this specific issue and the
effect of school finance reform on cities generally. While letters and phone calls can be useful,
nothing works as well as face -to --face meetings with legislators in their district offices. TML
encourages each city to arrange a meeting with each of their state legislators within the next
month. The following points may be useful when conducting the meetings:
1. There is no evidence whatsoever that city taxes are poised to increase even one
dollar as a result of school tax reform. City tax rates are held in check for a
number of reasons, none of which has to do with the level of school taxes, high or
low. For one, city government is the government closest to the people, and
people don't like tax increases. City councils are elected by the same voters who
elect state officials: an electorate that doesn't look kindly on new taxes.
City property taxes have generally kept pace with inflation and population growth
(see chart on the next page). There is no indication they. would ar.celerate because
of any changes to school taxes. 1 (J (�-
L. J
Note: when you receive this TML Legislative Update. please make copies of it and distribute them t
ment heads as appropriate. TML sends only one copy to each city, and we rely on those who r
LJr
04
members c;Tt1 e fover`niri'gtidkt) and to dep
ceive itQb i-AbuteTe.,r0c kc'Fi, " ur hel
Published by the Texas Municipal League
1821 Rutherford lane, Suite 400, Austin, Texas 78754-5128 • 512-231-7400, fax 512-231-7490 • www.tml.org
9
Total Property Tax Levies
($ Millions)
1985 2002 Percent Inflation -Adjusted
Change Change
Special Districts 1,056.802 2,864.455 +171.05% +61.47%
Counties 1,427.755 3,849.728 +169.64% +60.62%
Cities 1,820.345 4,186.795 +130.00% +37.01%
Schools 4,663.892 16,418.789 +252.04% +109.71%
Total 8,968.794 27,319.767 +204.61% +81.46%
During the 17-year period (1985-2002) municipal property tax levies (adjusted for
nation) grew by 37 percent. During the same period, population grew by 33 percent.
Iffation-adjusted .growth in municipal property tax levies was roughly equal to
population growth.
3. City services benefit all Texans, city residents and non-residents alike. Municipal public
safety personnel are the first and most important line of defense in homeland security.
When disasters strike, city fire trucks, police cars, and ambulances don't stop at the city
limits. City roads and airports are the foundations of our economy —without them, state
commerce would grind to a halt. The list of invaluable municipal services goes on and
on.
4. City services benefit schools. It would be unfortunate to improve the school funding
system only to harm the cities in which schools are located.
5. Texas cities receive virtually no funding from the state to assist in providing these
essential services. Tax caps or revenue limits of any sort, in the absence of any state
funding, are patently unfair and may lead to a disastrous reduction in city services.
6. Current truth -in -taxation laws are designed to prevent sudden property tax increases.
Fears about "hiding" tax increases within appraisal increases are unfounded. When
valuations rise, the effective tax rates of cities drop in exact proportion. This lowered
effective rate is the baseline from which cities must operate, triggering tax hearing
requirements and the potential of a rollback election. In other words, the effective rate,
which is well -publicized by cities, is designed to shed light on the relationship between
appraisal valuations, and tax rates. Cities that must raise property taxes do so now in the
full light of day, thanks to the effective rate calculations.
7. Proposed tax or revenue caps ignore budget realities. (Please see article below.)
Prior to meeting with members of the legislature, it may be helpful to download two pamphlets prepared
by TML staff: "Where Do Cities Get Their Money?" and "School Finance and Texas Cities." The
materials are available at: www.tml.org. City officials should feel free to share these materials during
their meetings with their legislators.
City
Telecom Franchise
Fee Collections.
Percentage of
General Revenue
Austin
S 15,946,000
3.4%
Dallas
S35,000,000
4.3%
Denton
SI,085,676
-3.0%
Farmers Branch :
51,522,328
4.3%
Ft. Worth
S8,700,000.
2.8%
Garland
52,856,456
3.3%
Houston
S55,500,000
3.9%
Laredo
.S2,127,987
3.1%
Plano
S4,964,099
3.1%
San Antonio
S14,912,000
3.1%
Wichita Falls
S1,163,424
3.0%
ource: TML Revenue Survey FY 2002-2003
For more information on this issue, please contact the TML Legislative Department at (512) 231-7400.
City officials are urged to write letters of appreciation to Sen. Hutchison.
TEXAS ATTORNEY GENERAL SAYS FEDERAL LAW NO G00D IN TEXAS
Texas Attorney General Greg Abbott has ruled that the privacy provisions of the Federal Health Insurance
Portability and Accountability Act (HIPAA) do not apply in Texas. While HIPAA says that a
governmental entity may not reveal private medical information, Abbott ruled on February 13 that such
information must be released under the Texas Public Information Act.
This ruling (Open Records Decision Number 681) undoubtedly means that some governmental entity
(probably a city or county) will be forced to spend many thousands of dollars in court to resolve this
obvious conflict between federal and state law.
The next issue of the TML Legislative Update will contain more information on this issue. In the
meantime, city officials should consult with their city attorney on any HIPAA/privacy questions.
TML »iember cities may use the material herein for any purpose.
No other person or entity may reproduce, duplicate, or distribute any
part of this document without the written authorization of the
Texas Municipal League.
For further information contact the TML Legislative Services Department
1821 Rutherford Lone, Suite 400, Austin, Texas 78754-5128 • 512-231-7400, Fax 512-231-7490 • www.tml.org
PROPOSED TAX CAPS IGNORE BUDGET REALITIES
As noted above, the school finance reform debate has spawned several proposals to limit city revenue;
new caps on property tax rates; popular elections to approve any new taxes; higher tax rates or increased
revenues; lowered rollback rates; and others. All these ideas are based on the flawed belief that the need
for city services, and thus revenue, is easily predictable and steady from year-to-year. In fact, the
opposite is true. Cities frequently face new budgetary crises. The following are but a few examples of
unexpected expenses that cities face:
1. the high cost of homeland security, a cost that would increase if there is another
terrorist attack;
2. skyrocketing health care premiums for city employees;
3. natural disasters requiring direct expenditures;
4. new development creating the need for additional infrastructure and services;
5. lost municipal court fine revenue because of state fees on court convictions;
6. a deluge of open records requests by disgruntled citizens (some cities have had to hire
new staff just to respond);
7. loss of sales tax revenue due to the closing of major businesses or a general economic
downturn;
8. premature aging of city infrastructure;
9. state and federal mandates for which no state/federal funding is provided;
10. lawsuits against the city;
11. the expansion of a police or fire department from four to five employees triggering a
legal requirement for overtime pay; and
12. proposed changes to federal overtime laws expanding the number of employees eligible
for overtime pay.
Any of these budgetary emergencies might require a one-time tax increase that could be impossible to
accomplish under some of the tax cap proposals being offered up during the school finance debate. City
officials should be prepared to share this fact with their legislators.
TAX FREEZES: CITIES SHOULD PROCEED CAUTIOUSLY
A constitutional amendment approved by Texas voters in 2003 (H.J.R. 16), permits cities to freeze
property taxes on the homesteads of persons over the age of 65 and disabled persons. The freeze is
optional for each city, except that a popular election on the issue is required if the city receives a petition
signed by five percent of the registered voters in the city.
Many cities are beginning to feel the pressure brought by advocates of the freeze, including organizations
representing the elderly and certain newspapers columnists around the state. According to some of these
proponents, the freeze should be enacted immediately, without any further study or deliberation by cities.
This is unfortunate. Enacting the freeze without careful consideration is very risky for several reasons:
Once enacted, the freeze is permanent. There is no opportunity for the council or the voters
to undo it in the future. Hasty action could lead to fiscal regret for years to come.
2. The impact of public school finance reform is an enormous fiscal question mark on the
horizon. Talk of reform now includes proposed restrictions on municipal property revenue
(see previous articles). Though TML will be fighting any threat to city revenue during a
school finance session, it may be wise to wait until the smoke clears before acting on other
3
property tax issues. If a city grants the freeze and the legislature subsequently reduces the
authority of cities to raise revenue, the city may find it very difficult or impossible to recover
the revenue lost to the freeze.
3. 'There is no advantage to enacting the freeze now, as opposed to enacting it later in calendar
year 2004. A freeze enacted anytime in 2004 does not impact actual taxes paid until 2005.
Thus, waiting until after a spring special session on school finance to enact the freeze would
confer the same benefit on affected taxpayers as acting right away would, but at much less
risk.
4. Whether real tax "relief' is offered by the freeze is questionable. Cities must still levy taxes
to pay for public safety, infrastructure, and much more. Any artificial limitation on taxes
simply shifts the tax burden from the benefited landowners to other citizens —in this case
younger taxpayers.
5. Persons over 65 already enjoy substantial front-end homestead exemptions in many cities,
sometimes as much as $100,000. A city feeling pressured to enact the freeze may wish to
reexamine the extent to which these optional homestead exemptions are currently offered.
Freezing taxes on an already nearly tax-exempt homestead could be a case of gilding the lily.
There is no deadline by which city councils must make a decision on this issue. TML would advise
careful consideration before any decision on tax freezes, especially considering the current fiscal situation
in our state. City officials with questions about the freeze may call Bennett Sandlin in the TML Legal
Department at (512) 231-7400.
CITIES MAY WISH.TO RECONSIDER NEW TAX ABATEMENTS
The executive director of a statewide business lobby organization has spoken out both in public and in the
newspapers about a perceived need to limit the ability of cities and counties to raise property taxes. It is
unfortunate that the business lobby is aiming its fire at cities, when: (1) there is absolutely no indication
that cities plan any significant increases, and (2) Texas businesses rely heavily on the services and
facilities provided with municipal revenue.
Further, as the executive director of the business lobby organization is surely aware, cities enjoy broad
authority to grant generous property tax abatements to businesses located within their borders. It stands
to reason that calls for statewide limitations on city taxing authority should raise concerns about business
tax abatements, since any revenue lost to a tax abatement could never be recovered if the business lobby's
leader gets what he wants.
Accordingly, TML urges its members to consider more carefully than ever any new request for a city tax
incentive until this tax cap/freeze issue is resolved.
TDH PROPOSES INCREASE IN EMERGENCY MEDICAL SERVICE
PROVIDER LICENSURE FEES
The Texas Department of Health (TDH) has proposed new fee structures for emergency medical service
(EMS) licensure. The proposed fee structure reflects a 20-percent across-the-board increase in EMS
licensure fees.
The original proposed fee structure would have given TDH discretion to set fees anywhere within a
certain monetary range. The high end of the range would have represented a many -fold increase in EMS
licensure fees. Despite TDH assurance that the fees would be set somewhat lower than the maximum
allowable, the proposed fee structure faced strong opposition.
Because cities often pay the licensure fees for their EMS personnel, TML and other groups affected by
the proposal vigorously opposed the original, discretionary fee structure. Eventually, TDH agreed to
abandon the discretionary fee structure for a 20-percent across-the-board increase. While 20 percent
would seem to represent a hefty increase, it will only raise the annual cost of a paramedic's license from
$100 to $120, while emergency medical technician license fees go from $75 to $90.
The only significant fee increase would be for EMS vehicle operation licenses. Previously, these licenses
cost a non-refundable $150 per vehicle annually. The proposed fees would raise the fee to $180 per
vehicle annually and would add a one time non-refundable application fee of $500 per vehicle. While the
application fee may seem high, if the EMS vehicle is used for 10 years, the application fee would only
amount to an additional annual cost of $50.
City officials wishing to submit comments on the proposed rules should do so no later than February 29`h.
Contact Kathyn G. Perkins, Chief, Bureau of Emergency Management, Texas Department of Health,
1100 West 49" Street, Austin, Texas 78756. 512-834-6700 or kathv.perkins@tdh.state.tx.us.
(It is interesting to consider these proposed fee increases in the context of proposed caps on municipal
revenue described in the first two articles in this update. Does the state want to simultaneously: (a)
require cities to pay higher fees to the state and (b) limit the cities' ability to raise revenue to do so?)
SENATOR HUTCHISON INTRODUCES INTERNET ACCESS TAX
MORATORIUM LEGISLATION THAT PROTECTS CITY REVENUES
U.S. Senator Kay Bailey Hutchison has joined a bipartisan group of senators to introduce
legislation imposing a two-year moratorium on all Internet access taxes. The legislation is a
response to past efforts to make the ban on Internet access taxes permanent. Legislation from the
last Congressional session, specifically S. 150, would have had serious, negative fiscal impacts
on the State of Texas and cities. (See October the 28, 2003, TML Legislative Update.)
Specific .iy, S. 150 would have reduced city revenue from right-of-way fees and sales taxes
levied o:: telecommunications services. The new legislation introduced by Sen. Hutchison and
others reenacts the Internet Access Tax Moratorium that expired on November 1, 2003, for a
period of two years while a more permanent solution can be debated. Most importantly, the
legislation includes several safeguards to ensure that city revenue streams are not reduced.
Specifically, the legislation grandfathers existing state and local taxes in Texas and includes a
narrow definition of the "internet access" to which the moratorium would apply. By including
these features in the legislation, Sen. Hutchison has ensured that city revenue sources will be
protected.
The following table represents just a sample of the telecommunications franchise fee revenue
that could be placed in jeopardy if harmful Internet access tax moratorium legislation is passed
by Congress.
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