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R2004-046 03-22-04RESOLUTION NO. R2004-46 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PEARLAND, TEXAS, OPPOSING ANY SCHOOL FINANCE OR TAX SYSTEM REFORMS THAT WOULD NEGATIVELY AFFECT CITY REVENUES AND ECONOMIC DEVELOPMENT EFFORTS. WHEREAS, it is likely that the Texas Legislature will address school finance and tax system reforms in the near future; and WHEREAS, during theses deliberations by the Texas Legislature, proposals to limit the ability of cities to collect property taxes and sales taxes are likely to be offered by some members of the Legislature; and WHEREAS, additional restrictions on city taxes fly in the face of a history of frugal tax administration by Texas cities; and WHEREAS, all Texas cities combined collect only 15.3 percent of all property taxes collected in the State of Texas, while schools collect more than 60 percent; and WHEREAS, between 1985 and 2002, the municipal share of all property tax revenue fell from 20.3 percent to 15.3 percent; and WHEREAS, Texas cities rely on tax revenue to build basic infrastructure, to ensure public safety through police and fire departments, and to provide numerous essential services for city residents, who are 80 percent of the state's population; and WHEREAS, Texas cities engage in numerous economic development activities that produce jobs and revenue for the entire State of Texas; and WHEREAS, cities must meet the challenges of homeland security and compliance with state and federal mandates, many of which are unfunded mandates; and RESOLUTION NO. R2004-46 WHEREAS, Texas cities have shown over the years that they are fiscally responsible and good stewards of taxpayers' money; and WHEREAS, efforts to limit the ability of cities to collect sales and property tax revenues or to set tax rates would have severe negative impacts on city services, city employees, economic development efforts, and ultimately the citizens of the State of Texas; now, therefore, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF PEARLAND, TEXAS: Section 1. That the governing body'of the City of Pearland will oppose all school finance or tax reform efforts by the Texas Legislature that negatively impact the ability of the City to provide basic essential services, conduct economic development activities, and ensure public safety by limiting our ability, beyond the provisions of current law, to collect property tax or sales tax revenues. PASSED, APPROVED and ADOPTED this the A.D., 2004. APPROVED AS TO FORM: DARRIN M. COKER CITY ATTORNEY .~~i~~H~rch TOM REID MAYOR 2 Governor Unveils Plan to Cap Municipal Property Tax Revenue Page 1 of 5 , i,'' , M1 Legislative ,Online , (Legislative Services [III f Click Here 1 GOVERNOR UNVEILS PLAN TO CAP MUNICIPAL PROPERTY TAX REVENUE At press conferences in Houston and San Antonio on Thursday, March 11, Governor Rick Perry unveiled his plan to: (1)place caps on property tax revenues, (2)place a 3-percent cap on annual increases in the appraised value of residential homesteads, and(3)require voter approval of property tax revenue increases that exceed certain levels. At the same time,the governor's office released details of the plan in a document entitled, "Educational Excellence Plan."The document did not explain how a cap on municipal property tax revenue would advance educational excellence. Here are the key features of the governor's plan, along with an analysis of each. Local Government Revenue This part of the governor's plan sets a cap on property tax revenue for each local government and allows for an inflation and population growth factor. "Any increase in property tax revenues beyond inflation or population growth would require local voter approval, " the governor said. Property taxes for existing debt service would be exempt from the revenue cap. The governor's fact sheet says that"about half the states have some form of limitation on the growth of property tax revenue local governments can levy each year without voter approval:" The governor specifically mentioned Washington, Massachusetts, Idaho,Nevada, Mississippi, Colorado, Michigan, Montana, and South Dakota. But most of those states have something Texas cities don't have: state financial aid. The chart below shows current state aid to cities for each state, per capita state aid, and the amount that state aid would be in http://www.tml.org/leg_updates/legis_update031704a cap.htm 3/17/2004 Governor Unveils Plan to Cap Municipal Property Tax Revenue Page 2 of 5 Texas if it were adjusted for population. (Note: "state aid"means a grant made by the state government to cities from revenue generated by the state. Aid to schools is excluded.) Per ($Millions) ($Millions) Capita How Much Total State State Would That Aid/Current Aid to Amount to State Year Cities in Texas? Colorado $187-$229 $41.09- $908.8- $50.32 $1,113.0 Idaho $90.9 $66.54 $1,471.77 Massachusetts $1,143.0 $177.68 $3,930.02 Michigan $1,668.7 $165.65 $3,661.94 South Dakota $8.959 $11.73 $259.45 Washington $119.5 $19.49 $431.09 Texas $68,56-41 $3.10 - The governor's fact sheet says his proposed revenue limit is similar to the limit in Colorado. The chart above, however, shows that Colorado cities annually receive roughly$50 per capita in state financial aid. Adjusted for population, that would be nearly a$1 billion state aid program in Texas. The fact is that most states that have revenue limits pump millions and millions of dollars per year into cities. It's clear that a local tax revenue limit is much easier to handle when the state government is willing to provide financial assistance to cities. There are many differences between Texas cities and the cities in these other states referenced by the governor. Here are just a few of those differences. Montana—more.than$10 million of the state's gasoline tax revenue is shared with cities. Adjusting for the difference in population, that would be a$241 million program in Texas. Again, limitations on local revenue are easier to live with when the state is willing to provide financial assistance. Nevada—Nevada has only 19 incorporated cities. To judge by its largest city(Las Vegas), intergovernmental aid--largely from the state-- is the primary source of municipal revenue: almost 45 percent. Property tax accounts for only 11 percent of municipal revenue in Las Vegas. Michigan—Detroit, the state's largest city, gets more than 10 percent of its revenue from state aid, almost 10 percent from a municipal http://www.tml.org/leg_updates/legis_update031704a cap.htm 3/17/2004 Governor Unveils Plan to Cap Municipal Property Tax Revenue Page 3 of 5 income tax, and only 6.8 percent from property taxes. Colorado—the home rule cities in Colorado can establish any sales tax rate they wish. The City of Denver, for example,has established a local tax rate of 3.5 percent. A home rule city can also establish the sales tax base. Many Colorado cities, for example, tax food for home consumption. The point is that in each state referenced by Governor Perry, there are factors that substantially neutralize any negative effects of a revenue cap. It is extremely dangerous to transport just one feature of the state/local system from one state to another without understanding the entire system. If the governor's proposals are enacted, Texas cities will be subject to the worst, most oppressive intergovernmental system in the nation. We would have a system that in its totality doesn't exist anywhere else in the nation,with the possible exception of California,which is hardly a worthy model. The governor's inflation/population growth factor would appear to have a built-in problem. If any recurring expense goes up in cost by more than the growth factor, some other expense would have to be cut. Thus, when employee health care costs increase by 20 percent (not an unlikely scenario), other outlays would have to be cut to stay within the growth factor, or the city would have to call for a popular vote. The governor's document also says that since 1999, city property taxes have increased by 8.8 percent annually,while the average annual growth in inflation plus population was 4.5 percent. So far so good. But what the governor's fact sheet doesn't say is that city sales tax revenues actually fell relative to inflation and population growth between 1999 and 2002. That means that cities were forced to raise property taxes in order to maintain service levels. Finally,the governor's document omits another important fact: Texas cities undoubtedly raise more money for the state government than vice versa. For example, it is well known among city officials that municipal courts are used as cash cows by the state government and generate funds for numerous state programs. Taxpayer Appraisal Relief This part of the governor's proposal would limit residential property appraisals to an increase of no more than three percent per year. (The current limit is 10 percent per year.) "This cap shields individual homeowners from skyrocketing and arbitrary increases in the appraisal value of their property...the appraisal cap would be lifted when http://www.tml.org/leg_updates/legis_update031704a cap.htm 3/17/2004 Governor Unveils Plan to Cap Municipal Property Tax Revenue Page 4 of 5 property is sold, and the value of the property would return to full market value for the new owner." This part of the governor's proposal would undoubtedly shift the property tax burden to business and commercial property and to owners of residences that aren't going up in value. Sales Price Disclosure The governor's plan provides that"...actual sales price data would be disclosed...at the time of closing and sent to the appraisal district and the state comptroller. The data could only be used in a protest hearing and for the comptroller's annual property value study." Appraisal Board Accountability The governor called for an appraisal board made up of: 1. the county judge, 2. the mayor of the largest city in the county, 3. the mayor of another city selected by all other cities, 4. the president of the largest school board, and 5. the county tax assessor-collector. The board would be required to approve the appraisal roll so that "those responsible for spending property taxes also are accountable for how the money is raised." As the Fort Worth Star Telegram pointed out, bringing these elected officials into the picture "would bring the danger of political pressure on appraisals..." Unfunded Mandates The governor would assure that "cities and counties do not receive new unfunded mandates from state government."Thus far, the governor's office has provided no details on this initiative. (The most costly and unpredictable mandates, of course, are federal mandates. It is doubtful that the state government can do anything about them.) TML member 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. Back to Legislative Update Index http://www.tml.org/leg_updates/legis_update03 1704a cap.htm 3/17/2004 Governor Unveils Plan to Cap Municipal Property Tax Revenue Page 5 of 5 I LEGISLATIVE SERVICES J HOME I TEXAS LEGISLATURE ONLINE ©2004 Texas Municipal League Austin,Texas (512)231-7400 http://wwvv.tml.org/leg_updates/legis_update031704a_cap.htm 3/17/2004 Star Telegram 103/17/2004 I County officials say property tax cap is too costly Page 1 of 2 Search: StarTe]egraTrIic•orn (Articles-last 7 days for I ri News I Business I Sports I Entertainment I Living I Travel I Shopping I Classifieds I Jobs I Car. no purcburc n¢ceuury - — CI JOBS Back to Home > News > Wed nes ®CARS ®HOMES Fort Worth APARTMENTS NToday's Front Page ews 0 email this ,I,print this © license this • Breaking News Posted on Wed, Mar. 17, 2004 • News 2 Use Countyofficials •Fort Worth say Sponsored Links •Arlington property tax cap is too •Northeast costly Want to Volunteer? • Dallas/State •Nation By Amie Streater We can help you make a difference in your cc • Election 2004 Star-Telegram Staff Writer today! •World www.VolunteerMatch.org •Iraq FORT WORTH -Two Tarrant County •Weird News commissioners on Tuesday criticized the • Photos Support UCP today •Special Reports proposal Gov. Rick Perry unveiled last •Columnists week to cap local property taxes. and make a difference in the lives of people In www.ucp.org •Obituaries •Traffic The plan would put a cap on the amount •Weather Opinions of money local taxing entities could raise Grow wild •Cheer&Jeers each year. The limit would depend on the Discover how to turn your backyard into a wily • Letters to the editor amount raised in the previous year as well www.nwf.org Business as growth and inflation. Sports Entertainment Living Commissioners J.D. Johnson and Glen Whitley, both Republicans, criticized the Reput Classifieds governor's measure during the commissioners court meeting Tuesday, saying it woul' Archives local governments already hard-hit by unfunded state mandates. Contact Us Shopping "It's easy to say you're going to cap revenue especially when it isn't your revenue," V Johnson, who is also a member of the board of directors of the Texas Association of C Perry's proposal "is of grave concern to the TAC board and should be to all of us also. Johnson said the TAC board unanimously passed a resolution last week opposing the "It's going to be a property tax increase somewhere, some way, for somebody," John afraid it's going to be another one of those situations where the state is going to look money in the education fund but they are not looking at how it is going to affect cities Johnson said the measure would cost Tarrant County "several million" dollars a year. "We are all in favor of property tax reductions. but not to the point of crioplina aoverr http://www.dfw.com/m1d/dfw/news/loca1/8206943.htm 3/17/2004 Star Telegram 103/17/2004 I County officials say property tax cap is too costly Page 2 of 2 that is what we think could happen," Johnson said. Kathy Walt, the governor's spokeswoman, said other states, including Colorado, have implemented revenue caps. "There are protections in the governor's plan to allow for inflation and population gro% "In Texas, property taxes have exceeded the rate of inflation and population growth Walt said if there was a "valid public policy reason" to exceed the revenue cap in any voters could choose to do so under the governor's proposal. "His measures really do put a lot of power in the hands of people," she said. Perry has said that cities and counties would be protected from future unfunded man, Whitley and Johnson said Perry doesn't address the ones already in place. Johnson said homeowners would pay for the property tax cap through cuts in county services, which he said would be unavoidable under Perry's plan. "You can rob Peter to pay Paul for so long, but eventually Peter is going to run out of Johnson said. "In this case, we are Peter." Arnie Streater(817)390-7541 astreater@star-telegram.com n email this A print this © license this REAL C%:Jk<, lagw dl;ac�r,.c- News I Business I Sports I Entertainment I Living I Travel I Shopping I Classifieds I Jobs I cities -1,.,�; ;� � ... About the Real Cities Network I Terms of Use &Privacy Statement I About Knight Ridder I Cc http://www.dfw.com/m1d/dfw/news/loca1/8206943.htm 3/17/2004 03-17, State: Panel offers school finance suggestions Page 1 of 2 , R:. OG r ':. ' SS F'' ''' ITION 4 -- . - 2I ! � ; - Y�-. ;:Journal * Je*s'-J® 'irti ' n�� � I .corn for I i.A ro_duect of tlte)LBNGVIEW 1i - 01 r&&ij 4 Menu News News Obituaries 03-17, State: Panel offers school finance suggestions I Opinion Politics Associated Press Police Photos AUSTIN (AP)—Raising taxes on cigarettes to taxing video lottery machines were `f: 1 Sports among options a legislative committee offered to lawmakers Tuesday on how to raiser money for public education while easing the burden on homeowners now footing the High Schools tab through property taxes. p-. College I Professional The committee stopped short of making any recommendations, leaving that to Money lawmakers to decide during a special session on school finance. Gov. Rick Perry has sponsored by East said he will likely call a special session this spring. 146 Texas Professional Credit Union But some teachers and lawmakers said the report doesn't go far enough to ensure Stocks that all school districts will have equal access to funds under a new school finance { riCil Lottery system. new Living UOI Entertainment "If we do eliminate Robin Hood, my question is,what system will take its place and will we have as much or more equity than we have today?"asked Sen. Eddie Lucio,a Tiro Games Brownsville Democrat. Travel 1 Datebook The so-called Robin Hood school finance system has drawn fierce debate in the Health sponsored decade since its inception for its share-the-wealth method of funding. The state takes .4 by Open Imaging money from property-rich school districts and gives it to property-poor schools. Archives Schools in low-income areas have benefited, but many poor schools say they ` Weather continue to lag behind and need more money to provide a basic education to their To Fin students. National Classifieds Texas'$33 billion budget for K-12 education in 2004-2005 comes from federal, state Employment and local funds,with about 60 percent of the state's portion—more than$1 billion— Real Estate coming from property taxes. Automotive Merchandise The Joint Select Committee on Public School Finance was asked last year to suggest new ways the state could pay for public education. The committee submitted a report Shop&Save Tuesday that included these options: Advertisers —Expand or raise the state's 6.25 percent sales tax. One option calls for expanding the tax to include services, such as haircuts and legal representation. AHow To —Eliminate the franchise tax on businesses and replace it with a lower business tax Subscribe that would cover more businesses more fairly. Many corporations operating in Texas Buy a print ad now bypass the franchise tax by incorporating in another state.The new tax would cover all businesses that make$250,000 or more in Texas. Buy an online ad Ctaff riirartnry "The business tax is tax not fairly distributed."said Sen. Florence Shapiro. co-chair of .../1079498915.26609.4463.5520.html;COXnetJSessionID=AYg54g7CPNOly1 UO0NOt8yJcQ3/17/2004 03-17, State: Panel offers school finance suggestions Page 2 of 2 P ' the committee made up of House and Senate members. "Some are paying an Reach web staff inordinate amount while some are paying zero." Write to the editor —Raise the cigarette tax by$1 per pack, bringing the cost to about$4.50 a pack. Set my homepage —Tax video lottery terminals at horse and dog racing tracks,which could generate more than$1 billion, according to the state comptroller's office. The committee has set the goal of lowering the property tax cap by 50.to 75 cents per $100 property valuation,which would mean finding about$5 billion to$8 billion in lost revenue to replace the lower rates,.Shapiro said. Currently the cap is$1.50 per$100 property valuation and many districts are taxing at the cap. Shapiro, a Plano Republican, said any tax system adopted by the Legislature should have the capacity to grow with the population and economy. "Given this document, given all the work that was done,these are the options as we see it as a committee and good luck, Legislature,"she said. "Now the Legislature has • the responsibility to take this roadmap and craft legislation." Three South Texas lawmakers didn't sign the report—Lucio; Sen. Leticia Van de Putte, D-San Antonio; and Rep.Vilma Luna, D-Corpus Christi. © Email this page to a friend ©2004 Cox Newspapers, Inc.-The Longview News-Journal By using this service,you accept the terms of our visitor agreement and privacy policy. Registered site users,you may edit your profile. • .../1079498915.26609.4463.5520.htm1;COXnetJSessionID=AYg54g7CPNOly1 UO0NOt8yJcQ3/17/2004