Property tax decisions may keep cities and counties afloat following Hurricane Harvey
Hurricane Harvey is gone, but unfortunately, not forgotten as cities and counties move forward and find the funding to rebuild. Property owners will also recover, but will it be in a home that they might build much higher off the ground or one they are searching for in a part of town that didn’t flood? Regardless of the decision, their pre-damaged, taxable property was appraised at market value as of Jan. 1, 2017, and the bill is coming. According to Donald Lee, executive director of Texas Conference of Urban Counties, a property owner may get multiple bills or a higher total, depending on where they live in Texas. “There is a community college and hospital district where I live, so I pay taxes on those along with the city, county and school district,” said Lee. “In some parts of Texas, the tax base is very rich and the services are organized in a way that maximizes efficiency and their overall combined tax rate might be only 2.1 percent. Then there are other counties that don’t have a rich tax base with commercial/industrial property. Homeowners have to carry the whole load.”
Fort Bend County’s growth is outside of the cities, according to Lee, and the county has to be able to provide them with all of the services they need. Since the county is in southeast Texas along the Brazos River it floods and they need a levee. Fort Bend County has a levee district and emergency services district tax. “Now we have a municipal utility district and a school district on top of that (in a county like Fort Bend) and we could be talking $3.50 in overall tax rates compared to $2.20 for a similar home, similar type person in a suburb of some place like Dallas,” said Lee.
In Travis County is the city of Sunset Valley, and running through that city is Bodie Lane, a popular shopping area. According to the Travis Central Appraisal District’s website, the tax rate on this jurisdiction is 0.000000. Lee said that the homeowners in Sunset Valley don’t have a property tax because the sales tax accumulated from consumers who shop on Brodie Lane, basically covers the tax on properties.
For those who will be getting a tax bill in the mail, is there enough time to get damaged homes reappraised and at what cost? “There is a statute out there that would allow the governmental entities to request and pay for a reappraisal of damaged properties by the appraisal district,” said Lee. “But, I don’t believe there is enough time left in the tax schedule, or funds available, to do this massive reappraisal that would be required to look at all the damaged properties now.” There was a bill that the House passed during the 85th Legislative Session, House Bill 331, that stated if there was a natural disaster, homes would be reappraised. The bill was not passed by the Senate.
This week, the Harris County Commissioners Court voted to spend $20 million of county funds to purchase more than 200 homes that flooded during Hurricane Harvey and speed up what typically is a months-long process of applying for federal grants. The goal is to close on as many home purchases as possible by the end of October before residents engage in costly repairs and upgrades required by county regulations. Homes will be purchased that were substantially damaged in floodplains across unincorporated portions of the county like Cypress Creek, Greens Bayou and the San Jacinto River. The county expects to eventually be reimbursed by the federal government.
Lee says that it is too soon to tell if property values will suffer. “There is speculation and discussion that as flooded areas become less valuable, the areas that didn’t flood will become more valuable due to higher demand,” said Lee. “Maybe that will offset. That is yet to be seen.” Lee, who has lived in Houston, says that many homes flooded along the Brays Bayou in southwest Houston, a desirable place to live since it is near the downtown area. What about places like Rockport and Aransas Pass? “Most of these rural towns may have lost a significant portion of their tax base and they still need a lot of recovery expenses,” said Lee. “The state of Texas may need to tap into its rainy day fund and assist Rockport for a year or so. Aransas County is going to need some help.”
This week, Gov. Greg Abbott turned down a request by Houston Mayor Sylvester Turner for the state to tap into its $10 billion economic stabilization fund reserve, called the rainy day fund, to help pay for the recovery from Hurricane Harvey to avoid raising property taxes in the city. Abbot said that the state has already approved nearly $100 million for debris removal in Houston and implemented an accelerated reimbursement program for recovery efforts. He also said that he would pay any invoice submitted by the city within 10 days, and that city officials in Houston needed to tap into funds held by Tax Increment Reinvestment Zones. But the city claims those funds can only be spent in the districts where it was collected, and are largely intended for drainage projects to prevent future flooding. “The decision of whether to raise, lower, or keep property taxes the same following a disaster is uniquely local and depends on whether there are additional services needed by the citizens because of that disaster,” said Bennett Sandlin, executive director of the Texas Municipal League. “Cities’ cash reserves are typically 3-6 months of operating expenses. Those reserves rightly don’t contemplate 500 or 1,000-year events.”
The damage from Harvey also impacted several schools that have shut down until repairs are made. This is a concern for Texas because the state school finance system guarantees a school a certain amount of money per student. Schools get paid by their weighted average daily attendance (WADA), which is the state practice of providing extra money for schools based on the number of special needs students enrolled in a school district. The basic allotment is adjusted to take into account school district and student characteristics, such as limited English proficiency, disability and poverty. The number of kids that show up each day get counted and they are weighted. If schools are closed, that’s a weighted daily average of zero. “All of that has to be figured out to keep the school district going and they have to find money to rebuild the schools and get the mold out,” said Lee. “Hopefully those kids are off enrolled somewhere else. But the money may be going out of the school district, state or somewhere else. They are trying to prevent kids from losing half a year of school. That is the issue from a disaster of this magnitude.”
Have any cities in Texas ever received so much damage from a natural disaster that they just walked away because it was just too much to rebuild? This did happen to the city of Indianola in the 1800s. The city was located on Matagorda Bay and Powderhorn Bayou where it had been relocated to take advantage of deeper waters to accommodate steamships that had chosen this area due to ease of access from the Gulf. The decision to relocate on the beach front to the vicinity of Powderhorn Bayou, however, made the town more vulnerable to rising waters and storm surge from tropical storms and hurricanes. The hurricane of September 1875 caused extensive damage and loss of life in the town and it was only partially rebuilt by residents who felt strongly about keeping Indianola as their home. Only 11 years later in August of 1886 another hurricane brought havoc to this area of Texas and an end to this once prosperous frontier seaport.