1. William Lutz The Lone Star Foundation www.lonestarreport.org lutz@lonestarreport.org

2. The blame game The appraisal district says: “Don’t blame us when your taxes when up. It’s the taxing units’ fault. City councilor: “I cut your tax rate. It’s the appraisal that’s increasing your bill.” Both (and taxpayer-funded lobbyists): “Property taxes aren’t that big a problem. Your home/business is a special case – anomaly.”

3. Keys to stopping the blame game Know who does what Know what information is public Know your rights Get data from both Prove their both to blame Document it Disseminate the facts and hold elected officials accountable for what they – or their appointees -- do

4. Calculate the COMBINED effect of tax and appraisal changes

5. What you need Spreadsheet (preferably Microsoft Excel) Word processor Internet access Basic understanding of how property taxes work Tax bill or appraisal notice, showing what taxing unit your in

6. How to cut through the nonsense Calculate the AVERAGE taxpayer’s bill for home and business and explain how that’s changed over time What you need to make this calculation is public This cuts off the circular blame game and the argument that your property is an anomaly

7. How tax rates work

8. Tax rates are usually easy to find Look for the “nominal” tax rates – preferably for past 5 years The effective tax rate is a complicated mess used for purposes of state law. Not useful for this purpose. Ignore. Often the appraisal district website will have the tax rates posted. Texas constitution requires taxation be EQUAL and UNIFORM – there is only one tax rate per taxing entity Make sure you cover all the taxing units Texas tax rates are expressed per $100 of valuation. This is different from millage If all else fails, you can use the open records act to get rates

9. About ISD tax rates School tax rates are usually put on the appraisal district website in aggregate form. The rate has two components: Maintenance and Operations (M&O) and Interest and Sinking (I&S) Legally, these operate differently. M&O is set by school board, but I&S is set as a result of voter bond initiatives. It’s useful to calculate these separately. Many appraisals districts post these separately on website, but if not, school district almost always lists separately Don’t use TEA-website tax rate. These are not real rates people pay. These “rates” are used for purposes of allocating school funding.

10. This is the complicated part

11. Why I use school district data School taxes STILL account for about HALF of property taxes paid Usually, city and school district boundaries in large urban cities are close In a suburban area like Cy-Fair, one might calculate a neighborhood average, rather than a city or overall average For homes, the school taxable value is usually less than the city/county taxable value, meaning that you’re giving the taxing entities the benefit of the doubt – and they’ll still end up looking bad.

12. Taxable values vs. market values Taxable values Market values The portion of the market value upon which taxes are paid Can vary for a given property based on the taxing unit Appraisal cap is taken out of taxable value, as is over-65 freezes and disabled freezes Homestead exemption is deducted from this. The appraisal district’s estimate of the total value of the property – no carve-outs Same for all taxing units

13. A few other notes For business property, market and taxable value are almost always similar For the average home, there usually isn’t much difference between the school homestead exemption and the 20% local value homestead exemption offered in the Dallas area

14. The Homestead Exemption It’s like the standard deduction on your income tax It’s a portion of the value of the home that isn’t subject to taxation For schools, it’s a flat $15,000 – mandatory For cities and counties, it’s optional and a percentage of value – up to 20 percent of value Does not apply to business property

15. Comptroller’s Property Value Study Required by state law Designed to protect integrity of school finance system Actually puts pressure on appraisal districts to jack up appraisals To prepare study, the comptroller characterizes property into several common categories What’s useful in this context is that appraisal districts are required by law to report total value by state use category for all taxing units In other words, you can file a Public Information Act request for total property value

16. Key State Use Codes A: Residential (homes, not apartments) A1: Single-family homes F1: Commercial (strip centers, convenience stores, gas stations, etc). Possible: L1: Business Personal Property (desks, cars, computers, etc. used by a business to produce income)

17. Public Information Act Found in Chapter 552, Government Code Government has 10 days to respond Request must be in writing. If faxed or emailed, must be to designed address. Appraisal districts subject to Public Information Act While not required, use this magic phrase “This letter is a request for Public Information, pursuant to Chapter 552, Government Code.” If you have problems, mention that this information is required to be reported to comptroller. If push comes to shove, one can file request for reports to comptroller

18. Sample request(based on Houston) To: Mr. Jim Robinson, Chief Appraiser, Harris County Appraisal District. Dear Mr. Robinson, This letter is a request for Public Information pursuant to Chapter 552, Government Code. Please Send the following: the total TAXABLE value for the Houston Independent School District for the past five tax years for State Use Categories A1 and F1 and the number of parcels in each category. I am willing to pay up to $40 in copying and postage costs. If the costs of this request exceed this amount, please obtain my approval before proceeding further. Sincerely …

19. WHAT DO WE DO WITH IT??

20. It will take Microsoft Excel or something similar to crunch all these numbers.

21. First, calculate the average appraisal in each category Divide total value in each category by number of parcels for each year Keep business and residential property separate, as they are taxed in different rules Percent change in appraisal is also a useful number (For reference, percent change is the [new value minus the old value] divided by the old value i.e. (New-Old)/Old

22. Next add the tax rates Add tax rates for each year and each taxing unit Remember, the tax rate is uniform – same for business and residential Again, percent change is a useful number It helps to keep M&O and I&S separate

23. THIS IS THE KEY EQUATION. MASTERING IT IS THE KEY TO UNDERSTANDING PROPERTY TAXATION.

24. IN OTHER WORDS: Tax Bill = (Taxable value/100) * Rate Use this equation in your spreadsheet

25. Final summary: the real numbers For each year and type of property, multiply the appraisal divided by 100 by the tax rate. Definitely calculate percent change for each year Total dollar amount for all units to calculate estimated total bill Put numbers in a summary report I use the school district average value for all school districts, but it is possible (but a lot of work) to use separate averages for cities and counties

26. Why I use average values Average values Total levy Require some calculations with spreadsheet Closely related to what real people actually pay Comes up with a dollar figure that makes this real for average people Excludes many types of property that are special cases Easy to determine – in truth in taxation notice and reported to comptroller Covers entire amount of tax revenue – all property Number hard to identify with – It’s a large number

27. QUESTIONS, Anyone?