Thursday, May 26, 2011 Hilton Anatole Hotel

Texas Property Taxes Presented by W. Ken Parsons, Senior Vice President Foy Mitchell Jr., Vice President Marvin F. Poer and Company Jason Marshall The Marshall Firm PC Ken Nolan, Chief Appraiser/Executive Director Dallas Central Appraisal District

Overview Overview of the Appraisal District Ken Nolan The Property Tax Protest Process Jason Marshall Property Taxes; Why We Should Like Them! Foy Mitchell 3

OVERVIEW OF THE APPRAISAL DISTRICT Ken Nolan, Chief Appraiser/Executive Director Dallas Central Appraisal District 4

Overview of the Appraisal District 5 Who Governs the Local Appraisal District How are they Chosen Three-fourths Rule Responsibilities of the Board of Directors How is the Appraisal District Funded Duties of the Appraisal District

Mass Appraisal 6 What it is Universe of the Dallas Central Appraisal District Characteristics of Mass Appraisal in Dallas

Market Value 7 How it is Defined Limitation on Appraised Value Various Approaches to Value DCAD Appraisal Techniques Audits

THE PROPERTY TAX PROTEST PROCESS Jason Marshall The Marshall Law Firm PC 8

The Property Tax Protest Process Introduction Background Appraisal District Appraisal Review Board 9

The Property Tax Protest Process What May Be Protested Who May Protest How Do You Protest 10

The Property Tax Protest Process Late Protests and Motions to Correct Protest Hearing Appeal of ARB Decisions Appeal to District Court Other Appeal Options Important Property Tax Protest Dates 11

PROPERTY TAXES; WHY WE SHOULD LIKE THEM! Foy Mitchell, Jr., Vice President Marvin F. Poer and Company 12

Texas Property Taxes: Where We Rank and Where We are Going How Important are Property Taxes to Texas? How Does Texas Compare to Other States? What Are Solutions to Rising Property Taxes? What is on the Horizon?

Revenue Sources for State of Texas

Total Texas Tax Collections for All Sources

Per Capita State & Local Taxes Paid by Texans, YearRateRankPer CapPer CapTotalPer Cap LocalOtherIncome % 43 $964 $434 $1,399 $17, % 43 $1,023 $448 $1,470 $18, % 44 $1,088 $460 $1,548 $19, % 44 $1,147 $480 $1,627 $19, % 44 $1,203 $501 $1,704 $20, % 44 $1,284 $510 $1,794 $21, % 44 $1,327 $527 $1,854 $22, % 44 $1,353 $527 $1,880 $23, % 45 $1,403 $549 $1,952 $25, % 45 $1,468 $574 $2,043 $27, % 45 $1,545 $590 $2,134 $29, % 45 $1,596 $618 $2,214 $30, % 45 $1,688 $636 $2,324 $32, % 44 $1,745 $610 $2,355 $31, % 45 $1,769 $635 $2,403 $31, % 45 $1,866 $667 $2,533 $33, % 45 $1,873 $824 $2,698 $35, % 47 $1,958 $951 $2,908 $38, % 45 $2,155 $959 $3,114 $40, % 46 $2,178 $1,014 $3,192 $41, % 45 $2,248 $949 $3,197 $40,498

Legislation Passed in * (We’re from Government and we’re here to help you!) HB 1: Cuts School Tax Rate over 2 year period from $1.50 to $1.00 for maintenance and operations. HB 3: Establishes “Margins Tax” * (And why this matters in 2011)

What Really Happened? * Tax Rate Cut: Required 50 cent reduction in operations tax rate over two years ( ) with a provision allowing a 4 cent increase over the required rate cut in 2006 and a 6 cent increase in Many schools exercised this option Other tax agencies (cities, counties, etc.) have absorbed some of the tax savings! *(And why this matters in 2011)

Sales Tax$19,630,305, (6.6) Motor Vehicle Sales/Rental Taxes 2,630,137, Motor Fuels Taxes3,041,973, Franchise Tax3,856,865,9354.4(9.3) Insurance Taxes1,324,703, Natural Gas Production Tax 725,538,3880.8(48.5) Cigarette and Tobacco Taxes 1,388,764,8731.6(10.8) Alcoholic Beverages Taxes 809,233, Oil Production Tax1,008,664, Inheritance Tax81,4580.0(95.9) Utility Taxes478,742,7390.5(7.7) Hotel Tax330,809,4360.4(3.7) Other Taxes143,080,9740.2(8.6) Total Taxes$35,368,901, (6.5 State of Texas Revenue Sources, 2010

Why This Matters Current Texas budget shortfall will cause drastic budget cuts to school districts. The state will use some of its $9.5 billion rainy day fund to offset some of the budget needs, but local schools will be faced with one of two choices! – Cut staff – Raise Taxes (after the Legislature rescinds the cap on Maintenance & Operations previously invoked with the passage of the Margins Tax). Who do you think gets blamed for the local tax increase??

We’re for “Good Government”! The very best environment for economic growth is in a community or state that provides necessary public services and benefits to its citizens : – In a cost effective manner – When and where the services/benefits are needed – And at a responsible level When these needs are met, private enterprise can flourish and prosper Tax burdens are minimized Job growth will occur

Solutions to Rising Property Taxes Appraisal Caps Revenue Limits for Local Government Substitution of Sales Tax for Property Tax Statewide Income Tax

Appraisal Caps Unintended Consequences of (Based on Historic Performance in States Where Applied): – Redistributes tax burden to those least able to pay – Creates dramatic economic inequities among classes of property – Penalizes new ownership – Discourages property development – Hampers local governments ability to provide expected services – Fails to deliver on promise to control rising taxes – Encourages local governments to levy multitudes of additional fees for services

Revenue Limits on Local Governments Local governments must have funds to provide services either required and/or demanded Some cost of local governments are outside their control (Inflation impacts them too) But, historic performance indicates they : (1.) do use the appraisal process for a revenue generator, (2.) have not historically emphasized budgetary responsibility Sensible legislation that provided for access to funds to offset legitimate cost increases, adjustments for inflation and changes in population could provide some control of rising local property taxes

Appraisal Caps Can Be Dangerous 25

Sales Taxes as an Alternative to Property Taxes Texas has one of the highest sales taxes in the nation Sales taxes do not distribute the burden equally, falling hardest on the poor Sales taxes currently yield $19.63 billion in revenue to the State and $5.9 billion to local government; property taxes yield $40.08 billion or roughly 157% of total state and local sales tax collections. What sales tax rate would be required to reduce property taxes?

This building paid an estimated $3,555,457 in local property taxes in It is owned by a company outside Texas! If we substitute a sales tax for the property tax, we give alien owners a $3.5 million tax break while passing the new sales tax burden to Texans!

Statewide Income Tax in Lieu of Property Taxes An income tax is probably the most equitable method of levying taxes The first member of the Legislature that seriously introduces this concept can count the number of days left in his term as the end of his political career. Texans appear to be that adamant about this subject

Summary of “Solutions” There is no simple nor easy solution to rising property taxes Property taxes have been in existence for over 6,000 years and will continue for some time to come To control rising property taxes we must: – Quit relying on them so much! – Insist on accountability and responsibility from our elected officials for their use with legislation that will insure that local tax entities must report factually and clearly of their intentions to raise taxes – Provide initiative and referendum in cases where irresponsible spending of local taxes has occurred – Insure that the property appraisal process is managed by capable and knowledgeable persons – Improve state oversight of the appraisal process – Provide for a fairer, easier, less costly appeals process with access to the court system when abuses have occurred – Demand that a fair balance in taxation exist between classes of property

What is on the Horizon During the Next Legislature? Continued Push for Appraisal Caps Revenue Limits Sales Disclosure Continued Attention to the Appraisal Process Continued Attention to the Appeals Process More Focus on Truth in Taxation