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Part II:
Focus on School Taxes

In 2004, 1,031 Texas independent school districts (ISDs) reported their property tax rates, levies, and values to the PTD. The ISDs reported an average adopted tax rate of $1.558 and more than $18.5 billion in tax levies on a total property value of $1.1 trillion (assigned by the PTD). That average tax rate increased less than one cent since 2003 while the levy increased almost $1.3 billion (7.4 percent), and taxable property values increased by more than $66 billion, or 6 percent.

The ISD reports do not include local school taxes by special county equalization districts and South Texas ISD, a school district that operates tuition free magnet schools for students in a three-county area. Tax rates reported are per $100 of property value.

School Tax Rates

The 2004 average statewide tax rate increased not quite 1 cent above the 2003 average rate. About 25 percent of Texas school districts reduced their local adopted tax rates, 40 percent kept the same rate and the remaining 35 percent of the districts increased their rates.

The 2004 simple average statewide tax rate was $1.558 per $100 of value. The 2003 simple average statewide tax rate was $1.552 per $100 of value, a 2 cent increase above 2002’s average rate.

This simple average rate calculation uses the adopted tax rates divided by the number of ISDs reporting.

Table 10 provides rate change information for school districts, showing that more and more school districts are reaching their full tax rate capacity of $1.50 for maintenance and operations (M&O) and $0.50 for interest and sinking (I&S). The M&O rate covers general operating costs such as teacher salaries and maintenance of school buildings. The I&S rate, which is usually called the “debt” rate, is used to repay a district’s debt for voter-approved bonds to build instructional facilities.

Table 10: Changes in ISD Tax Rates Between 2003 and 2004
  Number of ISDs Percentage of All ISDs
Increase of more than $0.15 27 3%
Increase of $0.10 to $.1499 28 3%
Increase of $0.05 to $0.0999 101 10%
Increase of more than $0.00 to $0.0499 206 20%
No Change 409 40%
Decrease of more than $0.00 to $0.0499 179 17%
Decrease of $0.05 to $0.0999 35 3%
Decrease of $0.10 to $0.1499 18 2%
Decrease of more than $0.15 28 3%
Source: Carole Keeton Strayhorn, Texas Comptroller of Public Accounts, Property Tax Division.


Table 11 reflects the range of tax rates adopted by ISDs. The rates ranged from a low of $0.7803 per $100 of value in Kelton to a high of $2.00 in Katy and McKinney ISDs.

Table 11 - What was the range of 2004 ISD rates in Texas?
Total ISD Rate Number of ISDs Percentage of All ISDs
Less than $1.00 4 0.4 percent
$1.00 to $1.20 14 1.4 percent
More than $1.20 to $1.40 93 9.0 percent
More than $1.40 to $1.50 308 29.9 percent
More than $1.50 to $1.60 248 24.1 percent
More than $1.60 364 35.3 percent
Total 1,031 100 percent
Rates are based on $100 of property value.
Source: Carole Keeton Strayhorn, Texas Comptroller of Public Accounts, Property Tax Division.

Only four districts had adopted tax rates of less than $1.00, the same number as in 2003.

About 40 percent of the districts—or 415—had combined rates between $1.00 and $1.50 per $100 of value. The remaining 612 districts, or 59 percent, had rates range from above $1.50 to the high of $2.00.

The state’s 2004 simple average M&O rate for ISDs was $1.447, while ISDs’ debt rates averaged $0.115.

As indicated above, state law caps the M&O rate at $1.50. School boards in 506 ISDs—about 49 percent—adopted an M&O rate at the rate cap, compared to 489 ISDs, or about 47 percent in 2003. Another 32 percent—or 330 districts—have M&O rates of at least $1.40 but less than $1.50, compared to 2003 when 333 districts, or 32 percent, had M&O rates in that range.

Seven school districts in Harris County that are allowed to adopt tax rates above the $1.50 cap have done so. Prior to the enactment of the $1.50 cap, the voters in these districts authorized M&O rates above $1.50. The seven districts were Aldine, Deer Park, Galena Park, North Forest, Pasadena, Spring Branch and Katy ISDs. Katy ISD is located in both Harris and Waller Counties.

About 30 percent—or 301 districts—do not have a 2004 debt rate for repaying debt obligations. Of the 730 ISDs with debt rates, eight districts have a debt rate of $0.40 or more. McKinney ISD in Collin County set the highest debt rate at $0.50. With its M&O rate of $1.50, the district’s total rate was $2.00.

School Tax by Property Type

Note: The PTD changed its methodology for calculating school property tax burden by category of value in 2004. Electronic data submitted by CADs is now being used to estimate the distribution of exemptions across property value categories, and some of the categories have been re-classified according to type of property value. Residential inventory is now included in “Business Properties.” Manufactured Homes and Farm and Ranch Improvements have been moved into the “Residential Properties” section. Comparisons between the groups of property have been omitted from this report because of the discontinuity this year.

In 2004, residential property, including single-family homes, multi-family units, farm and ranch improvements, and mobile homes continued to pick up the greatest share of the school tax burden. Texas residential properties represented the largest category of property at almost 52 percent of the total amount in school taxes.

Businesses paid 43 percent of local 2004 school taxes.

Owners of single-family residences paid more than 44 percent of local school taxes and collected their 2004 school property taxes grew by $430 million. The typical homeowner has seen the average home’s taxable value (allowing only for the standard $15,000 school homestead exemption) increase from $81,590 in 2003 to $86,610 in 2004, more than a 6 percent increase.

Texas businesses paid about $8 billion in 2004 local school taxes. Commercial real estate bore the largest burden of all the business properties, paying about $3 billion, or 16 percent of the total tax burden. Taxes on commercial personal property were about half as much as taxes on commercial real estate, almost $1.5 billion. The next largest tax burden was on industrial real property at more than $1 billion, followed by oil and gas at $880 million, industrial personal property at $840 billion, utilities $670 billion, residential inventory at $90 million, and special inventory, which paid $60 billion.

Vacant lots, and rural acreage generated just under 5 percent of local school taxes with about $910 million in school property taxes.

Table 12 shows Texas properties grouped into four main property types: residential, business, acreage/lots/farm & ranch improvements and other personal property. The fourth type—other personal including privately owned vehicles in school districts where they are taxed—represented less than one-quarter of 1 percent of total school taxes at $4 million.

Table 12 - School Property Tax Burden - 2003 to 2004 (in billions)
Property Category 2003 School Taxes * % of Total 2004 School Taxes % of Total $ Change 2003 to 2004
Residential
Single-Family Homes 7.73 44.82% 8.16 44.10% 0.43
Multi-Family Residential 0.92 5.34% 0.95 5.13% 0.03
Mobile Homes and Other Personal 0.08 0.47% 0.07 0.38% (0.01)
Farm and Ranch Improvements 0.33 1.92% 0.42 2.27% 0.09
Acreage/Lots
Vacant Lots 0.46 2.66% 0.48 2.58% 0.02
Acreage 0.39 2.29% 0.43 2.30% 0.04
Business Properties
Commercial Real Estate 2.88 16.69% 2.97 16.04% 0.09
Commercial Personal 1.30 7.56% 1.48 5.47% 0.18
Industrial Real Estate 1.05 6.08% 1.01 7.98% (0.04)
Industrial Personal 0.76 4.41% 0.84 4.55% 0.08
Oil and Gas 0.60 3.50% 0.88 4.75% 0.28
Utilities 0.62 3.63% 0.67 3.63% 0.05
Special Inventory 0.04 0.22% 0.06 0.31% 0.02
Residential Inventory 0.07 0.39% 0.09 0.49% 0.02
Other
Vehicles 0.00 0.02% 0.00** 0.02% 0.00
Total*** 17.23 100.00% 18.49 100.00% 1.26
Numbers may not add due to rounding.
* Allocation of tax estimates to property categories based on values, exemptions and tax levies (not collections) reported by school districts.
** Vehicles represent less than one quarter of one percent of total taxes paid.
*** Does not include taxes collected for County Equalization or South Texas ISD.
Source: Carole Keeton Strayhorn, Texas Comptroller of Public Accounts, Property Tax Division.

2004 School District Property Value Study

The PTD assigned more than $1.1 trillion worth of taxable property value to Texas school districts in 2004 for the purpose of funding schools. This was an increase of more than 6.2 percent, or roughly $66 billion more taxable value than in 2003.

ISD property values were up for the 12th year in a row, based on numbers from the Texas Comptroller’s property value study (PVS). School property values have continued to rise since the 1992 study findings.

Texas Comptroller Carole Keeton Strayhorn certified the final determination of school property values—based on the appraisal date of January 1, 2004—to Education Commissioner Shirley Neeley on July 1, 2005.

The Education Code requires the Texas Education Agency to use the Texas Comptroller’s annual estimates of individual school district taxable wealth to determine state aid payments. The Comptroller’s findings in Table 13 may be obtained by ordering the agency’s School and Appraisal Districts’ Property Value Study – 2004 Final Report. Individual school and appraisal district findings are also available on the Comptroller’s Web site at http://www.window.state.tx.us/taxinfo/proptax/.

Table 13: Statewide School District Assigned Taxable Values 2003 vs. 2004 (in billions)
  Property Category 2003 Final Value 2004 Final Value % Change $ Change
A. Single-family Residences $ 593.67 $638.13 7.49 % $44.46
B. Multi-family Residences 55.25 56.62 2.48 1.37
C. Vacant Lots 27.40 28.34 3.44 0.94
D. Rural Real 53.82 56.08 4.21 2.26
F1. Commercial Real 174.78 178.59 2.18 3.81
F2. Industrial Real 67.43 67.10 (0.49) (0.33)
G. Oil, Gas, Minerals 39.47 51.89 31.47 12.42
J. Utilities 38.89 39.77 2.26 0.88
L1. Commercial Personal 86.31 92.22 6.85 5.91
L2. Industrial Personal 55.59 58.74 5.66 3.15
M. Other Personal 5.36 5.43 1.26 0.07
N. Intangible Personal & Uncertified 1.21 0.46 (61.58) (0.75)
O. Residential Inventory 4.90 5.34 8.92 0.44
S. Special Inventory 3.51 3.39 (3.45) (0.12)
  Subtotals 1,207.59 1,282.10 6.17 74.51
Homestead $15,000 65.55 67.18 2.49 1.63
Homestead $10,000 11.24 11.70 4.08 0.46
Disabled Veteran 1.31 1.38 5.29 0.07
10% Capped Homesteads 10.91 9.25 (15.26) (1.66)
65+ Tax Ceiling Loss Value 38.56 43.37 12.47 4.81
Abatements 0.06 0.04 (34.00) (0.02)
Tax Increment Financing 4.95 5.92 19.68 0.97
Freeport Exemption 10.84 13.15 21.33 2.31
Pollution Control 5.48 5.59 1.96 0.11
Deferred Payment 0.63 0.66 4.57 0.03
Other Exemptions 0.20 0.23 12.62 0.03
Less Total Exemptions $149.73 $158.47 5.83% $8.74
Total Taxable Value $ 1,057.86 $1,123.63 6.22% $65.77
NOTE: Totals may not add because numbers are rounded.
Source: Carole Keeton Strayhorn, Texas Comptroller of Public Accounts, Property Tax Division.

While there are 1,031 school districts, the Comptroller’s certification is for 1,048 districts because some school districts’ values are divided among more than one appraisal district.

The Comptroller certified the school district’s local tax roll values in 1,043 of the 1,048 studied school districts. They accounted for about $1.12 trillion in taxable value, or more than 99 percent of the total taxable value in Texas.

In 5 of the 1,048 studied districts, local tax roll values were outside the agency’s 5 percent margin of error. The Comptroller certified the state value determination for those 5 districts which exceeded the local value determinations by a total of almost $96 million.

Grace Period

The final PVS findings resulted in the eligibility of 57 school districts for the “grace period” provided by Tax Code 5.102. These 57 districts are located in 35 CADs and represent about $31 billion in taxable value. Eleven of these districts were in their second and final year of the “grace period.” Eligible school districts receive a two-year reprieve from the loss of state aid resulting from state value findings in the annual study.

The law requires the Comptroller to conduct a mandatory appraisal standards review of the appraisal district with school districts eligible for the “grace period.” The final 2004 PVS findings will result in the review of 25 appraisal districts that perform appraisals for 34 of the eligible ISDs.

Property Value Trends

For tax year 2004, taxable values increased in 933 school districts, with an average increase in value of more than 7 percent. In comparison, 764 school districts had an average increase in value of more than 8 percent in tax year 2002.

Values declined in 115 districts by an average of more than 2 percent from 2003 to 2004. In the preceding study, values declined by an average of less than 6 percent in 284 school districts. Fewer districts declined in value this year than in previous years due to a rebound in mineral values in 2004.

The final 2004 study, before exemptions, revealed an increase of more than 7 percent in the value of single-family residences, following an increase of almost 11 percent in 2003 and 12 percent in 2002. This category is the largest in appraised value, representing 50 percent of the total school district appraised values.

Multi-family residence values increased more than 2 percent in 2004, following a 3 percent increase in 2003.

Changes in business properties’ values varied, depending on the type. Commercial real property increased about 2 percent, following an increase of 3 percent from last year. Industrial real property saw appraised values decrease less than 1 percent, following a 4 percent decrease in 2003.

Industrial personal property gained almost 6 percent, compared to a 2 percent increase in 2004. Commercial personal grew by almost 7 percent following a decrease of less 1 percent in 2003.

Utilities increased more than 2 percent in value from 2003 to 2004, after a decrease of more than 5 percent in 2003. Oil, gas and minerals have seen both ups and downs in recent years. After dropping for two years in a row, this category grew by more than 31 percent in 2004.

Residential inventory, which is residential property held for sale by the developer, experienced a fourth year of increase in value, increasing more than 9 percent. Special inventory, which is inventory value of motor vehicle, boat, heavy equipment and manufactured housing that dealers are required to report to appraisal districts and county tax offices, decreased more than 3 percent.

Intangible personal and uncertified property included miscellaneous properties listed on the local tax rolls.

Exemptions

The final 2004 study findings also demonstrated that school districts’ exemptions and abatements increased almost 6 percent from the final 2003 study. The total 2004 amount exceeded $158 billion and was more than $8.7 billion above 2003.

Homestead exemptions accounted for about 84 percent of all exemptions. Those exemptions include the state mandated $15,000 exemption for general homeowners, the state-mandated $10,000 exemption for disabled or elderly homeowners, the school tax ceiling (or freeze) for over-65 homeowners, the capped value on homesteads and deferred homestead payments.

Government Code Section 403.302 specifies the exemptions and productivity value loss for special appraisals that the Comptroller deducts from market value to determine the taxable value of property in school districts.