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Chapter 3

Focus on School Taxes

In 2006, 1,027 Texas independent school districts (ISDs) reported property tax rates, levies and values to the Comptroller's office. The ISDs reported an average adopted tax rate of $1.450 per $100 of appraised value and more than $20.9 billion in tax levies on a total appraised property value of $1.5 trillion. Because of the school district maintenance and operations (M&O) tax rate reductions required by House Bill 1, passed in the 79th Legislature, Third Called Session, the average tax rate decreased by 11.8 cents since 2005. While the average tax rate fell, the levy increased by almost $725 million (3.6 percent) because property values rose by more than $150.7 billion, or 12.5 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

Some 95.8 percent of Texas school districts reduced their local adopted tax rates in 2006; 1 percent kept the same rate; and the remaining 3.2 percent increased their rates. The 2006 average statewide tax rate was $1.450 per $100 of value, compared to the 2005 average statewide tax rate of $1.568 per $100 of value. The rate calculation uses the adopted tax rates divided by the number of school districts reporting.

Table 11 provides rate change information for school districts. School district tax rates have two components. The M&O rate covers general operating costs such as teacher salaries and school building maintenance. The interest and sinking (I&S) rate, usually called the "debt" rate, is used to repay school district debt for voter-approved bonds used to build instructional facilities. In a few school districts, increases in the I&S rate offset the decrease in the M&O rate required by House Bill 1, or even caused an overall rate increase.

TABLE 11: Changes in ISD Tax Rates Between 2005 and 2006

Increased Tax Rate Number of
School Districts
Percent of
All School Districts
Increase of $0.15 or more 11 1.07%
Increase of $0.10 to $.1499 2 0.19%
Increase of $0.05 to $0.0999 11 1.07%
Increase of $0.01 to $0.0499 9 0.88%
Total ISDs Increasing Tax Rates 33 3.21%
Did Not Change Tax Rate Number of
School Districts
Percent of
All School Districts
No Change 10 0.97%
Decreased Tax Rate Number of
School Districts
Percent of
All School Districts
Decrease of $0.01 to $0.0499 31 3.02%
Decrease of $0.05 to $0.0999 95 9.25%
Decrease of $0.10 to $0.1499 703 68.45%
Decrease of $0.15 or more 155 15.09%
Total ISDs Decreasing Tax Rates 984 95.81%

Source: Texas Comptroller of Public Accounts, Property Tax Division.

Table 12 reflects the range of tax rates adopted by ISDs for 2006. These ranged from a low of $0.90 per $100 of value in Kelton ISD to a high of $1.841 in McKinney ISD.

TABLE 12: Range of 2006 School District Tax Rates

Total School District Rate Number of
School Districts
Percent of
All School Districts
Less than $1.00 5 0.5%
$1.00 to $1.20 34 3.3%
More than $1.20 to $1.40 352 34.3%
More than $1.40 to $1.50 290 28.2%
More than $1.50 to $1.60 203 19.8%
More than $1.60 143 13.9%
Total 1,027 100.0%

Rates are based on $100 of property value.
Source: Texas Comptroller of Public Accounts, Property Tax Division.

Only five districts had adopted tax rates of less than $1, one more than in 2005.

In 2006, about 65.8 percent of the districts (676) had combined rates between $1 and $1.50 per $100 of value. The remaining 346 districts, or 33.7 percent, had rates range from about $1.50 to $1.841.

The state's 2006 average M&O rate for ISDs was $1.33, while ISDs' debt rates averaged almost 12 cents. About 26.2 percent of ISDs (269) did not have a 2006 I&S rate for repaying debt obligations. Of the 758 ISDs with debt rates, 14 districts had a debt rate of $0.40 or more. McKinney ISD, in Collin County, had the highest debt rate at $0.471. With its M&O rate of $1.37, the district's total rate was $1.841.

School Tax by Property Type

The Comptroller uses data the CADs submit electronically to estimate the distribution of exemptions across property value categories and to reclassify some of these categories according to type of property value. Residential inventory now is included in business properties. Manufactured homes as well as farm and ranch improvements are now included with the residential properties section.

The residential property category, including single-family homes, multi-family units, farm and ranch improvements and mobile homes, continues to bear the greatest share of the school tax burden. Texas residential properties represented 53 percent of the 2006 school tax levy, while single-family residences represented 46 percent. Their school property taxes rose by $500 million over 2005's result.

Business properties accounted for almost 43 percent of local 2006 school taxes, or about $9 billion. Commercial real estate bore the largest burden of all business properties, at 16 percent of the total tax burden or more than $3 billion. Taxes on commercial real estate totaled $1.4 billion. The next-largest tax burden fell on oil and gas properties, at more than $1.3 billion, followed by industrial real property at about $1.1 billion; industrial personal property at almost $1 billion; utilities at $620 million; residential inventory at $100 million; and special inventory at about $70 million.

Vacant lots and rural acreage generated just under 5 percent of school taxes, with about $950 million in school property taxes.

Table 13 shows Texas properties grouped into four main property types: residential, business, acreage/lots/farm and ranch improvements and other personal property. The fourth type, other personal property, includes privately owned vehicles taxed in school districts. It represented less than one-quarter of 1 percent of total 2006 school taxes at $3.3 million.

TABLE 13: School Property Tax Burden (in billions) - 2005 and 2006

Residential

Property Category 2005
School Taxes
Percent
of Total
2006
School Taxes
Percent
of Total
Dollar Value Change
2005 to 2006
Single-family Homes $ 9.1 45.0% $ 9.6 46.0% $ 0.5
Multifamily Residential $ 1.0 5.1% $ 1.0 5.0% $ 0.0
Mobile Homes and Other Personal $ 0.1 0.3% $ 0.1 0.3% $ 0.0
Farm and Ranch Improvements $ 0.5 2.3% $ 0.5 2.0% $ 0.0

Acreage/Lots

Property Category 2005
School Taxes
Percent
of Total
2006
School Taxes
Percent
of Total
Dollar Value Change
2005 to 2006
Vacant Lots $ 0.5 2.5% $ 0.5 2.6% $ 0.0
Rural Acreage $ 0.4 2.2% $ 0.4 2.0% $ 0.0

Business Properties

Property Category 2005
School Taxes
Percent
of Total
2006
School Taxes
Percent
of Total
Dollar Value Change
2005 to 2006
Commercial Real Estate $ 3.2 15.9% $ 3.4 16.2% $ 0.2
Commercial Personal $ 1.5 7.4% $ 1.4 6.8% $ (0.1)
Industrial Real Estate $ 1.0 5.0% $ 1.1 5.2% $ 0.1
Industrial Personal $ 0.9 4.6% $ 1.0 4.6% $ 0.1
Oil and Gas $ 1.1 5.6% $ 1.3 6.1% $ 0.2
Utilities $ 0.7 3.3% $ 0.6 3.0% $ 0.1
Special Inventory $ 0.1 0.3% $ 0.1 0.3% $ 0.0
Residential Inventory $ 0.1 0.5% $ 0.1 0.5% $ 0.0

Other

Property Category 2005
School Taxes
Percent
of Total
2006
School Taxes
Percent
of Total
Dollar Value Change
2005 to 2006
Vehicles $ 0.0 0.0% $ 0.0 0.0% $ 0.0
Total $ 20.2 100.0% $ 20.9 100.0% $ 1.1

Totals may not add due to rounding.
Allocation of tax estimates to property categories are based on values, exemptions and tax levies (not collections) reported by school districts.
Values do not include taxes collected for County Equalization or South Texas ISD.
Source: Texas Comptroller of Public Accounts, Property Tax Division.

Property Value Trends

For tax year 2006, taxable local values rose in 982 school districts, with an average increase in value of 14.5 percent. By contrast, 979 school districts experienced an average increase in value of more than 11.4 percent in tax year 2005.

Values declined in 45 districts by an average of 5.4 percent in 2006. In the 2005 tax year, values declined by an average of more than 4.5 percent in 67 school districts.

Property values of single-family residences, before exemptions, rose by 10.3 percent in 2006, following increases of more than 7.9 percent in 2005 and 7 percent in 2004. This category is the largest in appraised value, representing 49.1 percent of all school district appraised values.

Multifamily residence values rose by almost 10 percent in 2006, following an 8.8 percent increase in 2005.

Commercial real property increased 13.4 percent in 2006, following an increase of 8.4 percent in 2005. Industrial real property also saw appraised values rise by 13.3 percent, following a 1.9 percent increase in 2005.

Industrial personal property gained 10.5 percent in value in 2006, following a 10.5 percent increase in 2005. Commercial personal property values rose by 6.2 percent, compared to an increase of 4 percent in 2005.

Utilities increased in value by 3.3 percent in 2006, after an increase of 0.4 percent in 2005.

Oil, gas and mineral properties rose by 37.9 percent in 2006, after an increase of 29.9 percent in 2005.

Residential inventory, which is residential property held for sale by the developer, experienced its sixth year of rising average value, increasing by almost 17.6 percent in 2006. Special inventory, which is the inventory value of motor vehicles, boats, heavy equipment and manufactured housing that dealers are required to report to appraisal districts and county tax offices, rose by 7.3 percent.

School Districts Local Self Report Data - 2006

Texas Tax Code Section 5.09 requires the Comptroller's annual report to include, for each school district, the total appraised value by property class, the total taxable value and the tax rate. Table 14 shows that Texas' school districts had appraised values exceeding $1.5 trillion in 2006. Their taxable value, after deducting exemptions and other deductions, was $1.3 trillion. The combined school tax levy was more than $20.9 billion.

TABLE 14: School Districts Total Appraised Value

Property Categories

Category Value
A. Single-family Residential $ 759,169,259,174
B. Multifamily Residential 67,705,952,646
C. Vacant Lots 34,361,394,868
D. Rural Real 63,838,901,524
F1. Commercial Real 219,365,114,249
F2. Industrial Real 77,503,875,163
G. Oil, Gas & Minerals 92,956,699,234
H. Vehicles 248,380,847
J. Utilities 41,260,051,878
L1. Commercial Personal 101,873,871,465
L2. Industrial Personal 71,719,306,741
M. Other Personal 5,635,595,322
N. Intangible Personal 0
O. Real Property, Inventory 7,270,238,089
S. Special Property 4,259,258,748
Subtotal $ 1,547,167,899,948

Deductions

Category Value
Required Homestead Exemptions $ 83,970,355,728
Local Optional Percent Homestead Exemption 27,896,520,876
Local Optional Over-65 and Disabled Exemption 6,546,955,893
Other Deductions 26,071,393,299
Value Lost to Tax Freeze 33,257,279,855
Value Lost to 10% Homestead Cap 14,210,269,432
Taxable Value $ 1,355,215,124,865

Tax Levy

Category Value
Actual Levy $ 20,918,122,059

Source: Texas Comptroller of Public Accounts, Property Tax Division.

Table 15 lists school districts according to a six-digit numbering system used by the Texas Education Agency. The first three digits denote the county in which a particular school district is located. The last three digits identify the school district. The appendix groups school districts by county and lists counties in alphabetical order. To assist the reader in locating a particular school district, Table 16 provides an alphabetical index of school districts.

Table 15 presents total appraised value in 15 property categories for each school district. Definitions for each of these categories are included in Chapter 2. Appraised value represents the productivity value of qualified agricultural and timberland and the market value of all other property categories as of Jan. 1, 2006. Taxable value is the appraised value minus partial exemptions and other deductions.

Many school districts report little or no 2006 value in Category H, Tangible Personal Property: Nonbusiness Vehicles. Personal property not used to produce income, such as personal vehicles, is exempt from taxation unless a school district takes official action to tax it. Category M, Mobile Homes and Other Tangible Personal Property, represents the property value of other personal property such as manufactured homes. Although Category N, Intangible Personal Property, appears in this appendix, there is little or no intangible personal property value to tax.

Following the subtotal value for the property categories in each school district, the item labeled state exemptions shows the amount of appraised value that was not taxable because of state-mandated exemptions. This figure includes the homestead exemptions and disabled veteran's exemptions, but does not include the amount of value exempted for tax abatements; these are included in other deductions.

Local % Homestead Exempt Grant indicates whether the school district granted a local option percentage homestead exemption, and the percentage granted, if any. Local % Homestead Exempt Value shows the total amount of value not taxed because the ISD offers this local-option exemption. For 2006, 218 school districts granted local option percentage homestead exemptions ranging from 1 to 20 percent.

Local 65+/Disabled Value indicates the amount of value not taxed because of the local option exemption granted by the school district to homeowners who are more than 65 years old or disabled. During 2006, 195 school districts offered this exemption.

Other Deductions represents the taxable value lost to freeport exemptions, pollution control exemptions, tax abatements, exemptions for solar or wind power, economic development, low-income housing, historical exemptions and any other value on which the school district cannot collect taxes.

Value Lost to Tax Freeze represents value not taxable because CADs established tax ceilings for homeowners 65 or older or disabled.

Value Lost to 10 % Homestead Cap is the value loss for the limited homestead value restriction on increases in residential homestead appraised value of more than 10 percent per year since the homestead's last reappraisal.

Taxable Value reflects the deductions for all exemptions for each ISD and for the value lost to the tax freeze for homeowners aged 65 or older.

The table also shows the school districts' adopted tax rates and the actual levy reported by the school district. This may be different from a calculated levy, depending on local circumstances.

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