Focus on Local Taxes Statewide
Texas local units of government rely heavily on property tax to fund their operations. Nearly 4,000 separate taxing jurisdictions impose a property tax; these include counties, school districts, cities and special-purpose districts, such as junior colleges, hospitals, utilities, flood control and emergency service districts.
In addition to property tax, the Texas Constitution and Legislature empower local governments to impose, levy and collect other taxes and fees that supplement their operations.
The local property tax remains the largest tax assessed in Texas. Statewide, property taxes levied by local governmental entities exceeded $40 billion in 2009, the most recent year for which the Comptroller has reported data (Exhibit 1).
Tax Revenue in Texas by Source, 2009
|Type of Tax||
|Property Tax ||$40,034,355,798||47.80%|
|State Sales Tax||$21,014,065,089||25.09%|
|Local Sales Taxes||$5,903,570,177||7.05%|
|Other State Taxes||$16,808,387,924||20.07%|
Source: Texas Comptroller of Public Accounts and 2009 Annual Cash Report.
While local property taxes account for almost half of all tax revenue in the state, the state does not set property tax rates or collect property taxes.
The next-largest tax revenue source in Texas is the sales tax, which is imposed by both the state and local governments (except for school districts, which do not have authority to assess a sales tax). In 2009, combined sales tax collections totaled $26.9 billion, or 32.14 percent of all taxes collected in Texas. The bulk of that amount, $21 billion, went to the state, with local governments receiving $5.9 billion. Other state taxes, such as those imposed on motor fuels, cigarettes and utilities totaled $16.8 billion (20.07 percent). Local governments collect 48 percent of all taxes in the state, while state government takes in 52 percent.
Local Property Tax
The Texas Constitution sets out five basic rules for property taxes.
The first requirement is that property taxes must be equal and uniform. No single property or type of property should be taxed at more or less than its taxable value. Local officials must base property taxes on value. If, for instance, an individual's property is worth half as much as the property owned by his or her neighbor, then - everything else being equal - that individual's tax bill should be one-half of his or her neighbor's. In addition, an appraiser cannot appraise commercial property at 150 percent of market value while appraising residential property at 50 percent of market value.
Second, a local government must generally tax all property on its current market value - the price it would sell for when both buyer and seller seek the best price and neither is under pressure to buy or sell. The Texas Constitution provides certain exceptions to this rule, such as the use of productivity values for agricultural and timber land. This means that governments assess taxes based on the value of what the land produces, such as crops and livestock, rather than its sale value, which is usually higher. The Tax Code requires that taxable value be the lower of productivity or market value.
Third, each property in a county must have a single appraised value. This means that the various local governments that collect property taxes cannot assign different values to the same property; all must use the same value. The Legislature requires CADs in each county to try to guarantee that this occurs.
Fourth, all property is taxable unless federal or state law exempts it from the tax. These exemptions may exclude all or part of a property's value from taxation. Finally, property owners have a right to reasonable notice of increases in the appraised value of their property.
Local governments can assess and collect property taxes for two primary uses. First, they can collect a maintenance and operations (M&O) tax that is used primarily to pay for the day-to-day functions of the government. An interest and sinking (I&S) tax is collected to pay bonds, including interest, sold by the local entity to finance capital projects such as buildings, facilities or other infrastructure. The local government can only use these funds to pay principal and interest on bonds; to cancel and surrender bonds; and to pay the expenses of assessing and collecting these taxes. While I&S property taxes are not the only way for local governments to pay for infrastructure, it is one of the primary tools available for this purpose.
Local Property Tax Levies
In tax year 2009, Texas' local taxing units levied over $40 billion in property taxes, 2.7 percent more than in 2008 (Exhibit 2).
Property Taxes Reported by Unit Type, 2008 vs. 2009
Number of Units
|Percent Levy Change from 2008 to 2009|
Source: Texas Comptroller of Public Accounts.
Unlike other local governments, which can also collect sales taxes and fees, school districts' only source of tax revenue is the property tax. In 2009, the state's 1,025 school districts levied almost $21.8 billion in property taxes, or 54.4 percent of all property taxes levied in the state (Exhibits 2 and 3).
Cities collected the second-largest share of the property tax in 2009 - $6.59 billion, an increase of 2.2 percent from the 2008 levy. Counties followed closely behind with a property tax levy of $6.52 billion, 2.9 percent more than in 2008. The levy of special-purpose districts rose by 3.7 percent from 2008 to 2009, to $5.1 billion.
In the last 20 years, property taxes have grown at an average annual compounded rate of 6.58 percent from 1990 to 2009 (Exhibit 4).
During the same 20-year period, special purpose districts saw the highest rate of increase in property tax levies, with an average annual increase of 7.26 percent. Counties followed closely behind with an increase of 7.2 percent, school districts experienced annual compounded rates of 6.48 percent and cities had the lowest annual growth rate, at 5.9 percent.
Growth of the Property Tax by Unit Type, 1990-09
|Tax Year||Special Purpose District Levy||County Levy||City Levy||School Levy||Total Levy|
|Average Annual Increase||7.26%||7.20%||5.90%||6.48%||6.58%|
Source: Texas Comptroller of Public Accounts.
Keeping Check on Local Property Tax Increases
The Legislature has provided Texas taxpayers with a mechanism to limit the rate of taxation a local government may adopt. If local taxing units, other than school districts, adopt rates above a calculated rollback rate, taxpayers can petition for a rollback election.
A school district exceeding the rollback rate must hold an election automatically, without any need for a petition process. This allows its voters to decide whether to approve the adopted tax rate or to roll back the tax rate.
In 2009, 48 school districts exceeded the rollback rate, compared with 116 in 2008. Voters in 24 school districts rejected the tax rate proposed by the school board and in 24 elections voters ratified the board's proposed rate (Exhibit 5).
2009 School District Rollback Election Results
County (or Counties)
in Which the School District is Located
or Rolled Back)
|Aledo ISD||Parker||Rolled Back|
|Anson ISD||Jones||Rolled Back|
|Bryan ISD||Brazos||Rolled Back|
|Canutillo ISD||El Paso||Ratified|
|Cherokee ISD||San Saba||Ratified|
|City View ISD||Wichita||Ratified|
|Collinsville ISD||Grayson||Rolled Back|
|Dime Box ISD||Lee||Rolled Back|
|Everman ISD||Tarrant||Rolled Back|
|Frost ISD||Navarro||Rolled Back|
|Gunter ISD||Grayson, Collin||Ratified|
|Hempstead ISD||Waller||Rolled Back|
|Jonesboro ISD||Coryell||Rolled Back|
|Karnes City ISD||Karnes||Ratified|
|Lake Travis ISD||Travis||Rolled Back|
|Lorena ISD||McLennan||Rolled Back|
|Lovejoy ISD||Collin||Rolled Back|
|Millsap ISD||Palo Pinto, Parker||Rolled Back|
|Mission ISD||Hidalgo||Rolled Back|
|Paint Rock ISD||Concho||Ratified|
|Panther Creek Cons. ISD||Coleman||Ratified|
|Petrolia ISD||Clay||Rolled Back|
|Prairiland ISD||Lamar||Rolled Back|
|Premont ISD||Jim Wells||Rolled Back|
|Richland Springs ISD||San Saba||Ratified|
|San Augustine ISD||San Augustine||Rolled Back|
|San Elizario ISD||El Paso||Rolled Back|
|San Saba ISD||San Saba||Rolled Back|
|Santa Maria ISD||Cameron||Rolled Back|
|Santa Rosa ISD||Cameron||Rolled Back|
|Santo ISD||Erath, Palo Pinto||Rolled Back|
|Southland ISD||Garza, Lynn||Ratified|
|Sulphur Bluff ISD||Franklin, Hopkins||Ratified|
Source: Texas Comptroller of Public Accounts, 2009-10 Operations Survey.
A school district that adopts a tax rate above the rollback rate must hold a rollback election between 30 and 90 days after its board of trustees adopts the rate. The school district's election differs from that of other taxing units in that the school district must ask voters to ratify the school district's adopted tax rate. If a simple majority of votes cast in the election favors the adopted tax rate, it stands. If the voters disapprove the adopted rate, the school district's rollback rate becomes the adopted tax rate.
Appraisal districts reported that no cities or counties held rollback elections.
Appraised and Taxable Values
The Tax Code requires the Comptroller's office annual report on the operations of appraisal districts to include, for each appraisal district, county and school district, the following:
- total appraised values, assessed values and taxable values of taxable property by class of property;
- assessment ratio; and
- tax rate.
The Comptroller's office may also include the same information for other taxing units, such as cities and special purpose districts.
With a few exceptions described previously, the appraised value of property is based on an appraiser's opinion regarding a property's market value as of a certain date. Generally, the Tax Code defines appraised value as market value as of Jan. 1. Appraised value means the value as determined by Chapter 23 of the Tax Code.
Taxable value means the amount determined by deducting from appraised value, the amount of any applicable partial exemptions.
At least once every two years, the Comptroller's office must conduct a study in each appraisal district to determine the degree of uniformity of and the median level of appraisals by the appraisal district within each major category of property. Pursuant to this requirement the Comptroller's office developed the Property Classification Guide that CADs use to submit data to the Comptroller's office. Each CAD reports total appraised value in the following property categories:
|A||Real Property: Single-family Residential||Houses, condominiums and mobile homes located on land owned by the occupant.|
|B||Real Property: Multi-family Residential||Residential structures containing two or more dwelling units belonging to one owner. Includes apartments but not motels or hotels.|
|C||Real Property: Vacant Lots and Tracts||Unimproved land parcels usually located within or adjacent to cities with no minimum or maximum size requirement.|
|D1||Real Property: Qualified Agricultural Land||All acreage qualified for productivity valuation under Texas Constitution, Article VIII, 1-d or 1-d-1.|
|D2||Real Property: Non-Qualified Land||Acreage that is not qualified for productivity valuation and is rural in nature.|
|E||Real Property: Farm and Ranch Improvements||Improvements associated with land reported as Category D property, including all houses, barns, sheds, silos, garages, other improvements associated with farming or ranching and land separated from a larger tract for residential purposes.|
|F1||Real Property: Commercial||Land and improvements devoted to sales, entertainment or services to the public. Does not include utility property, which is included in Category J.|
|F2||Real Property: Industrial||Land and improvements devoted to the development, manufacturing, fabrication, processing or storage of a product, except for utility property included in Category J.|
|G||Oil, Gas and Other Minerals||Producing and non-producing wells, all other minerals and mineral interests and equipment used to bring the oil and gas to the surface, not including surface rights.|
|H||Tangible Personal Property: Nonbusiness Vehicles||Privately owned automobiles, motorcycles and light trucks not used to produce income.|
|J||Real and Personal Property: Utilities||All real and tangible personal property of railroads, pipelines, electric companies, gas companies, telephone companies, water systems, cable TV companies and other utility companies.|
|L1||Personal Property: Commercial||All tangible personal property used by a commercial business to produce income, including fixtures, equipment and inventory.|
|L2||Personal Property: Industrial||All tangible personal property used by an industrial business to produce income, including fixtures, equipment and inventory.|
(M1 and M2)
|Mobile Homes and Other Tangible Personal Property||Taxable personal property not included in other categories, such as mobile homes on land owned by someone else. It also may include privately owned aircraft, boats, travel trailers, motor homes and mobile homes on rented or leased land.|
|N||Intangible Personal Property||All taxable intangible property not otherwise classified.|
|O||Real Property: Residential Inventory||Residential real property inventory held for sale and appraised as provided by Tax Code Section 23.12.|
|S||Special Inventory||Certain property inventories of businesses that provide items for sale to the public. State law requires the appraisal district to appraise these inventory items based on business's total annual sales in the prior tax year. Category S properties include dealers' motor vehicle inventory, dealers' heavy equipment inventory, dealers' vessel and outboard motor inventory and retail manufactured housing inventory.|
Source: Texas Property Tax Assistance Property Classification Guide.
Appraisal District Values
In 2009, CADs continued to appraise property with uniform results and close to market value. Market value is the price at which a property would transfer for cash or its equivalent under prevailing market conditions, if:
- it is exposed for sale in the open market with a reasonable time for the seller to find a purchaser;
- both the seller and the purchaser know of all the uses and purposes to which the property is adapted and for which it is capable of being used, and of the enforceable restrictions on its use; and
- both the seller and purchaser seek to maximize their gains and neither is in a position to take advantage of the other.
The median appraisal ratio measures how closely a CAD's typical appraisal is to market value. A median is a statistical measure of central tendency, which is the middle number in a group of numbers ranked from highest to lowest. If the sequence of numbers has an even number of entries, the median is the average of the two middle numbers.
According to the 2009 Property Value Study (PVS), the CADs' median appraisal ratio for market value was 99 percent. Exhibit 7 compares the statewide median appraisal ratios from the PVS for 1999 through 2009.
Statewide Median Appraisal Ratios, 1999-09 PVS
|A: Single-family Residences||98%||98%||97%||98%||99%||99%||98%||98%||98%||98%||99%|
|B: Multi-family Residences||98%||98%||99%||98%||98%||98%||98%||97%||97%||99%||99%|
|C: Vacant Lots||100%||100%||100%||100%||100%||100%||100%||100%||100%||100%||100%|
|D: Rural Real||98%||98%||98%||99%||99%||98%||99%||99%||99%||98%||99%|
|F1: Commercial Real||98%||97%||98%||98%||98%||97%||97%||97%||96%||97%||97%|
|G: Oil, Gas, Minerals||102%||103%||99%||101%||100%||100%||101%||102%||100%||100%||102%|
|L1: Commercial Personal||100%||100%||100%||100%||100%||100%||100%||100%||100%||100%||100%|
Source: Texas Comptroller of Public Accounts, 2009 PVS.
Exhibit 7 does not include figures for the following categories, because they are not sampled:
- F2: Real Property - Industrial;
- L2: Personal Property - Industrial;
- M: Mobile Homes and Other Tangible Personal Property;
- O: Real Property - Residential Inventory; and
- S: Special Inventory.
CADs annually submit data to PTAD electronically that cover critical aspects of their appraisal work. Each CAD reports total appraised value in the property categories developed by the Comptroller's office (Exhibit 10).
2009 Market Value of Taxable Property by Category of Property, CADs
Total Market Value
of Taxable Property
|Percent of Total Market Value|
|A. Real: residential, single-family (properties)||6,776,678||937,139,606,029||43.49%|
|B. Real: residential, multifamily (properties)||151,178||87,384,447,438||4.06%|
|C. Real: vacant lots/tracts (lots)||1,658,044||45,231,166,746||2.10%|
|D1. Real: qualified ag land (acres)||143,932,338||213,157,133,952||9.89%|
|D2. Real: non-qualified land (acres)||18,200,239||21,640,311,834||1.00%|
|E. Real: farm and ranch improvements (parcels)||612,171||46,167,247,956||2.14%|
|F1. Real: commercial (properties)||459,356||298,582,186,772||13.86%|
|F2. Real: industrial (properties)||23,900||89,841,501,454||4.17%|
|G1. Real: minerals oil and gas (leases)||3,816,491||108,237,710,549||5.02%|
|G2. Real: other mineral reserves (properties)||53||75,794,130||0.00%|
|G3. Real: non-producing minerals (properties)||2,867||7,610,393||0.00%|
|H. Tangible, non-business vehicles (accounts)||15,423||175,650,989||0.01%|
|J. Real and tangible personal: utilities (companies)||149,592||58,091,602,660||2.70%|
|L1. Personal: commercial (properties)||874,778||129,804,342,456||6.02%|
|L2. Personal: industrial (properties)||85,426||99,476,072,397||4.62%|
|M1. Mobile homes (mobile homes)||333,758||5,638,166,046||0.26%|
|M2. Other: tangible personal (accounts)||770||33,127,498||0.00%|
|N. Intangible personal (accounts)||5||45,870||0.00%|
|O. Real property, inventory (properties)||298,859||9,719,199,145||0.45%|
|S. Special Inventory (properties)||14,142||4,318,228,946||0.20%|
* Property categories are counted in a number of ways, such as properties, acres, leases, parcels, companies and accounts. The type of unit is in parenthesis in each category in the first column. No total is provided since they include different types.
Source: Texas Comptroller of Public Accounts, Appraisal District - Report of Property, 2009.
Full details of all appraisal values are available: