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ETR, Revenue Certification, Forecasting and BudgetingPerdue Brandon Fielder Collins & Mott, LLPDebbie Wheeler, Client Liaison, Austin

This Session•What is the Effective Tax Rate (ETR)? •What is the Rollback Rate?•What does the auditor have to do with or for these rates?•What happened to the tax $$$ projected? Where did they go?

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ETR and Rollback Rates•Comptroller’s Webpages at Property Tax Assistance Division, Truth-in-Taxation, under Assessment/Collection •2017 forms not posted; legislative changes?

TNT EvolutionPast 38 years,

Legislature took a simple Florida law in

1979 andTEXAS –

SIZED TNT.

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Ø County, Cities – Local Govt Code Ch. 140.010 (2014) & Ch. 26

Ø Special districts – Ch. 26, Tax CodeØ School districts (1999) – Education

Code Sec. 44.004 & Ch. 26Ø Water districts (2003) – Water

Code Sec. 49.236Ø Small units (rate $.50 or less for

$500,000 or less) – Sec. 26.052

Effective Tax Rate (ETR)Calculate rates before tax rate adoption. April 30 (ISD 7/1) & July 25 (all)Why calculate rates? Values up, rate down. Values down, rate up. “No tax increase - We didn’t change tax rate.” won’t work.

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ETR raises about same total $$$ as prior year on properties taxed in both years. 24 Steps! Total rate.

2016 taxes – lost taxes2017 value – new improvements

x $100

Lost 2016 taxes: new exemptions, new ag land; Gain: Add in court decisions & tax refunds for years preceding 2016 tax yearThis Year’s 2017 Value: New improvements & new personal property in them – generates +$$$;Uncertified properties with ARB

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ETR:Not required to publishbut have available for inspection.

ETR needed if taxing unit does not adopt rate by Sept 30, or 60 days after certified values.

Rollback RateCalculate 2 parts: Maintenance & Operations (M&O) Rate tied to last year’s taxes + 8% ($.04 ISD)+ Debt Service Rate (I&S) -upcoming payments on bonds & debt secured by property taxes.

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Data by Appraisal District* Certified taxable values* Properties under protest* Properties still being appraised* Homesteads with tax ceilings* New Improvements (Buildings)* New Exemptions and New Ag Value* Captured value – TIF / CERTZ

Data by County (Auditor)* Debt information for next budget* Unencumbered fund balance(s)* TIF / CERTZ payments* Additional sales tax for M&O * Increased Indigent Health Care* Increase to house state prisoners* County pollution problem

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Debt : Tax Code 26.012(7) & (8) (1) paid solely from property tax;(2) paid for more than one year; (3) not budgeted as M&O expense; (4) secured by property tax pledge.Estimated Debt Collection Rate: Certified by Tax Collector for 7/1 to 6/30 for all tax collections

Estimated Debt Collection Rate: If use less than 100%, track collections to see if projected collection rate was reached. If more collected, excess above is deducted from next year’s debt to lower next year’s debt rate.

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Unencumbered Fund Balances:Amount expected to be carried forward into next year’s budget that is not encumbered. Need for each fund: M&O and Debt.

$0 -- perfect budgeting? Spent every penny you had ?

TIF / CETRZ (County Energy Transportation Reinvestment Zone)v CETRZ Base Year – 2013 or 2014? v Zone boundaries & propertiesv Captured value above base value on real property per Sec. 26.03.v ETR Lines 14 and 16D (new improvements in Line 21 only)v $0 if value is + or below base value

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Sales Tax spent on M&OLocal sales tax to reduce property tax; Varies in what happens with sales tax and local values. Add full year of sales tax (4 qtrs) to M&O taxes.Deduct sales tax gain rate with 2017 values.

Enhanced Indigent Health CareNeed more M&O revenue above last year to provide indigent health care at the increased minimum eligibility standards, without state assistance.Take $$ spent 7/1/15 to 6/30/16, include state aid.Compare to 7/1/16 to 6/30/17.If more spent, that amount needed from local taxes has rollback protection.

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County Criminal Justice MandateCounty auditor certifies, based on info from county sheriff.Need more M&O revenue above last year to house state prisoners, less any state assistance.Take $$ spent for 12 months, include state aid.Compare to next 12 months.If more spent, that additional needed from local taxes has rollback protection.

Rollback Protection for Pollution Control Needed extra taxes to fix county pollution problem. Requires letter from TCEQ certifying problem and $$.

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County calculates rate for each county fund & adds together = Total effective and rollback rates.Counties vary from 1 to 3 funds:County General FundCounty Farm-to-Market (FMFC)County Special Road Fund

Effective & Rollback RatesAvailable in tax officeStatement of Increase/DecreaseAdopting ETR will be more or less $$ compared to last year taxes & +/- amount.

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Schedules of Certain ItemsFund Balances: M&O & I&S fundsDebt Schedule: Upcoming payments, using excess funds to lowerSales Tax: Expected revenueCriminal Justice Mandate: increase to keep state inmates in countyDept. or Function Transfer: rareEnhanced IHC Expenses: increase

After RatesTaxing unit’s duty to publish notice and hold hearings on tax increase. Varies by type of taxing unit.County publishes one ad –No hearings (no increase) ORwith 2 hearing dates

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County proposed rate equal or less than effective/rollback: No public hearing dates, publish ad with no dates:

Notice of Tax Year 2017Proposed Property Tax Rate

for [Name] CountyForm 50-818

County or City proposes higher rate than effective/rollback: Two hearings required

Notice of Tax Year 2017 Proposed Property Tax Rate

for [Name] CountyForm 50-819

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Notice of Tax Year 2017Proposed Property Tax Rate for

[Name] CountyProposed RateLast Year’s RateEffective RateRollback RateDetailed info, contact TAC info2 hearings – date, time, place

2016 Law Change added to Comptroller Notice 50-819:“The governing body of Name County proposes to use revenue attributable to the tax rate increase for the purpose of ____________.”

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Ø At least ¼-page ad in newspaper. Ø Must appear 7 days before first

hearing + on Website for 7 days.Ø Published and on Website by

September 1 (or 30 days after value certification)

Ø Not in classified/legal section. Ø Must have 24-point + headline.

Hearing DatesHeld on weekday, not holidays. 1st Hearing - 7 days after notice.2nd Hearing – at least 3 days after 1st hearing. Post open meetings notice for both. Quorum present. Members of public present their views. Announce date, time & place to adopt rate.

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Meeting to Adopt RatePost open meetings notice.Adopt budget before tax rates.Adopt in 2-parts: M&O and Debt for each Fund = Total.Wording by Tax Code Section 26.06. Language in adoption order using larger type if increasing M&O taxes. On Website, too.

2016 Law ChangeRequires 60% of commissioners court to vote for tax increase.

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Meeting to Adopt RateCounty quorum: at least 4 members must be present to adopt tax rate and at least 3 must vote for rate. County judge is a voting member.

Tx. Constitution County Rate Limits$.80 General; $.15 Special R&B;$.30 Farm-to-Market/Flood Control

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Deadline to Adopt RateTax Code Section 26.05(a) states rate must be adopted by: Sept. 30 or 60th day after taxing unit received appraisal roll (whichever is later). Failure to adopt by date results in adopting either ETR or last year’s rate, whichever is lower.

Failure to ComplyIf county fails to comply in GOOD FAITH, a property owner may seek injunction to stop tax rate adoption and/or sending of tax bills. Too late once substantiallyall tax bills are mailed.County: Exempt from injunction for publication process.

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Calendar of EventsFor Two Hearings:July 25 - Values from CAD Aug 7 or after – TAC calculate rates, submit to commissioners (NEED COUNTY INFO)______ - 72-Hour Open Mtg Notice______ - Commissioners court proposes rate; schedule 2 hearings if tax increase______ - Publish ad no later than September 1 or 30 days; no tax increase, post notice and adopt rate.

Calendar of Events______ - 72-Hour Open Mtg Notice______ - 1st Hearing Tax Increase with notice posted for at least 7 days ______ - 72-Hour Open Mtg Notice______ - 2nd Hearing Tax Increase, held no earlier than 3 days after first hearing______ - 72-Hour Open Mtg Notice______ - Meeting to Adopt Tax Rate 3-14 days after hearing. Adopt before Sept. 30 (60 days after certified values).

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Voters’ right to call for tax rate rollback election. Adopted tax rate exceeds calculated rollback rate. Section 26.07 – Units other than school district – petition requiredSection 26.08 – School district (no petition required) – tax ratification

County – Up to 3 Funds:Rollback petition is when sum of adopted rates for funds exceeds combined rollback rate. Do not look at individual rates for each fund.AG Op. #GA-0954, June 26, 2012

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Tax Rate Rollbackv Citizens organize petition drive.v 10% of registered voters must

sign petition if county levies less than $5 million for M&O purposes (not debt taxes).

v 7% must sign petition if county levies $5 million or more.

v Citizens submit petition within 90 days of rate adoption.

v Commissioners court determines if petition valid, pass order 20 days.

v If no action taken, petition is automatically valid.

v If petition not valid, county continues to collect taxes.

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v If petition is valid, call election.v Hold election within 30 to 90 days

from last day that could have ruled on petition’s validity UNLESS specified election date falls in the 30-to-90 day period.

v If election fails, county continues to collect taxes.

v If election passes (yes to roll back), commissioners adopt the rollback rate as current rate.

v Tax collector sends out new bills with extended delinquency date (# of dates between mailing of original and corrected bills).

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v Refund tax difference paid $1 or more within 60 days.

v Refunds of under $1, property owners must request in writing.

Auditor’s Role• Current law – info to County TAC or who calculates for the County timely – Need to have before Aug 7• Future law??

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Omnibus Bill – SB 2•Property Tax Reform & Relief Act 2017•Truth-in-Taxation Changes

Omnibus Bill – SB 2•Chief appraiser certifies July 10 (not 25), estimate is May 15 (not April 30) •TNT: “No-new-taxes” rate for ETR• 5% rollback increase; schools at 4 cents• Disaster area can be 8% increase• All rollback elections are ratifications, no petition required

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Omnibus Bill – SB 2•“No-new-taxes” rate & rollback rate submitted to County TAC/designee to certify as correct; written certification• Designated officer submits July 11 (not August 1) to governing body• Publishes rates in newspaper (or mails) July 27

Omnibus Bill – SB 2•Certified collection rate for debt not lower than the lowest actual collection rate in past 3 years (assessor or collector)•Additional sales tax needs certification from CFO or auditor paid for debt (?)•Comptroller rules on forms

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Omnibus Bill – SB 2•Adopt rate before Sept 30 or 60 days after receiving roll UNLESS•Adopting above rollback rate done by August 15. •Second notice 7 days (not 14th day).•New language for notices with TABLE

Omnibus Bill – SB 2•TABLE formatted specific way•Five Rows and Four Columns•Last Year & Proposed Rates, diff. $ and %•Avg HS Value & Avg Taxable, diff $ and %•Tax on Avg HS both years, diff $ and %•Total Levy both years, diff $ and %

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Omnibus Bill – SB 2•Ratification election held on November election date, order issued by August 15•County website with rate info, include worksheets for most recent 5 years beginning 2018; posted by August 1•No notices in Local Govt Code – back to Tax Code

More TNT Bills•HB 15 by Chair Bonnen, Ways & Means:“Texans who are tired of ever-increasing property taxes must take a more active role at the local level, where appraisals and tax rates are set,” Bonnen said .... “The Property Taxpayer Empowerment Act will give them the transparency and the tools they need to hold local officials accountable.”

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HB 15 similar to SB 2•No-new-taxes rate; 8% to 4% rollback; ratification •Chief appraiser confirms value totals; auditor/CFO certifies calculation correct. •Keeps counties & cities in Local Govt Code.

HB 15 similar to SB 2•Comptroller’s database by county, searchable by property address with acct #, MV, TV, unit, rates. •All units have website. •Chief appraiser sends August 7 notice to taxpayers about rate info on website.

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$$$ - Forecast & BudgetWhat happened to the tax $$$ we projected? Where did those $$$ go?

$$$ - Forecast & BudgetChanges to certified appraisal roll• Late filed homestead exemptions• Section 25.25 corrections• Failure to get notice• Court decisions / settlements• Tax deferrals

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???Debbie Wheeler

dwheeler@pbfcm.com(512) 302-0190 in Austin