The Connection Between Property Tax and School Finance
As published by the Waco Tribune-Herald.
Few are the people who take delight in paying property taxes. Yet when we understand where our dollars go and have confidence they are being spent wisely on services and infrastructure of benefit to us all, the sting is lessened and, in fact, we may appreciate the quality of life and services they provide.
Nevertheless, when the growth of our tax burden outpaces the growth in our income, it can cause a strain that is more intimately felt. The same is true in the commercial sector. Businesses may be reluctant to make new hires (i.e., create jobs) or otherwise expand their business (which oftentimes includes a capital investment that boosts our tax rolls) if they face uncertainty on how their property taxes may increase from one year to the next.
In that vein, property-tax reform has been a battle cry of the last regular and special state legislative sessions. At the Greater Waco Chamber of Commerce, we stand with our members and businesses in calling for policy solutions that will offer true and meaningful property-tax relief and reform. Businesses experiencing a 200 percent increase in land valuations will not support the sustainable growth and development so many in our community have worked so long and so intentionally to foster. To discuss what those meaningful solutions could be — and what they are not — it may be helpful to widen the scope and provide a bit of context.
Our property-tax bill comes from the taxing entities in our jurisdiction: city, county, school districts and community colleges. Each entity determines its tax rate and may tax up to a maximum rate determined by the state government. If they want to increase over 8 percent from one year to the next, they must take this proposition to the voters for approval (this is called the roll-back rate).
Many taxing entities strive to lower their rates when possible. Our local county leadership has successfully done so the last two budget cycles. With that in mind, let’s consider the other piece of the property-tax system, which is the appraisal valuation.
Unlike the tax rate, which is set locally, the appraisal valuation is not fully within the local appraisal district’s control. State of Texas Government Code Section 403.302 requires the State Comptroller’s office (the Property Tax Assistance Division) to conduct a Property Value Study (PVS) to determine the total taxable value of all property in each school district every two years. For each study, the state selects a sample and determines what they feel are fair market values for each property.
For this year for Waco Independent School District, state officials looked at 400 of 26,000 properties, determined what they felt were their values and used those to set the range in which other properties in the district should fall. Interestingly, many of the properties selected were prime properties in areas of town experiencing increased development interest, such as within the Tax Increment Financing Zone, or two at Barron’s Crossing. We should remember those properties are not truly representative of all properties within WISD.
The state comptroller study is then used to determine appraisal district performance, with the performance metric being that the appraisal district must come within a range of 5 percent below/above the total value set by the state. Let that sink in a moment.
Let’s turn to another aspect. This might seem a change of topic, but read on to fully consider. On the floor of the Texas House of Representatives during the special session, a legislator asked Rep. Dan Huberty, chairman of the Public Education Committee who had proposed legislation (HB 21) to boost education funding to the tune of some $1.8 billion, if in fact the state weren’t spending more on education today than ever. While technically true, this does not recognize that the number of students we have in the system is growing at a rate that far outpaces student spending. The net effect is that the per-pupil amount of state funding is less every year, with current spending levels below pre-recession levels of 2008, before even taking into account inflation. Adjusted for inflation, in 2015 dollars, Texas was spending $10,260 per student in 2009-2010. Today we spend just $8,935.
Further, our demographic trends in Texas are such that our percentage of English language learners — a group more costly to prepare for success in our educational system and for post-secondary success in our workforce — is growing more rapidly than other student groups. So the need is greater now than ever, but the state dollars are slipping away from education. Texas, in fact, ranks 43rd in the nation in per-pupil spending (up from 49th in 2012). Our student outcomes reflect that. According to the U.S. Department of Education, Texas ranks 40th in percentage of fourth graders reading at grade-level (46th in the nation for Hispanic students alone) and 41st in the nation in post-secondary matriculation. While 46 percent of young adults ages 25-34 in the nation hold a certificate, associate’s degree or higher, in Texas just 38 percent of adults in that same age range do. For the Texas economy to remain competitive and grow, it is imperative we develop our talent and workforce to support the very businesses that will drive our economic growth.
Declining state funding
Historically, state support of education spending (per-pupil spending) was an even split, 45-45, between the state and local school districts (via those property taxes discussed above) with the remaining 10 percent coming from federal dollars. Over the last decade, the state’s share of per-pupil funding has been gradually declining, from about 45 percent for the last couple of decades, to around 36 percent in the upcoming budgetary biennium from the state. The balance, of course, must be made up by increased local share, which means increased local property taxes.
I’ve burned the midnight oil looking over budgets of years past, digging through Legislative Budget Board reports, and running numbers and scenarios, but in the interest of brevity, and for some wonderful real-life projections of impact, I simply would refer you to the excellent Texas Tribune article by Ross Ramsey, “Analysis: The state’s declining support for public education in Texas” (December 2016). One standout fact from that read is this: Had state support of education remained at 44.9 percent over the last decade, the state would have spent $18.6 billion more and school district taxpayers would have spent $11.6 billion less. But as the state reduces its share, local districts must fill the gap — and the way to do that is by raising property taxes. Further, as our state experiences economic growth, property values may experience market-driven increases as well. The state has used these as an excuse to decrease its own education spending.
The crux is this: State aid in education declines — is able to decline — as local property values rise. And values are within a range set at state level, though not necessarily market-driven. This is codified statutorily for the Comptroller’s Office and again in the state’s budget (SB 1) crafted by state legislators and passed by the legislative conference committee. It’s an exhaustive 900-plus-page document and, in Article III of the 85th legislative session’s SB 1, relating to the Texas Education Agency, page 5, subsection 3 tells us clearly: Property values, and the estimates of local tax collections on which they are based, shall be increased by 7.04 percent for tax year 2017 and by 6.77 percent for tax year 2018.
We know it is inevitable that property values will continue to rise because the state is mandating it and has given that directive in the state budget. State officials have set the values to which our appraisal district must adhere.
When we consider all these components, it is curious then for the Texas Legislature to consider lowering the property-tax rollback rate from 8 percent to 4 percent or even 6 percent as the best solution for property-tax reform. The problem, as we can see, is not the rate but the rising values. And that range of values is artificially created and imposed by the state. Again, our appraisal district must adhere.
If we want meaningful property-tax relief — which we as the Greater Waco Chamber of Commerce do — we must address the real problem, which is the broken way we fund our public schools, and stop shifting the cost from the state down to the locals. This is a shift we have seen already: cities being expected to maintain state/federal rights-of-way along our interstates and highways but not given funding to do so; counties being required to provide mental-health services for inmates (a worthy investment, though also one that perhaps should fall more squarely under the state mental-health umbrella) but not given money to provide them; and schools being mandated to give teacher raises or implement more rigorous high-quality early-childhood education programs but not given money to do so. The state is shifting more responsibility to local entities but not providing the funding, which means no choice remains but for local property-tax bills to increase.
Further, the state proposes to limit the amount local entities can raise to meet such responsibilities, all while setting the valuation ranges — a fact many voters don’t know — so that local appraisal districts bear the brunt of citizen outcry when property taxes rise when, in fact, the state has directed it to be so.
We applaud the work of the Texas House of Representatives, Speaker Joe Straus, Chairman Huberty, his Public Education Committee and its outstanding staff, who worked to craft some meaningful solutions to the property tax-school finance dilemma. We are grateful our representatives supported that bill. We applaud Chairman Larry Taylor and the Senate Education Committee for their call to study school finance during the interim and we appreciate our senator supporting that aspect of the bill.
Perhaps if we can talk and move toward repair of our method of school finance, then we can make more progress on broader educational reforms to improve the system. Advocates of public education are often wary of educational reforms. If we fix the system of cost-shifting down to the local government, we could then turn to such education reforms, all while also righting the burden of our rising property taxes. Conversations about what education reforms will improve student outcomes seem premature if the essentials of adequately funding Texas public schools isn’t first addressed.
It’s imperative to our future economic growth and vitality that we address our broken property-tax system. It is certainly true that, because Texas does not have a state income tax, our overall tax burden places us in the middle of the pack in a state-by-state ranking. Yet our property taxes are among the highest in the nation. The pro-business orientation of our elected leadership and a friendly regulatory environment have allowed us in Texas to be very successful in attracting and expanding business. Imagine how much stronger our hand would be in competing for new business — particularly those that are capital intensive and thus generate higher property taxes — if we were able to lower our property-tax bills. Property tax relief and reform is possible. It begins with fixing our method of funding Texas public schools.
Meaningful property-tax reform and relief is important to businesses and residential owners alike. Perhaps if we could set aside our ideas about what we’ve always known, and be willing to think outside the box about meaningful policy solutions, we could create a property-tax system that allows the certainty that businesses need to grow and thrive, while also improving school funding and student outcomes so that our schools are strengthened and can create a future workforce ready to meet the needs of a thriving state economy that supports enhanced quality of life for us all. The prosperity and economic strength of our state — and all her people — depends on it.
-Jessica Attas is director of public policy for the Greater Waco Chamber of Commerce. Our mission is to “prepare and market the Greater Waco region for the businesses and jobs of the future and an outstanding quality of life.”
Central Texas Area, Texas – The Grand Central Texas (GCT) economic development partnership releases marketing video to attract and retain companies in the Central Texas area–a region that encompasses a population of 724,673. The marketing video showcases assets and information from the Bell, Coryell, Falls, Lampasas, McLennan and Milam counties.
The GCT partnership formed in 2014 and works collaboratively to market the region, both nationally and internationally. The partnership invites you to utilize this video to promote your company and community in your initiatives.
To watch the video, please visit GrandCentralTexas.com.
About Grand Central Texas:
Grand Central Texas is an economic development partnership that promotes business development and provides services to businesses interested in locating to the six county region. By working closely with our local, regional and state partners, the partnership can assist with locating a site or building, gathering detailed business cost and economic data and securing a competitive incentive package. With a convenient location, low cost of doing business, diverse workforce and abundant resources, the region is becoming a sought-after area for business development and company relocation. The Grand Central Texas partners are recognized regionally and nationally as one of the country’s most professional and progressive economic development organizations.
To learn more about the Grand Central Texas economic development partnership, please visit www.grandcentraltexas.com or contact the communities at www.grandcentraltexas.com/contact/.
Greater Waco Chamber of Commerce received a Silver Excellence in Economic Development Award for its 2015 project in the category of Newsletter/Newspaper for communities with populations of 200,000-500,000 from the International Economic Development Council (IEDC).
The honor was presented at an awards ceremony on Tuesday, October 6th, during the 2015 IEDC Annual Conference, which was held October 4-7, in Anchorage, Alaska.
“From localized community projects, to large scale endeavors, economic development efforts have played a vital role in the global economy,” said JoAnn Crary, CEcD, Chair of the International Economic Development Council and President of Saginaw Future Inc. “As we address new and longstanding challenges, these efforts continue to take on even greater importance. The award serves as a salute to pacesetting organizations like Greater Waco Chamber of Commerce for leading the charge.”
Each quarter, the Greater Waco Chamber Economic Development team publishes the Greater Waco Economic Development Update electronic newsletter. The newsletter details the most up-to-date information related to projects, development activity, key demographic data in the Greater Waco area, and provides a connection to additional resources including: WacoProspector.com for local real estate offerings and community specific data via WacoCustomReports.com. This report is distributed to over 10,000 economic development contacts including: local, regional, state and national economic development consultants, real estate professionals, clients and the Greater Waco Chamber membership directory.
“It’s an honor to receive recognition for our economic development work,” said Whitney Richter, business development and marketing manager for the Greater Waco Chamber. “The Greater Waco Economic Development Update e-newsletter acts as marketing tool for sharing the chamber’s economic development team’s success, local company news and community activity. It’s also a gateway for accessing key demographic statistics and custom community data to fit the needs of local companies and economic development prospects.”
As the first LEED Certified Chamber building in the United States, the Greater Waco Chamber is committed to sustainable office practices. Through this initiative, the Greater Waco Chamber Economic Development Update is delivered in electronic format to decrease the amount of paper used and eliminate postage costs.
Greater Waco’s Central Texas location and accessibility along the Interstate 35 corridor play a key role in the community’s success in attracting new businesses and supporting existing companies. With a limited marketing budget, the team has found the e-newsletter to be a cost-effective resource in sharing those successes with clients and partners.
Recipients of IEDC’s Excellence in Economic Development Awards demonstrate to an experienced panel of judges that they are at the forefront of the economic development profession. They are recognized as the world’s best economic development programs and partnerships, marketing materials, and the year’s most influential leaders. These awards honor organizations and individuals for their efforts in creating positive change in urban, suburban, and rural communities.
About the International Economic Development Council
The International Economic Development Council (IEDC) is a non-profit membership organization serving economic developers. With more than 4,600 members, IEDC is the largest organization of its kind. Economic developers promote economic well-being and quality of life for their communities, by creating, retaining and expanding jobs that facilitate growth, enhance wealth and provide a stable tax base. From public to private, rural to urban, and local to international, IEDC’s members are engaged in the full range of economic development experience. Given the breadth of economic development work, our members are employed in a wide variety of settings including local, state, provincial and federal governments, public private partnerships, chambers of commerce, universities and a variety of other institutions. When we succeed, our members create high-quality jobs, develop vibrant communities, and improve the quality of life in their regions. IEDConline.org.
About the Greater Waco Chamber:
The Greater Waco Chamber is a business leadership organization that advances a progressive and visionary agenda for economic growth and quality of life. The Chamber prepares and markets Greater Waco for the businesses and jobs of the future and enhances the quality of life of the community by promoting strategic development. For more information, visit WacoChamber.com.
Kingsdown, Inc., the nation’s largest independent and employee-owned mattress manufacturer, has entered into a long-term lease agreement for the former U.S. Postal Service regional sorting center on Imperial Drive. The company is investing $2 million in the 100,000-square-foot facility to convert it into a state-of-the-art sleep products manufacturing and distribution center that will support its growing business in the central portion of the country. The new plant will create 50 new local jobs.
Kingsdown worked closely with the Greater Waco Chamber and its economic development team, as well as other government entities to close the deal.
“We are extremely excited about the opportunity to expand our operation to McLennan County to more effectively support our business growth in the region,” said Kingsdown President and CEO Frank Hood. “The dedicated professionals in both the public and private sectors of the City of Waco and McLennan County have been fabulous to work with and we look forward to long and successful partnership together.”
Hiring at the Waco plant is expected to begin immediately, and the company plans to start manufacturing by Jan. 19, 2015. This will be Kingsdown’s sixth domestic manufacturing facility.
“We are extremely proud that Kingsdown has chosen McLennan County for its newest manufacturing location,” said McLennan County Judge Scott Felton. “We are very excited to welcome Kingsdown to our community and we are looking forward to its positive impact on our economy.”
“I am sure that we will all rest better knowing that Kingsdown, Inc. is coming to Waco! They are a great company and we are looking forward to working with them on this great project,” said Waco City Manager Dale Fisseler.
Kingsdown, Inc. founded in 1904 and headquartered in Mebane, North Carolina, USA is a manufacturer of premium mattress systems serving leading retailers across the United States and in more than 20 countries. The company was honored in 2014 as the North Carolina Manufacturer of the Year. Each Kingsdown product is manufactured using handcrafted techniques combined with state-of-the-art research, materials and equipment. Research and development, training and distribution facilities, as well as two manufacturing facilities, are also headquartered in Mebane. International offices are located in Tokyo, Japan and Melbourne, Australia. Additional manufacturing and distribution centers are located in Winchester, Va.; Muskogee, Okla.; Lakeland, Fla.; Stockton, Calif.; Toronto, Calgary and Vancouver, Canada; Leicestershire, England; Tuscany, Italy; Istanbul, Turkey; Dubai, United Arab Emirates; Rio de Janeiro, Brazil; Kuala Lumpur, Malaysia; Jakarta, Indonesia; Shenzhen, China; Melbourne, Brisbane and Perth, Australia. For more information, visit Kingsdown.com.
About Greater Waco:
Greater Waco is located in McLennan County, Texas along the Interstate 35 corridor and is home to more than 14,000 companies, 234,906 people and a regional workforce of approximately 320,000. To prepare and market the Greater Waco region for the businesses and jobs of the future, Greater Waco is strategically positioned with centralized access to Dallas and Austin (90 miles) and Houston and San Antonio (185 miles).
Since 2006, Greater Waco has seen more than $965 million in new capital investments and $596 million in riverfront and downtown development, making it an attractive place to live, work and play. Greater Waco is landscaped with top-rated higher educational institutions, including Baylor University, McLennan Community College and Texas State Technical College Waco.
The Greater Waco Chamber leads economic development efforts for the area, targeting five key industries for growth, including: Advanced Manufacturing, Aerospace and Defense, Health Care, Professional and Financial Services and Supply Chain Management. For more information, visit WacoChamber.com.
Sarah Roberts, senior vice president of economic development for the Greater Waco Chamber, has been selected as a winner in the economic development profession’s “40 Under 40”awards, the first-ever awards program recognizing young talent in the economic development profession.
A five-member selection committee chose the winners from a pool of more than 150 candidates based on their exceptional contributions to the economic development industry. The award’s program was managed by Development Counsellors International (DCI), a New York-based firm that specializes in economic development marketing.
Matthew T. Meadors, president and CEO of the Greater Waco Chamber, applauded Roberts on the recognition.
“We are certainly pleased to have Sarah on our team and realize that she is deserving of this recognition in her peer group. Her professionalism and scope of economic development expertise is a valued asset in Greater Waco,” said Meadors.
Roberts is a graduate of Baylor University with a bachelor’s degree in business administration in entrepreneurship. She joined the Chamber team in 2003 and leads the organization’s regional economic development efforts. In addition to growing Greater Waco’s diverse economic sectors, she also builds strategic real estate assets in the Waco Industrial Foundation’s 5,000-acre portfolio.
DCI’s “40 Under 40” award was designed to discover the economic development profession’s rising stars.
“The people chosen by the selection committee represent a bright future for the economic development world,” said Andy Levine, president of DCI. “They are a new breed of results-driven place makers. We’re very pleased to see Roberts among the winners.”
DCI officially announced the winners last night at an awards reception during the International Economic Development Council Leadership Summit in Orlando and will feature an in-depth profile of each on its website during 2013.
For more information on DCI’s “40 Under 40” winners, visit AboutDCI.com/40under40.
About Greater Waco Chamber
The Greater Waco Chamber is a business leadership organization that advances a progressive and visionary agenda for economic growth and quality of life. The Chamber prepares and markets Greater Waco for the businesses and jobs of the future and enhances the quality of life of the community by promoting strategic development. For more information, visit Waco Chamber.com.
Considered the leader in marketing places, Development Counsellors International (DCI) specializes in economic development and tourism marketing. The agency has worked for more than 400 cities, regions, states and countries since it was established in New York City in 1960. For more information, visit AboutDCI.com.