One tiny Texas town is doing a great job highlighting the need for statewide property tax reform by hiking its property tax rate by more than fifty percent.

Splendora’s FY 2016 property tax rate was 26.16 cents per $100 valuation, but the town is now proposing to increase the rate to $41.03 cents per $100. That’s a staggering 56 percent increase.

Splendora is a two-square-mile town in Montgomery County, just north of Houston. The town has about 1,600 people and over $4 million in debt. As a matter of fact, according to the state comptroller’s Debt at A Glance tool, at $2,536 per capita Splendora has both the highest debt per capita and overall debt for towns of similar size.

According to a local newspaper, most of the proposed hike comes from an increase to its debt service outlays, to pay down their certificates of obligation. So, not only is the city placing the burden on taxpayers, but taxpayers didn’t even have a say when the city decided to take on the debt.

Certificates of Obligation are issued too regularly in many cities. Typically, COs should be reserved for emergencies, as it’s a form of debt available at the unilateral request of council and can be borrowed with immediate action. They are one of the most often abused debt mechanisms employed by municipalities in the state and are not supposed to be used to fund ongoing expenses or maintenance.

Splendora’s fiscal year 2017-2018 proposed budget collects $113,718, or 40.87 percent more in property taxes than last year’s budget. Of that amount, $104,144 is from existing taxpayers and $9,574 is from new property added to the tax rolls. This hefty increase is allowed because it falls below the city’s current rollback rate of 43.41 cents per $100 valuation.

Cities and counties have an 8 percent rollback rate, meaning that they can levy a tax rate that collects up to 8 percent more revenue from the existing tax base (excluding new property taxes) without voters being able to petition for a rollback election.

In the meantime, Splendora city council set public hearings on the proposed budget and new tax rate. Property owners should attend and voice their concern to their city council.

Budget Meeting: 6:30 p.m., August 21

Tax Rate Meeting: 6:30 p.m., August 22

Both are at Splendora City Hall, 26090 FM 2090 East, Splendora, TX.

Charles Blain

Charles Blain is the president of Urban Reform and Urban Reform Institute. A native of New Jersey, he is based in Houston and writes on municipal finance and other urban issues.


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