Houston’s recovery from Hurricane Harvey is well underway, but Mayor Sylvester Turner’s plan to temporarily increase the city’s tax rate is one part of the recovery that will do more harm than good.
Reports show that over three years Harris County taxpayers have seen appraisals increase by 32 percent, while the average homeowner saw a 6 percent increase this year alone. Appraisal increases push tax bills higher, and coupling that with a tax rate increase is a double hit to Houstonians who currently find themselves in unfavorable conditions.
Turner’s original tax proposal was to increase the tax rate by 8.9 percent, but after FEMA funds were announced last week, he said his proposed increase will be cut by more than half. Technically it is a temporary increase as the city will once again be bound by the property tax cap next year, (barring another disaster) but more on that later.
The mayor has been selling this increase as negligible, saying it will only cost the average homeowner around $50 and he wouldn’t ask more than what is reasonable.
Here’s the thing, government can’t objectively determine what a “reasonable” tax increase on Houston taxpayers is, especially those who have lost all or part of the homes they owned or whose apartments were destroyed, leaving them looking for new ones.
Houston officials have long had a tendency to be tone deaf to taxpayer protections. During a public meeting under the previous administration, (where the cap was regularly under attack) former City Controller Ron Green said, “Giving $53 million back that may sound like we’re living within our means, but giving people the equivalent of a happy meal back does nothing for the overall good of the city.”
While it may be hard for politicians to understand, for many Houstonians living on a budget, “no more than a happy meal” can mean a huge difference.
The property tax cap that Turner is seeking to bust isn’t only about how much of their earnings each Houstonian saves, that’s an added benefit. The cap restricts government’s unfettered access to taxpayer dollars, forcing it to operate within its means, plan and prepare for the worst, and look for areas to reduce spending rather than increase revenues.
As far as the increase being temporary (told you we’d get back to that), buying into that would require one to blatantly ignore the rhetoric from the mayor, his allies, and many others who have long said that they seek to remove the property tax cap.
There are plenty of reasons to believe that the mayor’s administration will come back to voters next year, when $1.5 billion in bonds aren’t on the ballot, and ask for a permanent repeal (or at least modification) of the property tax cap, using this temporary suspension as an example of “success.” Turner has said that if pension obligation bonds were not on the ballot this year, he would have placed the property tax cap up for repeal.
Make no mistake, he will come back for it eventually.
Housing prices
In the near future, home prices and rental rates are very likely to increase regardless of the tax increase. Following Katrina, New Orleans’ housing supply dropped significantly and with thousands of properties damaged by Harvey it wouldn’t be farfetched to anticipate the same in Houston.
“The experience of New Orleans gives some insight into what may lie ahead for Houston. In the 10 years after Hurricane Katrina, average home prices rose to $339,743 in 2015 from $228,620 in the first half of 2005 – an increase of 48 percent,” read a report from Reuters.
One realtor who spoke with Reuters said that days after Harvey she saw homes that remained dry increase in price by nearly 20%. Similarly, after Hurricane Allison in 2001 rental rates increased by about 6 percent, and after Ike in 2008 rates increased about 5.7 percent.
With thousands of displaced residents looking for homes, a limited supply of housing, and inflated costs as a result, throwing a tax rate increase on top of that is adding insult to injury.
Private dollars
One disturbing aspect of the proposed increase is that it is based on the mayor’s assumption that those dollars would be better used by government than by the taxpayers, which is incorrect.
Leaving taxpayers with that money would allow it to be directed efficiently, effectively, and quickly, much more than government could ever manage. Property owners could rebuild faster, commercial and residential rental rates wouldn’t be forced to increase more than the market demands, and Houstonians could continue to give generously to charity as they have been doing since Harvey delivered its blow.
Council Member Mike Knox, a vocal opponent to this increase, pointed out that that the revenue wouldn’t be generated until early 2018; however, it would impact taxpayers now. Why generate revenue for future use when cost estimates of damage at this point are just that, estimates, and the total amount that will be provided by FEMA, and federal and state aid hasn’t been fully determined?
ReBuild Houston
If there ever was a time to revisit criticisms of the Rain Tax, now is that time. Here’s what fiscal watchdog and former mayoral contender Bill King had to say about the tax increase and the rain tax:
“First, let’s not kid ourselves that [this] money is going to be used to stem flooding. Since 2012, the City has collected about $800 million in ’drainage fees.’ A tiny fraction of that money has actually been spent on flood control projects.”
The rain tax was sold as a pay-as-you-go ‘lockbox’ and dedicated revenue stream for streets and drainage. Despite being ruled unconstitutional (due to deceptive ballot language) the city is still collecting it and taxpayers are left wondering where it’s going.
Maybe it’s time to consider a suspension of “rain tax” collections?
Reappraisals
The Texas tax code authorizes, but does not require (“may,” not “shall”), tax units to authorize the reappraisal of property within a disaster zone. Houston has not formally requested that property be reappraised by the appraisal district and intends to levy the increase on a property’s pre-flood value. At this point, property owners’ only recourse is to personally appeal to have their property reappraised and damages taken into consideration. For the city to fail on these requests is an insult to taxpayers.
On its face a tax increase (especially at this time) is simply bad optics. Businesses, especially small, that are either considering moving to Houston or rebuilding here are already weighing the potential for future storms when considering the risk and returns of a presence in Houston. Let’s not forget, this is the city’s third major flood event in as many years.
Now, they’ll have to throw a tax increase into consideration.
The last thing taxpayers need while dealing with devastation, displacement, and discontent is an increase in their taxes on property for which market value is nowhere near what it once was. It’s not just bad public policy to rip these funds from taxpayers’ hands, but it’s tone-deaf and a slap in the face to the residents of this city who are trying to regain a semblance of pre-disaster normalcy.
Months ago, when it seemed that a repeal of the cap was going to be brought to voters, Turner often said that its repeal does not mean a tax increase; we can now confirm that is not the case.
Harvey was a disastrous storm and certainly not one to be downplayed, but this response is a political one aimed at removing taxpayers’ last defense and that couldn’t be reiterated any better than by a statement from one of Turner’s strongest allies and staunchest property tax cap opponents, Council Member Dwight Boykins.
When asked if he would vote for the increase, Boykins said, “Anything to bust that damn [revenue] cap, I’m in.”
Three (3) public hearings on the tax increase have been set and will take place at Houston City Hall: September 25, 6 P.M.; October 2, 6 P.M.; October 11, 9 A.M. Concerned taxpayers should not feel limited to these dates; they can also voice their concerns during the weekly public hearing of Houston City Council every Tuesday at 2 P.M.
Houston City Council is set to vote on the property tax increase on October 18, 2017.
