Houston Uses COVID-19 Disaster Loophole to Raise Taxes Beyond State Limit

The Houston City Council approved aproperty tax rate on Wednesday that will increase taxes beyond the 3.5 percent limit set by the Texas Legislature in 2019.

Citing a disaster declaration loophole that Senate Bill 2 (SB 2) authors andGovernor Greg Abbott say was intended for areas incurring physical damages due to hurricanes and similar events, Mayor Sylvester Turner and 13 members of the council voted for a rate calculated as if the loophole applies due to the COVID-19 disaster declaration.

Without the loophole, Houston would have to seek voter approval for the planned increase.

The published rate will decline from $0.56792 to $0.561840, but due to rising property values, homeowners will pay more.

Turner and several council members blamed the appraisal board for the increase, a common theme as taxing entities and elected officials enact the same rate or even a decreased rate from the previous year while relying on appraisal increases to bring in more tax revenue.

The city's official notice says the tax bill on a $250,355 home will rise by $42, and state Senator Paul Bettencourt (R-Houston) who is the former Harris County tax assessor-collector, contends the increase will be $41 for a $201,000 home.

During Wednesday's public hearing, Bettencourt addressed the council and warned against raising property tax burdens when residents were struggling with the economic fallout from COVID-19 restrictions, including high unemployment rates.

The senator also noted the city was awash with an extra $400 million in CARES Act funds.

Turner pushed back on Bettencourt's assessment and accused the state of not using $5.7 billion in CARES funds to better assist residents. He also repeatedly called objection to the proposed rate a "manufactured" controversy.

"I want the record to be made very clear. When you are saying there's a tax rate increase you are saying that based on a manufactured situation by the legislature to try to make people feel as though we are increasing taxes when in actuality we are not."

Nearly 20 speakers phoned in to the virtual hearing to voice opposition to the tax rate, including former Lone Star College trustee and current Republican nominee for county tax assessor-collector Chris Daniel.

"At the end of the day, in the middle of a pandemic, we've got to find a different way to find that revenue. We cannot do it on the backs of taxpayers," said Daniel.

The elected county tax assessor-collector, currently Democrat Ann Harris Bennett, also sits on the county appraisal district board.

Other speakers included owners of commercial or residential lease properties who said the increase would further burden them or their tenants.

Turner did not dispute that the tax rate would produce more than $30 million in new revenue for the city, but said that without the additional funds the city would have to cut police and fire department staff.

Councilwoman Amy Peck voiced support for a sunset review process and audit to identify savings elsewhere, but Councilman David Robinson argued that the city had a tight budget. "This is a lean and mean budget. We are not indulging in a lot of unjustified expenses across the City of Houston."

During last year's mayoral race, Turner was heavily criticized for employing a $95,000 intern and throwing a$13,000 holiday party at taxpayer expense. The city has also come under scrutiny for tax-payer fundedlobbying contracts.

Peck also suggested that the city should not create a budget until after setting the tax rate and having a better picture of revenues, but Turner dismissed her suggestion as impossible.

Councilman Greg Travis, who voted against the tax rate, said, "While some people might argue that $41 isn't a lot money, I always find that to be hubris and elitist because I think $41 for a lot of people, some people, happens to be a weekly grocery bill."

"I don't think it's matter of whose money it is, it is the citizens' money and it's just a matter of those who oppose [the tax increase] are just saying, ‘we just want them to keep more of it while they can during this time of crisis.'"

Earlier this year, members of the Texas Democratic Congressional delegation sent a letter to Governor Abbott asking him to suspend any raises, interest, and penalties on Texas property taxes for the year since "Texans are facing an unprecedented crisis due to the coronavirus." Signers of the letter included Houston area representatives Sheila Jackson Lee (TX-18), Lizzie Fletcher (TX-07), and Sylvia Garcia (TX-29).

Turner also complained that SB 2 also forced the city to include disputed property tax values in calculations. Prior to the state-implemented requirement, numerous taxing jurisdictions including Houston would set aside the entire value of a disputed property when calculating the no-new-revenue rate. Because of SB 2, all jurisdictions must consider the portion of the value not in dispute when making those calculations.

Mayor Pro Tem Dave Martin read the motion describing the rate as a tax increase.

"I move that the property tax rate be increased by the adoption of a tax rate of $0.561840 which is effectively a 2.20 percent increase in the tax rate."

Turner then explained that the motion had to be written with the words "tax increase" due to the law, but he insisted that Houston's rate did not count as a tax increase.

Bettencourt told The Texan that Houston's newly approved rate actually fell within 3/1000 of a penny from the rollback limits. "They're just right against the fence."

Following the vote, Daniel told The Texan that Houston was embarking on the same path that led cities like Detroit into financial crisis and unlivable conditions.

"They say let's raise property taxes just a little bit each year, until people are forced to sell or move. Before you know it, nobody can afford to live there anymore, and declining revenues lead to cuts in services."

Council members voting against the tax increase included Mike Knox, Michael Kubosh, Peck, and Travis.

Since the application of the SB 2 loophole is disputed under the COVID-19 disaster declaration, it is possible that property owners will file a lawsuit against the city over the tax increase.