Debate stalls on property tax reform as DFW mayors raise concerns about revenue

Both Fort Worth Mayor Betsy Price and Dallas Mayor Mike Rawlings are worried about losing millions in city revenue through property tax reform.

The Texas House was supposed to debate its version of the property tax bill on Thursday. But the issue stalled on whether to include school districts and their tax rates.

At the city level, there are concerns about what happens if the state caps property tax rates and also increases the sales tax. It comes down to how much control city governments should have over tax rates without having to get voter approval for anything more.

If House Bill 2 stands, the cutoff would be 2.5 percent, which both mayors say is just too low to keep with growing expenses in their cities.

Mayor Rawlings says House Bill 2, as it stands right now, would put Dallas in the poor house.

“The bill on the floor today would be very bad for this city,” he said. “We’re talking about hundreds of police officers that could be laid off. Closing the library system or half the maintenance and repair of our streets.”

By Rawlings’ estimate, a 2.5 percent cap on tax revenue growth would cost Dallas $30 million, which is the equivalent of 358 police recruits.

Mayor Price says the cap would leave Fort Worth with a shortfall of more than $4 million next year.

“2.5 with no allowances for public safety or emergency services or infrastructure is pretty onerous when we have guaranteed 3 percent raises for our police and fire unions,” she said.

Both mayors stress that whatever comes out of Austin will not lower homeowner tax bills.

“Right now, the average citizen believes they are going to get significant tax relief and this is not going to provide that relief,” Price said.

“It's going to raise the sales tax,” Rawlings warned. “And services are going to go down.”

While capping property taxes, lawmakers are proposing to increase sales tax by 1 percent. Two-thirds of it would go to the state.

“You take both of those things together, the citizens of Dallas are going to be spending more money and sending it to Austin than they ever have before,” Rawlings said.

SMU Political Science Professor Cal Jillson says the property tax cap would have the biggest impact on cities with rapid growth.

“If their property taxes are capped at 2.5 percent and they're growing really fast, they can't build out ahead of their population increase,” he said.

Because Texas does not have a state income tax, Jillson says property taxes are the fourth highest in the country, and the sales tax increase would bring a similar infamous status.

“It's a question of pick your poison,” Jillson said.

Both mayors say a cap on property tax growth isn't unreasonable, but they argue it should be in the range of 6 percent and not 2.5.

What is not clear at this point is how negotiations are going between the House and a similar bill in the Senate and when either bill will come up for a vote.