Use of Certified Estimate of Property Tax Values
This issue arises from provisions in the Texas Education Code, Texas Tax Code, and Texas Election Code, all of which govern school districts’ budget and tax rate adoption and tax ratification elections (TRE).
Each year, the board of trustees of a school district must adopt a budget and a tax rate for the next fiscal year. Generally the budget must be adopted before the tax rate. If the board sets its tax rate at a rate that exceeds its rollback rate, then it must hold a TRE.
Districts are generally required to use the certified appraisal roll in adopting both their budgets and tax rates and in calculating their rollback rates. Under the Texas Tax Code, chief appraisers must provide certified tax appraisal rolls to school districts by July 25. In order to comply with the legal requirements for public notice, school districts typically must have their certified appraisal rolls before they publish notice of the board meetings at which they will adopt budgets and tax rates. Under this traditional tax rate adoption method, districts with July 1 fiscal years have adopted their budgets based on a certified estimate of taxable value, which chief appraisers provide each school district by April 30 of each year. They have then waited for their final certified appraisal rolls to set their tax rates.
In 2009, the Texas Legislature created an early tax rate adoption method in Texas Tax Code section 26.05(g), which allows any school district to use the certified estimate of taxable value to set its tax rate and calculate the rollback rate. If a district follows the process set forth in Section 26.05(g), the district may adopt its budget after it adopts its tax rate and conduct a TRE within 30 days from the date the tax rate was adopted. TREs called pursuant to this early tax rate adoption method often occur on non-uniform election days.
An issue has arisen because appraisers in large urban counties often cannot and do not meet the July 25 deadline for providing the final certified appraisal roll to school districts. In order to meet the window for a TRE imposed by the Tax Code and also meet the election deadlines for calling a TRE as established by the Election Code, a school district that wishes to adopt a tax rate that exceeds the rollback rate and order a TRE for the November general election must act to set its tax rate on or immediately following the July 25 deadline. If districts in these large urban counties wait for the final certified appraisal rolls, which can arrive up to one month late, they will not meet the deadlines imposed by the Texas Election Code for timely calling an election. This means that a school district in a large county that wishes to adopt a tax rate that exceeds the rollback rate and order a TRE for the November general election must use the certified estimate to adopt its tax rate.
As stated, Section 26.05(g) offers districts an opportunity to use the certified estimate to set a tax rate and then a budget. The key question, however, for districts with a July 1 fiscal year, is whether the districts have the option to adopt their budgets first, and then adopt their tax rates using the certified estimates.
Commissioner of Education Michael Williams requested the opinion of the Texas Attorney General regarding whether a district may, after adopting its budget, set a tax rate and call a TRE using the certified estimate of property tax values rather than the final certified appraisal roll. In his request, the commissioner indicated that he would answer in the affirmative.
LAF filed a brief arguing that an independent school district may use the certified estimate of property tax values to adopt a tax rate after adopting its budget in order to schedule a tax ratification election for the November uniform election date. The attorney general issued an opinion, holding that Section 44.004(j) of the Education Code and Section 26.05(g) of the Tax Code do not authorize an independent school district to use the certified estimate of property tax values to adopt a tax rate after adopting its budget. Op. Tex. Att’y Gen. No. KP-0001 (2015). LAF’s Attorney: David Thompson, Thompson & Horton, L.L.P., Houston.