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June Legislative Update II

Everything you wanted to know about Compression, Exemptions, and more

Compression: What is it? It’s simply reducing the school tax rate you personally pay by 5 to 20 cents (whatever it is in a particular session) and having the state pay the school district instead of you. We “compress” the rate for you and the state pays it. Compression is good, but very expensive because we do it for everyone who pays school taxes from homeowners to businesses. It can be reduced by any legislature in the future. It’s not lasting.

Exemptions: An exemption is permanently reducing the amount you are taxed on your home. If your home is valued at $250,000, you get a current exemption from the state of $40,000 so you are taxed on $210,000 instead of $250,000.

Some school districts and other taxing jurisdictions offer even more exemptions on top of the state’s $40,000. Remember, an exemption is permanent. Compression is not.

Here’s a short four-minute video where I explain the differences.

When I became Lt. Governor in 2015, the state homestead exemption had been $15,000 for many years. I’ve increased it to $40,000.

This session, the Senate plan is to increase your homestead exemption to $100,000. That means if you live in a $250,000 home you would only be taxed on $150,000. We also blend that exemption with compression to yield a much larger tax savings of about $1,250 – $1,450 annually. That’s about $1,250 – $1,450 a year every year you own your home. That could easily be $20,000 or more for you over your lifetime.

The current debate between the Texas Senate and me with the House and Speaker Phelan is that they don’t want to give you the $100,000 homestead exemption.

Big business is the big winner in the House’s plan. The Senate plan gives a boost to Texas homeowners through the exemption. The Governor now appears not to want to give you the $100,000 exemption either, but it’s not totally clear.

The House wants the entire $17.6 billion set aside for property tax relief to go exclusively into compression for every property owner including businesses. Under the House plan, you would only get $700 a year in tax savings. Under our Senate plan, with compression and exemptions, you get $1,250 – $1,450 a year in tax savings.

The Senate and I are fighting for the homeowners to get you the full $1,250 – $1,450 a year. That’s $700 more per year than the House, and apparently, the Governor, wants to give you.

Here’s a short four-minute video where I explain the differences.

Thank you all for your support and everything you do to keep Texas red. May God bless you and your family, and may He continue to bless the greatest state of all—Texas.

Sincerely,

Dan Patrick
Lieutenant Governor of Texas

P.S. Feel free to forward this email to your friends and family who may not be on our email list — they can also click here to sign up for future updates.

“Whomever wants to be a leader among you must be your servant.”
Matthew 20:26 (NLT)

Texas Legislature Property Tax Relief Feud Highlights Key Lawmakers’ Business Interests

The division between House and Senate leaders over property tax relief has boiled over with rhetoric bringing personal motives into question.

MATT STRINGERJUNE 1, 2023

Left to right: Speaker Dade Phelan (The Texan/Brad Johnson), Lt. Gov. Dan Patrick (The Texan/Mazlin Jordan) and Sen. Paul Bettencourt (The Texan/Mazlin Jordan).

With Texas having a part-time legislature, state lawmakers generally have other full-time sources of income. Those with professional expertise are usually leaned on in each chamber to tackle the issues they are most familiar with.

On Tuesday, however, Lt. Gov. Dan Patrick opened the door to viewing lawmakers’ professional backgrounds in another light.

At an event hosted by the Texas Public Policy Foundation (TPPF), Patrick gave a PowerPoint presentation on the dueling property tax relief proposals. He explained that during negotiations the House initially wanted to cap property appraisal increases at 5 percent annually for both homes and businesses, and that House Speaker Dade Phelan (R-Beaumont) asked for an 8 percent appraisal cap during a meeting with the governor.

Patrick then said the appraisal caps were too expensive over a 10-year period, with his presentation estimating a $12.4 billion cost to the state budget.

He then recounted how during the meeting; Phelan said his proposal would be funded by forcing school districts to spend less money. Patrick asserted he quickly dismissed that notion, saying “Try to sell that one,” and that when he told Phelan that appraisal caps for both homes and businesses were off the table, Phelan countered by taking homestead exemptions out as well.

Patrick then described how he was trying to figure out why Phelan was so adamant regarding the House’s tax relief plan until a comment by the speaker brought his attention towards Phelan’s personal business, commercial real estate investing.

“I couldn’t figure it out,” Patrick said in a frustrated tone, before elaborating on his epiphany: “And then one day in one of the meetings, [Phelan] said ‘I own a lot of property. Not that it is about me.’”

“Now anytime anyone says it’s not about me, it’s usually about them,” Patrick concluded.

He then went on to name the speaker’s Beaumont area real estate business.

“If you go to Phelan Investments online, they own everything, for decades, proud to say fourth generation of owning property,” Patrick said. He speculated further, “If you have a cap on property, the taxes go through the triple net lease, but when you can hold your value down and hold that property for decades, and then sell it one day, it’s a whopping, whopping, profit.”

Patrick then clarified that he wasn’t accusing the speaker of personal enrichment, but nonetheless stated that he believed the speaker’s business interest stood to benefit more from the House’s plan to extend tax relief to all businesses than the Senate’s.

“Now I am not saying he is doing that to benefit himself, but I could never figure out why he wanted to do that. And he ( Phalen) will say, it just brings my rents down… if you bring your rents down, well, that means the taxpayers are helping keep your rents down so your buildings stay full, and your shopping centers stay full. So, we didn’t do that. I’m sure he is watching now and he’s got steam coming out of his ears, but I’m just telling you I couldn’t figure it out until he said it.”

Patrick’s comments prompted a reaction from Rep. Justin Holland (R-Rockwell), who pointed to the business interests of a key advisor to Patrick on property tax policy and author of the Senate’s property tax relief plan: Sen. Paul Bettencourt (R-Houston).

Bettencourt owns Bettencourt Tax Advisors, a Houston-area property tax consulting firm that specializes in protesting appraisal values. The business notes on its website that Harris County property values for both home and commercial properties have recently undergone “unprecedented” increases of over 20 percent.

Bettencourt said in a statement to The Texan, “I stay focused on the reality of what SB1 could do for property tax relief with $17.6 Billion dollars. A Texas ‘Two-step’ of an 100k Homestead Exemption combined with a School M&O Tax rate reduction of 21.8% yields an average savings of $1350 for 5.7 Million homeowners, and a HUGE tax cut for every Texas Taxpayer.”

Unlike Phelan, who is ultimately a taxpayer and stands to share the same tax relief benefit that all taxpayers receive, Bettencourt’s business provides a service based on the current tax structure.

In his tweet, Holland questioned whether someone whose business is fighting skyrocketing property tax appraisals would want to statutorily cap appraisals.

“If your business is fighting skyrocketing appraisals, why would you not want a cap?” Holland wrote.

This rhetoric, drawing into question personal motives behind the policy standoff, denotes the unprecedented intensity of the open political warfare between the two chambers on this issue.

As of late Wednesday there was still no sign of compromise. Gov. Greg Abbott sided with Phelan and the House proposal that provides relief entirely through compressing the tax rate — which is what he called on the chambers to do in his special session proclamation — while Patrick remained adamant in demanding the lower chamber and the governor accept a plan providing relief through increased homestead exemptions.

After the House passed its plan on Tuesday, the chamber immediately adjourned sine die, meaning they cannot come back to conduct business during the first special session. Patrick, however, indicated his belief that the House could still return: “The Senate is still working. The House can return.”

The Texan reached out to Phelan for comment, but received no response by the time of publication.

What is tax compression?

By James Quintero|May 31, 2023

TAXES & SPENDING

As Texans continue to get crushed under the ever-increasing burden of property taxes, Governor Abbott has promised them the “biggest tax cut in Texas history” and the Legislature appears poised to deliver—eventually.

During the closing days of the Regular session, legislators appropriated a massive $17.6 billion in tax relief for homeowners, renters, and businesses. But they hit a snag: how best to deliver that relief to taxpayers?

One of the more popular methods is called tax compression. The concept is relatively straightforward.

In recent years, tax rate compression efforts have centered on using state funds to buy down school district M&O tax rates to reduce property tax bills. An example of this policy in action is 2019’s House Bill 3. Part of the reason for the focus on M&O taxes is that they represent roughly half of the overall bill. The main benefit of targeting the M&O tax is that it keeps Texas on the pathway to elimination, with the tax rate making incremental progress to the $0.00 mark—permanently.

So what might this look like in the real world?

Imagine a home with a taxable value of $300,000 and an M&O tax rate of $0.90 per $100 of value. Without reform, this property’s tax bill (school M&O tax only) would be $2,700 annually. If the Legislature finally comes to an agreement on compression—and I believe they will—then the M&O tax rate will be reduced by $0.26 per $100 of value by the end of fiscal year 2025 (due to a 10-cent reduction under House Bill 3 and another 16 cents reduced under legislation likely in the future). That means that the tax rate applied to the $300,000 house would be $0.65 per $100 of value, yielding a tax bill of $1,950 – a savings of $750.

And that would be on an ongoing basis. Only if Legislators don’t ‘decide to get rid of it at some point. It is not permanent.

Of course, with tax rate compression it’s not just homeowners that would see this kind of relief. Businesses would also see their tax bills shrink because of the state-mandated tax rate cuts. Too, renters stand to gain as landlords could pass along tax savings in the form of lower rents.

Here are some more of the Bills that have been signed into law.

HB 2127, approved by the Senate, strips Texas cities of the authority to establish local ordinances related to the State’s agriculture, finance, insurance, labor, natural resources and occupation codes. This would mean municipal governments would only have a chance every two years to submit desired changes through the state legislative process.

Bill increasing power to TCOLE passes (SB 1445)

SB 14, a ban on transition-related health care for minors, advanced to the governor on May 19. Abbott said in a May 18 interview with Fox News that he will sign the bill.

Patient safety bill, goes to governor (HB 1998)

Here are some of the other bills heading to the governor:

Bills already signed

As of Sunday night, Abbott has signed 244 bills.

Abbott has vetoed two bills so far; SB 1615, which would have entered Texas into an interstate compact for cosmetology licensure, and HB 279, which he said was “largely duplicative” of a Senate bill that he signed.

Bill expanding crime victim compensation signed into law (SB 49)

Here are some of the bills signed into law:

Dear residents,

 

Next week, my City Council colleagues and I will vote on the City’s $6.2 billion proposed budget for the 2024 fiscal year, which for the first time includes an Other Post Employment Benefits (OPEB) trust contribution. The OPEB Contribution will total $10 million with a general fund contribution of $8 million and the remaining funds are a combination of Enterprise and Special Funds. This is a huge step towards increasing financial security for the City of Houston and I could not be prouder to have been the catalyst behind this new strategy for the City. The proposed budget includes pay raises for all City of Houston employee groups: 3% pay raise for municipal workers, 3% pay raise for police, and a 6% pay raise for firefighters. The 6% pay raise for firefighters included in this budget represents the 3rd year of an 18% cumulative pay raise for Houston firefighters valued at $115 million.

 

This budget also includes plans to invest in repairing and maintaining our roads, bridges, and drainage systems helping to reduce traffic congestion, improve safety, and increase resiliency for Houstonians. There is a $47 million increase in transfers to the Dedicated Drainage Street and Renewal Fund (DDSRF), or Rebuild Houston, to support streets and drainage projects in the Capital Improvement Plan, coupled with a decrease in debt service of $7 million, for a net increase of $40 million for pay-as-you-go and debt. The City of Houston is investing in parks and recreational facilities, including new parks, playgrounds, and sports facilities. This investment will provide more opportunities for outdoor activities and promote a sense of community and togetherness. Information related to the City’s proposed budget can be found online here.

 

As we, just kicked off the start of Hurricane Season residents should take note the budget also includes increased funding for emergency management services, improved communication systems, and enhanced infrastructure to mitigate the impact of flooding. The City of Houston Disaster Preparedness Guide is updated every year and helps Houstonians plan for emergencies. The guide is free and can be downloaded in six languages from the City’s Office of Emergency Management’s website here. Additionally, I encourage all residents to sign up for emergency alerts through Alert Houston. Alert Houston delivers critical information to Houston residents regarding current conditions, expected impacts, and protective actions to keep themselves and their loved ones safe.

 

Wishing everyone a safe summer and a reminder the District E Office will be closed on Monday, June 19 in Observance of Juneteenth.

 

 

Sincerely,

 
Lake Houston Spillway Gates to

Receive Crucial State Funding

Last week the State agreed to two requests from our community which were to include funding for the Lake Houston Spillway Dam Improvement Project, sediment capture projects, and both structural and nonstructural improvements for the San Jacinto River and Lake Houston in order to convey future floodwaters. Mayor Pro Tem credits the success of this funding to the hundreds of community members who answered the call to action and called State leaders over the last two weeks.

 

The Lake Houston area is blessed with many engaged residents and together the “fix” for the Lake Houston Gates is finally on the horizon. This new state funding signals to the federal government the City of Houston is ready to move forward. It is important to note the Lake Houston Spillway Dam Improvement Project has a benefit-to-cost ratio of 3.5, which is the highest-rated project in the state of Texas.

 

The specific requests included in a rider to the 88th Legislature’s Appropriations Bill (page 243/4) are in Sec. 17.38. Appropriation: Texas Water Development Board Water Grants and Lake Houston Accumulated Siltation.

 

These state funds in the amount of $50 million dollars will be utilized in the final design and construction of eleven new flood control gates to be added on the east embankment of the Lake Houston Spillway Dam. The City of Houston has spent $4.375 million on the preliminary design for the Lake Houston Spillway Dam Improvement Project securing $48 million dollars from the federal government along with $30 million dollars in local funds. U.S. Congressman Dan Crenshaw has also been instrumental in securing an $8 million dollar earmark and $38 million dollars in additional money for dredging in the San Jacinto River and Lake Houston.

 

Over the last several months, Mayor Pro Tem has visited Austin multiple times diligently meeting with representatives, legislative committee staff members, collecting over twenty letters of support from elected officials, and kicking off a grassroots campaign to accomplish the goal to fund much needed post-Harvey improvements in the San Jacinto River Watershed. The District E office plans to host a Fall community meeting in Kingwood to present the design concept and details related to the Lake Houston Spillway Dam Improvement Project, future dredging and sediment capture, as well as, progress on the expansion of Northpark Drive.

 

Thank you to U.S. Congressman Dan Crenshaw, U.S. Congressman Dan Crenshaw’s District Director Kaaren Cambio, Governor Greg Abbott, Lieutenant Governor Dan Patrick, State Senator Brandon Creighton, State Senator/Chairwoman Joan Huffman, Speaker Dade Phelan, State Representative Charles Cunningham, State Representative/House Appropriations Chair Greg Bonnen, State Representative Armando Walle, Montgomery County Judge Mark Keough, Montgomery County Commissioner Matt Gray, Harris County Commissioner Tom Ramsey, City of Humble Mayor Norman Funderburk, Humble City Manager Jason Stuebe, City of Houston Mayor Sylvester Turner, City of Houston Chief Recovery Officer Stephen Costello, City of Houston Government Relations Team led by Bill Kelly and consultants Dan Huberty, Ben Melson. Additional thanks to our communities of support including Humble Independent School District, San Jacinto River Authority, Kingwood Super Neighborhood, Lake Houston Redevelopment Authority, Kingwood Service Association, Greater East Montgomery County Chamber of Commerce, Greater Houston Partnership, Lake Conroe Association, Partnership Lake Houston, North Houston Association, and Kingwood resident Bob Rehak. None of this would have been possible without these amazing representatives and partners.

Beth Guide

President

9434 Katy Freeway #360

Houston, Tx 77047

Office 713-703-3030 x701

Mobile 281-389-5117

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