HomeMy WebLinkAboutIR 8771INFORMAL REPORT TO CITY COUNCIL MEMBERS
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No. 8771
Date: May 9, 2006
To the Mayor and Members of the City Council
Page 1 of 2
SUBJECT: Impact of Potential Changes to Appraisal Cap Legislation
This report provides an analysis of the impact of potential legislation that would cap values of real property at
some number less than the current 10% or increase the categories of property that qualify for the cap from
just residential to all real property (residential and commercial).
Currently, homesteads are capped at a 10% increase in valuation each year, which means that if the value
of a homesteaded residence increases in value above 10 %, the valuation, for tax purposes, will be held at
10% for that year. As a consequence, each year in the July certified tax roll, the Tarrant Appraisal District
(TAD) provides the value lost to the 10% cap on residential market values.
The draft legislation offered throughout the 2005 legislative session ran the spectrum from a cap on the
same category of property, but at a lower rate, cap all categories of residential property, rather than just
homesteaded property, and cap all real property. As an example, if the State changed the cap rules to
include all residential property, and using 5% and 3% as possible new caps, the following lost revenue chart
can be generated using 2006 preliminary data provided by the TAD.
01 1
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Revenue Impacts of Proposals to Reduce Appraisal Cap from 10% to 5% or 3%
Residential Only
Value Lost to Cap
Number of Properties Affected
% of total Properties
Total Residential
Total Appraised Value ($000)
Tax Rate
Revenue Loss Due to Cap
Change
FY2005 -06 (10 %)
5% Cap
3% Cap
$968,104,746
$1,158,576,113
$1,262,267,470
57,169
70,354
79,870
28%
35%
39%
202,890
202,890
202,890
(10% Cap - Current Rules)
(Homesteads Only)
$968,104,746
$1,158,576,113
$1,262,267,470
$0.86500
$0.86500
$0.86500
$8,374,106
$10,021,683
$10,918,614
($1,647,577)
($2,544,508)
Source: Special TAD Generated Report - Apr 06
Note: Currently, any property can potentially be eligible for the Homestead Exemption if the property is owner - occupied Rental
units, whether they are multi - family or the rented half of a duplex, are thus not eligible for the 1-Homestead Exemption.
ISSUED BY THE CITY MANAGER
FORT WORTH, TEXAS
INFORMAL REPORT TO CITY COUNCIL MEMBERS
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To the Mayor and Members of the City Council
No. 8771
Date: May 9, 2006
Page 2 of 2
SUBJECT: Impact of Potential Changes to Appraisal Cap Legislation
Similarly, if the State changed the cap rules to include all real property, and using the same potential cap
percentages, the following lost revenue chart could be generated.
All Real Property - Apr 06
Value Lost to Cap
Number of Properties Affected
% of total Properties
Total Properties
Total Appraised Value ($000)
Tax Rate
Ad
IN�v =s
Revenue Loss Due to Cap
Source:
FY2005 -06
5° o Cap
3% Cap
$2,101,121,981
1
$2,269,859,279
75,382
85,213
no cap in effect
34%
38%
224,843
224,843
Potential
Legislation: no comparative
history
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$2,101,121,981
$2,269,859,279
$0.86500
$0.86500
$0.86500
$0
$18,174,705
$19,634,283
TAD Report, Apr 06 TAD Report, Apr 06
Revenues would suffer dramatically as a result of either of these potential changes.
The reductions of caps are often linked to school finance reform. The most often discussed reasons for not
enacting additional caps are that proposals to cap appraisals or revenue to cities do not address school
finance reform; proposals to cap appraisals or revenue are very similar to Prop -13" California styled policy,
which have led to dramatic distortions in the real estate market; cities collect approximately 15% of the
property tax statewide - school districts collect approximately 60 %, so, limitations on cities will have very
little impact on the average homeowners; proposals to cap appraisals or revenue challenge a City's ability to
raise sufficient revenues to meet basic services — like streets, police and fire; proposals to cap appraisals or
revenue challenge principles of local control — they ignore the impact of community desires for varying levels
of services.
UL-
Charles R. Boswell;,
City Manager
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ISSUED BY THE CITY MANAGER
FORT WORTH, TEXAS