Ballot Language:

The constitutional amendment authorizing the legislature to provide that the maximum appraised value of a residence homestead for ad valorem taxation is limited to the lesser of the most recent market value of the residence homestead as determined by the appraisal entity or 110 percent, or a greater percentage, of the appraised value of the residence homestead for the preceding tax year.

HJR-40 History

Passage of this proposition would eliminate the possibility of property appraisals rising more than 10% in any one year. The current system allows appraisal districts to skip appraising property for two years and raise the rate in the third year by 30%. No significant fiscal implication is anticipated for the state.

Galveston County Tax Assessor-Collector Cheryl Johnson has come out in favor of the proposition, using her own home as an example of how it could lower taxes.

Although I have availed myself of the protest process, my home values began steadily increasing in 2003. The 26 percent market value increase from 2001 to 2003 resulted in a 20 percent taxable value increase in 2003 (10 percent per year since last appraised). As a result, my tax bill increased $809 or 22 percent in one year alone!

Had Prop 3 been in place, the increase would have been 10 percent, rather than 20 percent in 2003. Over the four year period shown below, the savings adds up to a whopping $1,735 - enough to have paid for my daughter’s braces or school lunches for the entire four years!

BigJolly says: Who am I to argue with Ms. Johnson? I can see where some smaller districts or districts that have stagnant property values being against this amendment but for the majority of Texans, it’s a good deal.

Click to read comments for and against.

From the Texas Legislative Council Summary (note: 131 page pdf file):

Comments by Supporters: When the legislature proposed the limitation on increases in appraised value of residence homesteads in 1997 and the voters approved it, the legislature and the voters understood the limitation to prohibit the appraised value of a homestead from being increased by more than 10 percent from year to year. The intent was to provide a circuit breaker that would protect homeowners from the hardship of having their ad valorem taxes increased substantially from one year to the next as a result of appraisal increases. Instead, the limitation has been construed by many appraisal districts that do not appraise property annually to authorize increases of up to 30 percent in the year in which a residence homestead is reappraised for tax purposes. The proposed amendment conforms the language of the Texas Constitution to the legislature’s intent when it
enacted the original appraisal limitation and the voters’ understanding of the limitation when they approved it.

The proposed amendment makes the ad valorem tax system fairer. Under current law, residence homesteads of similar value in different appraisal districts may have different appraised values depending on the frequency with which the appraisal districts appraise property and the year in which the homesteads were last appraised. Under the current appraisal limitation as it is generally construed, increases in the value of residence homesteads are taken into account only when the homesteads are reappraised. While many appraisal districts appraise property annually, some districts appraise property only every two or three years. If
property values are changing, differences in appraised values of residence homesteads of similar value may arise between appraisal districts that appraise property annually and those that do not. Furthermore, in an appraisal district that appraises property only every two or three years, in any given year residence homesteads of similar value may have widely different appraised values because they were last appraised in different years. Because the proposed amendment authorizes changes in the appraised value of a residence homestead regardless of whether the homestead is reappraised in the current year, similar homesteads will be more likely to be appraised at the same value regardless of the frequency with which the appraisal district appraises property or the years in which the homesteads were last appraised, resulting in a more equitable sharing of the tax burden.

The effect of the proposed amendment on the ad valorem tax revenue of local governments is minimal. The proposed amendment affects the appraised value of residence homesteads only in appraisal districts that do not appraise property annually. The proposed amendment would not affect the appraised value of residence homesteads in most populous
counties because the appraisal districts for those counties generally appraise property annually. Furthermore, even in appraisal districts that do not appraise property annually, the effect would be minimal because even though appraisal increases might initially lag increases in market values over the short term if market values are rising rapidly, over the long term appraised values would likely catch up with market values because the proposed amendment permits appraisal increases of up to 10 percent annually.

Comments by Opponents: The proposed amendment is unnecessary because appraisal districts in most counties that are experiencing rapid increases in property values already appraise property annually, and the proposed amendment has no effect on appraisal increases in those appraisal districts. While the amendment is intended to protect homeowners from increases in property values from one year to the next of 20 or 30 percent as allowed under current law in appraisal districts that appraise property only every two or three years, in reality those increases are uncommon because property values tend to increase more slowly in those appraisal districts.

To the extent that the proposed amendment reduces the ad valorem tax burden of the owner of a residence homestead the value of which is rising rapidly and that is located in an appraisal district that does not appraise property annually, the amendment has the effect of shifting the tax burden to other taxpayers, including owners of commercial property and of homesteads the values of which are rising less rapidly.