BellCAD confirms that freeze cannot be taken away

When then-State Rep. Fred Brown authored the bill that calling for  a state constitutional amendment to allow Texas counties, junior colleges and cities to adopt a tax freeze on homesteads of those over age 65 and on homesteads of disable veterans, it passed the state House unanimously. In 2003, the constitutional amendment was approved by 81 percent of the voters statewide It seemed, at the time, like a no brainer. Freeze the municipal taxes that senior citizens pay, much like the school taxes for seniors have been frozen in Texas for many years.

For many city leaders that were quick to embrace the tax freeze and implement it locally, the idea has backfired as they now face the dilemma of funding their budgets every year.

Many cities have refused to put the tax freezes into place. Others have done so, only to regret it later, especially when they cannot repeal or rescind the tax ceiling.

Now, discussion of the tax ceiling law and other local homestead exemptions have been caught up in the heated debate over the $10.55 million bond for construction of a sewer system in Salado.

Some opponents to the sewer bond have taken to social media, quoting part of the property tax code and telling those over 65 that the tax freeze can be taken away by a vote of the board of aldermen. 

This is not so. 

Roger L. Chesser, deputy chief appraiser for the Bell County Tax Appraisal District (BellCAD), in an email with Salado Village Voice on Oct. 24, was asked this direct question: “A municipality — once it has adopted the over 65 tax ceiling — cannot repeal the tax ceiling. It can repeal or lower the tax exemptions.  Are those correct statements? Even if the city were to repeal the exemptions ($50,000 for over 65), it would not affect the ceilings already in place.”

His response was this: “To the best of our knowledge those statements are true.”

The Comptroller’s office, in a lengthy paper on property tax, confirms this, as does the Texas Municipal League (TML) and the Texas Association of Counties. A county, junior college district or municipality, once it has adopted the over 65 Tax Ceiling, may not repeal or rescind it.

However, if those entities offer a further tax exemption to homesteads of citizens over the age of 65 or citizens who are disabled, those taxing entities may reduce or repeal the tax exemptions it offers. This action will have no effect on property owners who have had their property taxes frozen.

This is one reason that many Texas counties and cities have chosen not to adopt the tax ceilings. Around the state, cities are dealing with the long-term ramifications of those tax ceilings. 

Fairview’s Mayor Sim Israeloff explained in a letter to taxpayers that “If a senior tax freeze is enacted, the governing body ‘may not repeal or rescind’ the exemption in the future, not matter what happens…. The issue of a senior tax freeze in Fairview has come up for discussion from time to time. Some cities have adopted them including a few in our area, but most in Texas have elected not to enact one.”

“The main concerns with at ax freeze involve perceived tax fairness, lack of flexibility, and whether the needs of low income seniors can be better addresses through other approaches,” Israeloff stated.

Israeloff referred to several arguments against the senior tax freeze,  including these: “1. a senior tax freeze does not reduce the cost of operating municipal government, only shifts the burden from one taxpaying group to another, 2. Older taxpayers do not use few city services and can be bigger users of some services like EMS. 3. Age and lower income are not necessarily correlated. Younger couples often have less income and ability to pay taxes than seniors. Nor is everyone over age 65 retired or living on a low fixed income. 4. A tax freeze can lead to uneven tax burdens even among those taxpayers under the freeze…. Two identical houses, both owned by seniors, would pay very different taxes. 5. Once a senior tax freeze is enacted, it cannot be canceled or rescinded no matter what happens.”

Salado is one of five municipalities in Bell County to adopt the tax ceiling (often referred to as a tax freeze) for over homeowners over the age of 65. The Village did so when it first adopted an ad valorem tax by ordinance in 2008. At that time, village aldermen also adopted the most generous property tax exemptions in Bell County and the lowest property tax in the county at a rate of $0.0492 per $100 valuation. According to Marvin Hahn, chief appraiser for Bell CAD, Killeen adopted the freeze in 2008, Nolanville in 2005, Temple in 2005 and Troy in 2007. In addition to the tax freeze for over 65, Killeen offers a $20,000 tax exemption, while Temple offers a $10,000 tax exemption for those homesteads. Nolanville and Troy offer the tax freeze only.

Salado offers homeowners over 65 and those who are disabled, both the tax freeze and a further $50,000 tax exemption.

Temple and Salado are the only two municipalities in Bell County to offer a tax exemption for homesteads. Both offer a $5,000 minimum or 20 percent exemption from the taxable value of the homestead. Additionally, the local homestead tax exemptions of 20 percent are stacked with either the over 65 exemption and freeze or the disabled homeowner exemption and freeze.

So how does it work? For example, in 2008, when the Village first adopted its tax rate at $0.0492, a homeowner over the age of 65 whose home was appraised at $250,000 and who claimed the tax exemptions could have their taxes frozen at  $73.80 per year, regardless of how high the Village might increase its property tax rate in future years. This is based on the following formula: $250,000 – $50,000 (20 percent of appraised value for homestead) – $50,000 (over 65 exemption)= taxable value of $150,000. That amount is divided by 100 and then multiplied by $0.0492 for a total due of $73.80.

Between 2008 and 2011, when Village aldermen raised the property tax to $0.121 per $100 evaluation, 403 properties were already frozen at the lower rate. Since the Village increased the property tax rate to $0.121 per $100 evaluation and 2014, another 134 over 65 homeowners had the taxes frozen on their property.

All told, the appraised value of homes that qualify for the over 65 exemption is $77,874,216. Of that amount, $42,167,419 is taxable. Those properties, 366 of them in 2014, generate a total of $26,754.56 in property taxes, according to Bell CAD’s 2014 Certified Appraisal Rolls for the Village of Salado.