HB 371 — The adoption of two budgets by a political subdivision t

90R481 CS-D By: Wilson H.B. No. 371 relating to the adoption of two budgets by a political subdivision that adopts an ad valorem tax rate that exceeds the political subdivision's voter-approval tax rate.

SECTION 1. Chapter 140, Local Government Code, is amended by adding Section 140.015 to read as follows: Sec. 140.015. CONTINGENT BUDGETS FOR POLITICAL SUBDIVISION ADOPTING AD VALOREM TAX RATE THAT EXCEEDS VOTER-APPROVAL TAX RATE. (a) In this section: (1) "Political subdivision" means a county, municipality, school district, special purpose district, or other subdivision of state government that has jurisdiction limited to a geographic portion of the state. (2) "Tax rate" means the ad valorem tax rate of a political subdivision for a tax year. (3) "Tax year" has the meaning assigned by Section 1.04, Tax Code. (4) "Voter-approval election" means an election required by law to be automatically held to allow voters to approve a political subdivision's tax rate when the political subdivision adopts a tax rate that exceeds the political subdivision's voter-approval tax rate. (5) "Voter-approval tax rate" means the voter-approval tax rate of a political subdivision calculated as required for the political subdivision under: (A) Chapter 26, Tax Code; (B) Chapter 49, Water Code; or (C) another provision of law. (b) This section applies only to the fiscal year of a political subdivision that begins in a tax year in which the political subdivision adopts a tax rate that exceeds the political subdivision's voter-approval tax rate. (c) The governing body of a political subdivision shall adopt two budgets as provided by Subsections (d) and (e) for a fiscal year to which this section applies. (d) The governing body of a political subdivision must adopt one budget that assumes the voters approve at the voter-approval election the tax rate adopted by the political subdivision. This budget is contingent on that voter approval and is the budget for the political subdivision if the adopted tax rate is approved by the voters at that election. (e) The governing body of a political subdivision must adopt a second budget that assumes the voters approve at the voter-approval election the voter-approval tax rate. This budget is contingent on that voter approval and is the budget for the political subdivision if the voter-approval tax rate is approved by the voters at that election. (f) A provision of law that applies to the preparation and adoption of a budget by a political subdivision applies to both budgets required to be adopted under this section, including notice and hearing provisions.

SECTION 2. Section 26.042(e-1), Tax Code, is amended to read as follows: (e-1) The governing body of a school district may not adopt a tax rate under Subsection (e) for a tax year in which: (1) the governing body previously adopted a tax rate that exceeded the district's voter-approval tax rate; (2) an election was held under Section 26.08 for the purpose of approving [ determining whether to approve ] the district's [ adopted ] tax rate; and (3) the proposition to approve the district's adopted tax rate was not approved by the voters of the district at the election.

SECTION 3. Sections 26.06(b-1) and (b-3), Tax Code, are amended to read as follows: (b-1) If the proposed tax rate exceeds the no-new-revenue tax rate and the voter-approval tax rate of the taxing unit, the notice must contain a statement in the following form: "NOTICE OF PUBLIC HEARING ON TAX INCREASE "PROPOSED TAX RATE $__________ per $100 "NO-NEW-REVENUE TAX RATE $__________ per $100 "VOTER-APPROVAL TAX RATE $__________ per $100 "The no-new-revenue tax rate is the tax rate for the (current tax year) tax year that will raise the same amount of property tax revenue for (name of taxing unit) from the same properties in both the (preceding tax year) tax year and the (current tax year) tax year. "The voter-approval tax rate is the highest tax rate that (name of taxing unit) may adopt without holding an election to seek voter approval of the rate. "The proposed tax rate is greater than the no-new-revenue tax rate. This means that (name of taxing unit) is proposing to increase property taxes for the (current tax year) tax year. "A public hearing on the proposed tax rate will be held on (date and time) at (meeting place). "The proposed tax rate is also greater than the voter-approval tax rate. If (name of taxing unit) adopts the proposed tax rate, (name of taxing unit) is required to hold an election so that the voters may approve either [ accept or reject ] the proposed tax rate or [ . If a majority of the voters reject the proposed tax rate, the tax rate of the (name of taxing unit) will be ] the voter-approval tax rate of the (name of taxing unit) . The election will be held on (date of election). You may contact the (name of office responsible for administering the election) for information about voting locations. The hours of voting on election day are (voting hours). "Your taxes owed under any of the tax rates mentioned above can be calculated as follows: "Property tax amount = tax rate x taxable value of your property / 100 "(Names of all members of the governing body, showing how each voted on the proposal to consider the tax increase or, if one or more were absent, indicating the absences.) "Visit Texas.gov/PropertyTaxes to find a link to your local property tax database on which you can easily access information regarding your property taxes, including information about proposed tax rates and scheduled public hearings of each entity that taxes your property. "The 86th Texas Legislature modified the manner in which the voter-approval tax rate is calculated to limit the rate of growth of property taxes in the state." (b-3) If the proposed tax rate does not exceed the no-new-revenue tax rate but exceeds the voter-approval tax rate of the taxing unit, the notice must contain a statement in the following form: "NOTICE OF PUBLIC HEARING ON TAX RATE "PROPOSED TAX RATE $__________ per $100 "NO-NEW-REVENUE TAX RATE $__________ per $100 "VOTER-APPROVAL TAX RATE $__________ per $100 "The no-new-revenue tax rate is the tax rate for the (current tax year) tax year that will raise the same amount of property tax revenue for (name of taxing unit) from the same properties in both the (preceding tax year) tax year and the (current tax year) tax year. "The voter-approval tax rate is the highest tax rate that (name of taxing unit) may adopt without holding an election to seek voter approval of the rate. "The proposed tax rate is not greater than the no-new-revenue tax rate. This means that (name of taxing unit) is not proposing to increase property taxes for the (current tax year) tax year. "A public hearing on the proposed tax rate will be held on (date and time) at (meeting place). "The proposed tax rate is greater than the voter-approval tax rate. If (name of taxing unit) adopts the proposed tax rate, (name of taxing unit) is required to hold an election so that the voters may approve either [ accept or reject ] the proposed tax rate or [ . If a majority of the voters reject the proposed tax rate, the tax rate of the (name of taxing unit) will be ] the voter-approval tax rate of the (name of taxing unit) . The election will be held on (date of election). You may contact the (name of office responsible for administering the election) for information about voting locations. The hours of voting on election day are (voting hours). "Your taxes owed under any of the tax rates mentioned above can be calculated as follows: "Property tax amount = tax rate x taxable value of your property / 100 "(Names of all members of the governing body, showing how each voted on the proposal to consider the tax rate or, if one or more were absent, indicating the absences.) "Visit Texas.gov/PropertyTaxes to find a link to your local property tax database on which you can easily access information regarding your property taxes, including information about proposed tax rates and scheduled public hearings of each entity that taxes your property. "The 86th Texas Legislature modified the manner in which the voter-approval tax rate is calculated to limit the rate of growth of property taxes in the state."

SECTION 4. Section 26.063(b), Tax Code, is amended to read as follows: (b) This subsection applies only to a taxing unit that is required to hold an election under Section 26.07. In the notice required to be provided by the taxing unit under Section 26.06(b-1) or (b-3), as applicable, the taxing unit shall: (1) add the following to the end of the list of rates included in the notice: "DE MINIMIS RATE $__________ per $100"; (2) substitute the following for the definition of "voter-approval tax rate": "The voter-approval tax rate is the highest tax rate that (name of taxing unit) may adopt without holding an election to seek voter approval of the rate, unless the de minimis rate for (name of taxing unit) exceeds the voter-approval tax rate for (name of taxing unit)."; (3) add the following definition of "de minimis rate": "The de minimis rate is the rate equal to the sum of the no-new-revenue maintenance and operations rate for (name of taxing unit), the rate that will raise $500,000, and the current debt rate for (name of taxing unit)."; and (4) substitute the following for the provision that provides notice that an election is required: "The proposed tax rate is greater than the voter-approval tax rate and the de minimis rate. If (name of taxing unit) adopts the proposed tax rate, (name of taxing unit) is required to hold an election so that the voters may approve either [ accept or reject ] the proposed tax rate or [ . If a majority of the voters reject the proposed tax rate, the tax rate of the (name of taxing unit) will be ] the voter-approval tax rate of the (name of taxing unit). The election will be held on (date of election). You may contact the (name of office responsible for administering the election) for information about voting locations. The hours of voting on election day are (voting hours).".

SECTION 5. Sections 26.07(b), (c), (d), (e), (f), and (g), Tax Code, are amended to read as follows: (b) If the governing body of a special taxing unit or a municipality with a population of 30,000 or more adopts a tax rate that exceeds the taxing unit's voter-approval tax rate, or the governing body of a taxing unit other than a special taxing unit or a municipality with a population of less than 30,000 regardless of whether it is a special taxing unit adopts a tax rate that exceeds the greater of the taxing unit's voter-approval tax rate or de minimis rate, the registered voters of the taxing unit at an election held for that purpose must determine whether to approve the adopted tax rate or the voter-approval tax rate . (c) The governing body shall order that the election be held in the taxing unit on the uniform election date prescribed by Section 41.001, Election Code, that occurs in November of the applicable tax year. The order calling the election may not be issued later than the 71st day before the date of the election. At the election, the ballots shall be prepared to permit voting on [ for or against ] the proposition: "Approving either the (name of taxing unit's) adopted ad valorem tax rate of $_____ per $100 valuation in (name of taxing unit) for the current year or the (name of taxing unit's) voter-approval tax rate of $_____ per $100 valuation in (name of taxing unit) for the current year. The adopted ad valorem tax [ , a ] rate [ that ] is $_____ higher per $100 valuation than the voter-approval tax rate of (name of taxing unit), for the purpose of (description of purpose of increase). Last year, the ad valorem tax rate in (name of taxing unit) was $_____ per $100 valuation." [ The ballot proposition must include the adopted tax rate, the difference between the adopted tax rate and the voter-approval tax rate, and the taxing unit's tax rate for the preceding tax year in the appropriate places. ] (d) The tax rate adopted by the governing body for the current tax year is the tax rate for the current tax year if [ If ] a majority of the votes cast in the election required by this section approve that [ favor the proposition, the tax ] rate [ for the current year is the rate that was adopted by the governing body ]. (e) The voter-approval tax rate of the taxing unit for the current tax year is the tax rate for the current tax year if a majority of the votes cast in the election required by this section approve that [ If the proposition is not approved as provided by Subsection (d), the taxing unit's tax rate for the current tax year is the taxing unit's voter-approval tax ] rate. (f) If, after tax bills for the taxing unit have been mailed, the voters of the taxing unit [ a proposition to ] approve the taxing unit's voter-approval [ adopted ] tax rate at the election required by this section [ is not approved by the voters of the taxing unit at an election held under this section ], the assessor for the taxing unit shall prepare and mail corrected tax bills. The assessor shall include with the bill a brief explanation of the reason for and effect of the corrected bill. (g) If a property owner pays taxes calculated using the [ originally ] adopted tax rate of the taxing unit and the voters of the taxing unit [ proposition to ] approve the taxing unit's voter-approval [ adopted ] tax rate at the election required by this section [ is not approved by voters ], the taxing unit shall refund the difference between the amount of taxes paid and the amount due under the voter-approval tax rate if the difference between the amount of taxes paid and the amount due under the voter-approval tax rate is $1 or more. If the difference between the amount of taxes paid and the amount due under the voter-approval tax rate is less than $1, the taxing unit shall refund the difference on request of the taxpayer. An application for a refund of less than $1 must be made within 90 days after the date the refund becomes due or the taxpayer forfeits the right to the refund.

SECTION 6. Sections 26.08(a), (b), (c), (d), (d-1), and (d-2), Tax Code, are amended to read as follows: (a) If the governing body of a school district adopts a tax rate that exceeds the district's voter-approval tax rate, the registered voters of the district at an election held for that purpose must determine whether to approve the adopted tax rate or the voter-approval tax rate . (b) The governing body shall order that the election be held in the school district on the next uniform election date prescribed by Section 41.001, Election Code, that occurs after the date of the election order and that allows sufficient time to comply with the requirements of other law. At the election, the ballots shall be prepared to permit voting on [ for or against ] the proposition: " Approving either the (name of school district's) adopted [ Ratifying the ] ad valorem tax rate of _____ (insert adopted tax rate) in (name of school district) for the current year or the (name of school district's) voter-approval tax rate of _____ (insert voter-approval tax rate) in (name of school district) for the current year. The adopted ad valorem tax [ , a ] rate [ that ] will result in an increase of _____ (insert percentage increase in maintenance and operations tax revenue under the adopted tax rate as compared to maintenance and operations tax revenue in the preceding tax year) percent in maintenance and operations tax revenue for the district for the current year as compared to the preceding year, which is an additional $_____ (insert dollar amount of increase in maintenance and operations tax revenue under the adopted tax rate as compared to maintenance and operations tax revenue in the preceding tax year)." (c) The tax rate adopted by the governing body for the current tax year is the tax rate for the current tax year if [ If ] a majority of the votes cast in the election required by this section approve that [ favor the proposition, the tax ] rate [ for the current year is the rate that was adopted by the governing body ]. (d) The voter-approval tax rate of the school district for the current tax year is the tax rate for the current tax year if a majority of the votes cast in the election required by this section approve that [ If the proposition is not approved as provided by Subsection (c), the governing body may not adopt a tax rate for the school district for the current year that exceeds the school district's voter-approval tax ] rate. (d-1) If, after tax bills for the school district have been mailed, the voters of the district [ a proposition to ] approve the [ school ] district's voter-approval [ adopted ] tax rate at the election required by this section [ is not approved by the voters of the district at an election held under this section, on subsequent adoption of a new tax rate by the governing body of the district ], the assessor for the district [ school ] shall prepare and mail corrected tax bills. The assessor shall include with each bill a brief explanation of the reason for and effect of the corrected bill. The date on which the taxes become delinquent for the year is extended by a number of days equal to the number of days between the date the first tax bills were sent and the date the corrected tax bills were sent. (d-2) If a property owner pays taxes calculated using the [ originally ] adopted tax rate of the school district and the voters of the district [ proposition to ] approve the district's voter-approval [ adopted ] tax rate at the election required by this section [ is not approved by voters ], the [ school ] district shall refund the difference between the amount of taxes paid and the amount due under the voter-approval tax [ subsequently adopted ] rate if the difference between the amount of taxes paid and the amount due under the subsequent rate is $1 or more. If the difference between the amount of taxes paid and the amount due under the voter-approval tax [ subsequent ] rate is less than $1, the [ school ] district shall refund the difference on request of the taxpayer. An application for a refund of less than $1 must be made within 90 days after the date the refund becomes due or the taxpayer forfeits the right to the refund.

SECTION 7. Section 49.236(a), Water Code, is amended to read as follows: (a) Before the board adopts an ad valorem tax rate for the district for debt service, operation and maintenance purposes, or contract purposes, the board shall give notice of each meeting of the board at which the adoption of a tax rate will be considered. The notice must: (1) contain a statement in substantially the following form: "NOTICE OF PUBLIC HEARING ON TAX RATE "The (name of the district) will hold a public hearing on a proposed tax rate for the tax year (year of tax levy) on (date and time) at (meeting place). Your individual taxes may increase at a greater or lesser rate, or even decrease, depending on the tax rate that is adopted and on the change in the taxable value of your property in relation to the change in taxable value of all other property. The change in the taxable value of your property in relation to the change in the taxable value of all other property determines the distribution of the tax burden among all property owners. "Visit Texas.gov/PropertyTaxes to find a link to your local property tax database on which you can easily access information regarding your property taxes, including information about proposed tax rates and scheduled public hearings of each entity that taxes your property. "(Names of all board members and, if a vote was taken, an indication of how each voted on the proposed tax rate and an indication of any absences.)"; (2) contain the following information: (A) the district's total adopted tax rate for the preceding year and the proposed tax rate, expressed as an amount per $100; (B) the difference, expressed as an amount per $100 and as a percent increase or decrease, as applicable, in the proposed tax rate compared to the adopted tax rate for the preceding year; (C) the average appraised value of a residence homestead in the district in the preceding year and in the current year; the district's total homestead exemption, other than an exemption available only to disabled persons or persons 65 years of age or older, applicable to that appraised value in each of those years; and the average taxable value of a residence homestead in the district in each of those years, disregarding any homestead exemption available only to disabled persons or persons 65 years of age or older; (D) the amount of tax that would have been imposed by the district in the preceding year on a residence homestead appraised at the average appraised value of a residence homestead in that year, disregarding any homestead exemption available only to disabled persons or persons 65 years of age or older; (E) the amount of tax that would be imposed by the district in the current year on a residence homestead appraised at the average appraised value of a residence homestead in that year, disregarding any homestead exemption available only to disabled persons or persons 65 years of age or older, if the proposed tax rate is adopted; (F) the difference between the amounts of tax calculated under Paragraphs (D) and (E), expressed in dollars and cents and described as the annual percentage increase or decrease, as applicable, in the tax to be imposed by the district on the average residence homestead in the district in the current year if the proposed tax rate is adopted; and (G) if the proposed combined debt service, operation and maintenance, and contract tax rate requires or authorizes an election to approve or reduce the tax rate, as applicable, a description of the purpose of the proposed tax increase; (3) contain a statement in substantially the following form, as applicable: (A) if the district is a district described by Section 49.23601: "NOTICE OF VOTE ON TAX RATE "If the district adopts a combined debt service, operation and maintenance, and contract tax rate that would result in the taxes on the average residence homestead increasing by more than eight percent, an election must be held to approve either [ determine whether to approve ] the operation and maintenance tax rate under Section 49.23601, Water Code , or the district's voter-approval tax rate ."; (B) if the district is a district described by Section 49.23602: "NOTICE OF VOTE ON TAX RATE "If the district adopts a combined debt service, operation and maintenance, and contract tax rate that would result in the taxes on the average residence homestead increasing by more than 3.5 percent, an election must be held to [ determine whether to ] approve either the operation and maintenance tax rate under Section 49.23602, Water Code , or the district's voter-approval tax rate ."; or (C) if the district is a district described by Section 49.23603: "NOTICE OF TAXPAYERS' RIGHT TO ELECTION TO REDUCE TAX RATE "If the district adopts a combined debt service, operation and maintenance, and contract tax rate that would result in the taxes on the average residence homestead increasing by more than eight percent, the qualified voters of the district by petition may require that an election be held to determine whether to reduce the operation and maintenance tax rate to the voter-approval tax rate under Section 49.23603, Water Code."; and (4) include the following statement: "The 86th Texas Legislature modified the manner in which the voter-approval tax rate is calculated to limit the rate of growth of property taxes in the state.".

SECTION 8. Section 49.23601(c), Water Code, is amended to read as follows: (c) If the board of a district adopts a combined debt service, contract, and operation and maintenance tax rate that would impose more than 1.08 times the amount of tax imposed by the district in the preceding year on a residence homestead appraised at the average appraised value of a residence homestead in the district in that year, disregarding any homestead exemption available only to disabled persons or persons 65 years of age or older, an election must be held in accordance with the procedures provided by Sections 26.07(c)-(g), Tax Code, to [ determine whether to ] approve either the district's adopted tax rate or the district's voter-approval tax rate. The tax rate adopted by the board for the current tax year is the tax rate for the current tax year if a majority of the votes cast in the election approve that rate. The voter-approval tax rate of the district for the current tax year is the tax rate for the current tax year if a majority of the votes cast in the election approve that rate . [ If the adopted tax rate is not approved at the election, the district's tax rate is the voter-approval tax rate. ]

SECTION 9. Section 49.23602(c), Water Code, is amended to read as follows: (c) If the board of a district adopts a combined debt service, contract, and operation and maintenance tax rate that exceeds the district's mandatory tax election rate, an election must be held in accordance with the procedures provided by Sections 26.07(c)-(g), Tax Code, to [ determine whether to ] approve either the district's adopted tax rate or the district's voter-approval tax rate. The tax rate adopted by the board for the current tax year is the tax rate for the current tax year if a majority of the votes cast in the election approve that rate. The voter-approval tax rate of the district for the current tax year is the tax rate for the current tax year if a majority of the votes cast in the election approve that rate . [ If the adopted tax rate is not approved at the election, the district's tax rate is the voter-approval tax rate. ] An election is not required if the adopted tax rate is less than or equal to the voter-approval tax rate.

SECTION 10. Section 140.015, Local Government Code, as added by this Act, applies only to the adoption of a budget by a political subdivision for a fiscal year that begins on or after the effective date of this Act.

SECTION 11. Sections 26.042, 26.06, 26.063, 26.07, and 26.08, Tax Code, and Sections 49.236, 49.23601, and 49.23602, Water Code, as amended by this Act, apply only to an ad valorem tax year that begins on or after the effective date of this Act.

SECTION 12. This Act takes effect January 1, 2028.