By Zachary Lewis | Aug 7, 2017

AUSTIN – Texas Attorney General Ken Paxton is refuting Representative John Zerwas and Fort Bend Independent School District’s argument for bypassing tax legislation to reduce their tax rates without a tax ratification election.

Zerwas sought a written opinion from Paxton in April asking whether or not an independent school district would need to hold the election to implement tax rates. The district was seeking to reduce its ad valorem tax rate to $1.32 per $100 versus its current $1.34 rate. To accomplish this, it planned to lower its debt service rate by 4 cents and raise its maintenance and operations rate by 2 cents. It was its goal to change the tax rate while avoiding the costs associated with holding the election.  

According to Texas Tax Code Section 26.08(a), a school district is required to hold a tax ratification election when its board adopts a tax rate greater than its rollback rate, both of which includes the sum of the maintenance and operations and debt service rates in their calculations. The district reasoned because the proposed rollback rate was lower than the tax rate, the election requirement should not be applicable according to the statute’s language.   

Zerwas cited Paxton’s predecessor, Greg Abbott, stating the former attorney general said tax ratification elections were mandatory only when the tax rate was greater than the callback. Zerwas argued in his opinion, Abbott wrote, “a district may, of course, adopt a tax rate that is lower than the rollback rate without a rollback election” in a previously published opinion, GA-0775.

Zerwas also claimed requiring an election when the ad valorem tax is lower than the rollback rate is “contrary to statute’s plain text and would undermine the legislature’s well-publicized goal of lowering property taxes.”

On July 14, Paxton responded to Zerwas and the district that their calculation regarding their rollback rate was off. In his written opinion, he agreed with Zerwas in regards to the statute’s language and requirements for election; however, he points out subsection 26.08(n) which defines the rollback rate and how it is calculated.

In 2006, maintenance and operations rates underwent a compression of 66.67 percent through state legislation. This led to changes in how the rollback rate is derived; it requires a “maximum” maintenance and operations rate and a current year debt service rate to properly calculate the rollback rate. The maintenance and operation rate falls under two different criteria under the legislation:

“The maintenance and operations component of the rollback rate is the lesser of: (A) the sum of the product of the state compression percentage (66.67 percent) and $1.50, 4 cents, and any additional cents authorized at prior rollback elections; or (B) the sum of the effective maintenance and operations rate and the product of the state compression percentage (66.67 percent) and 6 cents,” Paxton wrote in his opinion.

According to Paxton, Fort Bend did not raise its maintenance and operations rate to adjust after 2006, making it $1.04. Upon adding 26 cents – its current debt service tax rate – the new rollback rate would be $1.30, which is less than the planned $1.32 ad valorem rate and would require an election.

Moreover, Paxton also commented in his opinion on the necessity of voter approval before independent school districts can increase the maintenance and operation tax rate above the maximum allowable, stating, “While it may seem unusual to require Fort Bend ISD to hold an election when it lowers its debt service tax rate beyond the amount by which it raises its maintenance and operations tax rate, it does not amount to an absurd application of the law…To the contrary, it ensures that a district does not raise the maintenance and operations tax rate beyond the maintenance and operations rollback rate without voter approval.”

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