July 11, 2019 635 PM
MARFA – City council has one month to determine whether they will instate a homestead exemption on city property taxes for 2020. As appraised home values skyrocket, and crucial services––like public education––continue to rely on property tax revenue, Texans have felt the growing strain of property taxes. Marfa residents are no exception.
A Texas statute dictates that homestead exemptions can only be adopted in July, so Marfa City Council is acting fast to understand their taxing options and to, potentially, hand out a new exemption.
A homestead exemption, in Texas, is a homeowner claiming a property as their primary residence, thus second homes do not qualify for the exemption. Presidio County Appraisal District’s (PCAD) Chief Appraiser, Cynthia Ramirez said, “We have a lot of out-of-town owners. If they don’t reside here and don’t have a local address on their driver’s license or mailing address, they cannot qualify for a homestead exemption.”
The numbers reflect it––only 210 Marfa residents claim homestead status. Another 268 residents receive a different homestead exemption for residents over 65 of age. Currently, the county and the school district offer homestead exemptions. Hoping to increase their savings, these same citizens have been asking for the city to create a homestead exemption as well.
Taxing entities in Marfa include the school district, the county, the hospital district and the city. Each of the four collect their own taxes based on the home’s value as determined by the appraisal district. Exemptions can either be a flat dollar amount or a percentage subtracted from the total assessed value of the property, therefore lowering the homeowner’s taxes.
City Attorney Teresa Todd explained, “Counties and cities are not allowed to do a homestead exemption the way the school does. School districts, by statute, are authorized to do $25,000 across the board, which of course benefits lower income homeowners more than higher income.” The $25,000 exemption is a progressive tax.
A house valued at $100,000 that receives a $25,000 homestead exemption from the school district, would only be taxed for $75,000 of the value. A home assessed at $1,000,000 would be taxed as if it were worth $975,000. The high income homeowner will end up paying a far higher property tax to the school district.
The city, however, is restricted by state law to offering only percentage-based exemptions, rather than a flat dollar amount like $25,000. “It can be up to 20%, but that would be off the appraised value of every single home,” Todd said. “So the folks who have more expensive homes would benefit more. It’s not set up in a way to do what we want to do, so that’s what we’ve been struggling with.”
City council members are hoping to alleviate the tax burden for low-income earners in Marfa, who are struggling to keep up with quickly growing home valuations.
The flat dollar amount is a progressive tax, where lower income homeowners benefit more, and higher income homeowners benefit less. But the city’s option of subtracting percentages is regressive, sparing the high income owner’s far more.
“It is so supremely helpful to have a former chief appraiser as a councilmember on this. It would’ve been way, way worse if we were trying to do this without Irma,” Todd added, referring to City Councilmember Irma Salgado, the former Chief Appraiser for the PCAD.
During her re-election campaign for council this past April, Salgado spoke at the candidate forum, saying that although citizens were hoping for a homestead exemption, they would hardly see any benefit from it. She estimated residents would save, on average, around $12. She questioned whether the exemption was even worth the cost of postage.
City council has asked Ramirez to send them calculations of how much money the city stands to lose should it institute a 5%, 10%, 15% or 20% homestead exemption. The city will discuss the options at the July 25 council meeting.
The city has a tax rate of $0.444 cents per every $100 of taxable value. The city’s rate is lower than the county’s $0.61475 and the school district’s $1.17 per $100. The hospital tax rate is the lowest at $0.11144.
If the city of Marfa offered the full 20% exemption, a home valued at $100,000 would receive 20% off and be taxed at $80,000 in value–– a loss of $88.88 in income that they city has previously collected. For a $1,000,000 home, the city would lose $888.80, a much larger loss to the city coffers and more benefit to higher value properties.
According to calculations by Salgado, the city would lose over a million dollars annually in taxable value if the city adopts a 20% homestead exemption. At that rate, she says the city stands to lose between $45,000 and $50,000 in revenue.
At the city council meeting last month, city accountant Dan Dunlap asserted that the city would need to decide where it was making cuts to the budget if they put homestead exemptions in place, because lost revenue would hit the city’s bottom line. The clock is ticking––council has until July 31 to institute changes for the 2020 tax year.
