The red hot real estate market in Dallas County, Texas is pushing assessed property valuations up by double-digits for 2018. The increase for all property types this year is 14.59 percent. The spike is even higher for commercial property.

 

Across-the-Board Value Increases

 

Total market value of all taxable property rose to $333.957 billion in 2018 from $291.427 billion in 2017 in Dallas County. The Dallas Central Appraisal District reported increases by property category as noted below:

 

		Commercial Property	19.13%
		Residential Property	12.68%
		Business Personal Property	7.8%

 

These increases indicate a healthy real estate market. We all wish to see our assets grow in worth. However, when we also see a growth in our property taxes due to reappraisal, we must be more watchful to insure that we are only paying a fair share of the tax liability.

 

Cost of Government Services Keeps Going Up

 

Consumer price indices indicate that costs have risen from 2 percent to 3 percent in the past year. Clearly increases in operation costs also occur for local governments that rely heavily on property taxes. Some increases in revenue are necessary in order to meet the demands of the public for required services.

 

Local governments do not control the determination of taxable values. This is the purview of the local appraisal district. Nevertheless, local governments do control the adoption of the tax rate, that portion of the tax equation that determines how much a taxpayer actually pays. The method used by a local government to determine its tax revenue is very simple. It is based on the following formula:

 

Value of All Taxable Property

x

Tax Rate Adopted by Tax Entity

=

Tax Levy (Revenue)

 

Naturally, if you change one factor in the equation, you change another as well. If taxable value rises and there is no commensurate adjustment in the tax rate, then the levy will rise proportionate to the value increase.

 

Tax Rates Controlled

 

The Texas Legislature has attempted to control tax increases by limiting a tax entity's ability to arbitrarily raise tax rates. The law requires that each entity determine an “effective tax rate.” This is the tax rate that would yield exactly the same tax revenue in the current year as collected in the prior year (exclusive of value added due to new construction).

 

Tax entities can raise the tax rate as much as 2.99 percent without notice. If they wish to raise the rate 3 percent or more, they must publish a notice and hold a public hearing. If they wish to raise the effective rate 8 percent or more, the rate hike may be challenged by the public in an election and rolled back to the effective rate if the election is successful. This is why we often see tax rates rise 2.99 percent or up to 7.99 percent, so tax jurisdictions can avoid legislative mandates. The establishment of a fair tax rate is a key part of the process of establishing a fair system of property taxation.

 

Taxpayers Play a Role

 

Taxpayers generally understand how to protest a proposed value they feel is too excessive. Each year, thousands of property owners avail themselves of their rights to protest their values at the local appraisal districts. However, we seldom see taxpayers attending a public hearing where the tax rate is to be established. This is an equally important function of establishing a final tax levy.

 

We understand that property taxes are necessary for the support of government services. Taxpayers should be encouraged to participate more fully in the entire process. Tax entities should look upon this not as an obstruction or delay to the process, but rather as an opportunity to display to citizens the soundness of their planning and responsible fiscal management.