The hearing was intended to study the idea of changing the makeup of the boards of directors of appraisal districts (including the possibility of putting elected members on the boards). Under current law directors of appraisal districts are selected by the units of government that collect property taxes.

Unanimously the witnesses opposed the idea of electing directors, though some supported changing the way Appraisal Review Board members are appointed. (The ARBs hear property value disputes and are currently appointed by the appraisal district boards of directors.)

"The issue of property tax in this state has got everybody exercised," said the panel’s chairman Rep. Fred Hill (R-Richardson). "...We are ninth highest in the country [on property taxes], so it means that we really do hit the taxpayer with a lot of property taxes. But that’s the tool that we, the Legislature, have given to our local taxing entities to raise their money, with the exception of the sales tax...

"We don’t give local government any money ... Then on top of that, we pass mandates on them. And every time we pass a mandate on them, they have to raise taxes locally to pay for that mandate ... Yet in spite of all that, we rank 44th in the country on a per-capita basis in regards to taxation ... which makes Texas a real bargain.

"The question is, do we want to go forward and continue to be a property tax burden state? And the alternatives are not very good."

Not everyone in Texas, however, thinks the state’s tax system is a bargain. "Not when it comes to property taxes," said Tom Pauken, chairman of the Texas Task Force on Appraisal Reform, which studied ways to reform the property tax system.

Pauken (who took office this week as chairman of the Texas Workforce Commission) told LSR that, despite Gov. Rick Perry’s success in cutting local school property taxes by one-third, "local taxing entities are raising taxes far in excess of reasonable limits. Nine to ten percent increases per year are not reasonable, and they are bumping up values across the state and spending the money."

During the hearing, witness after witness defended the existing property tax system, saying that Texans, unlike the residents of other states, are more likely to get taxed at the fair market value of their property.

The Pauken task force recommended restructuring appraisal district boards to include two representatives of the taxing units, two representatives of the taxpayers, and the elected county tax assessor-collector. The report did not specify whether the taxpayer representatives would be appointed or elected.

"The proposal in our report would create a balanced, independent appraisal district board," Pauken said. "Right now, the appraisal district boards are totally controlled by the local taxing entities, which appoint all of the members to the appraisal district board of directors.

"Effectively the taxing entities have the authority to hire and fire the chief appraiser and all of the members of the appraisal review boards, which hear appeals from property owners.

"There is an implicit push for higher appraisal values so that property taxes can be raised by local taxing entities without having to raise the tax rate. In effect, local officials can say, ‘I didn’t raise your property taxes,’ even though in reality those property taxes are going up an average of eight, nine, or ten percent a year because of the increased spending by these local taxing entities, well beyond population growth plus inflation."

"We need a totally independent appraisal board," Pauken said. "Now whether it’s appointed or elected is a separate discussion. The current system is skewed against the taxpayer, against the homeowner, against the businesses, and in favor of the local taxing entities."

Some businessmen have expressed serious reservations about elected appraisal boards. "The direct popular election of those responsible for establishing the taxable value of property will not protect the public interest," said John Kennedy of the Texas Taxpayers and Research Association to the committee "The principal public interest that must be protected in order to have a constitutional and equitable property tax system is, there must be professional, impartial, equitable appraisal for property tax system ...

"Our members conduct business throughout the country, and they tell us that the property tax system we have here in Texas is a model for the rest of the country ... And they would rather do property tax business here in Texas than any place else, because they get more professional appraisal and a fairer shake at establishing what is the true market value of their property."

Kennedy discussed the history of property tax appraisals prior to 1979, when the property tax code was enacted. He argued that elected officials — who set values prior to the creation of appraisal districts — favored homeowners at the expense of absentee homeowners and businesses (but would often lower values of outside businesses the elected officials wanted to attract to the county).

One of the key divides on property tax issues is the difference between the positions taken by business and those taken by suburban legislators seeking to curry favor with homeowners. Businessmen have frequently been leery of appraisal caps, out of concern that caps would shift the tax burden from residential customers to business. Similarly, business has concern about the equity of elected appraisal districts.

Ironically, however, in the past few tax years, commercial properties in Texas urban counties rose much faster than residential values. So businesses — which do not have an appraisal cap — have had their property taxes rise faster than homeowners, who are eligible for a variety of exemptions.

One change that did get substantial support during the hearing was changing appointment criteria for appraisal review board members. Directors of the appraisal district currently set the budget for the appraisal district, hire and fire the chief appraiser, and appoint the review board. Directors are prohibited by law from discussing the appraisal of individual properties with members of the appraisal district staff outside the context of a public meeting.

Several witnesses told the Local Government Ways and Means committee of a perception that review board members — who hear appeals on individual properties — are tied too closely to the appraisal districts, which pay them and provide their office space.

Ideas for reform suggested at the hearing included letting judges appoint the ARB or replacing ARBs with state hearing examiners at the State Office of Administrative Hearings.

Donald Lee, representing the Texas Association of Urban Counties, told the committee that his organization’s members would willingly pay additional money to make the "optics" of the system seem fair to taxpayers.

Rep. Charlie Howard (R-Sugar Land) suggested that most of the blame for rising property taxes belong to the units that set tax rates. Howard wondered what could be done to make sure more taxpayers know about tax rate hearings and how to attend and participate.

But Rep. Gary Elkins (R-Houston) argued that many taxpayers are mad about taxes, period. "My personal opinion is," said Elkins, "I don’t think it matters who appoints them ... The public doesn’t like paying taxes.

"At the end of the day, those [who] feel they ‘won’ [in] the process are going to feel that it’s fair. Those that lose are going to feel that it’s unfair, no matter who appoints them. The public will have distrust, if it’s even judges, because their budget comes from the county taxes, which are part of the appraisal process."

The Local Government Ways and Means committee may not think Texas property appraisals are a problem, but a lot of Central Texans would beg to differ.

Preliminary 2008 property value estimates were mailed to taxpayers in Central Texas this week, and — despite the national problems with real estate — the Texas market is still strong. The Austin American-Statesman quotes Travis County chief appraiser Patrick Brown as saying the average home value rose 11.5 percent. Meanwhile, in Williamson County, home values are estimated to rise six percent, with commercial values rising nine percent.

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