Tax Hike Laws

Many laws favor government by giving them specific powers. Those powers include the ability to imprison citizens, ways to force citizens to give money to the government, and procedures for the government to seize private property. All these laws are for good reasons and recognized as a normal part of a democratic society. Some laws favor the citizen such as the assumption of innocence until proven guilty. One law that favors citizens is that the city must inform taxpayers of a property tax hike so that they can make comments in public hearings. If the city does not inform taxpayers, they cannot raise taxes. The law is very clear and very specific about public notices. One can only imagine the shenanigans that must have occurred long ago that would cause the state to write such an explicit public notice law.

A concerned citizen has written a detailed report of the laws that Marfa must follow before they raise taxes. That document is available here for those that want to read the details. I have attempted to summarize that report in this post. The actual law for property tax assessment can be found in the detailed Tax Code Chapter 26. Because legal text is difficult to read, the Texas comptroller publishes a friendly guide in print and on the web called Truth-In-Taxation. This explains the law clearly; all elected officials or tax officials should be familiar with the 2006 edition.

• The city must pass an ordinance to raise taxes and can only raise taxes to fund items in the budget.
  
• The city must have two public hearings before raising property taxes, and citizens must be informed of these meetings in a very specific way.
  
• Notice must be published in the Big Bend Sentinel seven days before the first meeting and three days before the second meeting.
  
• The notice must include information concerning the value and taxes for a homestead for the previous year and upcoming year so that citizens understand how the tax hike will affect a typical household.
  
• The law also clearly states the details of the public notice including size of the ad, size of the headline text, number of pages, and information that must be included.
  
• The city must also publish notice of the public hearings on the public access channel on the local cable TV system.
  
• If the city "owns, operates or controls" a website, they must publish notice seven days in advance there also.
  
• The city must announce at the end of the public hearing the date and time when the city council will vote on the tax rate hike.
  
• If the city fails to effectively inform the citizens about the upcoming tax hike so that they can take part in public hearings, the city cannot raise taxes above the effective tax rate from last year. This is the tax rate that would bring in the same amount of money as last year.
  
• If the city raises taxes without properly informing the citizens, any taxpayer can ask the court to intervene and stop tax collection until the matter is resolved.

So those are the laws that the city must obey before they can raise taxes. How well did Marfa do this year? The asterisk in parentheses (*) indicates possible violations of state law by Marfa. The Truth-In-Taxation web site includes a handy calendar checklist that helps outline all the important dates. This is not rocket science.

• The city held a public hearing on Monday, September 14th and Thursday, September 21st and considers these two meetings sufficient to proceed.
  
• Public notices were attempted on September 7th, 14th, and 21st though the first two notices did not meet the legal requirements.
  
• The September 7th public notice had many problems: it was smaller than the legally-required size(*); the font size for the headline was too small(*); some required numbers concerning taxable value of property were omitted(*), and the second page of the two-page notice was completely omitted(*). This cannot be considered a good-faith attempt at public notice. The public simply was not given the information about how it would affect them.
  
• The September 14th public notice also had problems. The percentage increase in the proposed tax increase was different (more than double) the percentage increase in the first notice and it was not clear which notice was correct (*), and page 2 of the notice was omitted again (*). This notice was four days before the first public hearing, so it does not count towards the seven-day advance notice (*).
  
• At the first hearing there was no announcement, as required by law, of the date, time and place of the vote on the proposed tax hike (*).
  
• Marfa did not place a public notice on the local public access cable TV channel as required by law (*).
  
• Marfa did not publish notice on its web site (*). Wait you say! The City of Marfa does not have a web site. Actually they do, I found it after noticing a payment for web hosting in professional services. I started guessing at URLs until I hit www.cityofmarfa.com. It was registered in March. It has little content yet, but how hard is content?
  
• Marfa finally published a valid public notice on September 21st, but this was the same day as the second attempted public hearing, so it does not count as a public notice for either meeting (*). It was not until the morning of the second meeting that the city informed the taxpayers that the average property tax bill might go up more than 32 percent next year.

The legal nature of the city’s public notices hinges on the interpretation of “good faith.” Did the city make a good-faith attempt to notify citizens. Most people would agree that a notice with all the required information but a small headline would still meet good faith. But we are talking about many mistakes and omissions. If a teacher were to grade a student on following instructions like this, the student would probably not get a passing grade. In that regard, the city’s utter lack of respect for the law can be considered bad faith.

There is another way to look at this. Did the city effectively inform taxpayers that their taxes might go up by 32 percent next year with sufficient time for citizens to attend either of the two public hearings? If they believe they did a good job, they can argue they acted in “good faith.” It was not until the morning of the second hearing that taxpayers learned that their taxes would go up by 32 percent. This is after the first public hearing and only hours before the second hearing. It is hard to see how the city can claim to have given taxpayers sufficient notice so that they could provide their comments to city council. Indeed, turnout was low for both public hearings.

This is not an attempt to withhold needed tax revenue from the city. It is an attempt to get the mayor (budget officer) and the city council to respect the laws of the State of Texas. These elected officials swore an oath to uphold these very laws. Citizens do not have the flexibility to consider themselves above the law. Why do our elected officials consider themselves above the law? There are unpleasant consequences for not following the law. This is an intentional way to encourage compliance. If the city respects state law, they should admit they did not properly notify taxpayers of a tax hike. Some fiscal belt tightening might be in order at city hall. Then they should figure out why such big mistakes were made and find a way to correct the mistakes ASAP.

City councilmembers find themselves in a difficult position. By now they should understand that the public notice was not done correctly. On the other hand, they believe that a tax increase is required to fund the city. If they keep taxes the same to respect the law, then they make it harder to run the city next year. If they raise taxes anyway, they show a disregard for the law and gamble that no taxpayers will file an injunction to stop tax collection due to improper notice.

How in the world did they get in this mess? Don't we have an experienced city administrator that knows important municipal law? And what about Budget Officer Lanman? He missed the deadline for last year's budget thus eliminating the ability to increase taxes. He studied the rules about landfills this summer but did not study the rules on taxation. We did not consult the attorney about public notice because the comptroller spells it out with clear instructions for local officials. Now that we have this mess, expect another large attorney bill to help us sort our options.

I do not envy council now facing this difficult dilemma. When will they demand accountability from the administrator that they hired to carry out their policy? When will the mayor focus on the boring basics required to keep a city functioning? Council will review the 05-06 amendment, the 06-07 budget, the tax hike and all the other normal business on Thursday, September 28th and then vote on all that on Friday. We have had only one budget reading so far and have only three days left in the fiscal year.