Recapture of school property taxes has been established in Texas to provide an equitable balancing of public education funding across Texas. It is colloquially known as Robin Hood funding.
It establishes a mechanism to transfer tax revenue from higher value property school districts to lower value property school districts. Its roots are in lawsuits initiated against the state on public school funding equity.
In some localities, the property values are so high, they can finance their public schools very easily. Other areas cannot tax the properties in their district enough.
Robin Hood is an attempt to address the court ruling that public school children across the state deserve the same per student level of education funding. Recapture is essentially the state’s response to the lawsuit. While that is the intent, it seems some school districts are using Chapter 313 of the Texas Property Tax code to reduce their contribution to Texas’ Recapture funding mechanism.
In the granting of an abatement in the Gregory-Portland ISD, the board’s financial expert said, “the agreement would save the school district from paying $461 million in recapture payments to the state over a 10-year period.” Corpus Christi Caller-Times, Fares Sabawi, March 21, 2017.
It is becoming abundantly clear that while 88% of Texas higher property value school districts are dutifully writing checks for their recapture participation, other school boards are manipulating school district M&O property values to avoid theirs. It is primarily industrialized school districts and those districts in the Texas Plains granting abatements to renewable energy producers.
So how can the goings on in Gregory-Portland ISD near Corpus Christi impact school financing across Texas? It is just one of more than 400 abatements that have sequestered billions of dollars in district M&O property values from the state. While it might seem illicit, it is all legal due to a provision in the Texas Property Tax Code titled Chapter 313 (www.chapter313.org).
Chapter 313 was established in 2001 in the tax code as The Texas Economic Development Act. It allows school districts to defer for 10 years the time before a new investment project within the district goes onto the tax roles at full market value. It essentially allows school boards to manipulate certain property values to attract “new” investment to Texas. No such property value relief is provided to the residences and businesses that have contributed and been a part of the community for 20 or 30 years.
In the process of granting the Chapter 313, the school district can use the lowered valuation in calculating their participation in funding for statewide recapture. Hence the quote from the board’s financial expert above.
This $461 million savings is from one abatement in one school district. Most school districts across the state, regardless of size or student population, do not participate in the program. In fact, only 12% of school districts do. Most are in districts with small student enrollment. Gregory-Portland student population is less than 5,000. School districts large (Dallas, Houston, Katy, Cy-Fair) and small (Kilgore, Needville, Nordheim, Cuero) can be described as bedroom community districts and do not have the industrial or state provided electric grid as in the Panhandle, to be able to fabricate a case for generating an abatement.
These school districts do not capriciously lower property values, therefore they pay fully into Texas’ recapture funding mechanism. The 12% of school districts busily entering into agreements lowering certain property values can reduce recapture payments. As recapture is a statewide mechanism to level public education financing; as these districts lower their participation the rest are left with contributing more or the shortfall comes from Texas’ Treasury or general fund. Which impacts all Texans regardless of school district.
In the last legislative session, the governor, lieutenant governor and house speaker all committed to lowering recapture. Could this be achieved if school boards were not allowed to surreptitiously manipulate property appraisals to calculate their recapture participation? This would end these school boards sequestering these property values from statewide calculations, expand the taxbase by billions of dollars therefore, granting relief to the other 88% of school districts and all Texas taxpayers alike.