Texas Constitutional Amendment Election, 2007 - Proposition 5

Proposition 5

Proposition 5 (S.J.R. No. 44) is the constitutional amendment authorizing the legislature to permit the voters of a municipality having a population of less than 10,000 to authorize the governing body of the municipality to enter into an agreement with an owner of real property in or adjacent to an area in the municipality that has been approved for funding under certain programs administered by the Texas Department of Agriculture under which the parties agree that all ad valorem taxes imposed on the owner’s property may not be increased for the first five tax years after the tax year in which the agreement is entered into.

The measure passed 66 percent in favor to 34 percent against.

• Comments by supporters: Senate Joint Resolution No. 44 would provide eligible small cities a tool to create incentives for private property owners to renovate downtown buildings and improve downtown properties in conjunction with other downtown revitalization efforts undertaken by those cities. The temporary limitation on tax increases would allow smaller cities for which economic development options such as tax increment financing or tax abatements may not be feasible to achieve the same effect. With only a small number of properties eligible for the limitation on property tax increases, the fiscal impact is expected to be neutral during the five-year limitation period. After the expiration of that limitation period, the political subdivisions that tax those buildings or properties are expected to see a positive fiscal impact because of taxes imposed on the increased value of those buildings and property.

• Comments by opponents: Property owners who receive the benefit of infrastructure improvements funded through the Texas Department of Agriculture grant programs should be required to pay taxes imposed on any resulting increase in the value of their property. Furthermore, to the extent the amendment permits the legislature to reduce the tax burden of those property owners, the amendment may result in a shift of that tax burden to other property owners. In a smaller city, that effect would be more pronounced because the shifted tax burden would be borne by a smaller number of taxpaying property owners.