"People were giving us lip service": Texas cities' legislative efforts have struggled this year

Texas Tribune Blue Government News

The Houston skyline on Dec. 17, 2018.
The Houston skyline on Dec. 17, 2018.
Miguel Gutierrez Jr./The Texas Tribune

The interest group representing Texas cities used to be one of the most powerful legislative forces at the Capitol. This session, it has become the GOP’s most prominent adversary.

Its members have been harangued at hearings. Targeted by a proposed ban on “taxpayer-funded lobbying.” And seen multiple proposals sail ahead over its protests.

When, around March, one mayor inquired about the reasoning for a controversial provision in a property tax bill, he said an advisor to Gov. Greg Abbott suggested, “you reap what you sow.”

The message was clear, said McKinney Mayor George Fuller: Local officials had been obstructionists in the past.

Though the antagonistic relationship between Texas cities and the state has been building for years, this session has reached the fever pitch of all out legislative assault, said Austin Mayor Steve Adler, in April. Typically, the Texas Municipal League tracks bills it opposes that are gaining momentum in the Legislature. This session, the group had amassed more than 150.

Among them, was a cable franchise fees bill authored by state Rep. Dade Phelan, a Beaumont Republican and chair of the powerful State Affairs Committee. After the Texas Municipal League warned its members the proposal could cut into cities’ revenue, Phelan had a concise response for the group, which represents 1,156 of Texas’ roughly 1,200 cities.

“When you are in a hole — you should stop digging,” Phelan recommended, in an email obtained by The Texas Tribune.

In an interview, Phelan said he harbored no animus toward the organization, but took umbrage with its opposition to legislation his constituents want. The sentiment is widely-shared in the Legislature, Phelan said, as evidenced by the support the bills on taxpayer-funded lobbying and franchise fees have garnered.

“Those bills have never gotten out of committee before,” he said. The Texas Municipal League represents “their own interests and we are representing the taxpayers.”

“I think there’s a disconnect sometimes,” he added.

The group’s leaders see a different trend. They say model legislation with an anti-city bent has been exported from conservative think tanks and taken root at statehouses across the country. At the same time, Republican strongholds have shifted to the suburbs, making progressive city leaders convenient whipping boys for politicians from the president on down.

“Where do we have all our problems in America?” asked Republican Lt. Gov. Dan Patrick, in a televised interview in 2017. “In our cities — that are mostly controlled by Democrat mayors and Democrat city council men and women. That’s where you see liberal policies. That’s where you see high taxes. That’s where you see street crime.”

In recent years, local officials in Texas have faced an onslaught of attempts to override their ordinances on everything from short-term rentals to plastic bag bans to ride-hailing services and paid sick leave. Lawmakers say the efforts are an attempt to avoid a regulatory patchwork quilt that is burdensome to businesses operating statewide.

Dick Brown, a former head of the Texas Municipal League, said the Legislature has always overridden localities they believe are “abusing their authority.”

“There’s nothing new to this syndrome,” he said.

But critics view it as an attack on progressive policies, and a hypocritical stance for a state that chafes at the notion of federal overreach.

Nowhere has the lack of cooperation been more evident this session than on the issue of property tax reform, a top imperative for the state’s top three Republicans leaders.

The bill, which aims to slow the growth of rising property tax bills, makes a host of changes designed to make the tax system more transparent and accessible. But it includes one provision — widely disliked by city and county officials — that requires local governments to hold an election before raising 3.5% more property tax revenue than the previous year. Currently, residents must petition for an election if the property tax levy surpasses 8%, a rate set during a period of high-inflation in the 1980s.

Municipal leaders say the proposal could hamstring local budgets while providing only a marginal dent in most homeowners’ bills. While they successfully defeated similar proposals to constrain revenue growth last session, their respite was short-lived. By the time the Legislature reconvened two years later, the legislation had been resuscitated — and it came back with terms considered more punitive than before.

Instead of limiting growth to 4% or 6%, the figures that deadlocked the Legislature in 2017, the threshold was reduced to 2.5%. (It has since been increased to 3.5%, but the final details of the legislation are still being negotiated in a conference committee.)

“I’ve not heard any mathematical logic for this,” said outgoing Dallas Mayor Mike Rawlings. “It seems to be a number that was pulled out of air.”

Fuller, the McKinney mayor, also said he was not provided a policy explanation for the new number. In fact, when Fuller attended meetings with state leaders in March and April, he said House Speaker Dennis Bonnen and a member of the governor’s office did not provide a rationale for the reduced figure and noted local officials had not been receptive in the past.

In one meeting with Bonnen, Fuller said he “repeatedly attempted to steer the conversation to one about constructive policy.”

The speaker “would only rant about retribution,” Fuller said.

“I had never been more discouraged in our leadership — how did settling personal scores become more important than policy?” he said. Fuller said he had a more productive dialogue with the lawmakers that represent his city in the Legislature.

A spokeswoman for Bonnen, Cait Meisenheimer, disputed the notion that the speaker implied retribution or score-settling played any role.

Cities and counties have for years “refused to work with lawmakers in identifying workable solutions,” despite being given multiple opportunities to do so, Meisenheimer said. “This session has been no different.”

“While local governments lobby to protect their ability to tax Texans out of their homes, the House has taken meaningful action to empower taxpayers with a greater say in their property taxes,” she added. “The train has left the station — it’s unfortunate that cities declined every opportunity to jump on board.”

Abbott’s office did not respond to a question about the policy reason for a 2.5% election trigger, nor to a detailed account of Fuller’s recollection.

The governor’s property tax reform plan says property taxes have continued to “grow inexorably,” and that two-decades of GOP-led efforts have failed to provide long-term relief. The plan cited other states that use a variation of a 2.5% revenue constraint, like Massachusetts and New Jersey.

“The feet are more firmly in cement this time”

Bennett Sandlin, executive director of the Municipal League, said the group has continued to communicate with lawmakers despite the sparring over big-ticket items.

Much of the group’s work involves reviewing bills and working as “partners with nearly all legislators, regardless of party,” Sandlin said — pointing to a bill Phelan sponsored that the group provided input on. (“I always have an open door,” Phelan said.)

But in public forums, a fraught relationship between the two levels of government has become increasingly apparent this session.

Some local leaders received a brusque welcome at the first hearing on the property tax bill. The day of the third, the proposal to ban “taxpayer funded lobbying” was scheduled at the same time.

And after several mayors organized a work group to compromise with lawmakers on property tax reform, a revised version of the bill came back — and left them equally dissatisfied.

“We went into those conversations in a positive manner to try to find a solution,” said Rawlings, the Dallas mayor. “People are cordial to us, but people were giving us lip service. Everybody patted each other on the back, but nobody was really interested in a serious compromise.”

“I think that the feet are more firmly in cement this time,” Rawlings said. “There was more flexibility” in previous years.

The rationale for the property tax legislation is that homeowners are facing skyrocketing property tax bills, driven largely by school taxes and rising property values. School taxes make up a majority of the property taxes levied statewide. But proponents of the legislation have said its broad scope is necessary to provide meaningful reform.

Municipal leaders say the revenue constraint could threaten their bond ratings or cut into their ability to provide vital services. While public safety makes up the bulk of many local budgets, lawmakers have suggested it is disingenuous of municipal officials to say the bill’s passage would force them to lay off police and firefighters, instead of leading them to trim less critical line-items in their budgets. They’ve also questioned why mayors and county judges take issue with letting their residents vote on a tax increase.

The advancement of the measure comes as the state has decreased its share of spending on public education, shifting the burden onto local property taxpayers. As the state’s contributions have dropped from around 46% to 36% over the past two decades, Sandlin said the state has looked to find a “scapegoat.”

The “attack on city and county property taxes has always been a smokescreen,” he said. State leaders want “somebody to blame” for the oft-maligned school tax system — and they’ll “keep coming back” to cities until the funding is fixed.

For that reason, he said, the Texas Municipal League didn’t agree to past property tax proposals that “might seem reasonable now.”

This session, lawmakers are negotiating a top-priority and major school finance reform bill that could save the owner of a $250,000 home $100 a year, or more, in property taxes.

The property tax proposal, meanwhile, could include a provision that lets taxing units bank unused revenue growth for five years, allowing them to exceed the 3.5% threshold in some of them. Property taxes collected on new developments — and some of the money municipalities spend on indigent healthcare, indigent defense or homestead exemptions — may also be factored into the revenue growth calculation, or excluded altogether.

Still, mayors and most Democrats say the constraint is not practicable considering the rate of inflation and other cost-drivers.

“I understand the political atmosphere to reduce taxes; there’s no one that would be more aligned with that than I am,” said El Paso Mayor Dee Margo, a former Republican state lawmaker. “But I’m also trying to deal with basics. I say I’m the mayor of public safety, potholes, and parks.”

El Paso’s property values — and so its tax base — is growing at a slower clip than other parts of the state, he said. Though the factors differ from city to city, each municipality has different needs and budgets, and local leaders say they are unaccounted for under a blanket property tax reform policy.

“The frustration is that we are grouped, coupled with across-the-board perceptions,” Margo said.

Brown, the former head of the Texas Municipal League, has observed from afar the changing dynamic between the different levels of government.

In the 15 years he lobbied for the group, Brown said the relationship with the state was one of “cooperation,” where issues were resolved by showing “some kind of accommodation” on the cities’ side.

Now, some cities have developed a “penchant for doing things that annoy private businesses and the Legislature,” and have hammered past property tax proposals without offering anything, he said.

“What I see over the years is a series of defiant actions,” Brown said. And “when you defy the Legislature — why, something bad is inevitably going to happen to you.”

Disclosure: The Texas Municipal League has been a financial supporter of The Texas Tribune, a nonprofit, nonpartisan news organization that is funded in part by donations from members, foundations and corporate sponsors. Financial supporters play no role in the Tribune’s journalism. Find a complete list of them here.