Dear Judge Saucedo and Mr. Wilson,
We are in agreement that Maverick County is required to adopt the lower of the effective rate or the previous year’s rate. We are also in agreement that the effective rate is the lower of the two. However, both the procedure and the rate that was adopted/ratified by Maverick County on October 3, 2016, are incorrect.
First and foremost, Maverick County failed to approve the tax rate as two components separately as required by Section 26.05 (a) of the Texas Tax Code; the debt rate and the maintenance and operations rate.
Furthermore, the Texas Attorney General has defined the Effective Tax Rate as “the tax rate that will produce both the revenue necessary to satisfy the taxing unit's debt payment obligations for the year in which the rate is calculated and the same amount of operating revenue levied on properties taxed in the previous year and taxable in the current year.”
We understand the term effective rate is used throughout tax worksheets, however, this definition has been confirmed by the Texas Comptroller’s Property Tax Assistance Division.
Section 26.05 (a) (1) states that the debt rate is the “…rate that, if applied to the total taxable value, will impose the total amount published under Section 26.04 (e) (3) (c)…” or in other words the amount necessary to cover debt obligations.
This means the debt portion of the tax rate that was originally calculated $.088571/$100 in box 38 of the attachment “Scann0034” is correct. With the current property values, we concur that this is the amount necessary to fund the debt obligations.
Maintenance and Operations Rate
The second portion of the effective rate is basic math. The effective maintenance and operations rate is that rate that will result in the same amount of operating revenue as last year. Since Maverick County assess a sales tax, this calculation is the effective maintenance and operations rate in box 30 ($0.461078/100) minus the sales tax adjustment rate. Since we have not received some documents as requested under the Public Information Act, we have estimated this amount to be ($0.12969/100). This results in an “effective” M&O rate of approximately $0.33139/100. At this rate, Maverick County would approximately make $7.5 million or “effectively” the same amount of revenue as last year.
Together the two rates equal the rate that is required. We estimate this total rate as $0.41996/100.
Maverick County adopted a rate of approximately $0.542309/100. This means that the amount of the debt rate is greater than $.088571/100 and will result in unnecessary funds for debt obligations or the M&O rate is greater than $0.33139/100 and will result in significantly more revenue than last year; both of which are not allowed by the Tax Code.
At the meeting on October 3, 2016, the Commissioner’s Court did not disclose to the public the breakdown of the tax rate as required by the Tax Code so we are unsure as to what tax rate was approved and thus are not clear on what recourse we have as taxpayers in Maverick County. We do know for certain that the rate adopted was in violation of the Texas Tax Code.
Please advise on how this error will be rectified as soon as possible.