McLennan tax base up $4B; Exemptions to save owners hundreds

Overall the county’s taxable property value increased by 16%, or $4.03 billion, to some $27.9 billion in 2023, according to certified tax rolls released in recent weeks by the McLennan County Appraisal District, which is in the process of changing its name to the McLennan Central Appraisal District. About $785 million of the increase is due to new construction.

Chief Appraiser Joe Don Bobbitt said construction costs alone have increased, which likely accounts for a bit of the appraised value.

The jump in property appraisal values does not mean an equal jump in tax bills. The property tax rates local entities are in the process of finalizing this month determine tax bills, alongside taxable property values that include both exemptions and caps on increases for owner-occupied homes.

Average taxable home values increased by 11.7%, or $21,192, between 2022 and 2023, from $181,171 to $202,363 this year. The number of properties built in McLennan County has also increased steadily over the past few years, with the 1,847 new buildings constructed this past year doubling the 920 new buildings constructed in 2016.

The city of Waco’s tax roll increased by 17%, or $2.28 billion, to $15.7 billion in 2023.

Although market values are increasing rapidly, Waco Finance Director Nicholas Sarpy said the state’s homestead cap, which limits taxable values of owner-occupied homes from increasing more than 10% year over year, has built up a bank of funds. The city’s cap holds a bank of some $937 million in untapped revenue, which Sarpy said it could eat into if growth flattens out.

In 2022 the city increased its homestead exemption from 10% to 15%, meaning 15% of a home’s appraised value is not included in the taxable value used by the city. At the same time, Waco also increased its exemption for homeowners 65 and older to $50,000 and added a new $50,000 exemption for homeowners with disabilities.

Sarpy said he will continue to watch the housing market, monitoring interest rates, how long houses are on the market and if the value they are sold for matches their appraised value, but he is fairly confident the city will continue to see values grow next year. He said properties are still selling at high prices due to the lack of housing inventory, but they may be taking longer to sell.

Some $384 million of Waco’s increase is accounted for in new construction.

Value increases for school districts are at the hands of the Legislature this year, as Texans will go to the polls in November to vote on a legislative proposal to increase homestead exemptions from $40,000 to $100,000 for school taxes.

Bobbitt said he cannot imagine the exemption failing to pass. Doing some loose calculations, Bobbitt predicts the average homeowner could save about $700 in taxes.

The exemption, proposed in a state constitutional amendment, could lower many local districts’ value increases by about 10%, but state money is expected to match the losses in local tax revenue.

“In theory the Legislature’s plan is supposed to hold schools harmless,” Bobbitt said. “Any revenue lost will be supplemented by state funding.”

The Waco Independent School District saw an 11%, or $914 million, increase in taxable values for a total of $8.97 billion with the current $40,000 exemption. With the new $100,000 homestead exemption the increase shrinks to 6%, or $513 million.

Waco ISD Chief Financial Officer Sheryl Davis said the increase in valuations does not have much of an impact on the district’s budget. She said the district’s decrease in attendance and enrollment will have more of an effect.

When local revenues come down state revenues are expected to increase, she said. Last year Waco ISD received about $200,000 to help with debt service, and this year the district will receive some $2.3 million from the state to offset the need to increase its debt service tax rate, Davis said.

Some $169 million of Waco ISD’s increase in values is from new construction, but Davis said the growth has been more commercial than residential, especially in the downtown area. She said the increase in values also is not representative of students’ financial status, as their property values may be increasing but their income is not.

“Our student population tends to be high educationally or economically disadvantaged, but that contrasts with what you’re seeing happen with values,” she said.

Midway ISD’s values increased by 22%, or $1.43 billion, to $7.93 billion in 2023 under the current $40,000 exemption. Accounting for the new homestead exemption the district’s increase in values drops to 15%, or $998 million.

Both Midway and Waco ISDs do not take as much of a hit with the increased exemption as some rural districts with smaller tax bases. Robinson ISD’s taxable value falls below last year’s value with a 1% decrease, China Spring ISD a 4% decrease and Mart ISD could see a 2% decrease.

Midway Assistant Superintendent for Finance Wesley Brooks said 55% of the district’s tax base is commercial. The district covers Texas Central Park, a master-planned industrial zone that is home to more than 90 companies.

However, values in the district are increasing rapidly across all areas, Brooks said. Existing home values are increasing, subdivisions and new homes are increasing and new industrial operations continue to move in, with the Amazon fulfillment center hitting tax rolls late last year and the nearby Graphic Packaging International paper mill, an estimated $1 billion operation, on its way.

“In really every facet of our tax base we’re seeing increases,” Brooks said.