Recent Developments in Texas Property Taxes: Special Purpose Districts

For the fourth installment in my series on Texas property tax developments, I’m taking a closer look at rates and levies imposed by Special Purpose Districts (SPDs) as a group.

What Are SPDs?

SPDs are local governmental entities created to provide specific services within a defined geographic area. These entities and services include hospitals, colleges, libraries, water conservation, utilities, and fire control districts. The largest SPDs by total levy in any given area, especially urban areas, tend to be hospital districts and community college districts.

Updated Levy Data

Since my last post, we received updated statewide property tax data from the Comptroller’s Office for all tax entities. Figure 1 below is similar to the first figure in my initial post in this series. The main difference is that the total levy first breached $80 billion in 2022, rather than 2023. According to the updated data, the levy skyrocketed nearly 12 percent from 2021 to 2022 in concert with market values and expanding budgets, then declined slightly from 2022 to 2023 primarily because of the rate compression and homestead exemptions that I outlined in that initial post.

Figure 2 illustrates the five- and ten-year growth rates for each entity type. SPDs have led the charge, so to speak.

What’s Up With SPDs?

The total levy of SPDs has not retreated YoY since 2018. The same can be said about SPD’s percentage of the total levy statewide, as illustrated in Figure 3. Over the long term, SPD’s share of the total has been on the rise. It represented 15.6 percent of the statewide total levy in 2023.

2023 SPD Summary

The growing SPD levy is not only the result of rising taxable values; it has a lot to do with the growth in the number of SPDs across Texas. In 2023, there were approximately 2,300 SPDs that reported a property tax levy. That number has risen 25.2 percent since 2014 and 16.7 percent since 2019. Of the new SPDs created in the last ten years, 71.3 percent were added in the last five years (through 2023). The table shows the number of SPDs by size of levy in 2023. The average total rate (AVG TR) indicates the taxes charged per $100 of taxable value. The largest levy of 2023 was raised by the Harris County Hospital District, which exceeded $900 million.

Given all of that, it should come as no surprise that total property tax levied by SPDs has grown substantially over the last five years. Figure 4 illustrates the total levy raised by SPDs and changes in total taxable value subject to SPDs, which grows with the addition of each new SPD.

You might have assumed, as I did before closer examination, that rising tax rates were a key factor in the growth of SPD property taxes. However, as Figure 5 shows, that is not the case. The total change in the average total SPD rate was 4.5 percent from 2019 to 2023. Furthermore, the weighted average tax rate (by total levy of each SPD) declined 4.6 percent over the same period.

Nonetheless, SPD rates have not fallen like the rates of schools, cities, and counties. The data in Table 1 above helps explain why the weighted average tax rate is lower than the average (larger SDPs tend to charge lower rates than smaller ones).

Difficulty of Governing Property Tax

Considering all the information covered in this series—the four entity types, the differences in M&O and I&S rates and the rules that govern them, the various exemptions and caps that apply to different entities and property types, and more—it’s easy to see why governing property tax liabilities in total, or of any group of taxpayers, is so difficult. 

Metaphorically, it is a bit like balloon art in that as the balloon is squeezed and twisted, the air inside gets relocated. Of course, no analogy is perfect. Each year the balloon gets bigger as the economy grows, new properties are added, values appreciate, and local budgets grow even though limits exist. Air has also been let out as the state has replaced some of the local school funding with state revenues. To continue the analogy, it is a very large and complex balloon. While pressure can be released in various ways, the most important thing is to ensure the system is fair with efficient taxpayer remedies and equal treatment under the law. Equal and uniform property valuation is the foundation of a fair property tax system, so that must be maintained in the purest form possible even though different rules may apply to different taxing entity types and property classifications.

End Notes:

1. All data was sourced from the Comptroller (https://comptroller.texas.gov/taxes/property-tax/); rate analysis excludes entities that did not report complete data to Comptroller in any given year.
2. The figures presented are calculated totals for each tax year based on data self-reported to the Comptroller’s office and not actual total property tax levies. The Comptroller’s office does not guarantee the accuracy of self-reported information.
3. For more information on SPDs, see https://comptroller.texas.gov/transparency/local/special-purpose.php.
4. For detailed public information on any specific SPD, visit https://spdpid.comptroller.texas.gov/.