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Hurricane Beryl: Implications for Tax Rate Setting and Procurement

July 11, 2024
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Legal Guidance for Disaster Pennies, VATREs, and a Sample Emergency Procurement Resolution

On July 8, 2024, Hurricane Beryl wreaked havoc along the Texas Gulf Coast. Many school districts and taxpayers are facing a variety of challenges from this disaster, including responding to significant property damage. Districts impacted by Hurricane Beryl should be aware of its implications on both tax rate setting and procurement.

 

Tax Rate Setting

 

Districts impacted by Hurricane Beryl may need to seek additional funding to defray increased costs due to this disaster. There are two primary mechanisms for school districts in Texas to increase maintenance and operations tax revenues: (1) levying the “disaster pennies,” and (2) conducting a voter-approval tax rate election (a “VATRE”). Both mechanisms are impacted by the occurrence of a disaster such as Hurricane Beryl.

 

In the case of disaster pennies, a specified type of disaster must occur for the disaster pennies to be levied. That disaster must: (1) not be a drought, epidemic or pandemic, (2) impact the district, (3) have caused increased district expenditures related to disaster response, and (4) have resulted in the Governor requesting federal disaster assistance for the area in which the district is located.

 

Whether a district may levy disaster pennies for the 2024/25 fiscal year due to Hurricane Beryl will depend on a variety of factors. Most importantly, the district must have been directly impacted by the disaster and have increased expenditures directly related to the disaster. Additionally, the Governor must formally request federal disaster assistance related to Hurricane Beryl in the area in which the applicable school district is located. At this time it is clear that a request has been made for disaster assistance and also that President Biden approved of disaster assistance in 67 Texas counties. However, it is currently unclear which counties were included in the Governor's or Acting Governor's initial request for assistance. As such, it is difficult at this time to determine which school districts technically meet this threshold requirement, though districts within the 67 approved counties almost certainly would have been listed in the initial request for federal assistance.  Finally, districts will need to confer with legal counsel regarding the appropriate timing of levying the disaster pennies. Depending on the timing of your district’s fiscal year end and counsel’s interpretation of the disaster penny statute, some districts may need to wait until fiscal year 2025/26 to levy the disaster pennies in response to Hurricane Beryl.

 

Districts may also conduct a VATRE in order to increase their maintenance and operations tax revenue. While districts are typically required to obtain an efficiency audit before conducting a VATRE, the Education Code does provide an exception when a Governor-declared disaster has occurred within the district in the last two (2) years. As such, if your district is located within the Hurricane Beryl disaster declaration, it may conduct a VATRE in November 2024 without obtaining an efficiency audit. This exception reduces the costs and administrative burden associated with holding a VATRE, but the district must otherwise follow the typical requirements for holding a VATRE.

 

Though deciding whether to conduct a VATRE or levy the disaster pennies is a complex decision, the largest factor is determining whether permanence in the increased tax rate is important. A successful VATRE results in a district being able to levy a higher maintenance and operations tax rate permanently. By contrast, levying the disaster pennies lasts for only one fiscal year.

 

The Property Tax Code also provides certain protections to taxpayers who incur property damage from disasters. Property owners with qualified property that is at least 15% damaged by a disaster in a Governor-declared disaster area receive an exemption on their property taxes. The amount of the exemption ranges from 15% to 100%,which will be equal to the damage assessment rating assigned by the chief appraiser in the applicable county. The amount of the exemption is also prorated based on the number of days left in the tax year following the day on which the Governor declares the area to be a disaster area.

 

Finally, the Property Tax Code also permits taxpayers owning homes or certain small businesses located in a disaster area and damaged as a direct result of the declared disaster to pay taxes imposed in the year following the disaster in four equal installments, commencing on February 1 and ending on August 1, and without penalty or interest.

 

To the extent possible, districts should consider the impact of these provisions on their taxable values and collections for fiscal year 2024/25. Given the timing of this disaster, however, it may be challenging for districts to fully understand the impact on their taxable values before they must set their tax rates for the upcoming fiscal year.

 

Procurement

 

For storm-damaged school buildings that need immediate repairs, state law allows a board of trustees to adopt a resolution suspending state procurement laws and the delays that such procedures necessarily entail. Section 44.031(h) of the Texas Education Code permits a board of trustees to make a finding that competitive procurement can be suspended if school equipment or facilities are destroyed or severely damaged as a result of an unforeseen catastrophe or emergency and the board of trustees determines that the delay posed by competitive procurement methods would prevent or substantially impair the conduct of classes or other essential school activities.

Additionally, a school board may consider expanding, at least temporarily, the authority of the superintendent to contract on the district’s behalf to expedite the execution of emergency repairs.  Section 44.0312(c) allows a board of trustees to delegate authority to the superintendent to enter contracts on the district’s behalf if emergency repairs or construction are necessary for the health and safety of district staff and employees.

Conclusion

 

If your district has questions regarding these issues or otherwise, please do not hesitate to contact your attorney at Leon Alcala.

Sample Emergency Resolution Here
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