Recommendations of the Texas Comptroller

Provide Centralized Public Information Concerning Special Districts

Summary

Special districts are special-purpose units of local government created to provide a service or services to a specific group of constituents. In 1999, 1,241 special districts in Texas assessed property taxes, and 515 assessed sales taxes for various purposes. Texas should centralize all information relating to special districts and, when possible, make this information available on the Internet.

Background

Special districts are enacted primarily to raise money for the provision of certain services. In Texas, the Legislature, the Texas Natural Resource Conservation Commission, county commissioners courts, and municipal governments can authorize the creation of special districts.

Generally, groups of residents or property owners seeking local autonomy create special districts. Usually, these citizens desire a particular service that traditional authorities either cannot or will not provide. In addition, groups may form special districts because their local governments do not anticipate the need for a service or are not receptive to additional debt burden.

Traditionally, most special districts in Texas have been water districts, municipal utility districts that provide water and wastewater services to neighborhood developments by levying taxes on personal and commercial property, sales taxes, or user fees. The first water districts were established in 1904 to provide irrigation services. The Legislature authorized the creation of drainage districts in 1905, and levee improvement districts and navigation districts in 1909.[1] Despite their ability to fund their own operations, 21 water districts filed for bankruptcy in the last decade.[2]

In 1999, 1,241 Texas special districts assessed property taxes, and 515 districts assessed sales taxes for various purposes (Exhibit 1).[3] The growth of special districts has created fragmented service provision and eroded local governments’ tax bases.[4] In addition, the general lack of coordination between local entities and the state may inadvertently lead to duplicative services or overlapping jurisdictions.

Although special districts create programs and services that affect nearly every Texas resident, the public has little knowledge or understanding of them. Special districts provide useful and often necessary services; however, their existence may create the appearance of “hidden government” and raise questions of accountability to local taxpayers. Currently, tax data and other information about special districts are not available in a central location.

Exhibit 1

Special Districts in Texas, 1999

Recommendations

A. To increase public access to information on special districts, the TexasOnline State Portal should be used to provide the public with centralized information relating to special districts assessing property and sales taxes in Texas.

The Comptroller’s Property Tax and Revenue Accounting Divisions collect data on property and sales tax rates for Texas’ special districts. The Local Government Section of the Comptroller’s office should develop an Excel spreadsheet to centralize special district information, including district name, manager, board of directors, service or services provided, location, and property or sales taxes assessed. Local Government analysts should update the spreadsheet annually using data received by the Property Tax and Revenue Accounting Divisions. Special districts should cooperate with any Comptroller’s office information requests to assemble this information.

B. The Comptroller’s office should post information relating to special districts on its agency Web site and the state Web portal for public access.

The Comptroller’s office should convert the Excel spreadsheet into a useable format available on its agency Web site and the state portal, TexasOnline. The Comptroller’s office may choose to make additional information available in the future, such as an electronic map detailing the exact location of special districts.

This recommendation would increase special districts’ accountability to taxpayers and provide elected officials and local government administrators with enough information to make informed decisions concerning local tax bases and revenue sources. In addition, it may decrease the duplication of services between local governments and special districts.

Fiscal Impact

The Comptroller’s office could implement these recommendations with existing resources.

Endnotes

[1] Texas Comptroller of Public Accounts, Forces of Change, Shaping the Future of Texas, Volume II, Part I (Austin, Texas, November 1993), p. 650.

[2] Texas Natural Resource Conservation Commission, Water Permits and Resource Management Division, Bankruptcy and Orders from the Commission, Years 1990-1999 (Austin, Texas, November 1, 2000), p. 1.

[3] Texas Comptroller of Public Accounts, Property Tax Division, “1999 Special District Information, Reported by Statewide County Tax Assessor/Collectors” (Austin, Texas, May 2000), pp.1-24; “Local Sales and Use Tax, SPD Sales and Use Tax,” July 2000 (http://www.window.state.tx.us/

taxinfo/local/spd.html). (Internet document.); and Economic Development Corporation Report Fiscal Years 1998 and 1999 (Austin, Texas, October 13, 2000), p. 1.

[4] US Department of Treasury, Office of State and Local Finance, Federal-State-Local Fiscal Relations: Report to the President and the Congress (Washington, DC, September 1985), p. ix and pp. 75-80.

e-Texas is an initiative of Carole Keeton Rylander, Texas Comptroller of Public Accounts
Post Office Box 13528, Capitol Station
Austin, Texas

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