Not knowing the law can be costly.
For the Central Texas College board of directors, that cost is about $780,000.
That’s the amount of anticipated revenue the college won’t be getting after it was forced to forgo a previously approved tax increase because the board’s action didn’t meet the Texas Tax Code’s requirements for a majority vote.
At the time board voted to approve the 0.84-cent increase on Sept. 18, two board members were absent. That made the decisive tally 4-1 in favor of the rate hike.
But when the board met again last week to approve the meeting minutes indicating passage of the tax increase, Harker Heights resident Scot Arey spoke up, arguing that the Texas Tax Code required that an action increasing taxes requires passage by at least 60 percent of a governing body.
The 4-1 margin for passage represented only 57 percent of the board, the resident argued, making the tax increase invalid.
In response, board member Rex Weaver explained that the college’s bylaws state that as long as a quorum is present, that group can act as the governing body.
The problem is, state law apparently is at odds with that rationale — at least since a change in the statute that went into effect in 2015. The tax code makes no mention of a quorum, but very clearly states that 60 percent of the governing body must approve an increase.
There was enough doubt among CTC officials that they called board members after the meeting to inform them that the previous vote on the tax increase was rejected.
The college is to be commended for doing the right thing and rejecting the vote — especially in light of subsequent interpretations from local taxing officials that Arey’s reading of the law was the correct one. Given that reality, the college had no choice but to reverse the tax increase.
How could this unfortunate situation have been avoided?
First, the tax and budget approval process could have been started earlier.
Tuesday’s meeting was less than a week before the state-mandated Sept. 30 deadline to establish a tax rate. Because the board’s error was found so late in the game, it was not practical to post the required 72-hour notice for another board meeting to revisit the tax vote before the deadline.
Because the board didn’t cast a record vote to approve the tax rate, the law requires that the rate revert back to the effective rate — which would raise the same amount of revenue as the current rate.
That means CTC didn’t just lose out on nearly $800,000 in badly needed revenue that the 14.83-cent rate would have produced. By adopting the effective rate of 13.86 cents, the college forgoes whatever increase in revenue it would have received by leaving the tax rate unchanged. Even at the current rate of 13.99 cents, increased property values and more taxable property on the tax rolls would have generated more money for the college in the coming year.
And while starting the process earlier could have given the board the opportunity to rectify its procedural error, there’s simply no substitute for knowing the law.
Granted, it’s unlikely that many school board, college board or city council members are aware of the subtleties of state tax law, or that changes to the law have been enacted in the last three years.
However, it’s worth asking why an attorney for the college wasn’t present during the tax vote to guide the board in its actions.
Just as city attorneys and legal counsel are in attendance at all city council and school board meetings, it’s imperative that all other taxing bodies adopt the same setup.
What should be embarrassing and concerning to the college and its board of directors is that it fell to a diligent local resident to point out the problem with the tax vote. Had the error gone unnoticed or unchallenged and the increased tax rate put into effect, it’s hard to say what legal recourse residents would have had a few months down the road.
For now, residents will save a little money — about $17 annually on a median-priced $140,000 home — which would have been tacked on under the proposed tax rate.
But the local taxpayers’ gain during the next year is certainly CTC’s loss.
In the short term, the college will have to tighten its belt further, as one CTC official commented after last week’s tax decision. That means revising the college’s spending plans, potentially impacting already-planned programs and services.
When the board takes up the tax increase again next summer, as is likely, it will no doubt do so with a better understanding of the law and its implications.
But for now, this is simply a difficult lesson learned — and a costly one at that.