A while back, I posted a thread concerning being surprised by a tax bill from a county in Texas in which I had no royalty interest holdings. Subsequent to that, I was surprised by another tax bill from another county in which I had no holdings. After research, I determined that my holdings with respect to this issue are entirely within Fisher county. Fisher county consolidated school districts with districts in Nolan and Taylor counties, resulting in tax bills from those counties in addition to Fisher county. I only received an appraisal from Fisher county.
It strikes me this is a very inefficient way to do business for all parties concerned. Instead of the county in which the wells reside following up the appraisal with a single tax bill that collects for the consolidated school district that resides in their county and then sending a single check to each of the school districts, three counties are paying the fees to send out tax bills and paying the labor to process the payments received and the royalty receivers are having to send in three separate payments. For small interest owners such as myself I suspect the costs of processing the billing and payments exceeds the revenue received.
It seems to me the state has an opportunity to greatly increase fiscal efficiency by making each county responsible for collecting all taxes appraised/assessed within their boundaries or exempting taxation of properties if the cost of processing the billing and payments (including postage) exceeds the revenue.
Usually, when I post a thread like this, by this time a couple of people will have posted responses saying or implying that I don’t have a clue what I am talking about.
Perhaps, the title didn’t catch the attention of many. Perhaps everyone who has read the post agrees.
Either way I want to elaborate a bit.
Cost of billing:
2 pages of paper - .02
envelope - .03
postage - .78
wear/tear on printer, cost of ink - .02
payroll costs ($15/hr) for removing statement from printer, folding, inserting in envelope, applying postage and moving to mail pickup - $3.75
Cost of payment processing:
labor to open mail, record payment, prepare deposit slip - $3.75
Total estimated cost of 2 page bill $8.35 (per county).
The two bills I received are for $6.08 and $6.33.
So for the 2 bills, processed by separate counties, cost is $16.70 versus revenue of $12.41.
I have no way of estimating how many other small royalty interest holders exist, but if the county where the royalty interests reside was the only one to bill and they wrote a single check to each of the other school districts for monies collected, instead of a loss of $4.39 for the additional 2 counties, almost the entire $12.41 of revenue would be a gain.
It seems to me that is a very strong argument that the current procedure is very inefficient.
Your points are taken. The simple fact is that with the government running anything, there is little incentive to improve anything, and every incentive to figure out how to maximize employment and keep the status quo. County taxing efficiency and accuracy, especially for oil and gas mineral interests is extremely poor in TX (and likely elsewhere as well). I’m afraid that until you happen across any legislators who care about efficiency and effectiveness, this will remain.
For a serious contribution to government efficiency, the best solution is for you to consolidate your small mineral ownership with others in the same tract so only one ad valorem tax bill has to be sent for the tract, instead of multiple small bills. For small school districts crossing county lines, it is most efficient to ask a single county to assess the taxes and only have to process one payment. These districts have small administrative departments and save money this way.
We have a couple of wells out of about 200 where the pooled unit crosses county lines and we receive 2 tax bills. The appraisal of the wells are by a single company, then the appraisal is prorated to the entities involved. My limited management experience is that processes are most efficient/ effective when based on the 90% , rather than the 10% exceptions to the rule. Prior to 1980 each taxing entity did their own appraisal, set their own valuation, and collected their own taxes. The legislature mandated central appraisal in the 80’s and central collections have increased greatly since then.
I have always believed that problems cannot be solved until they are identified and defined. That is what the purpose of this post is. I certainly understand the perceived goal of government to create jobs. In the scenario I defined, the proposed change would only have the effect of reducing costs of collecting revenue and I fail to see how that would jeopardize jobs. As to my finding a legislator, since I am out of state, that will not happen. Perhaps by posting here it will be seen by a legislator or someone who will pass the into on to an appropriate party.
I can’t imagine how I would go about fixing this problem by consolidating my holdings with some unknown party, since I am unaware of anyplace that information is available to me. Also, it would seem that would involve the use of an attorney and the preparation of legal documents and would simply add more to the costs of my holdings without an increase in revenue. Where is the win in that?
With regard to 90/10 solutions, I agree that some undefinable (but probably small) percentage of individuals have holdings that cost more to process than the revenue received in the current scenario. However, if the proposed solution were implemented, I cannot see any downside, regardless of the size of the holdings. The number of tax bills sent by all parties will still be reduced, resulting in processing and postage savings.
Your holding may lie in a single county, but once your interest is pooled to a unit, all interest owners share in production of the unit regardless of county, city, school, or water district boundary. The value is prorated to each district. A taxing entity will choose the most effective method to get the money quickly to start earning interest, make bond payments, pay employees, or whatever. BIlling will be done in the most consistent manner that collects the most money in the speediest manner. Sometimes a district may have a delay in setting their tax rate for various reasons. One district would not want their billing delayed while waiting on another district to resolve their issues. This is just one of the complexities in appraising and collection of ad valorem taxes throughout the state of Texas, an important source of funding for schools, counties etc.
Pooling is not involved in this scenario. Are you confusing horizontal wells that traverse county boundaries with wells residing in a single county that has consolidated with a school district in another county?
All of the tax statements I received arrived within about a 2 week period near the end of October following an appraisal done in the spring. I certainly believe that competent legislators can define laws that would eliminate any co-dependency issues.
Texas independent school districts have the authority to contract their collections as they determine best meet the needs of the district. It might be more helpful for you to inform the school district of how they can save money on paper and postage by contracting with multiple collecting agencies, than to attempt to go through the Texas legislature.