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Real Values For Texas

Compromise property tax appraisal bill signed

It’s better than nothing, though not by that much.

Gov. Greg Abbott has signed a bill that partially closes a loophole that allowed a powerful oil company to take back millions in tax dollars from Houston-area school districts while draining hundreds of millions more from local government coffers.

The measure that won final approval, HB 2083, from the Republican-controlled Legislature doesn’t go nearly as far in reforming the law as the Legislative Budget Board wanted. The board noted earlier this year that the law is costing the state $70 million to $80 million a year because Texas has to help maintain a certain level of funding at school districts, which are having to repay companies winning court cases based on a 1997 amendment to the state’s tax law.

When the measure takes effect in January next year, though, companies for the first time will be forced to use generally accepted appraisal methods in court cases challenging assessed values under the 18-year-old “equal and uniform” clause of the tax law.

The bill was pushed by county appraisal districts, who complained that often questionable methods were being used during tax appeals to arrive at appraisal values, said Charles Gilliland, a research economist at Texas A&M’s Real Estate Center at College Station.

“I think it will have some effect on it. How much … depends on how much unconscionable activity has been going on,” Gilliland said.

The new standard could give an advantage to appraisal districts, he said. “If they see the numbers being cooked, it gives them ammunition to raise that issue without going to district court,” Gilliland said.

The tax code section at issue gained attention after the Valero oil company forced the Port Arthur school district to refund about $30 million in taxes and other fees, and the Texas City school district about $5 million.

“I think the law was so bad that anything they could do was an improvement,” said Harris County chief appraiser Sands Stiefer, whose county school districts lost $685 million from 2011 to 2014 because of the loophole.

Stiefer, who took part in negotiations over the bill, said the measure leaves much to be desired. He said the issue will be revisited next legislative session. “We would like to see more done,” he said.

See here for the background, and here for a reminder of just how badly the current system is rigged. This bill will help a little, and that’s a good thing. Real Value$ for Texas calls it a “step forward”. I would agree with that and I appreciate the hard work they did to get that step forward taken. My concern is that now that we have taken this step, the perception in Austin will be that the problem is solved, and there will be no appetite to do anything further. I hope I’m wrong and that this is indeed just a first step. Be that as it may, I’m glad to see us get this far. It will make things a little fairer, and that’s never bad news.

Compromise bill to reform property tax appraisals

Better than nothing, I guess, but not clear to me yet how much better.

State lawmakers are looking to partly close a tax loophole that has allowed big companies to drain tens of millions of dollars from local government coffers in recent years, but any reforms that pass may still not end the legal battles that have been driving down appraisals on industrial and commercial properties.

Several reform bills were filed this year as counties began putting pressure on legislators to do something about an increasing number of lawsuits by major companies trying to take advantage of the loophole, which allows property owners to avoid the traditional fair-market system of appraisals.

School districts have been among those hardest hit. Valero Energy Corp. used the loophole to force the Texas City school district to refund about $5 million, while two other lawsuits by the company compelled the Port Arthur school district to pay $32 million in refunds and other charges. The company has new lawsuits pending that could mean even more tax refunds from the two school districts.

The loophole is also costing the state an estimated $70 million to $80 million a year in six counties, according to a January report by the nonpartisan Legislative Budget Board that called for sweeping reforms. The state must pay its share of tax revenue lost by school districts.

Although several reform measures have been introduced, the one that appears to have the broadest support in the GOP-controlled legislature is a measure introduced jointly by state Rep. Drew Darby, R-San Angelo, and state Sen. Kelly Hancock, R-Richland Hills, a Fort Worth suburb.

The compromise bill would require that property values used in court cases be arrived at using generally accepted appraisal methods instead of arbitrary estimates arrived at, in the words of the budget board, “independently of the market values of those properties or the appraisal district in which they are located.”

The measure also addresses the board’s concern that the law now allows commercial and industrial property owners challenging their tax assessments to compare their properties with dissimilar ones in other appraisal districts, or even other states. The bill requires that the comparisons be made within the same county unless there are no comparable properties there.

Alvin Lankford, Williamson County’s chief appraiser, said owners of large apartment buildings in his county typically search for such properties in neighboring Travis County to make comparisons rather than use apartment buildings on the same street. “They are able to pick these properties and get the answer they want,” he said.

Many appraisers, citizens’ groups and officials in affected counties wanted a bill that included more of the reforms recommended by the budget board. However, some of the attorneys, consultants, real estate firms and big businesses that benefit tremendously from the loophole refused to negotiate, said Ed Nolan, Dallas County’s chief appraiser and the chairman of the Texas Association of Appraisal Districts’ legislative committee.

“We didn’t get as much as we wanted,” Nolan said. “But it’s a start.”

[…]

In Houston, property owners concerned about having to shoulder higher property taxes because of tax reductions on industrial and commercial property formed Real Value$ for Texas, which has chapters statewide. The group found that from 2009 to 2013, owners of large commercial properties in Texas’ six largest counties shed $5.6 billion in property taxes that were made up for through higher taxes paid by homeowners.

“It’s unfair, it’s bad public policy and it needs to be changed,” said state Sen. Rodney Ellis, D-Houston, in announcing his own reform bill this month. He said large commercial property owners are using the loophole to “exploit the appeals process to drive down the appraised values of their properties to well below the market value.”

Ellis’ bill was the most ambitious of six reform bills, four by Democrats and two by Republicans. The compromise bill that emerged calls for the most modest changes. It also has the imprimatur of state Rep. Dennis Bonnen, R-Angleton, chairman of the powerful House Ways and Means Committee.

I support Sen. Ellis’ bill, and would like to know what he and groups like Real Value$ for Texas think before I decide how I feel about these compromise bills. They may represent a step forward, but they may also represent a point at which the forces who like things the way they are can say “we’ve already addressed this” and block further progress. The fact that Jim Popp, who may be the single biggest individual profiteer off the current system, appears to have signed off on the Darby/Hancock bills is the surest sign that there’s a lot more that could be done. I don’t think he’s complaining enough for these bills to do enough, but this may be the best we can do for now.

Some grassroots action on the unfairness of commercial property valuation

From the inbox:

Parents, homeowners, teachers, and community members from Houston gathered at the park in front of Nathaniel Q Henderson Elementary School to kick off local efforts in a statewide campaign called Real Values for Texas to fix the state’s broken property tax system.

“Our broken property tax system works against kids, homeowners, and schools,” said Reverend James Caldwell of the Houston Coalition of Community Organizations. “When big building owners manipulate property tax law, they deprive schools and neighborhoods of much-needed funds.”

In Houston, most large commercial property owners exploit loopholes in property tax law that allow them to lower their property tax bills by an average of 40 percent each year. As a result, Houston schools and local communities have lost an estimated $1.4 billion over the past five years. Schools have been hit the hardest, with losses of at least $730 million.

“It troubles me that, unless we change property tax law, kids in pre-kindergarten like my daughter will face obstacles to their education every year because of funding cuts,” said Tarah Taylor, a parent of an HISD student. “Even though she is just 4 years old, my daughter is already fundraising for musical instruments at her school.”

“My students pay the price when large commercial property owners get huge discounts on their property taxes,” said Daniel Santos, an HISD teacher. “From bigger class sizes to limited supplies, each year it gets harder to give students the full attention and resources they need to succeed.”

For homeowners, the impact has been equally significant. Since 2000, the property tax burden on homeowners grew from 45 percent to 54 percent while the share that commercial and industrial property owners paid dropped to less than 20 percent, according to the Associated Press.

“I do my part and pay my property taxes each year, and it’s unfair that homeowners like me have to make up for what big commercial property owners are not paying,” said Guadalupe Avila, a homeowner from Houston’s Northside. “It’s time for a fair system where big commercial property owners pay property taxes on the real market values of their properties.”

Local public officials have also shown support for a fair property tax system.

“Property tax fairness is a simple issue,” said Houston City Council Member Jerry Davis of District B. “It is about fixing the law to ensure that children have a quality education, our streets are safe, and homeowners are not overburdened.”

In April, supporters of Real Values for Texas in San Antonio rallied in front of the Homewood Suites-Riverwalk to call on large commercial property owners to stop exploiting loopholes and to pay property taxes on the real market value of their buildings.

In El Paso, Real Values for Texas supporters are engaging the local community around the connection between property tax manipulation and the proposed budget cuts by the El Paso Independent School District.

You know how I feel about this. Real Values For Texas is a newcomer on the scene, but they’re starting to get some attention, in the Trib and the DMN, which last month had its own big story on the unequal playing field for commercial property owners plus an editorial that called for fixing it. We all know the first step in solving a problem is admitting that you have one. The second step is getting organized. That’s what Real Values For Texas is about, so check them out.