Home > Uncategorized > Texas Property Tax Cycle – VALUES?

Texas Property Tax Cycle – VALUES?

September 24, 2010 Leave a comment Go to comments

As we close out the 2010 Texas Appeal cycle we take a look back and reflect on the opinions of the appraisal districts as well as, the general state of the individual sectors of the commercial markets. How did their opinions line-up next to the true current market conditions? What were the initial assessed values, and did they mirror the decline of the current commercial real estate markets? Lastly, what is on the horizon for tax rates?

Entering the 2010 Texas Appeal cycle, which began with the receipt of the 2010 Notice of Assessed Values, the ripple effects of the recession continued to be evident. In reviewing the data across the state we saw an average decrease in value of 3-5%. We saw that approximately 80% of assessed values rolled, meaning they stayed the same as their 2009 final assessed value.

Primarily we saw the bulk of the decreases in Harris and Bexar Counties, and flat values in Travis County. Market sectors which seemed to be left with the highest assessed values were multifamily and office. However, in light of the current market conditions for hotels and restaurants, and other hospitality industries, they stood out as the sectors most deserving of substantial reductions from their 2009 assessed values.

Throughout the appeal process we were faced with differing opinions of value and the approach most appropriate. This is typical in Texas, as there is no collaboration of best practices in that respect between the appraisal districts. However, we have found that taking the time to understand the individual market sector, and its particular current challenges well in advance of the received notices, enables us to quickly hone in on those properties in need of appeals. We then begin the process of sharing our analysis and data with the appraisal district so that we can jointly arrive at the fair assessed/market value.

Unfortunately, the current property tax law burdens the appraisal districts with an annual reappraisal of both Business Personal Property and Real Estate tax accounts, as of January 1. With limited staff and resources this leaves them with no choice but to primarily approach everything from a mass appraisal approach riddled with flaws.

As an advocate for the taxpayer we have responsibility for determining the most accurate current market value, considering all current market trends. Which requires us to keep up with why and what criteria the current buyers in the market utilize in determining the acquisition price of a property. It is then our responsibility to share this information with the appraisal districts. In this respect we consider ourselves part educators.

As to be expected, each market handles their value approach as different as how they handle their hearings. We found some counties this year such as Bexar and Travis being very agreeable in their informal process, whereas in the past they would not budge off of their numbers demanding a formal hearing in almost every case. This opens a new chapter in the world of property tax appeals; counties that would normally be flagged as difficult and non-taxpayer friendly, are displaying a new demeanor of willingness to really review and consider the evidence presented.

Most likely, this may be attributed to the overwhelming number of lawsuits that have been filed over the last couple of years, as well as the simple fact that they have come to recognize that their values may have been inflated, and are now taking the steps to correct the problem one property at a time. Additionally these counties recognized that certain industries were suffering more than others, with the hospitality and service business having performance issues, and income that was about 1/3 less than the prior year, leaving appraisers no choice but to decrease the values of these properties.

You know the saying Rome wasn’t built in a day, and neither will a reformed property tax system be. There were still a few Texas counties that we had the pleasure of protesting in that stayed �tried and true� in their ways, requiring us to put every effort forth for the adjustments we obtained for our clients.

Harris County for instance, in our experience over the years it is hit or miss with the only variable being the board that you appear before. The boards in this particular county usually lean toward the methodology that the district elects to utilize in determining the value, regardless of whether it is the most accurate for the current market. When presenting in this environment it is necessary to be prepared with multiple approaches to the value, as well as, able to make variable adjustments on the spot.

Much like its western counterparts, Harris County too took a pro-active approach and lowered the values on many of their hospitality businesses leaving the apartment sector and the warehouse sectors alone in many cases.

The outlying counties of the major metro areas are still a little slower to catch up to declining values. We heard the phrase quite frequently, The recession hasn’t really impacted us out here yet  more times then we cared to. The lack of arms length transactions were not an indicator to these counties that values were dropping, only that no one wanted to leave. However, these exterior counties also could be very agreeable at times, but more often than not, they too are struggling to maintain their taxable values at the prior levels.

What is on the horizon for tax rates? Bottom-line brace yourself for an increase. News article after news article, from Dallas, to Houston, to Austin, on down to San Antonio, reports of tax rate increases abound. Jurisdictions trying desperately to hang on to their revenue streams during this period of declining property values, all the while telling taxpayers that it should go somewhat unnoticed due to their reduced values. So much for the bright side of your declining real estate values!

Finally, the current economy shows NO signs of improving over the next three and a half months, and it looks like 2011 will again be an up-hill battle for the county appraisal districts to hold onto their assessments. We anticipate that 2011 will be yet another year that will warrant many protests in order to obtain fair market values in-line with the true current market and their performance.

Michael Slevens is the founder and CEO of Tax Recourse, LLC based in Houston, TX. Michael has over twenty years of experience in commercial real estate and ad valorem tax representation. Michelle Solis is the Vice President of Sales for Tax Recourse, LLC, located in their San Antonio, TX office. Michelle has over thirteen years of experience assessing and advocating the ad valorem tax solutions for commercial real estate and business owners alike. Tax Recourse, LLC provides commercial property tax appeal services for commercial property owners across the Northeast and Southern U.S., providing additional services including Cost Segregation Analysis, Exemption/Abatement Management, Arbitration Management, Litigation Management, Business Personal Property Returns/Renditions, Commercial Appraisals, Roll-back Tax Analysis, and Property Tax Budget Analysis. If you have a complex property tax issue, or a question about what classifies as a deferred maintenance item, you can contact us at http://www.taxrecourse.com.

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