As tax bills grow, so do calls for reform

We say: Austin’s affordability gap

Sometimes the pain must be intense before a patient seeks treatment.

That perhaps is the best explanation for a swelling movement by Austin homeowners — as well as the call to action by local leaders — to do something about the state’s tilted property tax system in which homeowners are being gouged. In this case, the pain comes in the form of soaring tax bills with no end in sight.

Momentum to reform the state’s property tax system has been building as residential property tax bills in Austin have skyrocketed even as income and wages have not kept pace. Those dynamics helped widen an affordability gap that has for several years spread like a virus across the city and some nearby Central Texas communities.

But the pain reached a tipping point recently with the arrival of this year’s appraisal notices. Travis County notices showed homes’ average market values jumped 12.6 percent and average taxable values 8 percent for 2014. There were similar jumps in Williamson and Hays counties, but nowhere was the pain greater than in Austin, with its hot housing market. Now there is a movement.

To be sure, “gouging” is a strong word. But in our view it fits because homeowners are being squeezed on both sides, by a state system that continues to give an upper hand to big commercial property owners and by a city of Austin system that gives tax breaks and fee waivers to companies and for-profit enterprises but has not seen fit to offer even a meager homestead exemption to regular homeowners — other than those who own historical homes. Seniors and people with disabilities also are eligible for a homestead exemption from the city.

But it looks as if some change is finally on the radar.

In the next week or so, Travis County commissioners are poised to take a huge step in addressing problems with appraisals and appeals that continue to shift a disproportionate share of the tax burden onto homeowners, in favor of commercial and corporate interests. Commissioners will vote on whether to challenge the county’s entire 2014 commercial property tax roll. The deadline for filing a challenge petition is June 17.

It’s a drastic step, but necessary.

Texas is one of just a few states that do not require some form of disclosure of property sales prices. Without such data, it’s tough to assess high-dollar properties accurately. Often, county appraisers are flying in the dark in assessing high-dollar properties. But even when appraisers get information regarding sales prices, big commercial property owners have used so-called equity appeals, which use median valuations instead of sales prices, to get generous markdowns. In other words, there is an incentive to protest property assessments, and those with means do. There also is an incentive for counties to reach settlements with property owners who protest appraisals, since counties have limited resources to wage court battles that can go on for years.

Real Value for Texas, a group pushing for statewide property tax reform, estimates based on data they’ve collected that commercial properties are being taxed at an average of 60 percent of their actual value, or a whopping 40 percent discount. They calculate that the state could recoup billions of dollars for school districts and other local services if the Legislature fixed the problem.

As some note, the fix is not easy. The rule that permits commercial property owners to exploit the system also gives homeowners similar rights. But if Travis County commissioners do file a challenge and do prevail, it could help slow an erosion of the county’s tax base and begin restoring balance.

The American-Statesman’s Shonda Novak and Lori Hawkins reported in last Sunday’s editions that the share of residential property taxes to support public schools grew from 45 percent to 54 percent over a 12-year period, while commercial and industrial owners’ share declined to less than 20 percent. Other sectors, from oil and gas to personal property, make up the rest.

On Thursday, the city of Austin will take up the matter with several agenda items proposed by Council Member Kathie Tovo. Tovo wants the city to prioritize tax reform measures on the city’s legislative agenda and require companies that get city-financed incentives to agree not to protest their property valuations for some period of time. She also wants the latter to apply to companies that seek the city’s support for state incentives.

What is missing, however, is movement on a homestead exemption, which the city could do without state approval. We do realize that it would be expensive initially, but it could be phased in over time to blunt the effect on the city’s budget. We will be examining that approach in future editorials.

In the meantime, the movement is playing out in town hall meetings that drew hundreds of people to local churches in recent weeks to discuss their escalating tax bills and what can be done to slow them.

What was made plain is that the affordability gap does not discriminate — it is affecting homeowners in higher-income neighborhoods, such as Bouldin Creek just south of downtown as well as lower-income neighborhoods in East Austin. And the pain only will worsen if local leaders don’t act.

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