Travis County commissioners decided Tuesday not to challenge the entire 2014 commercial property tax roll and instead make a more measured contribution to the growing efforts to reform Texas’ appraisal system, which critics say unfairly benefits commercial properties.
Commissioner Bruce Todd, who said the Legislature — not a challenge of the Travis Central Appraisal District’s values — can “fix the structural problems of appraisal law,” instead proposed more discussion and research on property values and potential reforms.
The Commissioners Court unanimously approved Todd’s motions to convene a working group that would study fixes to the appraisal system and include major Travis County taxing units as well as business and real estate representatives; solicit the services of a professional to analyze the accuracy of commercial and industrial appraisals in Travis County; and collaborate with other counties to explore legislative and other reforms to the appraisal system.
Even if the county prevailed in showing this year’s commercial appraisals are inaccurate, “they will still be appraising under the same flawed system next year as this year,” Todd said in prepared remarks. “We do need to address fairness in the commercial and industrial appraisal process. I believe a challenge by Travis County won’t address this issue.”
About two-thirds of the almost two dozen people who spoke before commissioners Tuesday morning urged the court to file a challenge petition, often embedding the plea in personal stories — or accounts from neighbors and acquaintances — about being priced out of their homes. A challenge could have prompted the reappraisal of commercial properties or ended up in district court.
“I feel they really missed a significant opportunity,” said Brigid Shea, the Democratic nominee for a Travis County commissioner seat who has long pushed for change to Texas’ appraisal system.
Shea said there’s little chance a Legislature poised to have more conservative leadership will reform the appraisal system — but that a court decision on a challenge from Travis County might have spurred lawmakers to act. State Sen. Kirk Watson, D-Austin, who pitched a series of proposed tax reforms this week, acknowledged some of his ideas might not make it through the Legislature but said it’s worthwhile to start a discussion.
Real estate industry representatives, such as property manager Daryl Chalberg, told commissioners that the problem isn’t underappraised commercial properties. Chalberg rattled off examples of properties that sold near, and in some cases below, their appraised value. The Austin Centre at 701 Brazos St., he said, sold for $76.5 million and was appraised at $78 million.
That might sometimes be the case but not always, said County Judge Sam Biscoe. A comprehensive study would get at the facts, noted Biscoe, who said Monday he felt the county might not have enough evidence to challenge commercial property values if the issue went to court.
“This issue was brought to me 12 days ago,” Biscoe said Tuesday. “It is a big issue. It is controversial, and it is also thorny. I think that what we’re doing is a step in the right direction.”
Overall, Travis County’s taxable value from single-family residential properties increased from 42.8 percent in 2000 to 52.1 percent in 2013, according to data from the appraisal district. Part of the reason, activists say, is that commercial property owners take advantage of a state law that allows properties to be appraised at the median value of comparable properties.
Last year, after the appeals process, the value of the county’s commercial properties went down by $2.5 billion, with an additional $4 billion tied up in lawsuits, according to the appraisal district. The value of residential properties was reduced by $1.6 billion.
When commercial properties get reductions in value, that shifts the tax burden to homeowners, activists say. Texas should also require a property’s sales price be disclosed so appraisers have more accurate information, they say.
A memo from the Travis County Planning and Budget Office estimated, at the request of Todd, that adding $500 million in commercial property value would result in a $5 reduction in the county portion of the tax bill for the average-value homestead. Increasing commercial property value by $1 billion would mean $10 in savings.
Those numbers are far too low, said Shea and Austin City Council candidate Laura Pressley, who worked out a different set of figures.
Shea and Pressley said a state appraisal district association has estimated that commercial properties are appraised at just 60 percent of market value. If commercial properties in Travis County were appraised at market value, it would add $22.4 billion to the tax rolls, meaning about a $1,300 reduction in the average homeowner’s total tax bill, Shea and Pressley said.
Houston-centered Harris County challenged the values of vacant commercial lots, alleging they might have been appraised at just 62 percent of market price, at the beginning of June. The Austin City Council will also consider filing a challenge to commercial properties in the city at its Thursday meeting.
Commissioner Ron Davis, who backed Todd’s motion, called on the City Council to provide tax relief by adopting the maximum general residential homestead exemption of 20 percent — the same exemption Travis County currently offers.
Commissioner Margaret Gómez, who was absent from Tuesday’s meeting, said in an interview last week she was against filing a challenge.