Point Austin: The Appraisal Scam
TCAD can't accurately appraise commercial properties – and the Lege likes it that way
The taxes is too damn high.
That was the unsurprising but emphatic thrust of the Property Tax Appraisal Forum held Tuesday at the First Unitarian Universalist Church, hosted by Travis County Commissioner Brigid Shea, and featuring a panel that included Mayor Steve Adler and Mayor Pro Tem Kathie Tovo. Leigh Murrin of Real Values for Texas (a forum co-sponsor, with Austinites for Fair Taxes) also spoke, on the statewide group's efforts to reform property tax appraisals; the Center for Public Policy Priorities' senior fiscal analyst Dick Lavine updated the audience on the current prospects for legislative action (gist: slim to none); and Travis Central Appraisal District's Chief Appraiser Marya Crigler and Travis County Tax Assessor-Collector Bruce Elfant added their perspectives on the appraisal process and the politics of change.
The focus of Murrin's group is the inequity between residential and commercial appraisals; in brief, Real Values contends that for various reasons, commercial property in Texas is taxed at about 40% less than the constitutional standard of "market value," while homeowners' appraisals are much closer to 100%, meaning they bear an inequitable portion of the overall tax burden. The forum occurred on the same day the city released a report City Council commissioned last year to review commercial appraisals, and it turns out that (at least for Austin), Real Values is underestimating the problem.
According to "An Analysis of TCAD's Commercial Valuations for City of Austin," produced by UT-Austin professor George W. Gau and Aegis Group, Inc. CEO Robert S. Radebaugh, "For the period of 2012-14, the average undervaluation [of commercial properties in Austin] was 47%" (when comparing appraised values to actual sales prices). For unimproved land, the discrepancy was more than 90%. Should those valuations be raised to market value, the authors write, "there would be potential savings for both Austin renters and homeowners through lower property taxes."
Ignorance Is Mandatory
The study was commissioned last year in lieu of an immediate challenge to TCAD, and the results will likely be welcomed by the current Council this week and next, as it discusses whether to proceed with a formal challenge (this year's decision deadline would be June 1). Adler reiterated that the community faces "an affordability crisis" driven primarily by housing costs, and recommended using "all available tools," including legal action if necessary, "to figure out if this is a tool that can improve the situation." Tovo noted that the previous Council began work on the matter – enacting a flat homestead exemption, pressing the Legislature for more options, and this commercial challenge research.
Adler added that the city "does not consider [the challenge] an adversarial exercise," and noted that the good relationship between the city and TCAD might serve as a model for the rest of the state. That's largely because, as Crigler explained, the tools that were available to the city's consultants in evaluating properties are simply not available to TCAD. Texas is one of only five states which does not require price disclosure at time of sale, and appraisal districts are largely barred from acquiring that information by other means; meanwhile, the commercial appraisers at (for example) the Aegis Group have a vested interest in accurate sales-price information. Reads the report: "The primary cause of the undervaluation appears to be the unavailability to TCAD of sales price data."
I spoke briefly with Crigler after the forum, and she said that TCAD has even tried to purchase sales price information from commercial firms: "They told me that they just couldn't do it, for fear of backlash within the industry."
The Big Picture
In other words, the deck is legally and commercially stacked against accurate appraisals, and the Legislature has resisted efforts to level the playing field; Crigler said this year she couldn't even find a legislator willing to carry a (hopeless) bill requiring sales price disclosure. Meanwhile, Lavine briefly noted that the resolute legislative resistance to an income tax – that is, a tax "actually based on the ability to pay" – means an over-reliance on property taxes, inequitable appraisals, and a market-driven tax base that inevitably raises the pressure on many longtime homeowners either to sell or risk default on their taxes.
Quite a few of those folks lined up afterward to berate Crigler (angrily or plaintively) about their particular property appraisals, insisting either that the appraisers had been inaccurate or unfair (a group of TCAD staffers were on hand to hear specific complaints). It was left to Elfant to point out another too obvious conclusion: As so few people (in Austin as elsewhere in Texas) take the time and effort to vote, it's unsurprising that the folks under the Dome (many of them de facto representatives of various commercial industries) feel little obligation to respond to the needs of their actual constituents.
Read the Gau and Radebaugh report, "An Analysis of TCAD's Commercial Valuations for City of Austin."