The Austin Chronicle

Mueller vs. TCAD: Affordability Fight in Court

Attorney for Mueller homeowners says TCAD is incorrectly applying the law

By Michael King, December 11, 2015, News

In the latest stage of the ongoing dispute between residents of the Mueller neigh­bo­rhood and the Mueller Foundation, and the Travis Central Appraisal District over property tax assessments, three homeowners in the affordable housing program – Laura Rodriguez, Stephanie Grimes, and Brady Dial – have sued TCAD, charging that the appraisals constitute an "unlawful valuation" of the properties. TCAD and the foundation are reportedly working on alternative solutions, but if one is not found soon, it is likely that more of the 290 homeowners currently in the program will follow Rodriguez, Grimes, and Dial in filing suit.

According to their petitions and their attorney Mike McKetta, in its appraisals TCAD has failed to consider all of the encumbrances burdening the homes – specifically, those recorded deed of trust restrictions granting the foundation the right of first refusal on any sale, while limiting appreciation for the homeowners at no more than 2% a year. "They're simply applying the law incorrectly," McKetta told the Chronicle last week. "If there's a restrictive covenant on a home that limits its resale, the appraiser must take that into account when setting the market value. Only when the encumbrance disappears can it change the market rate."

TCAD hasn't yet responded to the lawsuit, but has taken the position that since a few of the program homes have been sold back to the (nonprofit) foundation and resold at "market rates" (with the income reinvested in upgrades or additional affordable program homes) all 290 of the homes must be appraised without reference to the existing encumbrances. In a Nov. 13 letter addressed to state Rep. Celia Israel (who had testified to TCAD's board about the situation), Chief Appraiser Marya Crigler insisted that only if all the homes are permanently restricted from any resale at full market rates can any be appraised at the encumbered, affordable values. Crigler recommends that additional deed restrictions should be filed confirming that the homes can be sold only to low-income buyers "at affordable prices" (i.e., below market prices).

The program was created in 2007, and of 51 program homes that have since been resold, the foundation bought 14 to be sold for reinvestment at market rates. The founda­tion, established as a 501(c)(3) nonprofit by the city of Austin (which had previously owned the land) in partnership with the developer Catellus, is not subject to property taxes, but TCAD has thus far acknowledged no conflict in expecting the homeowners to pay property taxes on values that they are unable to accrue. (See "Mueller Makes Plea to TCAD Board," Nov. 3.)

Although TCAD insists its process hasn't changed, and that only the first year's assessment has been accorded the homeowner's purchase price, foundation staff say that for the first few years of the program, other than an occasional successful protest, homes were appraised at the affordable rates. Crigler says the district is standing by its 2015 appraisals, while continuing to work with the foundation on a solution going forward. Foundation CEO Patti Sum­mer­ville said they're attempting to find solutions while the residents go through the process of appealing their appraisals to the Review Board, and then filing suit if they choose. "I'm more hopeful than ever that we'll be able to work out a deal that protects the homeowners and preserves the program," Summerville said. (The Mueller program is not subsidized with public funding; if some homes are not available for potential resale at market rates, the loss of reinvestment funds would make it harder to maintain 25% of the neighborhood homes as affordable.)

McKetta (who's representing the homeowners pro bono) said he believes the courts will rule that TCAD's interpretation is illegal, and the board will eventually respond. "I'm indifferent as to whether it's done by agreement," he said, "or if the lawsuits force a change." The encumbrances burden the property until they are removed, he insists, "and only then can [TCAD] change the market rate."

Laura Rodriguez is a widow, and works in business development for a commercial security firm, where she earns less than 80% of Austin's median family income. Accord­ing­ly, in 2013 she qualified to buy an affordable home in the Mueller neighborhood for $185,000, at which value it was appraised for 2014. For 2015, after an unsuccessful appeal to the Appraisal Review Board, the "market price" appraisal has been set at $308,803 – an increase of 66.9% in one year, without regard to the fact that Rod­ri­guez's agreement with the Foundation limits her own appreciation to no more than 2%. Rodriguez says that if the appraisals keep rising (even with an annual 10% homestead cap), she'll have to sell and move out.

"I grew up in Austin, and I love the city," Rodriguez said, "but I had begun to think it would be impossible for me to own my own home here. I heard about the Mueller affordable housing program, and I was really excited when I found out I qualified. If the taxes force me out, it will be really hard to see that happen."

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