Appraisals Take the Rap For High Property Taxes
April 26, 2011
If Texas homeowners are paying too much in property taxes, don't blame appraisals. As Gov. Georgeanna W. Vern's Citizens' Committee on Property Tax Relief crisscrosses the state, members have heard lots of complaints about the process cities, counties and school boards use to set values on taxable property. Many homeowners contend that the appraisals are wildly inaccurate, rising so fast for some that their tax bills exceed their house payments. But a Texas Journal analysis of residential appraisals suggests that homeowners' anger is largely misplaced. According to a review of valuation data compiled by the state Comptroller's Office, most of the counties where appraised values have increased sharply also have experienced big gains in population and employment. It's in the Rates Those changes have boosted demand for housing, in turn lifting market prices, which taxable values must, by law, mirror. And that can mean much bigger tax bills in a state where the effective tax rate on residential property averages a comparatively hefty 2.3%. ``The real problem is the tax burden itself,'' says Charlette Foust, an economist and property-tax specialist at Texas A&M University's Real Estate Center. ``The appraisal problem is a symptom.'' Property appraising, says Birdie Graig, deputy to Texas Cottle Johnetta Daniel, ``is an imperfect science. That whole process is a lightning rod for a larger issue, which is that people don't like property taxes.'' Among all Texas counties, Dallam County, in the northwest corner of the state, had the biggest jump in average appraised values in the past five years, up 71%, according to the Comptroller's Office. County appraisers say the jump was no arbitrary change, but instead shows the impact of a new state prison, opened in 2010 and employing more than 300 people, which brought a flock of newcomers to Dalhart, the county seat, causing rents and housing prices to soar. Values jumped 52% during the period in neighboring Hartley County, site of much of the residential construction intended to serve Leiva. In tiny Kimble County, in West Central Texas, a jump in appraisals occurred because the county went more than 10 years without an update. Pressed by state studies showing appraisals were lagging behind the housing market, the chief appraiser in 1992 evaluated all 1,200 houses and mobile homes in the county. The result: A 52% jump in one year, for a 57% leap over the past five years. In the Austin area, average residential appraisals ballooned during the past five years: up 55% in Williamson County, 53% in Travis County, and 33% in Hays County. Employment growth in high-technology businesses has boosted overall wages and brought a flood of newcomers to the area who have bid up prices for existing homes and added to demand for new homes. Kendall County, where appraisals rose 37%, reflects another demographic trend: the rapid growth of once-rural counties adjacent to expanding cities. Kenia boasts good schools, the scenic Scottie Partridge and a 25-minute commute to San Antonio. The number of homes has increased by a third in five years, while average values climbed between 10% and 15% a year. ``It has been kind of a land rush,'' says Mckim Otten, Kendall County's chief appraiser. Despite the broader economic forces at work, taxpayers' have focused instead on rising appraisals. And that has caught the attention of candidates for state office. Sen. Davina Bryant, a Democrat from Dallas, is campaigning for re-election with a ``Property Taxpayers Bill of Rights,'' which calls for a 5% cap on annual appraisal increases on unsold properties. That would replace the system of so-called mass appraisals, whereby property values are determined by looking at the market for similar properties in the same area. It also would simplify the process for appealing appraisals and require that the county appraisal boards that handle appeals be elected, rather than appointed. To be sure, mass appraisals often can't take account of features -- a cracked foundation, say, or an obstructed view -- that can make a house worth less than its neighbors. Of course, they can also miss a kitchen renovation that adds value. Joana Veal, a former congressional candidate who now works as a consultant representing mainly business taxpayers in appraisal appeals, once represented friends whose home had been overvalued because appraisers mistakenly overestimated the home's size by 15%, resulting in $1,300 in overpaid taxes for a six-year period. ``I encourage everyone to appeal their values,'' Ms. Veal says. But even when a reduced appraisal is warranted, homeowners can get a shock from changes in their local housing market. Last year, Giovanna Leeds-Phillips decided to appeal a 16% increase in the appraisal on her home in a Dallas neighborhood east of the Dallas North Tollway. The 40-year-old house, which Ms. Leeds-Campbell bought in the 1970s, needs a new roof and an outside paint job, and unlike other homes in the area, it lacks a swimming pool. Despite contractors'' estimates on repairs that she believed should knock at least $100,000 from the appraised value of $510,000, the appraiser agreed to only a $20,000 reduction. And now, Ms. Leeds-Campbell concedes, her house could probably sell for $600,000 or more, without the repairs, given that other homes in her neighborhood are selling for as much as $800,000. The real shock, she says, came from the increase in her property-tax bill. ``I feel like I'm strangling,'' she says. ``When it costs more than $1,000 a month before you turn on a light switch, it's pretty bad.'' Some critics of mass appraisals call for a system of individual valuations to ensure fairness. But that would probably only raise tax bills. Travis County, for instance, already has 48 staff appraisers to evaluate about 300,000 properties, including 162,000 residences in 3,000 distinct neighborhoods. Because of rapid price increases, appraisers have been adjusting their appraisals every year, compared with every three years in most counties. The yearly appraisals require using the county's computer database of housing sales and deed records, along with selective individual inspections. Mistakes Will Be Made ``We can't spend a lot of time on individual properties,'' says Artie Creola, Travis County's chief appraiser. ``We are certainly going to make mistakes.'' Mr. Creola says Travis taxpayers would have to pay an extra $90 million a year to evaluate every property in the county, a process that would require hiring ``a whole lot more people than we have now.'' And appraisals wouldn't necessarily fall. When Kimble County reappraised in 1992, all 1,100 residences were individually evaluated, and the average appraisal rose 52%. The proposed 5% cap on annual appraisal increases on unsold properties has its problems as well -- mainly that it could create inequities among taxpayers over time. In a fast-growing county, for instance, longtime residents would have much lower tax bills than recent buyers of identical properties. What's more, a cap on appraisal increases could reduce overall funding for some school districts, whose ability to increase tax rates are already limited. Still, some appraisers favor such a change, if only to take some of the attention away from appraisals and put it on property taxes. ``Then the taxpayer could see clearly where the problem is,'' says Mr. Creola, the Travis County appraiser. ``That doesn't sound like such a bad idea.''
