By Carlos Villatoro, Senior Managing Consultant, Dallas
It is no secret that significant commercial real estate investments continue to pour into the great state of Texas. However, if an owner isn’t lucky enough to receive major tax breaks from local jurisdictions as an incentive to invest here, they will have to accept some of the highest effective property tax rates in the country. The tradeoff is that Texans enjoy a relatively low sales tax rate and zero state income tax rate. Fortunately, the Texas Property Tax Code offers multiple appeal recourse avenues, which allow owners and tenants alike to review the property tax liability from a fair and competitive standpoint.
Every year, the Texas appeal process starts around the middle of April when the county’s appraisal district releases their proposed opinion of value on the property. The local taxing jurisdictions will then apply their tax rate to this value and issue a tax bill in October. Because the market is so healthy, there is plenty of press and market data that appraisal district assessors utilize in order to justify an increase in value from the previous year. Fortunately, this proposed value is not set in stone and should always be contested. At this point, a prudent owner has hired a reputable property tax consultant to facilitate all aspects of the property tax appeal. This process includes filing the appeal before the May 15th deadline, gathering the necessary evidence that supports the owner’s opinion of value, communicating to the owner realistic target values and appeal strategy, and appearing before the Appraisal Review Board (ARB) to present the case to obtain a board ruling.
Generally speaking, the ARB will rule a value that is fair to both parties and the appeal is complete. However, for the few owners that are not satisfied with the ARB’s ruling and have essentially been told “no” on a value they had in mind, there is still recourse. Shortly after the ARB ruling, a board order is issued giving the owner 60 more days to decide whether or not to further challenge the ARB’s ruling through the next judicial stages of appeal. In Texas, owners are protected with strong equal & uniform clauses in the property tax code that supersedes all other approaches to values such as acquisition prices, leased fee appraisals, and construction costs. It often takes filing the lawsuit and months of negotiation to reach a settlement based on the equal & uniform arguments. The decision to file a lawsuit against the appraisal district usually occurs sometime between mid-August and the end of September. Stay committed.
While it often requires a rather aggressive approach and process, a skilled property tax consultant can ensure property owners do not end up paying more than their fair share of property taxes. The commitment to such a lengthy appeal process can be the difference when it comes to tenant retention and getting a vacant space leased up. The judicial process is relationship driven, and having an experienced consultant with a reputable firm goes a long way in reaching a settlement that can occur almost a year after the original proposed value was released. The cases are virtually always closed before the set trial date, and in the end, a handful of “no’s” early on will eventually lead to that one “yes” we were all looking for.