Every year about this time—May 31st to be exact—a flurry of business occurs around the issue of real property taxes. And rightfully so; for commercial real estate owners, real estate taxes are almost always the largest line-item expense. So as this May 31 deadline to file a protest with your local county tax assessor fast approaches, I thought it would be timely to share some thoughts gleaned from more than three decades experience of discussing assessed values from both the assessor’s point of view and the property owner’s point of view. (Full disclosure: Over this 30± years, my firm has worked for both sides.)
1. The County Central Appraisal District (“county tax appraisers”) does not set your tax rate and is not the tax collector. Real property taxes are set by your elected officials. The vilification of “tax collectors” is biblical in proportion. Indeed, I Googled “tax collectors in the Bible” and got dozens of hits (these tax “gatherers” were, back in the day, referred to as “Publicans.”) Not surprisingly, these Publicans were not held in high regard (well, actually, they were really, really disliked, and basically considered crooks as they “skimmed” off the top of the taxes they collected for their personal enrichment). So, just be sure you don’t lump your county tax appraisers in with those “Publicans.”
2. Isn’t the whole process of protesting your appraisal value being “too high” counterintuitive—maybe even oxymoronic? So if you set aside for a minute your basic “for profit” instinct to lower your tax expenses, when have you ever heard of a property owner getting mad when told that his or her property is worth more this year, than last? I have been in the business a very long time and never once have I heard the statement “Dadgummit! I am so sick and tired of my house/office/warehouse/hotel/store going up in value, year-after-year. I just can’t take it anymore.” Now, of course, the issue of whether nor not a property is assessed too high—or, too low—involves a well-defined process, and involves several layers of professionals, at the heart of which is the real estate appraisers (on both sides.)
From my experiences—and this is a very important point—it is an unwise, naïve property owner who takes the capabilities and resources available to the county tax appraisers lightly. On a recent case that I felt was fairly straightforward, and my reasoning absurdly sound, the representatives from the assessor’s office came in extremely well prepared and proffered highly qualified and persuasive testimony. The assessor was represented by a litigator well prepared for the task, and they took me to task. While to this day I remain convinced in my opinions, I left that day, hat in hand, thinking to myself, “You know, if I was a tax paying citizen in Collin County, I would be very proud of these employees and the professionalism they exhibited in representing their constituents.” It is for this very reason that the Dallas-Fort Worth area has many of the best real estate tax professionals in the country (that is, tax professionals who represent private property owners). If the stakes are high, do not underestimate the other side.
3. Forget point No. 2 and hear this: Real estate values do change, and they change far more quickly than we (“the market”) used to think. It is now well documented that after Lehman Bros. failed in September 2008, commercial real estate values in the U.S. over the next six to nine months fell 30 percent to 40 percent, in general. As an asset class, real estate is now considered much more volatile in price/value than in years past. Indeed, there are now open-ended real estate investment funds that are priced daily: that’s right, the individual assets are re-valued every day. The recorded change in asset values looks like a saw tooth saw: price volatility times at least two. Publicly held real estate stocks show similar volatility. The point is: If January 1 of each year is the strike point for the assessed value, be sure all the facts are known—and considered—when assessing the assessed value.
4. Now, forget everything you have heard that “assessed value is synonymous with market value,” as we all generally think. Well, yes and no. In Texas, “assessed value” is supposed to be “market value” (with a couple of nuances). I know I have already referenced the Bible, but one aspect of real estate taxes in Texas is based upon the wording in the Texas Constitution. Granted, not biblical, but for us native Texans, darn close.
Here are the operative words in today’s property tax protest world: “Equal and Uniform.” (See: Texas Property Tax Code – Section 42.26.) This very important (for real estate owners) part of Texas law. Look it up. If you are liable for a big-time tax expense, hire an expert tax consultant. It is not a complicated concept, but it is one that needs to be handled by experienced professionals. The folks across the table do it every day, every year, in every county. Protestor beware, and be prepared.
So, don’t blame the county tax appraisers’ office for your rising property taxes—unless, of course, you are righteous in your belief your property is over-assessed. If it truly is, treat the process—and the people—with the respect and professionalism they all deserve.
Charles G. Dannis is senior managing director of National Valuation Consultants Inc. Contact him at [email protected]