CEOs with commercial buildings beware: Negotiating a favorable property tax assessment could be more troublesome than ever this year, thanks to the effect of commercial real estate foreclosures on declining tax rolls. That’s the opinion, at least, of property tax expert Paul Pennington, president of Carrollton-based P.E. Pennington & Co. and a member of Texas’ Property Tax Advisory Board.
Exacerbating the problem, Pennington contends, the deck is unfairly stacked in the appraisal districts’ favor: The districts hire and train the appraisal review board—the group of “private citizens” charged with resolving disputes between property owners and the appraisal district. Even so, P. E. Pennington & Co. was able to average a more than 10 percent reduction in commercial property tax assessments last year for the Dallas County properties they represented, he says.
So what’s his secret? Knowing how to pick your battles. “You have the right to be assessed at market value,” Pennington says. “You also have the right to be assessed ‘fairly and equitably’ in comparison to like properties. That is a little tougher. When you get to the informal level and the appraisal review board level, it’s tough to get relief.”
Taking the “fair and equitable” approach means property owners provide evidence on the value of properties near them and then use it to argue for a reduced assessment.
Pennington says the appraisal districts aren’t equipped to compare properties on an individual basis because they use mass appraisal techniques to assess value. He believes that’s why many Dallas County commercial property owners get frustrated and end up choosing the legally binding arbitration of the judicial review process; if property owners don’t receive the reduction they’re looking for, they can go to court and present evidence in a more objective setting.
But change could be on the horizon for the appraisal review process. The Texas Legislature passed a bill in 2009 requiring a local administrative judge in Harris and Fort Bend counties to appoint appraisal review board members. Pennington says it’s a step in the right direction.
“Board members should not be picked by anyone affiliated with the appraisal district,” he says. “I think any reasonable person would look at that and say, ‘That’s not fair.’ ”