"A key problem, critics say, is that the current system has shifted a disproportionate share of the burden of paying for schools and local services on homeowners, in favor of commercial and corporate interests who can afford to appeal their values and win big reductions year after year."
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Surge in property tax bills spurs push to reform tax appraisal process
By Lori Hawkins and Shonda Novak - American-Statesman Staff
On a recent evening, more than 300 homeowners who are worried about their rising property tax bills filled First Unitarian Universalist Church in North Austin for a town hall meeting. If something doesn’t change, many said, they will soon be priced out of their homes.
Two nights later, a similar discussion played out in South Austin, where homeowners gathered at Grace United Methodist Church in Travis Heights to talk about what can be done to slow escalating residential tax values.
“I’m at the breaking point,” said Gretchen Gardner, an Austin artist who bought a 1930s bungalow in the Bouldin neighborhood just south of downtown in 1991 and has watched her property tax bill soar to $8,500 this year.
“It’s not because I don’t like paying taxes,” said Gardner, who attended both meetings. “I have voted for every park, every library, all the school improvements, for light rail, for anything that will make this city better. But now I can’t afford to live here anymore. I’ll protest my appraisal notice, but that’s not enough. Someone needs to step in and address the big picture.”
The arrival of this year’s appraisal notices — which in Travis County showed homes’ average market values jumped 12.6 percent and average taxable values rose 8 percent for 2014 — is sparking a push for reform. Similar jumps have occurred in Williamson and Hays counties.
Real Values for Texas, a statewide group advocating for property tax reform, local officials and others say they believe enough momentum is building around the state to put pressure on the Legislature to fix what they say is a flawed property tax system. The issue is an especially hot one in Austin, where property values have risen at a much faster rate than wages in recent years, leaving more and more area homeowners saying they are struggling to pay their property tax bills.
At issue is what can be done. Market forces generally dictate home values. And with no state income tax, the state government and local taxing entities rely heavily on property tax for revenue to fund schools and many local services.
“There’s tremendous evidence that the appraisal process is broken,” said Brigid Shea, the Democratic nominee for Precinct 2 Travis County commissioner who organized the meeting at First Unitarian Universalist Church on May 20. “I’ve done grass-roots organizing for 25 years for a variety of issues, and I have never seen an issue where people are as furious — and as frightened — as this one. We have to do everything in our power to fix it. It’s grossly unfair, and it’s hurting our communities. More and more families are being driven out of the city because they can’t afford to live there.”
A key problem, critics say, is that the current system has shifted a disproportionate share of the burden of paying for schools and local services on homeowners, in favor of commercial and corporate interests who can afford to appeal their values and win big reductions year after year. The share of property taxes from homeowners to support public schools grew from 45 percent to 54 percent over a 12-year period, while commercial and industrial owners’ share has declined to less than 20 percent. (Other sectors, from oil and gas to personal property, make up the rest.)
State Sen. Kirk Watson, D-Austin, said he understands the frustration felt by homeowners, and said action by state lawmakers is overdue.
“Our state’s tax system is dysfunctional,” Watson said. “We want good schools, we want safe neighborhoods, and we want adequate roads and well-maintained parks, and we need a fair, equitable system that will pay for those needs. Everything’s on the table for me right now. I think homeowners are doing their part. It’s well past time for the Texas Legislature to do their part.”
Michael Amezquita, chief appraiser at the Bexar Appraisal District, said it’s not the tax system that’s dysfunctional, but the tax appeal system.
“The property tax system is a tried and tested workhorse that has consistently provided a reliable revenue stream for local government to provide the services taxpayers expect,” Amezquita said. “It has been overburdened by the Texas Legislature’s desire to give away ever greater tax breaks to big business and commercial interests by having them pay an ever-decreasing portion of their property taxes.”
Amezquita said he’s grateful that Watson, Shea and others have taken an interest in the issue, but he said he doesn’t hold out much hope for change.
“Virtually every single change to the property tax system since its inception has worked to shift the tax burden from commercial to residential properties,” Amezquita said. “Nothing in this next session is likely to reverse that trend.”
‘Issue of affordability’
Local officials say this is the first time they can remember neighborhoods coming together in town hall-style settings to push for legislative changes to ease the burden on homeowners.
“I do a lot of education for the public, and this is the first time there’s been a public forum where the topic of property taxes was a discussion item in terms of alternatives and what can we do,” Marya Crigler said of her 25 years with the Travis Central Appraisal District, including the past two as chief appraiser. Crigler spoke at the First Unitarian meeting, then fielded questions from property owners.
They were among residential property owners across town, but particularly in Central Austin neighborhoods and gentrifying East Austin, who got a shock last month when their 2014 appraisal notices arrived in the mail. Propelled by job and population growth and a robust housing market, the market value of homes in Travis County jumped 12.6 percent on average for 2014, to $320,032.
“Our appraisals are reflecting what we see in the market,” Crigler said. “The Austin market is really, really strong.”
The taxable value of all homes in Travis County – that is, residential value minus exemptions – rose an average of 8 percent, to $240,139.
Home values also rose in Williamson and Hays counties for 2014. In Williamson, the market value is up 10.6 percent, to $214,682 on average, and the taxable value jumped 11.5 percent, to $209,402 on average.
In Hays County, the market value of homes rose 7 percent, averaging $177,125, and the taxable value was up 7.25 percent, to $172,125 on average.
Taxable values will be used by the county, cities, school districts and other local taxing units to set 2014 property tax rates.
Those rates are set by each taxing unit later in the year, so it’s too soon to say how appraisals will affect a Travis County homeowner’s tax bill, although notices have estimates based on current tax rates. Under state law, a property’s appraised value can’t increase more than 10 percent for homeowners with a homestead exemption.
Crigler said homeowners aren’t so much complaining that their appraisals are incorrect as they are about their ability to pay their property tax bills, which are rising along with home values.
Citing data from the Texas A&M Real Estate Center, Crigler noted that in 2003 most of the Austin area’s home sales were in the $100,000 to $160,000 range. In 2013, the range was between $200,000 and $350,000 — essentially doubling in 10 years.
“It’s an issue of affordability,” Crigler said, and one that’s affecting communities across the state as incomes fail to keep pace with rising home values. In addition, Texas, as one of seven states without an income tax, puts a heavier reliance on property taxes to help fund local governments. Texas also is one of the few states that doesn’t have mandatory sales disclosure for residential and commercial properties — something appraisal district chiefs have long lobbied for to no avail.
While residential sales can be obtained in a number of ways, including websites of online brokerages like Zillow and Redfin, those familiar with the appraisal system say virtually everyone agrees that information about commercial property is scarce, closely held and vigorously contested.
But a key issue that Shea and other advocates for reform are zeroing in on is a decade-old provision in the state tax code that has allowed commercial landlords, particularly owners of large buildings, to use the appeals system to get their appraised values lowered, often to a fraction of what their property is worth.
Real Values for Texas, the group pushing for statewide property-tax reform, estimates that commercial properties are being taxed at an average of 60 percent of their actual value, a loss of billions of dollars over the past five years for schools and local services in Texas.
Homeowners can also appeal their values, of course, but many lack the financial and other resources to mount challenges like large corporations and commercial landlords, critics of the current system say.
Monday marks the deadline for residential and commercial owners to file a protest (or 30 days after they received their notice of appraisal, whichever is later). Last year, the Travis Central Appraisal District received about 79,000 protests, and so far protests are running about the same as last year’s, Crigler said.
The record was in 2009, when the district received 91,000 protests.
Austinites Deborah and Jeff Copas and their two children moved into the Brentwood neighborhood in Central Austin in June 2012. They purchased a 1,400-square-foot house in the $280,000 range. This year, their appraised value jumped about 8.8 percent, into the $300,000s, an amount the couple is appealing.
“We recognize appraisals are trying to catch up with the market,” Deborah Copas said, “but we think that’s too high. We think the numbers jumped too quickly.”
The couple’s 2014 tax bill is estimated to increase by $1,000, topping $7,000. Deborah Copas said it’s not this single year’s appraisal that troubles her, but the projected upward trend over time.
“We realize now going forward, if we’re going to stay in an area that’s going to grow, we have to fight it every year to keep it affordable for our personal incomes,” said Copas, who like her husband is a state employee. “If the property values go up much more, people are not going to be able to afford it. We’re going to get squeezed out. Every dollar counts in a family household.”
‘People are furious’
Shea, the county commissioner nominee and a longtime Austin activist, said she’s been briefing City Council candidates and others on the “broken” property tax system in her quest for a fix at the Legislature level.
“This issue is just off the charts,” She said. “People are furious.”
She is circulating a petition, now signed by about 600 people, which urges the Legislature “to fix the property tax appraisal process. The current system is placing an unfair burden on home owners, making Austin and Travis County increasingly unaffordable,” the petition states.
Kathie Tovo, an Austin City Council member who attended the meeting at the First Unitarian church, is among those who see the need for change.
“There are no easy fixes, but one productive change would be to enact legislation at the state level that requires sales disclosures for commercial properties,” Tovo said.
Tovo said she also believes that “we should have a conversation here in Austin about whether companies seeking local incentives – or support for state incentives – should agree not to protest their property tax valuations for some period of time.”
At the local level, Tovo said she plans to introduce a City Council resolution on June 12 “to add property tax reform to our city’s legislative agenda, and to encourage our city manager to form coalitions with municipalities across the state that are also concerned about this issue.”
“Austin homeowners are really struggling to pay rising taxes as the property values in this area escalate — many, many Austinites are struggling to manage these rising costs and to stay in their homes,” Tovo said. “As the huge turnout at last week’s forum demonstrated, people are frustrated with the current system, and I share their frustration.”
The Travis County Commissioners Court on Monday will consider filing a petition alleging the entire 2014 commercial property-tax roll was appraised at far less than actual market value.
Shea said the current system is driving families out of the city — she noted that the Austin school district lost enrollment for the first time in its history this year — and causing other harmful impacts.
“From a social justice perspective, it’s wrong and it’s hurting people. It was the Legislature that broke this process, and I want to turn up the heat on them. I’m not going to shut up,” Shea said.
For Gardner, the Bouldin homeowner, how the debate plays out will determine whether she can stay in the neighborhood she has called home for the past 23 years.
Two houses on her street recently sold for more than $1 million each, which will have the ripple effect of increasing her own property value.
“I bought my house because it was what I could afford – this is not an investment, this is not to flip,” she said. “It’s where all of my memories are, and I want to stay. I hope I can.”
Why it matters
Property tax bills are soaring in the Austin metro area and across the state. Meanwhile, income growth has failed to keep pace with rising home values, creating affordability issues for some residents. Some residents and elected officials are calling for reforms to the tax appraisal and review process.
By the numbers
County / 2014 average housing market values / Percent increase
Travis / $320,032 / 12.6 percent
Williamson / $214,682 / 10.6 percent
Hays / $177,125 / 7 percent
Source: Travis, Williamson and Hays central appraisal districts