Property taxes in Texas are a lot like dealing with a fresh wound.
Every year, we vent our rage because our property tax bills go up. Lately, they go up a lot. We’re wounded yet again.
But serious, fundamental change isn’t happening. Why? Because we’re underthinking the problem and rushing to find a Band-Aid for the wound.
Caps on annual increases and sales price disclosure on commercial properties, for example, ignore the heart of the problem — the appraisal system and the appraisal review boards (ARBs).
The appraisal review boards play a critical role. When a property owner isn’t satisfied with the appraised value and hasn’t been able to negotiate an acceptable amount with the appraisal district, the review board is the next step.
As an attorney who has represented hundreds of property owners in appraisal review hearings, I can tell you first-hand that many appraisal review board members simply are not qualified to handle complex residential or commercial valuations. Setting a value on a $75,000 condo is in no way comparable to doing so on an $80-million commercial property. Complex valuations should be handled by qualified appraisers or experts.
For example, one appraisal review board member in a hearing once said to me he would not agree to an exemption because he believed the non-profit was expensing “personal” expenses through the business, despite the profit and loss statement clearly listing personnel expenses. Two entirely different words with profoundly different meanings.
That wasn’t an isolated example. To get more accurate appraisals, we need to spend time and money educating appraisal review board members. In turn, they will be better equipped to make critical decisions.
The second issue is that those same ARB members are also completely unaccountable in our current system. Their deliberations and decisions should be just as transparent as any other public agency that has direct decision-making authority over public money. Texans should demand that ARBs publish the voting records of every ARB member, making it very easy to know whether any ARB member is simply a rubber stamp for their local appraisal district.
We could add even more objectivity to the appraisal review system if we allowed the property owner the option to pay a fee to have their appraisal protest heard outside of their own county. This would create true separation of powers between appraisal districts and ARBs — and the same time would be a cost-positive option for the state.
Currently there is virtually no separation. The appraisal district selects, pays and supervises the ARB members. Is it just me or doesn’t that system encourage the ARB to be biased in favor of the appraisal district, whose vested interest is clearly tilted toward the entities that rely on property taxes?
Fixing Texas’ property tax problem starts with the appraisal review boards. Informing and educating ARB members, and creating a system of accountability, are the first issues we should address. Once we dress the wound, we can work on fixing the scar.
— Rahul Patel is the managing partner of Patel Gaines, a Texas-based law firm specializing in property tax issues. He is also an adjunct professor at the University of Houston and a frequent speaker on real estate matters.