Many Texans are paying more property taxes than ever because of rising home values. At the same time, Mike Collier, a Democrat running for Lt. Governor, makes a provocative claim.
“The owners of large, commercial and industrial properties are underpaying their taxes by $5-billion dollars,” Collier says.
Underpaying their property taxes by $5-billion? Is that true?
LOWERING VALUES
My journey starts in Hood County where there's a brand-new power plant, built by Exelon Power.
After Exelon shared with Hood County what it spent to build the plant, the county set the plant's taxable value at $436 million. But Exelon said that was too high. It informed the county that the plant was not as profitable as predicted because of falling electricity prices.
Exelon filed a lawsuit against the county and succeeded in knocking the value down by $86 million.
“I want them to be successful. I want every business in the county to be successful,” County Judge Darrell Cockerham says.
“I just don't want them to be successful at the expense of the citizens,” he says.
“The taxpayer?” I ask.
“The taxpayer,” he responds.
Cockerham says, one way or the other, the county must meet its budget. So, a lower value on the power plant forced him to raise taxes on homeowners.
“So, are you saying when the power plant got its taxes reduced the taxpayers all chipped in a little bit more?” I ask Cockerham.
“Exactly,” he says.
“Is that fair?” I ask.
“I don't think it's fair. We didn’t think it was fair,” he added.
Exelon declined to comment for this story.
PAYING LEGAL FEES
So, I started looking around and I found more large properties that succeeded in lowering their taxable value.
- Southwest Airlines protested its valuation, this year, and settled for a $66-million-dollar reduction in the assessed value of its headquarters.
- In Austin, the owners of the Circuit of the Americas racetrack settled out of court, cutting $180 million in value.
- And in 2015, the nuclear power plant in Somervell County, Comanche Peak, cut $611 million in value with a lawsuit that settled out-of-court. Luminant, the plant’s owner, said the plant was worth less because the price of wholesale power had fallen.
To understand this better I went to see Dick Lavine with the Center for Public Policy Priorities. He’s an advocate for property tax reform in Austin.
“If you need to pay for police and fire, need to pay for schools, somebody has to do it. It ends up being the homeowners,” he says.
Lavine's telling me more about these lawsuits I found where corporations sue counties. He says, if a county loses at trial, it must pay the company's legal fees.
“What happens if you go up against the owner of a nuclear power plant and you lose, what's the downside for the county?” I ask Lavine.
“Instead of going to court they will say, 'Ok, we'll settle and reduce your appraisal.’ Because they can't afford to go to court and lose. But what that means is they are settling for what they know is less than the real market value because the property owner has them over a barrel,” Lavine adds.
Take Dallas County, for example. Last year, it was sued 2400-times by commercial property owners. Zero cases went to trial.
The county’s chief appraiser, Ken Nolan, told me the Dallas County Central Appraisal District could not afford to lose and pay the other side's legal fees.
SCHOOL DISTRICTS
The next stop is Texas City ISD in Galveston County. It’s home to an entire district of petroleum refineries and some are getting their valuations lowered.
The school district says it's taking the brunt of lower values. I am meeting up with Dr. Rodney Cavness, the superintendent, who’s telling me about a variety of financial challenges the district faces. Including the fact that homeowners are already taxed at the highest level, allowed by law.
“We lost three campuses in Harvey. Now our high school kids are in the first floor of the high school. Our middle school kids are on the second floor of the high school,”
And one of the biggest taxpayers in town is the Valero Refinery.
Through a lawsuit, Valero challenged 4-years of taxes it had already paid. It won. Texas City ISD had to pay Valero back. The state reimbursed the district over the course of a year.
“We had a $9.5-million-dollar budget deficit and we wrote a check to Valero for $8-million dollars,” Cavness says.
“Why did you write Valero a check for $8 million dollars?” I ask.
“They contested their values from ’15 and ’16,” he answers.
“When you write a check back for $8-million dollars what does that do to education?” I ask him.
“That takes $8-million out of the bank. $8-million dollars, that's almost 10% of our budget,” Cavness tells me.
Valero declined an opportunity to respond for this story.
POPP’S LAW
Everyone has the right to challenge their property taxes. It's just that, in Texas, there's a state law that really helps big corporations. It's written by this guy.
Jim Popp is a tax attorney who helps large properties challenge their valuations in complex litigation.
“Is not a process that was created out of thin air, when I wrote it. It's based upon, perhaps 100 years of appraisal methodology,” Popp tells me.
If you've ever challenged your own taxes, you might remember that the taxable value of your house is based on what similar homes in your neighborhood are selling for.
Popp's law introduced another method, called median value. Which means, in the middle. So, imagine you just bought a shopping mall for $100-million dollars but other, comparable malls are taxed on a value of $60-million dollars. It’s only fair that the value of your $100-million mall should come down.
“You compare yours to the other two. If they are identical, then you should pay on $60 million,” Popp says.
“Even if you just paid $100-million?” I ask.
“Even if you just paid $100-million,” he answers.
Popp says it's a fair way for commercial properties to pay what they owe, but not more.
“We're not lowering its taxable value. We're finding the correct taxable value,” he says.
“Whatever you're finding, it's lower. Someone has to pay more,” I say, talking about individual taxpayers.
“They do. That is how the process works,” Popp adds.
CONCLUSION
So, back to candidate Mike Collier's statement, that "large, commercial and industrial properties are underpaying their taxes by $5-billion dollars.”
Collier says that claim is based on a 2006 report where large Texas county appraisal districts estimated a loss of $4-billion in tax revenue. But that was 12-years ago, so Collier says his $5-billion number is adjusted for inflation.
But while the report has been referenced in news stories, Collier was unable to provide the actual report, nor could we find it.
Still, after looking into this myself I can verify that the appraisal process in Texas can drag down commercial values, shrink the tax base and force homeowners to pay more taxes.
Got something you want verified, send an email to: david@verifytv.com