June 22, 2009
The fact that the El Paso City Council agreed last month to pay $2.7 million for a former grocery store property that was on the tax rolls for $780,000 may illustrate a problem that costs El Paso taxpayers millions and Texas taxpayers billions each year.
Locally, the problem is the potential gap between the El Paso Central Appraisal’s District’s valuations for commercial properties and their higher market.
While not everyone believes the 7.3-acre Furrs site behind Northpark Mall in Northeast El Paso was worth $2.7 million, had it been bought privately for that much, the $2 million disparity between the CAD valuation and the sales price would have remained secret.
That is because Texas is one of a handful of states that don't require the disclosure of sales prices for homes or commercial properties to public appraisal and taxing entities.
The Dallas Morning News recently reported that Texas is one of five states that do not require the disclosure of single family home sales but other sources indicate that as many as nine states do not require sales price disclosures to the public or to government property appraisal entities.
What that means in Texas is that without sales information, central appraisal districts have to use less reliable information in setting values on businesses, homes and other property types.
The situation could be compared to having a state or federal income tax without requiring companies or individuals to disclose their incomes. Another example might be having a state sales tax but not requiring stores to reveal their sales.
Just how much value might be added to assessment and tax rolls isn't know, but state officials and references frequently point to a 2003 estimate by chief appraisal officers for Texas appraisal districts that sale disclosure would have added $18.8 billion to tax rolls that year.
The Texas Legislature last month killed bills submitted by Republicans and Democrats alike to require the disclosure of sales prices for property value assessments.
The bills had the support of the Texas Municipal League, which represents Texas cities.
“I’ve submitted it three sessions in a row, and it’s gone virtually nowhere. This year, we didn’t even get a hearing,” said state Sen. Jeff Wentworth, R-San Antonio.
His bill, SB 444, was co sponsored by Sen. Leticia Van de Putte, D-San Antonio. State Rep. Mike Villarreal, a San Antonio Democrat, submitted a similar bill in the House.
Wentworth said the disclosure bills have run into tough and consistent opposition from Realtors and their associations around Texas and the Texas Apartment Association.
“Sale price disclosure is opposed by people who are not paying their fair share of taxes and do not want to pay their fair share and want to continue the system that abuses the homeowners of Texas,” Wentworth said.
Commercial property almost always undervalued
Speaking for the Dallas area MetroTex Association of Realtors, Peter Urrutia agreed that his organization and others like it have opposed sales price disclosure legislation.
“Texas has always been a very pro-property rights state,” Urrutia said.
The big reason is privacy for both home and commercial property owners who simply don’t want their sales information made available to the public or appraisal districts.
“Commercial property is always, always undervalued on the books,” Urrutia said. “Very rarely is it over valued. That is exactly why they’re opposed. This is driven by people who don’t want the commercial sales disclosure.”
Other reasons for concern come under the heading of unintended consequences.
“You have multiple online companies that would gobble that information up and sell it,” he said, referring to the example of Zillow.com on the Internet where you can type in any residential address and pull up that property and values for surrounding properties.
“As accurate as Zillow is, it is also that inaccurate,” Urrutia said.
Another concern is that the sales information, once disclosed, would be used to establish a new tax, effectively, a sales tax based property transfers for commercial properties or homes or both. A flat fee of $35 per real estate transaction has also been proposed as an alternative.
Dallas Realtors offer sales data to CAD; El Paso Realtors don’t
He conceded there is an awareness among MetroTex Association leaders and members that property should be assessed and taxed at its correct value.
For that reason, the association voluntarily furnishes the Dallas County Central Appraisal District with sales information from its Multiple Listing Service.
The multiple listing information is mostly on home sales, because relatively few commercial brokers use the MLS to assist in sales and those that to usually ask that sales information be kept from the appraisal district.
More and more residential real estate agents are doing the same, especially for high priced homes.
Most experts agree that the gaps in residential valuations used by appraisal districts and sales prices are also a significant problem in Texas, though not as striking as commercial properties in individual cases.
For years, the El Paso Association of Realtors voluntarily shared its Multiple Listing Services sales information with the Central Appraisal District to assist the agency in coming up with more accurate valuations of residential property.
But that arrangement ended several years ago, leaving the appraisal district without the sales information it had used since the 1980s that the district and protesting homeowners alike could use in coming up with comparable values neighborhood by neighborhood.
The appraisal district’s interim chief appraiser, Dinah Kilgore, said the district relies on the sales information it is able to obtain from other sources, on state sales data and on national appraisal services.
While that information is useful, nothing is as good as up to date sales data, she said.
She hinted that the district relationship with the Realtors association is improving and that a new agreement for information sharing might be worked out in the future.
Association President Suzy Shewmaker Hicks said, “We are certainly open to discussion with the CAD.
“All they have to do is contact us at this point and we can sit down and talk. For the most part we have been against sharing sales information because it has been misused.”
Asked how the El Paso association can justify its position in light of the fact that the very conservative Dallas association still furnishes the CAD there with sales information.
“I can’t speak for Dallas. I speak solely for the El Paso Association of Realtors,” she said. “I’m not going to say who's right and whose wrong. It’s a complex issue.
“There are privacy issues involved, and Texas is a nondisclosure state. But we are willing to talk to the CAD, and there is always the possibility of coming up with something that works.”
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To reach David Crowder, write to dcrowder@epmediagroup.com or call (915) 351-0605, ext. 30, or 630-6622.