Image: Howard Jarvis was a property tax reform hero in California. Will Nick Vonas lead the property tax revolt in Texas?
Nick Vonas, Guest Writer to The Golden Hammer
As a backdrop I’ve referenced a couple of previously published editorials:
Property Tax Appraisals Don’t Reflect Real Values https://thegoldenhammer.net/
The Case for Electing Appraisal District Officials https://thegoldenhammer.net/
In trying to not excessively extend these already lengthy comments, I’ve also summarized some of the information here. This is the result of my laymans’ research and I invite you to make your own evaluation/conclusions of what is presented. I live in Crighton Ridge and therefore my focus is on my neighborhood and it’s sister neighborhood of Crighton Woods. But I have heard from other property owners in other neighborhoods facing similar issues.
I recently completed my ARB in-person hearing and significantly reduced my particular appraisal, although I have not yet decided if further arbitration is appropriate. At the hearing I was treated with respect and I returned with same. I’d also like to clarify that I have no personal animosity towards MCAD employees and ARB members simply doing their job. I am also doing what I suppose I’ve undertaken as my job, which is to push for fair and equitable appraisal evaluations. Unfortunately, the protest process is a dance we seem to do every year just to simply keep our value somewhere around a reasonable level.
The land valuations in particular for Crighton Ridge/Crighton Woods (CR/CW) subdivisions were astronomically increased from 2019 to 2020 – an average of over 200% for the majority of properties.
It appears that this land assessment increase is one of the highest increases in the Conroe area, even taking into consideration valuation property adjustments for overall neighborhood market values. This includes comparison of Grand Central, Stewarts Forest, River Plantation, Ladera Creek, Chase Run, Wedgewood Falls, Hills of Westlake, and Barton Creek Ranch. Again, don’t take my word, please make your own comparisons.
Part of my ARB Hearing included examining any evidence presented by MCAD regarding appraisal/market median average comparisons (Tax Code 41.43) including the appraisal districts’ Burden of Proof requirement (Tax Code 41.43) to support – in my case – the 194% increase in land valuations. I’m not a lawyer but I do know that a hearing includes presenting evidence from both parties – even if you have evidence somewhere but don’t present it, as far as the hearing is concerned you don’t have evidence. This is what appeared to be the case for the land assessment increase evidence that MCAD was requested to produce.
When asked by the ARB to substantiate the high land valuation, the MCAD response was that this was required by the state. Yes and no – but let’s review why I describe their response this way. It’s in summarized form, but still a bit of an extended read….
The Texas Property Tax Code (25.18) requires appraisal districts to plan for updating real property appraisal values every 3 years and to produce a ratio study (appraisal to sale ratio). Section 5.10 of the Property Tax Code requires the State Comptroller to conduct a study of districts’ ratio study to ensure the ratios are within required parameters. The primary goal of all this is to verify that appraisal values are current, looking at the end goal of ensuring equitable funding for education, and also for municipalities, etc. – any entity requiring public funding, both from state and local funding. Example is your local school district that receives funding from both the state and our local tax revenue. For our area, MCAD has produced their 2020 Mass Appraisal Report. You can access it from their website. This report also correlates with the 2019 Preliminary Property Value Study (PVS) published by the state Comptroller’s office. The PVS report was certified in February 2020.
From the MCAD 2020 Mass Appraisal Report:
“The appraisal district is responsible for local property, tax appraisal and exemption administration for 156 jurisdictions or taxing units in the county. Each taxing unit, such as the county, a city, school district, municipal utility district, etc. sets its own tax rate to generate revenue to pay for such things as police and fire protection, public schools, road and street maintenance, courts, water and sewer systems, and other public services.”
As per Tax Code Section 5.10, The State Comptroller’s Office develops a biannual Property Value Study (PVS) of Texas school and appraisal districts. This report, among other criteria, determines the level and uniformity of property tax appraisal in each appraisal district, including MCAD. The data is compiled and submitted to the State Comptroller’s Office by the appraisal districts. Statistical analysis of sold (market) values are factored with appraised values of unsold properties to develop an Assessment Ratio. This ratio is a number/percentage that basically gives a snapshot of whether or not appraised values are in line with actual market values.
The 2020 Mass Appraisal Report (2020 MAP) is used by county taxing jurisdictions as a factor in their basis for review/changing tax rates. It utilizes a median (average) valuation ratio of “1” or 100% (+/- 5%) which is basically a comparison of local market value vs. PTAD (Property Tax Assistance Division) values, which are local appraised values. Appraisal districts are expected to achieve/maintain a calculated median ratio of market to appraisal values at 100% (or “1”) but can be within 95% to 105%, essentially indicating that properties are assessed equitably to actual market values. Meaning that the goal is to assess your property fairly at market value. In theory, if the 2020 MAP reports that the valuation ratio is lower than “1” (less than 95%), appraisal values (and often subsequent taxes) would increase, with the opposite applying if the ratio is higher than “1” (over 105%). Remember also that the 2020 MAP is primarily based upon preceding year data which is utilized in the January 1 appraisal date noted by MCAD.
The ratio evaluation results are also reviewed in terms of a Confidence Interval – this is the confidence that the results of the ratio study/valuations are within the range specified by the State Tax Code. The 2019 Confidence Interval of the Conroe School District (CISD) findings (relating to our CR/CW neighborhood) is identified as “Within Confidence Interval” in the Comptroller’s 2019 Property Value Study, meaning that the 2019 appraisal-to-sale ratios are within the 95% to 105% ratio range.
All of this is to ensure adequate funding for the tax entities listed on the appraisal notice you receive each year. If a particular school district has a low valuation ratio, it means that district has less taxable value, or less income, so to speak. Increased funding can be accomplished by more state funding going to that district, or perhaps more funding with a combination of an increased school district tax rate or passing bonds.
Let’s not forget that appraisals and tax rates go hand in hand. Even if tax rates remain the same, even if as a senior your tax rates for certain entities are frozen – if the appraisal values go up, the amount of tax you pay will also go up.
Getting back to my Crighton Ridge/Crighton Woods corner of the world….
In reviewing the 2019 Field Studies Category Worksheet, which is a part of the Comptroller’s 2019 Property Value Study (PVS), the representative valuation ratios for Crighton Ridge and Crighton Woods are CR – 1.024 and CW – .9642. A ratio of “1” is equivalent to the 100% ratio value. The worksheet also places neighborhoods into different Categories and Stratums based upon the market values of the individual neighborhoods. CR is in Category A – Stratum 4, CW is in Category B – Stratum 2. CW market values are slightly higher than CR market values. The overall value ratio for Cat A/Strat 4 is .9865 and .8104 for Cat B/Strat 2.
As you can see, the report verifies that in the case of CR and CW neighborhoods, the appraisal-to-sale ratio values of 1.024 and .9642, respectively, are at or very close to the goal of equitable “1” appraisal-to-sale value. So how and why did MCAD decide that a 200% increase in 2020 CR/CW land valuations was suddenly warranted?
In addition, the Comptroller’s Office has verified that the 2019 CISD ratio study is within acceptable range, a “within confidence level” verification that the CISD district values are within the required +/- 5% range of that perfect “1” ratio. So why were appraisal values raised at all?
Let’s refer back to the response from MCAD to the ARB regarding evidence to explain their extraordinary land valuation increases. The response was “…it was the state requiring us…” That state requirement requires appraisal districts to re-appraise property every three years to ensure median ratio values are providing adequate funding. MCAD utilizes a mass appraisal process that relies on the ratio study as a primary tool. Again, the results above appear to indicate that the 2019 ratio study for my CR/CW neighborhood was in line with state requirements.
The state required that MCAD implement a Mass Appraisal Report to verify current appraisal ratios – it did not mandate that the appraisal district increase land values by 200% – that was a decision made by the appraisal district itself…. after the ratio studies verified that the 2019 appraisal-to-sale values were in line with state guidelines.
At this point, I can’t find a reason for increasing overall appraisal values in my neighborhood even by 2-3%, let alone the specific crazy increase in land valuations.
The last part of this article highlights a concern looking ahead at our 2020 appraisal values, and what I have called smoke and mirrors regarding many of the property appraisal values. I’ll use my “before-ARB-Hearing” values as an example…
My 2020 Land value assessment was increased by 194% from 2019. Yet my Improvements (house, garage, etc) value assessment was decreased by 11% from 2019. This resulted in my overall appraisal increasing by 6%, still above the 2019 median average of 2-3% values in my neighborhood. The first question here is just basic logic – how in the world could my property land escalate by 194% but yet include a decrease of any improvements on that same land? The land is static, there is nothing that I can do to significantly increase its value other than build on it (Improvements) – but those Improvements are now suddenly reduced? MCAD has seemingly priced my land value over what even local new residential development lots are selling for, as if the land use category has suddenly changed. Makes no sense.
In addition, if these inflated land assessments are allowed to remain in place, they will become falsely authenticated in 2021, when they will become part of our area comparables that MCAD will utilize for subsequent years protests. And what happens if next year our Improvements appraisals suddenly skyrocket? Now you’ve got both Land and Improvements values above market and you’re once again back into the protest process.
I am urging our neighborhoods to take action to reduce 2020 Land Valuations back to fair and equitable levels. I also support Rep. Steve Toth continuing to move forward with legislation making Appraisal District Directors and Chief Appraiser publicly elected positions.
Unless we move towards equitable and realistic assessments, we are going to be significantly burdened in the coming year(s). I’m 65, retired and would like to simply pay a fair share. Thank you.