October 06, 2007
Comptroller blinks in dispute against HCAD

Last month, Comptroller Susan Combs issued a report saying that the Harris County Appraisal District (HCAD) had been undervaluing commercial properties, which in turn was shorting HISD of revenue - see here for some background. Now they're saying maybe not.

In a statement Friday, Combs said she was looking into whether a state law passed earlier this year could change how her office conducts annual property value studies in school districts statewide. The statement was issued by Harris County Tax Assessor-Collector Paul Bettencourt and HCAD Chief Appraiser Jim Robinson, suggesting Combs may be coming around to their view on how properties are to be appraised.


Bettencourt and Robinson contend the Comptroller's Office has failed to take into account commercial and apartment property appraisals that have been lowered through successful tax protests by the owners.

For example, last year HCAD originally appraised downtown's Three Allen Center, 333 Clay, at $170 million. The owners protested and an appraisal review board agreed, lowering the property's value to $123 million. The Comptroller's Office, however, said the property had a value of $128 million.

In another instance, HCAD assessed the Fantome Tower, at 1100 Louisiana, at $190 million last year. An appraisal review board lowered that to $140 million. But the agency put the building's value at $253 million.


Robinson said the Comptroller's Office may not find that commercial property in HISD is undervalued if it takes into account those properties that had their appraisals lowered through the protest process.

To bolster their case, Bettencourt and Robinson cite a law passed this summer that says the comptroller should factor those protest victories into its calculations when determining whether a school district's property is being properly appraised.

A spokesman for Combs said the Comptroller's Office will ask the attorney general to confirm that the legislative intent of the bill's author, Rep. John Otto, R-Dayton, was to require the comptroller to give more weight to the outcome of protest hearings.

Reading Otto's bill in this way "could have statewide impact," spokesman Allen Spelce said.

There are a couple of things about this that puzzle me. First, looking at the text of the Otto bill, which appears to be HB3492, we see that

The change in law made by this Act applies only to the annual study conducted under Section 403.302, Government Code, as amended by this Act, to determine taxable value for a tax year that begins on or after January 1, 2007. The annual study to determine taxable value for a tax year that begins before that date is covered by the law in effect immediately before the effective date of this Act, and the prior law is continued in effect for that purpose.

If that's the case, then how are assessments made in 2006 relevant? I don't see how the legislative intent is that this is how it should have been done all along. It seems clear to me that this is a change for 2007 going forward.

The cited examples of disputes between HCAD and the Comptroller confuse me as well. In two of these cases, HCAD's initial assessment was considerably higher than both the ARB-lowered amount and the Comptroller's amount. In the third case, the Comptroller's number is 50% higher than the initial value, and double the ARB value. What this says to me more than anything is not that HCAD is necessarily lowballing things, but that the general methodology being used by both groups is not nearly as accurate as it should be. How can you trust something that so often misses by that much? I say this is another argument in favor of sales price disclosure legislation. Let's take some of the guesswork out, and maybe we won't have these problems.

We'll see what happens. If the Comptroller is waiting for an AG opinion, then we won't know for six months or so. If Bettencourt's argument carries the day, then as the story notes this will have an impact statewide, which will make the fight over school finance in 2009 that much more contentious. Stay tuned.

Posted by Charles Kuffner on October 06, 2007 to Budget ballyhoo