Coalitions and Property Tax Consultants

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Coalitions and Property Tax Consultants
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“We will now discuss in a little more detail the Struggle for Existence”. Charles Darwin

  1. Sampling of Coalitions opposed to the current Texas property tax system:
    1. Property Owners coalitions:
      1. Americans for Prosperity
      2. Citizens Lowering Our Unfair Taxes (CLOUT)
      3. Texans for Facts
      4. Texas Taxpayers
      5. Empower Texans
      6. Texas Public Policy Foundation (research)
  2. What do these coalitions want?
    1. Generally these groups propose appraisal caps or replacing property taxes for school funding with “fair sales tax.” Additionally, they oppose the Gross Margins tax and spending limits on political entities.
    2. “The cost of owning a home or business in Texas is becoming increasingly prohibitive. Not only are property owners currently facing sky-high tax bills, but as each year passes, the rate of growth intensifies. Rather than encouraging economic prosperity, the property tax system penalizes Texans every year for their investments. Short of totally abolishing the property tax, limiting the growth of local spending to the sum of population growth and inflation is the only meaningful way the Texas Legislature can push back the rising tide of property taxes.” Texas Public Policy Foundation.
    3. “Americans for Prosperity; Texas’ Property Tax Turns American Dream into Nightmare.”
  3. State elected officials seek to change the current Texas property tax system.
    1. Legislators speak out:
      1. “I am absolutely convinced that my constituents, and frankly, the voters across Texas, would rather pay a sales tax when they purchase something than a property tax for the rest of their life.” Republican State Representative Phil King
      2. “It’s broken and it needs to be abolished because we need to move away from a property tax base to support our schools and our government,” Patrick said. “But within the system we have, the appraisals from one property to another don’t represent the true value of the property.” Senate Dist. 7 Dan Patrick
    2. The Governor’s Office: Texas Tax Reform Commission (School Finance):
      1. Tax Fairness: Property Tax Relief by reducing school tax rates over two years (2006 – 2007).
      2. New Franchise Tax (Gross Margins Tax).
    3. The House committee studying property tax relief, including changes in the appraisal system.
  4. Appraisal districts, local governments, the Comptroller’s Office and the media by their actions keeps fueling the fire for the demand for change by the legislature and taxpayers.
    1. Issues from the taxpayers/consultants point of view:
      1. Unfair informal hearings.
      2. Unfair Appraisal Review Board (ARB) hearings:
        1. Bias of board members.
        2. The staff has too much influence at ARB hearings.
        3. Lack of qualifications of board members.
          1. Bias of board members.
      3. Taxpayers feel overwhelmed by the process:
        1. They feel like they are fighting a huge, rigid monolithic bureaucracy.
        2. They are not properly educated and do not have a good understanding of the Texas property tax system.
          1. Some appraisal districts provide training on how to present an effective appeal informally and formally.
        3. Thus they are drawn to special interest groups who claim to have quick fixes to change the current property tax system.
      4. Rogue appraisal district(s): Bexar County appealing ARB rulings:
        1. Bexar County; they want two bites at the apple.
      5. Pressure to constantly increase values because of the Comptroller’s Annual Property Value Study (PVS).
        1. Both the appraisal districts and the Comptrollers’ Office have agreed that the current methodology is an accurate measure of valuations, which it is not.
        2. Statistical samples do not reflect market as of the assessment date because of the natural ebb and flow of valuations.
      6. Harris County Appraisal District’s inability to make local value over the past three years.
        1. So goes HCAD, so goes the Texas property tax system.
        2. HCAD vs. the State Comptrollers’ Office.
      7. “Appraisal districts are not at fault!
        1. “If we had open sales records everything would be just fine”.
          1. They essentially have it with residential properties (MLS) and there are still errors.
          2. They currently have Costar, Loopnet, etc.
          3. How does sales disclosure affect uniform and equal appeals?
        2. “If we had audit powers with BPP everything would be just fine”.
          1. The districts would hire third party entities to conduct audits.
      8. Currently appraisal districts are not regulated as it relates to their day to day operations.
        1. There is a lack of accountability.
          1. With the exception of an occasionally adverse court ruling, Attorney General opinion and The Comptroller’s Office PVS, appraisal districts operate with immunity.
          2. Currently there is no agency to field complaints from the public and/or agents regarding issues they may have with appraisal districts.
      9. The media, Appraisal districts and local government officials continue to claim businesses don’t pay their fair share of property taxes.
        1. Neutral third party research groups disagree with this opinion;
          1. http://www.taxfoundation.org
          2. Businesses pay more property taxes in Texas than Homeowners.
        2. Why are businesses portrayed as not paying their fair share of property tax?
          1. (Easy Target) Homeowners vote and businesses don’t.
          2. Since appraisal districts and local governments won’t take any responsibility they pass the buck.
        3. Businesses do pay the fair share of property taxes and the Margin tax.
          1. This fact doesn’t sell news papers or make for good sound bites.
  5. How do we protect ourselves and our clients’ interests and rights?
    1. The answer: Coalitions:
      1. Definition. What is a coalition?
        1. “A structured arrangement for cooperation and collaboration between otherwise unrelated groups or organizations, in which each group retains its identity, but all agree to work together toward a common, mutually agreed-upon goal”.
    2. What elements make a coalition?
      1. Members must have a common interest.
      2. Members trust in each other and have credible commitment to the common issue.
      3. The coalition must have a mechanism(s) to manage differences between and among the collective members.
      4. The shared incentive to participate and consequently benefit.
  6. Coalitions which help property tax consultants and their clients:
    1. Texas Association of Property Tax Professionals (TAPTP);
      1. Its goal: “To unite professionals involved in all aspects of property tax management within the state of Texas. TAPTP has established itself as the clear voice of unified property tax professionals and has prevailed in multiple legislative and licensing issues”.
      2. Tax consultants are helped by TAPTP committees and lobbyists.
      3. Legislative updates to keep TAPTP members and their clients informed.
      4. The creation and/or distribution of “White Papers” regarding the effects that the dismantling of the current property tax system would have on all Texans.
    2. The IPT would be another example of a helpful coalition.
      1. The IPT is an excellent resource for educational programs and affords members the opportunity to obtain a nationally recognized CMI designation.
      2. National property tax news updates.
  7. Why Property Tax Consultants need local coalitions?
    1. To level the playing field, first assess your opponents:
      1. When looking at the size and budgets of appraisal districts, property tax consultants quickly find themselves in a “David and Goliath” situation.
        1. For example look at the budgets and number of employees of the Big 5 Texas Appraisal Districts.
          Appraisal District 2007 Budget Total Parcels Number of Employees Parcels per Employee Number of Appraisers Parcels per Employee
          Dallas Central Appraisal District $20,960,025 856,520 255 3,359 93 9,210
          Harris Central Appraisal District $46,777,911 1,505,827 561 2,684 241 6,248
          Tarrant County Appraisal District $17,805,057 675,477 210 3,217 82 8,238
          Bexar County Appraisal District $12,698,319 600,000 151 3,974 67 8,955
          Travis Central Appraisal District $9,929,300 369,880 112 3,303 45 8,220
        2. Another element which illustrates the “David and Goliath” environment is illustrated in the Big 5 Texas Appraisal District 2007 caseloads and litigation budgets.Big 5 Litigation Survey Tabulation July 18 2008
          2008 Harris Dallas Bexar Travis Tarrant
          1a Caseload Jan 1 4,566 1,374 702 992 554
          1c Resolved by July 1 1,082 881 200 71 301
          3a Total 2007 Lawsuits 3,567 1,673 475 492 543
          2007
          3a Total 2006 Lawsuits 2,325 1,252 466 497 545
          5 Actual 2007 Expense
          Total 2007 Cost $5,233,339 $1,059,250 $500,000 $512,363 $999,468
    2. The problems being a Goliath.
      1. Large bureaucracy tends to have inherent inefficiencies.
      2. Chief appraisers set the “Tone” for their districts.
        1. They establish the agenda and goals of their administration. Be it confrontational or cooperative.
        2. Their staff reflects the chief appraisers’ attitude towards taxpayers and/or property tax representatives.
      3. Chief appraisers need accountability to help them manage their districts’ more efficiently.
    3. “United We Stand and The Bigger We Become”: The benefits of coalitions for local property tax consultants:
      1. Strength in numbers. i.e.: Theoretically, when a coalition of consultants raises an issue a synergy is created.
      2. The more members in a local coalition the greater
      3. Coalitions tend to legitimize an issue in contention.
        1. When one consultant complains about an issue they might be viewed as being disgruntled.
        2. When a group raises an issue in unison, the issue obtains attention from the district.
      4. “More Bang for the Buck:” In theory, the larger the size of the coalition, typically the larger the amount of value in dispute. The larger the value in dispute, the more attention the issue receives.
      5. In theory, an appraisal district would want to settle with a coalition and preserve uniformity, rather than with numerous consultants one at a time.
    4. Why consultants avoid local coalitions?
      1. They don’t trust their fellow consultants.
      2. They don’t understand the benefit.
      3. They fear retribution from the appraisal district.
      4. Perhaps they fear their client’s perception of a local coalition.
      5. Other.

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