2009 Texas Property Tax Appeals

Most economists tell us that the economy will continue to deteriorate in 2009.  Some say that we have a one in five chance of entering a depression.  Warren Buffett tells us the economy has fallen off a cliff. 

During these challenging times Texas appraisal districts will be under pressure to hold values to 2008 levels and in some cases raise values.  The taxing entities need and want growing tax rolls to pay for the goods and services provided by municipalities.  On-the-other hand, property owners believe that their assets are not worth what they were in 2008.  Thus, the stage is set for gigantic battles between property owners and appraisal districts.  The scenario described above has occurred before during the S&L Crisis which occurred in the late eighties and early nineties.  During that period appraisal districts experienced shrinking tax rolls and values declined to unprecedented levels.   To make up for budget short falls municipalities raised their tax rates and other service fees.  As the Crisis played out investors purchased foreclosed assets at bargain basement prices and slowly values began to rise again and recovery returned.

Today with the worsening economy property owners need to develop property tax appeal strategies going forward. Cost analysis models need to be created to determine how far and much should be paid by owners to pursue favorable results of their appeal(s) in tax year 2009.  Does the potential tax saving support the cost and extent of an aggressive appeal?  Further, the owner should assume that appraisal districts, as they did at the beginning of the S&L Crisis, will not be willing to grant significant tax relief.   Their excuse will be that as of the assessment date January 1, 2009, things were not as bad as they are today  In-other-words, their sales data collected by them between January 1, 2008 and the current assessment date, will not justify whole-sale value reductions.  Counter arguments will be that the number of properties trading during the same period have fallen short of historical norms because of the lack of available credit and new underwriting requirements.  Additionally, the number of foreclosures has increased substantially during the same period.  Property owners understand that their market value(s) have dropped significantly over the past year.  They also understand that property taxes are their second largest expense, only exceeded by debt service.   Property taxes can make the difference between profitability and in extreme cases keeping a property out of foreclosure.

Since the early nineties commercial tax rolls have experienced continuous growth.  With that said, all markets at some point in time need and experience corrections.  We are at that point with property tax valuations.  Entering the 2009 property tax appeal season property owners will demand tax relief during administrative remedy and if denied will seek relief through Judicial Review in record numbers.  Appraisal districts need to come to terms with the realities today’s economic environment and grant significant taxpayer relief to avoid an unprecedented increases in property tax appeals and/ or litigation.