The real issue: a flawed appraisal system

Mayor Sylvester Turner was right to say during the April 6 Houston City Council meeting that the Texas Legislature needed to “address issues with the taxation of commercial property in Houston.” The only problem is that his argument is misguided.

The mayor pointed to a “spiral downward of commercial property values” caused by the “median” tax rates that commercial property owners pay as being the root of the issue; however, data does not support his theory.

The reality is that commercial real estate across Houston has experienced skyrocketing appraisal increases over the last several years without proportionate reductions in tax rates.

In 2013, Houston commercial property valuations increased 53 percent on average. In the central business district, increases were as high as 70 percent. These doubledigit increases continued in 2014 with an average 18 percent increase in commercial property values. Unfortunately, 2015 was no different: Commercial property valuations increased 12 percent — some areas of Houston experienced a staggering 100 percent increase in commercial property values in just three years.

Based on the numbers, it’s clear that commercial property owners are not taking advantage of a major loophole. The real issue is uncontrolled valuation increases.

It is understandable for the city of Houston to be concerned about its current financial situation, but to take it out on the hard-working residents doing business in Houston is not the way to solve the problem. Uncontrolled valuation increases have placed an incredible financial burden on Houston businesses — from the major corporations to the mom-and-pop establishments. Even worse, a continued approach of uncontrolled valuations will eventually force businesses to leave the city.

Additionally, Mayor Turner stated that, “taxes from hardworking homeowners should not subsidize wealthy commercial property owners.” However, according to the Texas Taxpayers and Research Association (TTRA) and the state comptroller’s office, this statement also holds little weight. In fact, an independent study by TTRA and the comptroller’s office found no evidence that commercial property appraisal appeals are forcing homeowners to pick up the slack.

On the contrary, the report found that a booming housing market and a reduction in manufacturing jobs across the state has simply made residential property a larger part of Texas’ tax base.

According to the TTRA report, “all available information — be it from the appraisal districts on the disputes they handle, or be it from the Comptroller’s review of local values — does not offer evidence of the widespread undervaluation of commercial property.”

Commercial property owners are eager to pay their fair share of property taxes, but demand that the appraisal process be fair. Commercial property owners should not have to file a lawsuit to have their voice heard by an appraisal district. More important, budgets for essential public services should not have to face sudden cuts because of a flawed appraisal system.

We agree with Mayor Turner that the system needs to be fixed, but the Legislature needs to focus on fixing the issue that is taxing businesses right out of town — an unfair appraisal process. This is the real issue that needs to be addressed.

State legislators should pass legislation that limits the impact of this flawed appraisal system.

Betancourt is chief executive officer and executive vice president of the Houston Building Owners and Managers Association.