Texas Property Tax Bill Agreed To

[bluto 4,894]

Ways/means hearing now 

rep turner "do we have any data that tax cuts actually have eased rents?"

Meyer 'No, we can check with comptroller. I absolutely believe it will' 

[RexWilson 1,341]

Originally each chamber’s version had money allocated for increased teacher pay. Final version has nothing. What the hell happened there?

[Biff Tannen 45,499]

1 hour ago, RexWilson said:

Originally each chamber’s version had money allocated for increased teacher pay. Final version has nothing. What the hell happened there?

[safe sex 11,684]

They found common ground

[CTC2 2,745]

5 hours ago, RexWilson said:

Originally each chamber’s version had money allocated for increased teacher pay. Final version has nothing. What the hell happened there?

Hot Wheels will tie it to vouchers. 

[tokamak 6,352]

I don’t recall the property tax bills ever having teacher pay raises. They might’ve, it’s possible. 

The senate tied teacher pay raises to their voucher bill, in hopes that it would force the house to pass it. House didn’t bite on that, so while we didn’t get vouchers (yet!), teacher pay raises died along with it. 

[bluto 4,894]

27 minutes ago, tokamak said:

I don’t recall the property tax bills ever having teacher pay raises. They might’ve, it’s possible. 

The senate tied teacher pay raises to their voucher bill, in hopes that it would force the house to pass it. House didn’t bite on that, so while we didn’t get vouchers (yet!), teacher pay raises died along with it. 

One of the final senate volleys had it in there, can’t imagine it was anything more than a jolly f you to the house forcing them to strip it

[atomheartbevo 89,449]

49 minutes ago, tokamak said:

so while we didn’t get vouchers (yet!)

It's one of the dumbass hills that Abbott wants to die on, so he'll make another run at it.  Watching DeSantis's campaign implode is making him think he's got a shot at moving up to 4th or 5th in the Republican primaries.

[bluto 4,894]

The ways/means hearing on it all today was some of the highest level of dipshittery our lege has to offer. 
“prop tax increases directly cause rent increases, so with this legislation reducing property taxes that means rents will come down!”

then trying to say landlords will be able to lower their rents, and if they don’t lower rents then the rental next door will to undercut the neighbor and market forces will save the day. 
 

then TTARA president, a very intelligent lady with deep experience talks about how the cap part is really just shifting the tax burden to uncapped segments only to get shouted down by mentally challenged house reps. 

[bluto 4,894]

And then there’s this which I have a difficult time imagining the pitfalls. 

[bluto 4,894]

mild apologies for the carpet bombing but still digesting it all. this 20% cap having a value threshold ($5m) as a qualifier is absolute lunacy. 

let’s say you have a vacant bldg A that the county bumps the value from 1M last yr to 5.1M next yr, but next door is a sister property B in same situation only it’s a few square feet smaller, so it goes from 1M to 4.9M in value. 

 

you are absolutely turbo fucked on bldg A, but bldg B is chilling bc under 5M so 20% cap … at least in yr 1, zero idea how it plays out if bldg B crosses the 5M threshold in yr 2. does it get raped having to essentially pay back taxes? if those bldgs are leased with the same value scenarios, tenant in A is severely handicapped vs tenant in B

[kevwun 15,653]

I'll worry about it when I have a vacant building worth 5 million dollars.

[horn4life 3,755]

So commercial property folks now get a 20% cap.  Along with the wonderful gift of not having to disclose sale prices in Texas to keep their taxes low to begin with. Of course homeowners sale prices are nearly universally disclosed because of the MLS.  

When you see the Appraised values of commercial real estate when the prices are disclosed, the problem is NOT that commercial property owners need relief.  They are already largely getting it by paying now where near the actual value of their holdings.

And yes tax cuts are always good, and there is always a place in the education system to make additional cuts to pay for the tax cuts.  This is just that on steroids, and of course we have shit teacher pay, and even shittier teacher retirement for our brave rural white leaders to hand their hats on!  Ye Ha! Super cool how millionaires can buy a couple pregnant cows and avoid real estate taxes on their lavish compounds with an ag exemption.  So that city folks can ship money to the rural areas of these holding of largess, to pay for that millionaire tax savings. Robin Hood, is just trying to rob the hood (cities) to pay for the lack of proper taxation where the rich are robbin' the tax accessor and school districts.  

[Neonmoon 38,127]

15 minutes ago, horn4life said:

tax cuts are always good

[Beau Vine 54,003]

12 hours ago, bluto said:

And then there’s this which I have a difficult time imagining the pitfalls. 

I wonder how much of this is caused by ag exemptions?

 

Edited July 12, 2023 by Beau Vine

[Beau Vine 54,003]

22 minutes ago, horn4life said:

And yes tax cuts are always good, and there is always a place in the education system to make additional cuts to pay for the tax cuts. 

[bluto 4,894]

22 minutes ago, horn4life said:

So commercial property folks now get a 20% cap.  Along with the wonderful gift of not having to disclose sale prices in Texas to keep their taxes low to begin with. Of course homeowners sale prices are nearly universally disclosed because of the MLS.  

When you see the Appraised values of commercial real estate when the prices are disclosed, the problem is NOT that commercial property owners need relief.  They are already largely getting it by paying now where near the actual value of their holdings.

And yes tax cuts are always good, and there is always a place in the education system to make additional cuts to pay for the tax cuts.  This is just that on steroids, and of course we have shit teacher pay, and even shittier teacher retirement for our brave rural white leaders to hand their hats on!  Ye Ha! Super cool how millionaires can buy a couple pregnant cows and avoid real estate taxes on their lavish compounds with an ag exemption.  So that city folks can ship money to the rural areas of these holding of largess, to pay for that millionaire tax savings. Robin Hood, is just trying to rob the hood (cities) to pay for the lack of proper taxation where the rich are robbin' the tax accessor and school districts.  

Only commercial getting capped is below 5M in value. Commercial sales price data has become much easier to come by for cads via CMBS data and other means. They are not hurting for market data. 

[CooterBrown 17,913]

15 hours ago, bluto said:

And then there’s this which I have a difficult time imagining the pitfalls. 

 

Austin ISD can just Robin Hood my property tax money right the fuck out to these ungrateful shitholes.  My kid's high school (McCallum) just hasn't had AC in half the school for 15 years and has raccoons regularly falling out of the ceiling during class. Nothing to see here.

Edited July 12, 2023 by CooterBrown

[RexWilson 1,341]

 

[horn4life 3,755]

7 hours ago, Neonmoon said:

Ah... I forgot to check the... Irony box... sorry for your confusion! 😉

 

7 hours ago, bluto said:

Only commercial getting capped is below 5M in value. Commercial sales price data has become much easier to come by for cads via CMBS data and other means. They are not hurting for market data. 

If you are correct what is your explanation for the huge gaps between sale and appraised value on most every large commercial property in Austin I have seen sold in like... 15 years?  To save time, just show me 3 sales where your assertion is correct.  Hell you will be lucky to find one...

[Anastasis 23,394]

4 hours ago, CooterBrown said:

My kid's high school (McCallum) just hasn't had AC in half the school for 15 years and has raccoons regularly falling out of the ceiling during class. Nothing to see here.

So basically same as it was 30 years ago too. 

[bluto 4,894]

49 minutes ago, horn4life said:

Ah... I forgot to check the... Irony box... sorry for your confusion! 😉

 

If you are correct what is your explanation for the huge gaps between sale and appraised value on most every large commercial property in Austin I have seen sold in like... 15 years?  To save time, just show me 3 sales where your assertion is correct.  Hell you will be lucky to find one...

Sent you a pm on “one example.” 

Some counties are more aggressive with their values, Travis is one of those. For many years I would tend to agree that values are very soft across the state on commercial values, but there's actually a strong argument to be made that some segments are thoroughly over assessed in 2023 given the interest rate climate. I would wager that the majority of the skyscraper offices in major CBDs are over assessed. 

 

and this isn't some 'poor commercial owners' as they generally have gotten a solid deal, and still do in many instances. a lot of that is due to the cads hiring very incompetent personnel (hot job markets tend to have that impact on gubmint jobs). they are also fairly incompetent in defending those values in litigation. as mentioned above, travis county is one of the few that truly fights and that's reflected in their assessments compared to sales prices. 
 

The fair and equal avenue for appeal is also a big player in what creates disparities between assessed and ‘true market’. 

[horn4life 3,755]

Here is the first one I googled as I said in PM.

1000 Red River in Austin Teacher retirement system building.  Sold for $108 million with it was appraised for $29 Million at the time of the sale.  Even after the sale for $108 in October 2022, it is today only appraised at $78 million.  So I feel pretty comfy with my assertion.

Now the commercial market is trending downward, but still as a rule, grossly under-appraised in Texas, and thus relief is... well to get checks for politicians... not about fairness.

https://stage.travis.prodigycad.com/property-detail/197025/2023

https://www.statesman.com/story/business/real-estate/2022/10/06/teacher-retirement-system-closes-on-sale-of-downtown-property/69541514007/

I'll also bet I can stack the shit out of these sorts of sales vs appraised value.  But that would be redundant wouldn't it?

Edited July 13, 2023 by horn4life

[bluto 4,894]

Like I said in PM, that sale has a 2 yr leaseback provision that tends to inflate sales prices. And your claim of 29M is faulty as that was for the land value only, not to mention the property was exempt for tax yr 2022 which negates any discussion of its value as exempt property assessment are hardly given 2 seconds of thought.
 

 I know first hand there are severely undervalued commercial properties. There are severely undervalued residential property as well, I live in one! 

[horn4life 3,755]

9 hours ago, bluto said:

Like I said in PM, that sale has a 2 yr leaseback provision that tends to inflate sales prices. And your claim of 29M is faulty as that was for the land value only, not to mention the property was exempt for tax yr 2022 which negates any discussion of its value as exempt property assessment are hardly given 2 seconds of thought.
 

 I know first hand there are severely undervalued commercial properties. There are severely undervalued residential property as well, I live in one! 

So what is you thoughts on the appraised value of $78M after a $108M sale?  I was wondering why you didn't address the most obvious and current valuation, instead focusing only on the faulty on?  I think the answer is pretty obvious, because it is so easy to see the property being grossly undervalued.  Or are you so silly to asert tht the leaseback provision has a value of roughly $30 million dollars?

I will happily admit the $29 million is inaccurate and incomplete. But why the $30 million difference in a sale price and appraised value?  You also assert the benefits of rich commercial property owners to appeal their values.  Which is their right, and the fact that Texas specifically allows the shielding of values is specific to keeping the taxable values BELOW the actual values. Nothing more nothing less.

But really Bluto,  Explain the $30 million difference in appraised value vs actual value?     This should be fun... 😉

[Jester 382]

2 hours ago, horn4life said:

So what is you thoughts on the appraised value of $78M after a $108M sale?  I was wondering why you didn't address the most obvious and current valuation, instead focusing only on the faulty on?  I think the answer is pretty obvious, because it is so easy to see the property being grossly undervalued.  Or are you so silly to asert tht the leaseback provision has a value of roughly $30 million dollars?

I will happily admit the $29 million is inaccurate and incomplete. But why the $30 million difference in a sale price and appraised value?  You also assert the benefits of rich commercial property owners to appeal their values.  Which is their right, and the fact that Texas specifically allows the shielding of values is specific to keeping the taxable values BELOW the actual values. Nothing more nothing less.

But really Bluto,  Explain the $30 million difference in appraised value vs actual value?     This should be fun... 😉

tldr:  it's not that easy.

I'll take a stab and Bluto can correct or jump in where he wants to.  Without knowing the specifics of the purchase, it's hard to 'explain' the discrepancy between the appraised value and purchase price.  With commercial properties, there are all sorts of intangibles that are not taxable that are typically included in a purchase.  It's why Walgreens pays at least 2x for a property on a corner at a busy intersection.  The property isn't worth that much, but it's a Walgreens business decision.  Then you have competitors trying to buy up land parcels to keep competitors out and overpaying for the same (see Lowe's and Home Depot acquisitions or even CVS and Walgreens).  Those overages are not taxable because the properties are simply not worth that much on the open market.  Then you can get into other avenues like 1031 exchanges where companies or individuals simply need to park their money to avoid a tax consequence who simply do not care about overpaying.  The list goes on and on.  In other words, it's not that simple and we'd need to know specific facts about the purchase to try and understand why TCAD landed on that valuation.

All of that being said, you're focused on the market value and not the equity value.  If all other comparable properties indicate a value of $78mm, then it will be on the tax roll for $78mm.  To get to 108mm, the District would need to raise the entire asset class by 38% to reflect a $108mm value.   But does 1 sale make a market?

[bluto 4,894]

Agree completely jester. 

start with 108M, per the tax code counties are considered 'passing' if they hit within 90% of true market value so knock that down to $98M roughly right off the bat. valuation/appraisals are 'opinion of values' hence the wiggle room in there - all those factors jester laid out. also, the office/commercial market in general further deteriorated in the 4th quarter after the Oct sale so maybe knock a point or two off b/c of that (assessments are as of Jan 1) - fed rate went from 3ish in Oct to about 4-4.25 by start of 2023. That's an insane jump in rates over the course of a couples year much less a single quarter. 

 

Travis CAD data says rental rates for offices of this class/age/location get about $50/ft and the building is 198,500 sq ft per that article. That would be $19,850,000 that would be paid back to the buyer over a 2 year period effectively reducing what they actually paid for the building by that amount - very simplified admittedly

 

interestingly enough the math works out where $98M less $19.85M in estimated leaseback payments pencils out to $78.15M vs an assessed value of $78.7M. Let me know if you have a copy of the lease or if you want to spend time filing an ORR to obtain it from TRS, happy to review that. 

 

this is also ignoring the fair/equal provision of the tax code stating ALL property tax payers are entitled to fair/equal taxation. essentially, what they paid for the property is immaterial if they are appraised excessively more than their comp set. so even if that $108M was a kosher arms length sale, if there a bunch of apples to apples properties at $85M they would be entitled to that value (same deal for homeowners).

[horn4life 3,755]

52 minutes ago, Jester said:

tldr:  it's not that easy.

I'll take a stab and Bluto can correct or jump in where he wants to.  Without knowing the specifics of the purchase, it's hard to 'explain' the discrepancy between the appraised value and purchase price.  With commercial properties, there are all sorts of intangibles that are not taxable that are typically included in a purchase.  It's why Walgreens pays at least 2x for a property on a corner at a busy intersection.  The property isn't worth that much, but it's a Walgreens business decision.  Then you have competitors trying to buy up land parcels to keep competitors out and overpaying for the same (see Lowe's and Home Depot acquisitions or even CVS and Walgreens).  Those overages are not taxable because the properties are simply not worth that much on the open market.  Then you can get into other avenues like 1031 exchanges where companies or individuals simply need to park their money to avoid a tax consequence who simply do not care about overpaying.  The list goes on and on.  In other words, it's not that simple and we'd need to know specific facts about the purchase to try and understand why TCAD landed on that valuation.

All of that being said, you're focused on the market value and not the equity value.  If all other comparable properties indicate a value of $78mm, then it will be on the tax roll for $78mm.  To get to 108mm, the District would need to raise the entire asset class by 38% to reflect a $108mm value.   But does 1 sale make a market?

All valid, but my statement is that commercial is often undertaxed, relative to the only true market value there is, sale price.  A single sale does not completely alter the appraisal market because it could very well be an outlier.  But what you tend to see over time is very large commercial sales, that indicate that the property has been grossly under-appraised in value.  I simply state that the relief for commercial property is not on par with the need for homeowner relief.  As the average homeowner doesn't (can't) annually employ attorneys and appraisers to reduce their property's taxable value.  Homeowners also do not benefit from the non-disclosure of sales price, another benefit that class does not enjoy.

While one sale does not make a market, a sale of a specific property indicates the value of that property at a point in time. IN my example $108 million sale when the value was pegged at $30 million less than the sales price for the coming year's appraisal. 

Whereas homeowners are taxed much, much closer to actual value, and often are taxed above value which is the case for a lot of folks after the crazy run up of 2021.  Commercial is generally undertaxed.  Especially the largest commercial properties.  IF commercial property was taxed closer to actual value there would be a lot more money in the state coffers, and thus not as great a need to shift that under-taxation onto the backs of homeowners.

 

 

[bluto 4,894]

1 hour ago, horn4life said:

All valid, but my statement is that commercial is often undertaxed, relative to the only true market value there is, sale price.  A single sale does not completely alter the appraisal market because it could very well be an outlier.  But what you tend to see over time is very large commercial sales, that indicate that the property has been grossly under-appraised in value.  I simply state that the relief for commercial property is not on par with the need for homeowner relief.  As the average homeowner doesn't (can't) annually employ attorneys and appraisers to reduce their property's taxable value.  Homeowners also do not benefit from the non-disclosure of sales price, another benefit that class does not enjoy.

While one sale does not make a market, a sale of a specific property indicates the value of that property at a point in time. IN my example $108 million sale when the value was pegged at $30 million less than the sales price for the coming year's appraisal. 

Whereas homeowners are taxed much, much closer to actual value, and often are taxed above value which is the case for a lot of folks after the crazy run up of 2021.  Commercial is generally undertaxed.  Especially the largest commercial properties.  IF commercial property was taxed closer to actual value there would be a lot more money in the state coffers, and thus not as great a need to shift that under-taxation onto the backs of homeowners.

 

 

I would take it a step further, all real property in the state has been undervalued, generally speaking. But even this is a tricky position to banter on as it certainly won't be overvalued or owners protest those values, so it stands to reason property is undervalued (kinda like the "humans have less than 2 arms on average"). I would even make the claim that for every commercial value severely below true market I can find a westlake or river oaks or highland park mansion on for half of what true market is. 

 

Where your assertion gets really tricky is mentioning 'homeowners are taxed much closer to actual value' as homeowners actually aren't being taxed on the full market value of their homes with homestead exemptions and caps that, until next tax year, weren't extended to commercial property.

 

sideroad.... On the whole property taxes are a total crock of shit and the system is well on its way to breaking down, the caps being extended to commercial property will only expedite and create more chaos. Our state leadership has painted us into a tight corner  as there really isn't any alternative than riding this rocket into the sun (income tax aint happening and godspeed getting public support for sales tax hikes that would be necessary). Toss in a little school funding/robin hood with rural counties declining in population, and this thing is in major trouble.

[Pato del Muerto 52,342]

For commercial property, and even residential property being used to generate revenue, like Airbnb, it seems that you may pay for the building plus assets inside the building- furnishings for a house or say manufacturing equipment for a plant, as well as some amount of future revenue, in the acquisition price.
Should those things be considered when assigning a value to the property?  Are they?  Or are efforts made to separate them for valuation purposes?

 

[bluto 4,894]

12 minutes ago, Pato del Muerto said:

For commercial property, and even residential property being used to generate revenue, like Airbnb, it seems that you may pay for the building plus assets inside the building- furnishings for a house or say manufacturing equipment for a plant, as well as some amount of future revenue, in the acquisition price.
Should those things be considered when assigning a value to the property?  Are they?  Or are efforts made to separate them for valuation purposes?

 

You’re referring to business personal property and that is its own property type that’s taxed separately. However hotels/apartments have the BPP rolled into the real property values 99% of the time. 
 

in terms of purchase price interplay with it, that’s a major part of skewing purchase price info. Business enterprise value as well. Take a gas station or fast food restaurant, there’s business value with the actual operation, bpp, and the real property of course. lots of money made by experts who do those allocations. As an owner you’d want as much as possible assigned to biz value (not taxable), then bpp (depreciating assets), then finally real property. 
 

THENNN you have to consider fee simple vs leased fee. Technically Texas is (supposed to be) a fee simple assessment state. Ie a tenant property should be valued based on current market rates, not the leases in place. Which is really tricky bc properties are traded on what kind of income they are generating based on sometimes years old lease rates. 

Edited July 13, 2023 by bluto