04/03/14 1:15pm

COMMENT OF THE DAY: A PROPERTY TAX PROTESTOR’S GUIDE TO HCAD BUILDING GRADES Housing Grades“There is no process to request that a home be considered an economic misimprovement. When a neighborhood has changed to the point that the original homes are no longer the norm, either by new construction or remodeling, HCAD can deem the remaining original homes as econ improvements. On to grade — Grade is set when the home is constructed. There is usually a discussion between the builder and the appraisal district as to what level of customization is going into the property as it’s being built. Think of a typical Pulte starter-home as a C+. For every level of better materials or customization, the grade will be increased up to a maximum of X+. This is, for the most part, impossible to change on a permanent basis. Especially after the construction is complete. The key here is to get in either during construction or immediately after. It helps if your home is exactly the same as the rest on the block, but for some reason, your grade is higher. Bring in floor plans and show which houses are similar. On to Condition/Desirability/Utility (CDU) – This is the one you can play with. A home with a reasonable amount of un-repaired deferred maintenance should be in Average condition. In the old days, all new homes were put on at Excellent condition, but HCAD has since changed that policy and puts most new homes on in Average condition. This is the one you need to work on with signed written repair estimates and pictures. Every year. Big stuff — electric, plumbing, foundation, windows, storm damage, etc. Finally, Level of Remodel — None, partial, extensive, total, new/rebuilt. This causes a great deal of angst to many people, because there is no real written explanation of what each one is, and how long a remodel actually lasts. There are homes from the early 90s in West U that are still being considered New/Rebuilt, and, as such, are being compared to brand new construction. Additionally, HCAD does not know about every remodel — they only started getting the building permits about 6 years ago. So, your neighbor with the spectacular new kitchen who did it under the table may still be listed as having no remodel. Unless you want to bring in pictures of their kitchen from the last BBQ, there’s not much you can do, other than show that yours is in worse shape than HCAD shows. Additionally, many ARB boards and appraisers have different ideas as to what makes a remodel — putting new cabinet doors up in the kitchen? I’ve seen that called a partial remodel. Replacing knob and tube wiring without increasing capacity to avert a possible fire? I’ve seen that called a repair, and not an improvement.” [BrewWench, commenting on How Do You Get on HCAD’s ‘Cheap’ List?] Illustration: Lulu

04/01/14 10:30am

HCAD Econ Misimprovement ClassificationA reader whose new property tax assessment is feeling pressure from all the construction nearby in Brooke Smith writes in with questions about HCAD’s “economic misimprovement” classification. That’s the label HCAD often applies to older houses in neighborhoods where similar structures are being torn down and replaced with new construction. (It’s “an adjustment to the dwelling to limit the remaining building value as the land value increases.”) Writes the homeowner: “I was wondering if my fellow co-readers would have any information about filing your home as an economic misimprovement and how to do so with HCAD. Also, are there any disadvantages of doing so?”

Some background: “I bought my home in 2012; my property taxes from 2011–2012 increased by 40 percent. I prepared a thorough protest, but the ARB essentially denied my protest by comparing my home to the new homes/heavily remodeled homes in the neighborhood.”

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Exceptions Misimprove the Rule
07/30/13 2:05pm

COMMENT OF THE DAY: HOLDING BACK THE ONSLAUGHT ON A GALLERIA MOD “There’s not too much respect for older architecture in Houston. I own a three family near the Galleria. My building was designed by Neuhaus and Taylor and was featured in ‘Houston and the Mod House.’ The developers are sniffing around trying to make deals for the whole street. I may reach a point of diminishing returns soon and be forced to sell. One of the reasons is that the city keeps raising the property taxes so high in ‘hot’ areas by comparing old buildings to the new ratables and raising the old assessments by thousands at a time. At some point you can’t afford to pay the bills with a density of three units on the property. A developer will come in, buy the whole cul de sac, and put up a tower so he can make a lot more money per sq. ft. from the land than we can. When you protest taxes, HCAD listens and lowers the amount a tiny amount. Thus, the little guy is eventually forced out.” [Gary Andreasen, commenting on Comment of the Day: How Houston Tears Down and Sprawls] Illustration: Lulu

05/31/13 2:00pm

COMMENT OF THE DAY: A LITTLE 411 ON THAT 2010 $6 MILLION 380 SOUTH OF I-10 “For the record, the Ainbinder 380 Agreement did not include drainage detention, they simply tied into existing storm sewer systems — there were no ‘improvements.’ The road was widened at the expense of a tree-lined sidewalk. The sidewalk was ‘abandoned,’ which means ‘is no longer in existence.’ There are no street tree wells and/or no ROW accounted for to plant shade-bearing street trees. The removal of $250K worth of mature Live Oaks resulted in a transfer of this public amenity to Walmart’s parking lot. Yes, that’s right. Public trees were allowed to be replanted on Walmart’s parking lot. And, oh yeah, the four-sided intersection has just two pedestrian signalized crossings. Yes, you can’t actually safely cross on two sides because there are no lights and markings. Why? Because PW&E missed it and the developer didn’t end up having to pay for it. The ‘bridge improvement’ is the biggest boondoggle of them all. Ainbinder wanted to pave it and area civic orgs fought them. Turns out, after coring was performed on the bridge, that the dead load was far greater than known AS A RESULT OF previous paving. That was the second load limit drop. So, Ainbinder window-dressed and spent 380 monies for cosmetic treatments — changing out balustrades and painting A BRIDGE THAT WILL BE TORN DOWN. That is an absurd waste of taxpayer money. Unlike other 380s, the Ainbinder 380 had next to no specifications that ensured deliverables. There were no clawback provisions to ensure public return on the investment. Once the money is awarded to the developer, they can strike or change line items and they still get full payment. The development doesn’t even have to perform to produce new taxes (not just poached taxes), it can be a miserable failure and they still get paid. The folks that were championing this development are now trying to pretend the public infrastructure results were worth $6,000,000 of public money. Guess what? You were wrong then and you’re still wrong now. The proof is right there for everyone to see. Own it.” [TexasSpiral, commenting on Headlines: Getting to the Washington Heights Walmart; Learning Lessons from Hurricane Ike]

04/19/13 5:00pm

HOW TO KEEP PROPERTY TAXES LOW — AT THE TOP Using figures from a study put together by the Service Employees International Union last year in support of striking janitors, Steve Jansen’s cover story in this week’s Houston Press highlights some spectacular feats of Houston highrise taxcutting: “For the 2011 tax year, if the owners of a class A skyscraper or office complex protested HCAD’s appraised value in front of HCAD’s appraisal review board or district court, they were 77 percent likely to have the value cut (and ­almost always by millions). By contrast, only 55 percent of owners of single-family homes won their appeals with HCAD.” Total resulting savings on those high-dollar tax bills: $58 million in 2011 alone. This year, HCAD is raising the market valuations on many of the city’s fanciest office buildings by more than 50 percent. But don’t expect those numbers to hold when the companies have lawyers at the ready. For 2012, 70 percent of large downtown commercial office property owners went ahead with property-tax lawsuits against HCAD. [Houston Press] Photo of Wells Fargo Plaza, which through lawsuits and negotiated settlements gained valuation reductions totaling $380 million between 2006 and 2011: Matthew Colvin de Valle [license]

04/12/13 10:15am

MAYOR PARKER’S PLAN FOR A BIGGER, FRIENDLIER UPTOWN TIRZ Why not both? Yesterday, Mayor Parker announced a $556 million plan that, if approved by city council on April 24, would fund the seemingly unrelated instead-of-light rail Post Oak BRT and Memorial Park reforestation: Uptown would annex 1,768 acres of property into the TIRZ, and a gradual increase in tax revenue over the next 25 years would help to keep the BRT operational and implement a program of park improvements. Those would include, says Houston Parks and Rec director Joe Turner in a city press release, “erosion control, removal of invasive non-native plants, the reestablishment of native grasslands and forests and facility needs.” Still: Only 36 acres of the property roped in for annexation would be taxable. And does this plan mean that BRT — first thought to be up and running by 2017 — will be delayed? Don’t worry, says Uptown Management District president John Breeding. Besides what will be generated by the more environmentally friendly TIRZ, money for BRT will come from TxDOT and — if approved by a vote on April 26 — Transportation Improvement Program grants from the Houston-Galveston Area Council. [City of Houston; previously on Swamplot] Drawing of Post Oak BRT: Uptown Management District

11/15/12 2:31pm

COMMENT OF THE DAY: HOUSTON FIRST SKIPS THE BULLY SALES BLOCK “Instead of ‘hoping’ to get residential/retail development on the site, why not REQUIRE such development on the site via deed restrictions or other contractual agreements with the buyer? This is how HISD screwed themselves on the sale of their old administration building. They sold to the highest bidder and ‘hoped’ they would build something like the fancy mixed use rendering they were passing around. Instead we got a Costco and an LA Fitness. When you consider that HISD pockets more than 50 percent of every tax dollar paid by the property, they might have made more money in the long run by GIVING AWAY their land to someone who would have developed it more intensely.” [Bernard, commenting on Headlines: Downtown Block for Sale; Accessing Remote Hermann Park]

09/19/12 2:58pm

COMMENT OF THE DAY: WHAT YOU REALLY MADE ON YOUR HOUSE “. . . Most people say ‘I bought it for x and sold it for y, so I made an (y-x)/x return on my house’ which really isn’t the case. That formula can tell you your total appreciation in market value, but that is not the same as your ROI. To get closer to calculating an accurate nominal return, you need deduct the following from y: total in real estate taxes you paid while you owned the home, total expenses for repairs and maintenance, total amount of insurance premiums, the total interest and fees you paid to a lender before paying off your mortgage, and any commissions you paid to a realtor. You can then add back any income tax benefit you got for deducting your interest payments as well as any income you got from renting out all or part of your property. If you wanted to take things to the next level you could discount these cash flows and also convert nominal dollars to real, but I think even with just doing the above exercise most people will find that they didn’t really make as much money on their house as they think they did, and unless you manage to time your purchase, sale, and hold period just right, home values really have to appreciate significantly each year for the regular homeowner to just break even on it as a pure investment. That said, I think there are a lot of other very good arguments in favor of home ownership, including some financial ones. My point is just that if you bought a house for $100K and sold it 10 years later for $200K, you didn’t actually get a 10% annual return unless your property was tax exempt, you paid cash (and had a separate account set up to hedge inflation and compensate you for the cost of that capital being tied up for ten years), sold it yourself, didn’t buy homeowner’s or flood insurance, and never made any repairs.” [You Didn't Earn That, commenting on Comment of the Day: What You Inner Loopers Got Wrong]

03/19/12 11:26pm

COMMENT OF THE DAY: AT THE EDGE OF EXEMPTION “Churches and private education getting a pass on property taxes is just wrong wrong wrong. it opens up too many loopholes. things become clouded, like when 2nd baptist buys the adjacent shopping center. they own it, they operate a portion of it for church activities, does that take the entire property off the tax roles? That’s easily a $20MM property now not part of COH taxes, and yet using an unusually high pro-rata portion of traffic control, road maintenance since the remaining businesses there are high traffic. another example — i want to buy a piece of real estate. i start a ‘church’ and then buy it. i now have a free hold on a piece of dirt forever, don’t I? . . . private schools and universities are no different. st agnes now has taken a 4 corners hard corner off the tax roll @ bellaire/fondren so they can have athletic fields, and theoretically could continue to take in the same manner forever. who is to say a board member there wouldn’t buy/BTS a building for them, then pass on the effective tax savings through a long-term cheap rent deal??? HBU – same thing. the list goes on and on.” [HTX REZ, commenting on There Was a Church, and There Went the Steeple]

02/09/12 11:44pm

COMMENT OF THE DAY: WHAT’S WORTH THE EFFORT “The system IS biased against low-value properties. There’s not a great deal of incentive to even file protest on a $40k mobile home, but there’s plenty of incentive to litigate the value of a downtown highrise in district court; and by that time, the highrise has had three bites at the apple. I’m not sure that there’s an easy solution to the inequity, though. Mass appraisal is a blunt tool by its very design. The right of protest allows for some of the rough edges to be smoothed out.” [TheNiche, commenting on The Office Building Appraisal Discount]

02/09/12 3:11pm

THE OFFICE BUILDING APPRAISAL DISCOUNT “Across the city, prime office buildings are selling for far more than their tax values, leaving billions in potential tax revenue on the table at a time when city and county budgets are stretched,” writes business columnist Loren Steffy. “It’s almost as if there’s two sets of books: one for the buyers and sellers, and one for the tax man. A random sample of more than 40 office buildings that sold in the past five years found 2011 appraisals trailing market value by about 40 percent, or more than $1.6 billion in unrecognized taxable value.” A state law prohibits county appraisers from taking into account certain “intangibles” — including leases and occupancy rates — in valuing commercial property. [Houston Chronicle, via Off the Kuff] Photo of Heritage Plaza: Waymarking

07/15/11 5:48pm

WALMART BUYS BACK ITS BIGGEST BOXES Walmart’s ridiculously humungous Cedar Crossing distribution center near Baytown now belongs to . . . Walmart. Last month the company bought the facility back from its landlord, Texas’s Permanent School Fund, for $104.5 million, or just $4.5 million more than the government entity paid Walmart for it in 2005. The complex consists of 2 separate 2-million-sq.-ft. buildings — encompassing more floor space than 9 Astrodomes — on a 473-acre tract. Under the 30-year lease for the property the company signed with the school fund after the original leaseback, the facility had been exempt from property taxes. [Houston Business Journal; background; awards] Photo: Force Engineering & Testing

06/09/11 4:00pm

DEATH, ABANDONED FEEDER ROAD STRIP MALLS, AND TAXES IN SHERWOOD OAKS Craig Malisow tries to unravel the ownership mystery behind the abandoned strip center that serves as a rather dilapidated Katy Freeway-facing welcome sign for 2010 Swamplot Award runner-up Sherwood Oaks: “The owner listed on the Harris County Appraisal District is J.E. Eisemann III, who died in 1981. Interestingly, he seems to have purchased the property in 1988. Apparently, HCAD inherited this information from the Harris County Tax Assessor’s Office, which never had any problem with a dead owner, because the dude, while dead, was paying his taxes. But in 2010, death caught up with Eisemann, and he missed some payments to a few taxing districts, including Spring Branch ISD. When that district sued, it listed Eisemann’s kin as defendants. . . . The estate promptly paid more than $20,000 in back taxes, and now appears to be current.” [Hair Balls; original MyFox Houston story; previously on Swamplot] Photo: MyFox Houston

04/29/11 12:15pm

Property-tax assessments dropped overall in Harris County this year, but a reader in Montgomery County writes in to brag about the remarkable rise in value her small neighborhood in The Woodlands experienced over the same period: Assessments for a group of 42 homes in the Village of Panther Creek went up by a minimum of 80 percent over last year’s values. To get a taste of the boom, our reader suggests, try a search for “Wedgewood Glen” on the MCAD website. The datasheets for any of the properties listed will show the appraisal history. “With increases like that, The Woodlands may be the hottest real estate market in the country,” she writes. And she says she’s ready to sell her 30-something-year-old home now — if she can get anyone to buy her home at the price the county assessor says it’s worth.

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03/04/11 10:31am

HCAD TAX PROTEST SETTLEMENT PROTEST The largest property-tax consultant in the state agreed last November to an $800,000 settlement with the attorney general’s office that requires it to pay a penalty to the Texas Department of Licensing and Regulation, restricts some of the company’s business practices, and establishes a restitution fund for clients. But the agreed judgment doesn’t require O’Connor & Associates to admit any wrongdoing. A 2-year-old lawsuit alleged that the company routinely represented thousands of taxpayers in property-tax protests without their consent, failed to appear at some clients’ appraisal hearings, submitted documents that were “fraudulently notarized,” and failed to file more than 11,000 legally required client forms to the Harris County Appraisal District. Company president Patrick O’Connor denies the charges, and tells the HBJ‘s Jennifer Dawson his company was picked on by HCAD because it is big and aggressive: “The firm filed 150,000 to 160,000 protests in 2010, at least seven times the volume of its next closest competitor, O’Connor said. ‘Yes, we do make mistakes, but the percentage is a very low percentage. . . . It’s about four per 1,000 hearings that we did.’” [Houston Business Journal; consumer alert]