By Robert Moseley
Look out the window of Mary Kieke’s office on the second floor of the Bexar Appraisal District building on Frio, and you see downtown on the other side of Interstate 35 and, on her side of 35, an apartment complex, a hospital, motels and other structures.
But Kieke, the deputy chief appraiser of BAD, also sees something else: examples of commercial structures over which owners can hire private appraisers as expert witnesses to manipulate data to lower property tax appraisals during protests or litigation.
The average Bexar County homeowner can’t afford to employ attorneys and experts to fight a hike in his appraisal. While state law doesn’t require disclosure of sale price of any type of property, BAD finds it much easier to appraise residential at its fair market value, Kieke said. Homes are in neighborhoods, often developed by a single company that built most homes at similar sizes and sold them at similar prices. If there’s a KB Homes subdivision in which houses sold for around $200,000, she noted, their values tend to rise together, making accurate appraisals relatively simple.
Commercial appraisals are another matter.
Commercial property is generally more valuable than residential, making a full-fledged protest or lawsuit more worthwhile for the owner. Like most organizations and individuals with limited budgets, BAD hates to get sued, Kieke said. Lawyers “swamp” BAD with litigation so that BAD’s appraisers, executives and attorneys spend countless hours answering interrogatories, attending mediation and — when the parties can’t settle the case — sitting through jury trials.
Kieke remembers BAD winning only two of the 12 lawsuits in her lengthy tenure there.
Private-sector appraisers in a suit against a BAD appraisal can juggle numbers to support almost any value the plaintiff wants, Kieke said. For example, she noted, an appraiser who had evaluated an apartment complex at $25 million when its owner sought financing, later testified, when the owner sued over BAD’s appraisal, that it was worth only $16 million. (BAD won that one.)
Kieke looked out her window toward the hospital and an apartment complex. “If I want to,” she said, “I can find data” to “prove” the hospital is more valuable than the apartment complex, then turn around to use different data to “prove” the apartment complex is more valuable than the hospital.
It doesn’t help, she said, that the Legislature has stacked the deck against appraisal districts with its requirement of an “equal and uniform appraisal.” The appraisal district has to prove that its number matches the appraisal of other equivalent properties. So there are disputes over what qualifies as an “equivalent” property. Kieke recalled an Austin case in which she said Randall’s Grocery Store lawyers tried to use run-down properties that had once been grocery stores as “equivalent” to Randall’s newest buildings.
Owners of expensive homes can also benefit from the “equal and uniform appraisal” standard, she noted. In a recent protest, Robert Kolitz’s attorney protested BAD’s appraisal of his 23,000-square-foot home on about 30 acres in Hollywood Park at $9.5 million. The Appraisal Review Board (ARB) heard the case and lowered the appraisal to $8.3 million. Where in Bexar County, Kieke wondered, do you find an “equivalent” property to support the figure? (The Kolitz property was listed for sale at $17.5 million in August.)
Since the individuals and businesses with the most valuable properties are the most successful at challenging appraisals, she said, “We don’t have the right values on upper-end properties. The (tax) burden gets shifted to homeowners from the commercial and high-end houses.”
Values are squeezed from the top down, but they’re also being squeezed from the bottom up. A variety of exemptions and freezes cut homeowners’ tax bills, as well.
Including new construction, BAD’s certified totals released in July — but subject to revision as protests were settled — showed a total of $141 billion worth of property in Bexar County. Exemptions of one sort of another, from abatements for hotels to reductions for the disabled, knocked $10 billion off that total.
Bexar County and the City of San Antonio will continue to be squeezed from both ends as they grant abatements to commercial and industrial developments and greater numbers of people qualify for exemptions for disabilities or age. Here are some ways — some well-known, some not so familiar — for you to lower or avoid paying your property taxes.
How do average homeowners avoid higher property taxes?
The Legislature has created exemptions for different categories of owners. Some people aren’t aware of them, but a spokeswoman in the office of Tax Assessor/Collector Albert Uresti said he meets with homeowners’ associations and neighborhood groups to bring them to everyone’s attention.
And they aren’t means-tested. So whether you’re one of San Antonio’s billionaires or just scraping by on Social Security, you’re equally eligible.
For example, disabled veterans have long qualified for a degree of property tax relief. In BAD’s 39-item list of property classes eligible for some form of exemption, eight are for veterans with disabilities or their surviving spouses. They go from DV1 for up to 29% disability, DV2 for 30-59% disability, and so forth, Kieke said.
In 2009, another exemption appeared. The Legislature created DVHS, for veterans with 100% disability, and eliminated all their taxes on homesteads. Of course, Bexar County is home to a lot of veterans, many of whom suffer disabilities of varying degrees.
According to appraisal district reports, the year before the 100% disability exemption took effect, 29,306 Bexar County veterans (or surviving spouses) claimed exemptions valued at either $5,000 or $12,000, depending on degree of disability. The next year, 32,655 benefited, including 2,394 via the new DVHS 100% exemption.
Those numbers grew to the point that in the current tax year, 44,970 disabled veterans receive some sort of property tax exemption, including 9,089 (with surviving spouses) who claim 100% disability and pay no homestead property taxes at all. Those with 100% exemptions lop $1.5 billion off Bexar County’s property tax base.
The Seniority System
The best way to beat the system is to turn 65 years old, at which point the state property tax code refers to you as “elderly.” Following passage of a constitutional amendment, Kieke said, Bexar County and the City of San Antonio were the only major county and city in Texas that significantly raised homestead exemptions for all homeowners age 65 and up (and, if they die, their surviving spouses age 55 and up). The county passed a $50,000 exemption while the City Council opted for a $65,000 exemption, according to BAD reports.
For the preliminary figures available for the 2015 tax year, that single change removes more than $5 billion from the county’s tax base (nearly $4.8 billion from San Antonio’s). Kieke calls the vote to raise the exemptions for the elderly “not smart” in light of demographics. At the rate the population is aging, this exemption will eventually put a lot of stress on county and municipal budgets. Of course, the seniors who pay lower property taxes still require the public services financed by property taxes.
Nearly 30,000 taxpayers have signed since 2008. More than a fifth of Bexar County homeowners — 112,000 out of 496,000 — currently take advantage of the exemption.
And it gets better. The exemption triggered at age 65 is transferable to a different homestead. As Kieke explained it, it is legal to move from your $1 million mansion into a condo or mobile home appraised at $50,000 and claim it as your homestead for the period in which your over-65 exemption is established. Since both the city and county exempt at least $50,000 of value, you will pay them zero property tax. The following year you can “port” that appraised value back to your $1 million home and enjoy the savings for as long as you (or your surviving spouse) live there.
Timing is everything, though. You must have purchased and claimed your homestead exemption on the $50,000 homestead by January 1 of the year in which you celebrate your 65th birthday. And with that sort of tax break, you’ll have a lot to celebrate.
Work it off
If a senior has more time than money on his hands, the Legislature has just the plan to help with property taxes, as outlined in its 1999 addition to the Property Tax Code: Section 31.035: “Performance of Service in Lieu of Payment of Taxes on Homestead of Elderly Person.”
The following clauses spell out all the details of “in-kind” payments — contracts and other terms and conditions — but the clincher is in paragraph (d): “For each hour of service performed for the taxing unit, the property owner receives a credit against the taxes owed in an amount equal to the amount that would be earned by working one hour at the federal hourly minimum wage rate.”
Since that wage is $7.25 an hour, it’s little wonder the “in lieu” plan hasn’t caught on.
Run a tab, Part 1
The only certainties, it is said, are “death and taxes.” If you don’t mind leaving a shrunken estate, you can forget about the taxes part, at least as related to property taxes.
Once you turn 65 or suffer a severe disability, you can simply stop paying your property taxes and let them accumulate. The legally authorized way to do this is with a Tax Deferral Affidavit, which you can find at this website: HYPERLINK “http://comptroller.texas.gov/taxinfo/taxforms/50-126.pdf” http://comptroller.texas.gov/taxinfo/taxforms/50-126.pdf. Once you file your TDA, you can pay part — or none — of your property taxes and incur only 8% interest on the outstanding total. Uresti’s office says he preaches the value of the TDA at homeowners association meetings throughout the county. Approximately 11,700 Bexar County homeowners have filed TDA’s, according to BAD records. Unfortunately, if your home is still subject to a mortgage, the lender does not allow you to defer payments.
It’s good to have a TDA on file, a staff member said, just to be on the safe side. Even if you always pay your taxes promptly, the TDA comes in handy when you’re unable to pay on time if you happen to be in the hospital or, presumably, on a round-the-world cruise.
Once you turn 65 file your TDA and you may never have to pay again. Of course, the tax man will come calling within six months of your death to collect from your heirs or auction the house for back taxes.
Run a tab, Part 2
Thanks to a little-known policy of the Tax Assessor/Collector’s office, there’s yet another way to avoid property taxes when you turn 65. Even if they don’t file a TDA, people over 65 in Bexar County can still stop paying their taxes without fear of collection, litigation or eviction.
Former Tax Assessor/Collector Sylvia Romo said when she took office nearly 20 years ago, she “noticed a lot of seniors were getting sued” for back taxes. So she devised a policy that put a stop to the lawsuits. The previous practice of collecting from seniors “sending letters and lawsuits” was “legally correct,” Romo said, “but the policy is you don’t want these seniors thrown out.”
This method of avoidance is, however, much more painful than deferring taxes with a TDA. Tax debt, interest and fees can mount to the point that Romo recalls occasions when the auction of a deceased non-payer’s home didn’t bring in enough money to cover the accumulated taxes.
Where the holder of the TDA pays no more than 8 percent interest on past-due balances, Uresti’s spokeswoman said those without TDA’s are subject to interest and penalties that add up to nearly 20%, plus additional fees for the tax collection law firm Linebarger Goggan Blair and Sampson. But nobody will sue you or evict you from your home the way they would a 50-year-old who ignores his tax bills.
Yes, you too can deprive Bexar County and other taxing entities of their revenue. If you defer your taxes, your financial advisor may think it’s a bad idea to pay 8 percent interest with a TDA when you might be able to borrow at a lower rate and pay the tab.
And your children won’t like it at all.