If commercial property owners paid more taxes, residential property owners would pay less — as much as $90 million less annually: That’s pretty much the bottom line in the ongoing debate over whether commercial property sales prices in Dallas County need to be publicly disclosed. The DMN offers a lengthy and informative story about the issue, which is expected to be acted upon during the state legislature’s session next year. And the whole issue gained momentum as a result of Dallas’ taxpayer-owned downtown convention center hotel land purchase — the city offered to pay about $40 million for eight acres of property that was being assessed at about $8 million (five times less than what the city is paying to buy the property).
Just imagine if your home tax appraisal increased by five times next year because the appraisal district figured out it had undervalued the house for awhile: I suspect we’d all have something to say if that happened to us. And it won’t happen, either, and not only because the appraisal district can’t raise taxes on a homestead that much in one year. It won’t happen because sales prices for residential property are virtually always publicly available, allowing the appraisal district to come pretty close year after year to proper home valuations.
That’s not to say the appraisal district doesn’t make a mistake from time to time. I live on a busy street, and I’ve protested our appraised value a couple of times because I believed the district didn’t make an appropriate adjustment (downward) due to the traffic on my street, as compared with a similar house nearby on a quieter street. But I’m able to protest my home value more effectively because I have access to sales prices of comparable properties throughout the neighborhood and city, so I know what people are buying and selling similar homes on similar streets for, and I can use that information to plead my case at the appraisal district.
With commercial properties, however, it’s all a big guess. Since it takes months or years for commercial sales prices to trickle into the public domain — and even then, the prices often are more rumor than fact — trying to decide what a big, empty piece of land or a fully leased-up office building is worth can be tricky. Add to that confusion the fact that commercial property owners — by virtue of the cash flow from their properties and the fact they’re likely to be a little more well-heeled than the rest of us — have the money to hire effective tax lawyers to plead their cases at the appraisal board, not to mention engaging the pay-for-play tax consultants who are more eager to work on reducing property taxes for a $10 million commercial property than a $250,000 residential property: They’re paid on contingency (amount of taxes saved), and the potential savings are much greater on more valuable property. The nature of capitalism is that they’ll work harder reducing taxes on the commercial piece because there’s more in it for them.
All of this could be simplified by requiring commercial sales prices to be made public. All of us could take a gander at the pricing, if we wanted to, and so could the appraisal district. And that little bit of knowledge would go a long way toward opening up the entire process, as well as potentially balancing the property tax load in Dallas County and throughout the state.
There’s really only one reason not to allow commercial sales prices to see the light of day: Real estate investors tend to be large campaign contributors, and I would imagine it’s kind of painful to tell a big contributor you’re going to vote for a bill that is likely to cost them additional property tax dollars. But the state politicos asked for these jobs, and it’s time to step up and do what’s right, regardless of which of their pals might be getting squeezed in the process.
