The Texas Legislature during the 2006 Special Session passed and phased in aÂ school tax rate reduction over 2006 and 2007.Â Â It sounds good except that real estate values increased significantly in 2006 and 2007, which translated into higher taxable values.Â Homeowners were somewhat protected by a cap of 10% on their taxable values, whichÂ commercial property owners do not have.Â This would account for the fact that businesses pay the majority of property taxes paid in Texas.Â Â Everyone knows that the legislature would not cut the school tax rates without creating a new source of revenue to replace it which they did.Â Business owners are now preparing to pay Â their tax billsÂ created by theÂ new “Margin Tax.”Â The Margin Tax is in fact a state corporate income tax which replaced the old Texas Franchise Tax.Â In-short, Texas businesses paid for the 2006-2007 school tax rate reductions.
So what happens now?Â AsÂ I have stated in earlier blogs homeowners will probably receive tax relief in 2008 based on the fact that the “Sub-Prime Crisis”,which has been well publicized has created a terrible residential market which has left homeowners watching the value of their homes decrease.Â Commercial property taxpayers will not be as lucky.Â I believe that generally speaking appraisal district will not giving relief to commercial real estate owners because their crisis has not been well publicized by the media.Â If you were to ask a professional inÂ commercial real estate about their industryÂ I believe you would find that their environment has changed dramatically since late 2006.Â Â Additionally, appriasal districts tend to be behind the curve when markets change.
The answer for commercial property taxpayers in 2008Â should be in my opinion to state the obvious in their 2008 property tax appeals.Â
1. We are in a recession.
2. We areÂ in theÂ middle of a credit crisis.
3.Â The days of unprecedented appreciation growth in commercialÂ real estate value are over.Â
4. Real estate is tried to the economy and-so as goes the economy so goes the value of real estate.
5. Present a well documented professional assessment of the value of you commcial property using sales comparables, income data, cost data and a equity study of the assessments comparable properties.