The Ins and Outs of Effective Protests of Property Taxes

1. COMMON MYTHS
• You should expect to pay property taxes
based on a recent purchase price or based
on a perceived value of what your property
would likely sell for.
• All appraisal districts are alike.
• All appraisal districts are the enemy.
• Lawsuits are a nasty word and should
never be considered when contesting
property taxes.

2. DFW Tax Rates
for 2015

3. Select Texas City Aggregate Rates

4. DFW Area Select Cities Aggregate
Tax Rates for 2015

5. Texas Important Property Tax Dates

6. Appraisal Process

7. REAPPRAISAL
• Mass appraisal is the systematic appraisal of groups of
properties as of a given date using standardized procedures and
statistical testing.
• Texas Property Tax Code requires appraisal districts assign a
January 1 value to all property.
• Mass appraisal provides the ability to accomplish such a large
task.
• Annual reappraisal effort is where the mass appraisal process
occurs.

8. COMMERCIAL REAPPRAISAL
• Undertaken January 15th – April 15th
• Land Market Areas (LMA)
• Improved Market Areas (IMA)
• LMA and IMA targeted for reappraisal
• Insure accurate and equitable values
• IMA
 Office Buildings
 Multi-family Property (Apartment Complexes)
 Retail Property
 Industrial Property (Warehouses)

9. COMMERCIAL
APPROACHES TO VALUE
• Mass Appraisal Records System (MARS)
• Three approaches to value
 Cost Approach
 Sales Approach
 Income Approach

10. Why Use A Tax
Consultant?

11. Reasons To Thoroughly Evaluate Your
Property Tax Assessments
Everyone in the industry has a basic
understanding of the traditional approaches to
market value. However, it’s the nuances of
these techniques and how they are utilized to
formulate the most effective property tax
appeal strategy

12. The impact of these assumptions on the
resulting value indication plays a crucial
role in understanding the appraisal
district’s value position. For this reason,
Cantrell McCulloch obtains a digital
version of the appraisal district’s
commercial worksheets and exports the
data to a proprietary software application
for comparison to the subject’s actual
operating history. The unique insight
gained from this data provides a
benchmark from which all negotiations
begin. It not only identifies inaccuracies
relative to the subject’s actual operating
performance, but also allows us to seek
common ground on any appraisal district
assumptions deemed favorable to our
client’s tax position.
Income Capitalization Approach – This is the
most common valuation approach utilized by
appraisal districts in a mass appraisal of multi-
family properties. The basic elements of this
approach include: estimating the potential gross
income on a stabilized basis; estimating a proper
allowance for vacancy and collection loss;
estimating anticipated fixed and variable
operating expenses (including a reserve for
replacement of depreciable components); and
capitalizing the income stream into an indication
of value by using market-derived capitalization
rates.
The data necessary to complete the preceding
steps is delineated on the appraisal district’s
commercial worksheet as follows:
• Potential Gross Income (PGI)
• Vacancy Allowance (%)
• Operating Expense Ratio (%)
• Net Operating Income (NOI)
• Capitalization Rate (OAR)

13. Cost Approach – Although utilized exclusively
during the construction phase of a new
apartment project, appraisal districts become
less reliant on the cost approach upon
completion and stabilization of the property.
• Sales Comparison Approach– Very
seldom used in our recent multifamily cycle.

14. • Uniform and Equal Protest – Allows for value corrections to be made “if the appraised value of
the property exceeds the median appraised value of a reasonable number of comparable
properties appropriately adjusted.” When a recent sale has occurred, this often is the only line
of defense in the appeal process. If a conflict exists between taxation at market value and equal
and uniform taxation, equal and uniform taxation prevails. The uniform and equal protest puts
taxpayers on equal footing regardless of market value or sale price.

15. Remedy for
Unequal
Appraisal

16. Remedy for Unequal Appraisal
By: Robert A. McCulloch, CMI

17. Sec. 42.26. Remedy for Unequal Appraisal

18. Recent Apartment Unequal Appraisal Protest Results

19. Benefits of Using
a Consultant

20. Benefits of Using a Consultant
• Timing of presentation to Appraisal District.
• Comparing Final values versus Notice values.
• Understanding of how the process works and knowing the
Appraisers on more of a personal level.
• Working with Senior Appraisers that have more decision making
authority versus less experienced Appraisers.

21. 3 Steps to the
Appeal Process

22. 3 Steps to the Appeal Process
1. Informal Hearing. Where Consultants attempt to settle “informally”. Most
appraisal districts make a good faith effort to reduce many protests at the informal
meeting. This is successful 90% +/- of the time. Approximate timeframe: May 1 –
July 1.
2. Formally. Through the Appraisal Review Board (ARB). Typically the more
respected consultants have hearing dates that are usually later in the process
allowing them to compare “settled” values vs. comparing to “notice” vales.
Results can vary depending on the board members at your hearing. Approximate
timeframe: July 1 – July 15.
3(a) Judicially. With a lawsuit. You must file within 60 days of receipt of ARB value.
Appraisal Districts are highly reluctant to take a market value or an equity case to
court. Almost all cases that end up in court are a result of a law or a procedural
situation. Success rate is high when settling a value during this process.
Approximate timeframe: October – January.
3(b)Arbitration. Must file within 45 days of receipt of ARB value and overall value
must be less than $3 million. Results are binding and if taxpayer is successful,
minimal cost involved. This appeal process has not been used often but with
recent changes to the law, will become more prevalent.

23. Property Tax Binding Arbitration for Property Owners