Determining “Taxable Value” of Real Property in Texas

Fort Bend County residents have expressed concerns about the Fort Bend Central Appraisal District and the valuation of their property for tax purposes. Below is an explanation of County Property Taxes.

  1. Fort Bend County has no control over property valuations for tax purposes. Such valuations are the responsibility of an independent authority, Fort Bend Central Appraisal District (CAD), which is not a part of Fort Bend County. A seven-member board governs the Appraisal District. The taxing jurisdictions appoint the Board members.
    Fort Bend County appoints 1 of the seven. The County Tax Assessor/Collector as a non- voting ex-officio member of the Board. The area school districts appoint a majority (4) of the board. For purposes of levying property taxes a property’s “Taxable Value,” the value on which a property tax is levied, is equal to the “Market Value,” the price at which a willing seller will sell and willing buyer will buy.
  2. The typical process of a protest by a property owner of their property’s “Market Value” is:
    1. the protest is heard by an employee of the CAD, who negotiates with the property owner on “Market Value”;
    2. if no resolution is reached the protest goes to an Appraisal Review Board (ARB) or Auxiliary Panel, which “ARB” and “Panel” members are appointed by the Administrative District Judge, an elected official, for a determination of “Market Value” by the ARB;
    3. if there is no agreement on “Market Value” as determined by the ARB, the dispute is submitted to binding arbitration.
  3. Persons not associated with a taxing jurisdiction or appraisal district, residents of Fort Bend County for at least two years, and are18 or over can apply to be appointed to the ARB or Auxiliary Panel to the Central Appraisal District (CAD), which forwards the applications to the Administrative District Judge. The Judge selects the members of the ARB, which must have a minimum of 3 members, and the ARB Auxiliary Panels. The CAD is not supposed to communicate with the ARB members other than the ARB communicating their decision on a property’s “Market Value” to the CAD.
  4. State law requires Appraisal Districts to value a property’s “Taxable Value” (the value on which taxes are based) within 5% of area “Market Values” (what a property would sell for) and those valuations are subject to audit by the State Comptroller’s office. If the values are lower than 95% or higher than 105% of area “Market Values” state law requires a revaluation by the Appraisal District. Per state law, the Comptroller conducts periodic evaluations of the “Market Value” as determined by the CAD. If the CAD’s “Market Values” are 94% or less of the “Market Values” determined by the Comptroller the state reduces the amount of state revenue to local school districts. Most single family residential properties are valued by the per SQ. Ft. Sales prices in the relevant neighborhood as reported to the Multiple Listing Services. If a homeowner believes their home is appraised at a value higher than the recent sales price per sq. ft. of comparable homes they can protest the valuation to the Central Appraisal District.
  5. Fort Bend County had countered the increases in property values by reducing the county tax rate from a high of about 65¢ when I came into office in 1997 to about 47¢ today saving taxpayers almost $900 million in taxes over those years. Taxes saved for 2016 are almost $100 million.Fort Bend County has kept the tax revenue increases at population increases plus CPI increases. The County has extended services to new arrivals and has to pay the same price for goods and services as everyone else.
  6. The majority of a homeowner’s property taxes go to the school district. County taxes are about 15% of the typical property owner’s property taxes, the school district’s taxes typically account for about 60-65%. The average home value in Fort Bend County is about $178,000. The average homeowner, after exemptions, pays about $680/yr. ($57/mo.) in property taxes to the county.
  7. The services the County provides are extensive – Funding the Justice System, including most Judges, the District Attorney office, Sheriff, Jail, Constables, County Clerk and District Clerk. The County also maintains all of the roads and major drainage systems in the county; it provides a county-wide library system and county-wide Emergency Medical Service; it provides a repository for all vital statistics, such as birth, death, and marriage certificates as well as for all property records; it provides a Public Health Service that monitors and addresses communicable diseases, including mosquito-borne diseases, such as West Nile Virus and Zika; it constructs new and improves existing roads, builds county facilities, including a new Justice Center, a new jail, new County Annexes, and parks. These services and more are provided for less than the average cell phone or cable TV monthly charge to the average homeowner.
  8. Approximately 65% of the county’s Annual Budget is required/mandated by state statute, leaving the county with the ability to reduce only 35% of the Budget. Our choices include reducing our drainage district expenditures, like improvements/maintenance to prevent flooding, reducing Sheriff’s Patrol, reducing library hours despite overwhelming approval of libraries by voters, reducing our Road & Bridge repairs to our county roads, or eliminating some of the ambulances that are providing emergency medical services. All tough choices, each with a constituency that demands those services. We work hard to balance taxing our residents and providing a reasonable level of services.
  9. All Texas government officials who levy a property tax are elected. If taxpayers/voters are unhappy with the increases in their taxes, whether through increases in “Taxable Values” or tax rates, they can elect officials who commit to lowering their taxes, like your Fort Bend County Judge and Commissioners have done over the last 20 years. Local officials making local decisions is how the federal and state governments were initially established. Keeping or getting back to local control works best overall as citizens have more influence with local officials.
  10. In the 2003 Legislative Session, I went to Austin and testified on legislation to reduce the “Rollback Rate” to 4%. Dan Patrick, now the state Lieutenant Governor then a radio personality and the Republican Party of Harris County sponsored a bus trip, including lunch, to Austin for taxpayers who wanted to support the legislation. Patrick’s radio station paid for one bus; the Harris County Republican Party paid for the second bus, and I paid for everyone’s lunch. Patrick in the group became upset when their testimony was delayed. They left to complain to the Speaker of the House, I stayed and testified. I was not able to testify until late that afternoon in the meantime both buses went back to Houston stranding me in Austin. I had to hitchhike back to Sugar Land. I testified in support of the legislation provided it was coupled with a constitutional amendment to rollback and prevent all unfunded mandates on local governments.
  11. Homeowners 65 and older or disabled can defer all of their property taxes by making an application to do so with the Central Appraisal District. The deferred property taxes accrue at an 8% rate annually, and the taxes plus the 8% interest are paid when the property sells. We are working with state legislators on several “fixes” to the CAD valuation process, including making the interest rate 2+Prime Rate, which today would be 5.5% instead of 8%.
  12. We continue to offer proposals to our state legislators to address the problem of taxing homeowners out of their homes. One proposal is to have a different process for selecting the ARB board members, including direct election of the Appraisal Review Board (ARB), which Board would, in turn, appoint the Appraisal Review Panels (ARP) to hear protests of property valuations. Members of the ARB and ARP would be required to have training in property valuations and be compensated at more than the per diem now provided to ARB members.
  13. Another proposal provides for the reporting of commercial/industrial property sales. Currently, the sale of a residential property is reported to a Multiple Listing Service (MLS), which provides a reasonable value of homes in a neighborhood. However, there is no MLS reporting of commercial/industrial property sales. Three methods determine the “Market Value” and therefore the “Taxable Value” of commercial/industrial property, (1) “Sales Approach” based on actual sales prices of similar properties. Since there is little or no reporting of sales of such properties, this is seldom used. (2) “Cost Approach” which takes the original cost of the property and deducts a “depreciation” amount to the cost to arrive at a “Market Value,” this is often used for large industrial properties. (3) “Income Approach” (use for income producing property) which values the property by the net income the property generates. The “Cost Approach” utilizes somewhat arbitrary “depreciation” and seldom includes upgrades are modifications to the facilities. The “Income Approach” entails a significant number of variables, – rental rate, vacancy factor, occupancy costs, discount rate – all of which are subjective. Property Tax Agents representing commercial/industrial property owners make a good living “calculating” the “Market Value” using the “Income Approach” and “Cost Approach” getting a reduction in “Taxable Values,” saving their clients millions of dollars in property taxes, shifting more of the tax burden to homeowners. Actual sales prices would provide a more accurate “Market Value” for such properties.
  14. Fort Bend County strives to ensure the tax burden is shared equally. Several years ago I noted that the “Taxable Value” of the Parrish Power Plant, the largest electricity generating plant in Texas in the Thompson area of Fort Bend County was reduced from $800 million to $450 million. The county cannot challenge the valuation of a single property but can challenge the valuation of a “category” of property, in this case, “Industrial.” We showed the ARB that a similar power plant, with a smaller electricity generating capacity than the Parrish Power Plant and built the same year, 1976, had sold six months earlier for $1.5 Billion. Despite evidence of what the Parrish Power Plant would sell for, the ARB found for the owner of the Parrish Power Plant stipulating that they believed they should support the CAD, which had accepted the Property Tax Agent’s calculation of “Market Value” utilizing the “Cost Approach.” This action shifted about $25 million in taxes to homeowners and other taxpayers. I pointed out that the ARB is supposed to be a neutral umpire calling balls and strikes not favoring one side in a dispute.

I hope this explanation helps you understand county property taxes a little better. Homeowners, if they haven’t done so already, should apply for a Homestead Exemption and those 65 and older or disabled are entitled to a special exemption of an additional $100,000 from the county. Also, homeowners 65 and older are eligible for the capping of their home’s taxable value at the application year’s value for school tax purposes. State law so provides that homeowners 65 and older and disabled can defer (not pay) their property taxes by notifying the CAD. The deferred taxes carry an interest rate of 8% per annum which means that unpaid taxes are accumulating at a compound 8% per year. The deferred taxes and accumulating interest are paid with the property is sold. Contact the Appraisal District for more information at (281) 344-8623.

Sincerely,

W. A. “Andy” Meyers
Fort Bend County Commissioner Pct. 3
832-338-1199 Cell
281-238-1400 Office