June 24, 2020 545 PM
PRESIDIO COUNTY — After holding appraisal values steady last year, the Presidio County Appraisal District announced in April that the average home value would increase 58% this year, an adjustment made in hopes of getting local appraisals more in line with the state’s market value data on Presidio County. The district will now hear 400 homeowners contest their appraisals, both over the phone and in-person, starting Monday.
The county has repeatedly struggled to align with the state, most recently failing the State Comptroller’s 2019 Property Value Study, which said the Presidio County Appraisal District was consistently undervaluing its properties last year. The study looks at local appraisal values in comparison to data collected on local home sales, which should be within 5% of each other.
“We were almost 20 percent behind. It was bad,” said Richard Petree, a consultant to the local appraisal district. “Consequently, we’re having to make big changes. Land was a real big problem; I’m just shocked at the price of land out there.”
Petree said Marfa is exceptional. “I work in 22 counties and I don’t see that kind of stuff going on anywhere else. It’s just a special environment,” he said. The tax rates aren’t higher than other places, but the appraised values are, so the tax bill for homeowners can come out more expensive than in other rural Texas areas, Petree noted.
“I do the work for Brewster County also – in Alpine, they’re probably 30 percent, 40 percent behind Marfa’s numbers for the same property. Then you go over to Fort Stockton and you get a much more normalized market that is typical of West Texas oil towns,” he said.
While it stings to get a high appraisal value in the mail, Cynthia Ramirez, chief appraiser for the PCAD, emphasized, “It’s not a bill.” The appraisals have gone up this year, but it is the taxing entities -– Marfa, City of Presidio, the two school boards, the county and the hospital district – that set the tax rate that is applied to your property value. “The taxing entities will be the ones to decide what you pay, because they’ll vote on their tax rates.”
In setting new tax rates this year, taxing districts will have to find the tax rate that brings in the exact same amount of money as last year. From there, they are capped at how much they can increase it.
While the hospital district can still increase by up to 8% each year, a new law will cap most local taxing entities at a 3.5% increase, down from the previous 8% cap. Any increase over the cap triggers an election where voters can reject that increase entirely.
As COVID hits local budgets already, the entities may be looking for revenues that will pay for their upcoming budgets, meaning they could increase the full 3.5%, or even go higher if they are willing to let residents vote on the tax increase.
There is some reprieve for property owners this year: if a homeowner “homesteads,” making their Marfa home their primary residence, their appraisal increases are capped at 10%. A home that used to sell in Marfa for $30,000 can only increase by $3,000 increments each year. “It’ll take a long time to go up to what it’s valued at now,” Petree said.
“I know a lot of people out there are worried about gentrification and issues driving people out of the community who aren’t able to homestead. New owners who hadn’t owned property previously, they get hit with the new numbers right off the bat,” the consultant said. “Those with a second home, they’re not protected at all; they’re not entitled to the homestead exemption.”
Demand for Marfa homes has risen, and the price people are willing to pay has grown too. Landlocked by ranches, the city is not able to add property in the way other cities might sprawl as they grow. That scarcity drives the prices up further.
“Some people don’t understand why we increase the values,” said Ramirez. “Our market here is very active. We have a lot of homes that are selling and I don’t think people really understand that it all relates back to the market.”
The yearly property appraisals that PCAD assesses are expected to measure the market value – what a house would sell for in Marfa. With rising home prices, appraisals have risen too.
The problem is that the PCAD can’t readily access house sales information. “We’re guessing because we don’t have any sales information, so we have to guess what homes are selling for.”
Homeowners can voluntarily provide sales information to the state and the PCAD, but Ramirez said, “It kind of seemed like people knew what we were using that information for, so they quit filling out their sales letters that we were mailing them. They don’t want to be taxed what they actually paid for their property.” Petree went as far as saying some homeowners had provided information that was false.
The consultant also acknowledged that adobes are appraised higher, but said it’s unavoidable when house sales are clearly driven higher when a home is made of that building material. “Now it has become a commodity that people really want and they’re willing to pay a premium for it in Marfa,” Petree said. “That’s not true in Presidio or other places in the state.”
It’s not a specific additional tax, however. “We just have adobe schedules, but we have always had adobe schedules, always. It goes according to sales,” said Ramirez, who has been with the PCAD for over 27 years.
“Adobe is what people want. There’s a romanticism with it that makes people pay more. That’s basically what we are mirroring,” said Petree. “We do the same thing if we saw that swimming pools were commanding an extra $100,000. We would recognize that as the characteristic impacting the market.”
Petree said that PCAD’s appraisals last year “missed the mark so dramatically that the school district, which is considered rich, has to pay more money to Austin for redistribution.”
“What PCAD did for the community was awesome,” MISD Superintendent Oscar Aguero said about appraisals not increasing last year, “but what it did for our personal budget was it hurt us. This year, they can’t continue to be that far off on values.”
Presidio County under-assessing values in 2019 was a particularly tough blow for the Marfa Independent School District. Because the state classified Marfa as a “rich” district, it “recaptures” money, sending a yearly bill that Marfa ISD has to pay the state.
That recapture bill is based on state valuations, while MISD’s tax collection is based on local valuations. When those don’t match, MISD’s budget suffers. Last year, there was about a $44 million difference between Marfa’s state and local valuations.
“We’re paying recapture on the higher value and getting local [tax revenue] on the lower value. So that’s the big problem,” Aguero said. Last year’s payment still isn’t quite settled, but the district will pay around $400,000 to the state. And the next bill is roughly estimated to increase to $425,000, taking more money from the school district’s coffers.
Petree and Ramirez said appraisers have asked the governor to give property owners a break, given the pandemic and economic hardship residents are facing, but Texas Attorney General Ken Paxton said that power rests with the Texas Legislature, which isn’t slated to meet again until 2021.
2020 has presented a slew of compounding issues. “It’s a perfect storm,” Petree said, referencing various challenges that have arrived this year. Along with the county failing the property value study, COVID-19 struck months after January 1 – the date PCAD is required to base their market values around. With the tourism industry slowed, many worry about paying taxes based on early 2020 appraisal values, though Petree said home values aren’t necessarily declining the way some expected.
Another challenge Petree mentioned was the softening of the oil and gas industry this year, hitting West Texas and its job opportunities particularly hard.
Property tax protest hearings begin Monday, June 29 over the telephone, and in-person hearings at the Marfa Shorthorn Gym are slated to start July 6. Petree said bringing photos, sales records and data about what similar houses sold for are all strategies in protesting an appraisal.
As for next year, “We’ll have to wait and see what the market does. If it starts to slow down and we see that houses are not selling, maybe next year we’ll look at a decrease,” Ramirez said. “It all depends what the market does throughout the year.”