Update: City loses appraisal district lawsuit

Update: Moday, Nov. 9

After Judge Tim Sulak’s ruling dismissing the city of Austin’s lawsuit on Friday, several parties weighed in.

Mayor Steve Adler said, “We need a court to rule on the fairness of the property tax system. The court’s decision today did not reach this question. That’s frustrating. The city of Austin’s challenge is brave, creative and in uncharted territory. We’re going to keep trying until we find a way to make the tax system more fair.”

Attorney General Ken Paxton also released a statement, saying, “This ruling is a victory for the taxpayers of Texas. The City of Austin’s attempt to rewrite Texas law was beyond the scope of their authority and put all property owners in the state at risk of higher taxes.”

At the same time, Lt. Governor Dan Patrick called the decision to dismiss the city’s lawsuit “a victory for all taxpayers. Courtrooms are not the proper venue for tax policy to be created or modified. This is one of the very reasons I appointed a Select Committee on Property Tax Reform and Relief,” which was announced Thursday.

“I am confident the Senate appointees will be able to examine issues such as the alleged ‘undervaluation’ of certain commercial properties. They will be able to better determine the fairness, or equity issue, in which was the basis of this lawsuit,” he concluded.

Patrick appointed Sen. Paul Bettencourt, R-Houston, as chair of the committee. Bettencourt is the chief executive officer of Bettencourt Tax Advisors LLC, a tax appraisal protest and appeal business. He sent a letter to Sulak on Oct. 7 urging him to dismiss the case.

Real Estate Council of Austin spokesman Ryan Poulos said in a written statement, “RECA is pleased with the judge’s ruling that the City of Austin does not have standing to bring its lawsuit against the Travis Central Appraisal District and owners of commercial and vacant properties before the court. … It would be in the community’s best interest if the city does the right thing and opts not to appeal this decision.”

Acting City Attorney Anne Morgan said Sunday that Council will hear their options at Thursday’s executive session.

Original story: Friday, Nov. 6

The city of Austin has lost its lawsuit to declare certain portions of the Texas tax code unconstitutional. The city had sued the Travis Central Appraisal District and owners of commercial and vacant properties in an attempt to overturn provisions related to how properties are appraised, claiming that those provisions unfairly favor commercial and vacant property owners and cause those properties to be undervalued.

On Friday morning, Judge Tim Sulak ruled in favor of arguments from the defendant, known as Junk Yard Dogs LP, that the city did not have standing to bring those issues before the court. Because the city could not legally make those arguments, the case was dismissed. Junk Yard Dogs owns the property.

Attorney Lorri Michel argued on behalf of commercial property owner Junk Yard Dogs. The judge granted a similar motion for the Texas Association of Realtors, Lowe’s home improvement centers and the Driskill Hotel. Although the appraisal district was the first named defendant, its attorneys did not really seem to be participating in the lawsuit.

Assistant City Attorney Meghan Riley, director of the litigation division, said after the hearing that city attorneys would have to consult with their clients, the City Council, before deciding whether to appeal. The deadline for such an appeal is 30 days.

Sulak said it was important to have a ruling on all matters before the court so that the city can take the matter to the Third Court of Appeals if it chooses to do so. He asked the city to dismiss one final cause of action so that the appeals court could not send the matter back to him for a ruling on that one issue.

Following a brief recess, Assistant City Attorney Michael Siegel told the court that the city would like to dismiss that cause of action without prejudice, meaning that although the matter would no longer be part of the lawsuit, the city could file another lawsuit related to that argument if it chose to do so.

Assistant City Attorney Andralee Lloyd handled most of the city’s arguments, but she was fighting an uphill battle because the judge was persuaded that the city could not be a plaintiff in such a lawsuit. The city is seeking reappraisals for all commercial property and vacant land in Travis County for 2015.

If the appraisal district reappraised those properties, Junk Yard Dogs and other commercial defendants argued, it would change the total value of properties the city, the county and the school district could tax. That would change the effective tax rate and have a ripple effect on everything involving taxes throughout the county.

Attorneys for the defendants argued in a previous hearing that such an outcome could have a devastating impact on Austin Independent School District because the state of Texas determines how much it will give to or take from each district based on appraised values of local properties and the revenue those properties generate.

“Whether the city decides to prolong this agony remains to be seen. But for now, we’ve got a final judgment by the court that is right and hopefully will not be appealed so that everybody can move on down the road,” said Michel after today’s hearing. Attorney Bill Aleshire, who also represented the Junk Yard Dogs, said after the hearing that the city should turn over all of its research on commercial and vacant land values to TCAD and ask Chief Appraiser Marya Crigler to use that research in appraising properties in 2016.

Photo by Austin’s Only Paper made available through a Creative Commons License.