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Handling Crushing Property Tax Increases

Jan 17, 2017

By Ginny Sutton, TSSA Executive Director

This time of year we all take a deep breath and pay our taxes if we haven’t already done so at the end of the previous year.  Most of us have the property taxes on our homes to pay (whether in a lump sum or monthly through an escrow account). For self-storage businesses, like all other businesses, there is the annual tax due on business personal property owned by the business. And last, but far from least—in scale—is the tax on the value of members’ self-storage facilities.

In a state with no personal income tax, property taxes are the main driver for funding government spending.

Determining the value of commercial properties has always been a combination of science and art (and maybe a little speculation thrown into the mix), and facility owners have been dealing for years with wildly escalating values. Three methods—income, sales comparison and cost—are used to assess values. Of course whatever method seems to yield the highest value is typically the one used. I’ve been employed with TSSA 19 ½ years and through them all, we’ve heard from members hit hard by startling year-over-year increases in valuation. Even if the tax rate stays the same, the resulting tax bill can take an enormous bite.

It seems that different counties’ taxing authorities roll out a mandate every so often—to take a close look at values for self-storage and adjust them—never downward, mind you—but sometimes by giant leaps and bounds upwards. This year reports from members are that Bexar County is implementing some of the biggest single-year increases on values, purportedly because of a handful of recent and unusual high-profile sales transactions. That doesn’t mean owners in other counties are not seeing surprising increases, just that we have heard most frequently from those in Bexar County, as increases in valuations have been as high as 50 to 200 percent in extreme cases.

It is during times like these that members understandably want to know what can be done, whether through legislative advocacy, class action suits, or something else they can’t quite name. Essentially, members want to know how TSSA can help.

Advocating for property tax relief is a thorny issue. There are those who believe that by sticking our heads up we call even more attention to the property type, theoretically causing a more critical look at a commercial property type that some believe has gone undervalued for years. And then there is the matter of being powerful enough to garner legislators’ attention, typically via a significantly-funded Political Action Committee (which TSSA does not have).

What’s a Member to Do?

The TSSA Board of Directors has for years grappled with the property tax issue. Our mission is to help members succeed, and for us that means in every area, including helping them reduce or manage expenses.

TSSA’s role in the property tax challenge has been as educator and watchdog legislative advocate. Our continuing goal is to provide resources, such as articles and webinars, as well as training at luncheons and annual conference about understanding the process and protesting valuations.

With regard to legislation, we closely monitor any bills related to property taxes and are always watchful for threats and opportunities.

About two years ago there was a groundswell of rhetoric—some would say propaganda—from groups such as Real Values for Texas about commercial property owners not supporting their fair share of the property tax burden. Around the same time, TSSA joined the Coalition for Equal and Uniform Taxation, a group of nine real estate organizations intent on spreading truth about the consequences of unfair taxation. Our most recent efforts have focused on connecting with and joining the respected Texas Taxpayers and Research Association.

One of the tenets of the five constitutional rules with regard to property taxes states that no single property or type of properties should pay more than its fair share of taxes. Whether reassuring or not, the Building Owners and Managers Association, which represents commercial building owners, is reporting increases of upwards of 100 percent over a two-year period among its members as well.

Rest assured that if advocacy opportunities present themselves, we will pursue them. And we will continue to educate members and encourage them to educate themselves about comparable properties in their counties, ensuring that their assessment is fair and equal. Further, we encourage protests where warranted and even lawsuits as a last resort.

Let us know if we can provide other resources to you.

109 Comments

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