Roland Altinger

Chief Appraiser,

Harris County Appraisal District

Dallas, Harris and Williamson counties have settled such protests via compromise on appraisal value, without accepting the theory. The Bexar Appraisal District recently completed a non-binding arbitration with Lowe’s. In a Jan. 10 decision, a three-member panel upheld the county’s existing methodology and appraisals. Lowe’s could continue the dispute in court, however, as litigation remains open for its 10 stores in Bexar County for tax years 2014 through 2016.

And of course, arbitrations and lawsuits in themselves can be costly for both sides. Bexar County estimates it has already spent at least $300,000 on the Lowe’s tax protest.

Lowe’s also sued Harris County, but in October 2016 approached the county to settle. Harris County Chief Appraiser Roland Altinger attributes the settlement’s timing to the company’s desire to avoid a similar but greater legal struggle in Harris County. “They approached us to settle after Bexar County finished its arbitration process [with Lowe’s],” says Altinger. “They knew the battle they were fighting in Bexar County was about to be replicated in Harris County, which has three times the number of stores.”

“Comparables,” and Why They Matter

Property tax appraisal methods for commercial properties usually rely on “comparables” — the sale value of similarly situated properties — to determine a property’s market value to a hypothetical buyer. Texas Property Tax Code Section 23.01(a) requires taxable property in Texas to be appraised at its market value as of Jan. 1 of each year.

Evertson points out that the Property Tax Code requires determinations of appropriate comparable sales to include the property’s condition, occupancy and any legal burdens. For her, considering vacant properties as comparables for a property that isn’t vacant is akin to using a ghost town as a “comp” for a vibrant city block.

Bexar County Chief Appraiser Michael Amezquita also believes dark store theory is inappropriate precisely due to the use of comparables, because it begins with the assumption that stores should all be appraised as if they were closed.

“It turns all appraisal theory on its head,” he says. “The first step in any appraisal assignment is to determine the highest and best use of a property. The highest and best use of these properties is usually continued use as a big-box retailer. It’s never appropriate to pretend one could only look to sales of failed, vacant stores for comparables.”

Brent South, chief appraiser of the Hunt County Appraisal District, agrees. “Real estate is location, location, location,” South says. “If [stores] have gone dark, there’s a reason — they’re in a bad location, an older part of town, a part of town with less economic activity. Why would you compare [those to] something in an affluent part of town? We have to make location adjustments.” And Chris Connelly, deputy chief appraiser of the Williamson Central Appraisal District, notes that dark store theory would be particularly difficult to apply in fast-growing areas such as urban Central Texas.

“As areas change, there’s blight, but we don’t have that,” Connelly says. “We’re a thriving and growing area and don’t have dark stores. To take a Kohl’s or Lowe’s in the center of our jurisdiction and not use nearby property sales [for comparison] — that goes against the main building blocks of appraisal.”