When Texans head to the polls this fall, a constitutional amendment designed to cut property taxes is expected to draw the most attention. But tucked at the end of that 112-word proposition is another change in law that some see as the key to restarting a decades-old debate.
At issue is Texas’ distinction as one of a handful of states that does not require the disclosure of real estate sales prices. Property appraisers and other officials argue that this missing data point makes it difficult to accurately value properties and fairly assess taxes. Amid past efforts to require disclosure of the sales prices, critics have cited a fear that future lawmakers would use the data to start taxing real estate transactions.
Enter Proposition 1, which, along with increasing the homestead exemption, includes a prohibition on state officials ever levying a tax on real estate transactions. That ban would undermine a key argument against requiring sales price disclosure in real estate transactions, according to proponents of mandating disclosure.
“The major concern that’s been cited in the past was that it would lead to taxes on real estate transactions,” said Travis County Chief Appraiser Marya Crigler. “We would hope that this removes that barrier.”
Crigler's appraisal district is one of the defendants in a lawsuit the city of Austin filed last week against the state of Texas that contends that the property tax system is “unequal,” in part because of a lack of mandatory sales price disclosure. The suit’s backers also argue that changes in state law that have made it easier for commercial property owners to win large reductions in their values, which have shifted the tax burden toward homeowners over time. While Crigler disagreed with some of the suit’s allegations related to her office’s appraisals, she said she backs its goal of pushing state lawmakers to implement sales price disclosure.
“If we could get that data up front, it would help us do that job and get our models right to begin with,” Crigler said. “But that’s not how it happens right now.”
Aside from predictions of a new tax, critics of mandatory sales price disclosure have argued it would violate property owners' privacy without improving the accuracy of appraisals.
The combination of the lawsuit and the upcoming election are shining the brightest spotlight on the issue of real estate sales price disclosure since 2007, when a Task Force on Appraisal Reform appointed by Gov. Rick Perry recommended a package of proposals including mandatory sales price disclosure and limiting local budget growth to 5 percent annually absent voter approval. The plan never gained enough support among lawmakers.
The lead author of the property tax cut measure on the November ballot, Senate Finance Chairwoman Jane Nelson, R-Flower Mound, also added the language banning taxes on real estate transfers. Though some lawmakers expressed confusion at the insertion of the provision, there was little public debate over it or the impact it could have on future proposals to require sales price disclosure.
"People are literally being taxed out of their homes, so we felt it was important to make sure no future Legislature can enact a new tax on home ownership without a vote of the people,” Nelson said in a statement. “Mandatory sales price disclosure is a completely separate issue that, to date, has received insufficient support to advance in the Legislature.”
A coalition of business interests including Realtors and various commercial property owners have long opposed efforts to mandate the disclosure of real estate sales prices but are supporting Proposition 1.
David Mintz, vice president of government relations with the Texas Apartment Association, agreed that a constitutional ban on real estate transfer taxes does mitigate a key point of opposition against mandatory sales price disclosure. But that doesn’t suddenly make disclosure a good idea.
“I think it addresses that one concern,” Mintz said. “It doesn’t address other concerns with mandatory sales price disclosure, about it being proprietary information, how an older property may need different considerations than newer property sales, how the information can be cherry picked by appraisal districts when they’re looking at how they use the information.”
Daniel Gonzalez, the Texas Association of Realtors’ legislative affairs director, said his organization’s concerns are the same ones brought up in 2007 by Perry’s task force. Though they supported sales price disclosure, they also questioned whether commercial sales data could be misinterpreted to inflate appraisals, according to their report.
“There are many appraisal districts in Texas that do not have the wherewithal to understand the complex data that’s included in those commercial property transactions,” Gonzales said.
According to the International Association of Assessing Officers, at least 37 states have a mandatory price disclosure law. In some of the other states, like Missouri, large portions of the state fall under local disclosure laws.
“IAAO standards encourage the disclosure of real estate sale prices to assist assessors in fairly and accurately determining the value of property,” spokesman Mike Ardis said. He noted that effective disclosure could constitute a price range rather than a specific sales price.
Even without mandatory sales price disclosure, Texas appraisers usually can find data on local residential prices through the private Multiple Listing Service, an inventory of houses for sale that some appraisal districts pay to access. But those listings often omit high-end homes, and the data on commercial properties can be tougher to get, according to appraisers.
Appraisal districts often get crucial additional information from commercial property owners when they appeal their original appraisals. Dallas County Chief Appraiser Ken Nolan said that tactic ensures that he manages to find out the necessary details of commercial sales in his area, though it sometimes takes a while.
“Basically, the property owner gets a year’s discount if I don’t know what it sells for,” Nolan said. “We may not know all the details, but we’re going to force all the details eventually out of the property owner or his representative. There’s ways to work around this.”
At the Texas Association of Counties’ conference last week in Austin, both the city of Austin’s lawsuit and the future prospects for sales price disclosure were hot topics. At a panel on property taxes, an attendee asked Crigler if Proposition 1 could pave the way for mandatory sales price disclosure. Crigler was skeptical because of the political power of the Realtors.
“Based on the comments we’ve seen most recently, the issues now are going to become 'It’s a privacy issue, the appraisal districts are too unsophisticated to know what to do with the data,'” Crigler said. “They’re changing tactics.”
But Dick Lavine, chairman of the Travis appraisal district's board of directors and a fiscal analyst with the liberal Center for Public Policy Priorities, said he’s more optimistic.
“I think it removes one of the primary objections that people have had to sales price disclosure, so it should smooth the way,” Lavine said.
Disclosure: The Texas Association of Realtors and the Center for Public Policy Priorities are corporate sponsors of The Texas Tribune. A complete list of Tribune donors and sponsors can be viewed here.