photo by Dallas Morning News David Woo
I may have told you that the Dallas Country Club sued the Dallas County Appraisal District earlier this year, claiming that the District has over-valued its lush 118 acres, which, as we all know, are located in a neighborhood of blue chip homes. The case is pending. DCAD put the value of the Dallas Country Club’s property over there on posh Beverly Drive at nearly $13.8 million, up about ten million dollars from a $3.5 appraisal last year. Sure got their attention. DCAD figured that with DCC’s new $27 million renovation, the land might be a bit more valuable, right? DCC did what every non-profit, non-tax paying blue-blooded American club aimed at keeping its dues low would do: it sued the Appraisal District.
In fact, the DCC, like most commercial property owners, has been suing to lower taxes for ten years.
The Dallas Morning News earlier this month reported that, (subscription req.) through an open records request, DCC has shaved more than $15 million off the value of its Beverly Drive property during the past decade through court settlements in SIX lawsuits.
Yikes! The current lawsuit is DCC’s seventh. In each lawsuit, guess what happened? The appraisal district backed off its original value and agreed to a lower amount, reducing the club’s property tax bill. For those who do sue, it’s a battle worth fighting.
But what the article didn’t tell you is this: most of the land that DCC sits on could never be used to develop multi-million dollar Highland Park homes: it’s on a greenbelt.
I checked with veteran property tax consultant Don Walker, who’s firm, Donald C. Walker & Associates, Inc., has been going to bat for homeowners and private clubs for years. He told me about the greenbelt. He also told me lawsuits are fairly typical in the state of Texas on commercial properties as well as golf courses. Thousands of lawsuits are filed each year as a remedy for excessive values after an ARB hearing. Quite simply, most property owners are interested in minimizing their taxes, and in Texas lawsuits are the only way to accomplish that. Hec, one year even I sued. Walker’s firm currently represents Bent Tree, Northwood, Preston Trails, and Prestonwood, and has filed 2011 lawsuits.
As far as valuing the real estate of private country clubs, confusion reigns, says Walker, like knowing that DCC sits on a greenbelt that cannot be developed. So, who would buy it? Generally, private clubs don’t sell for their real estate value. If a sale occurred, a large part of the sale price would be attributable to membership fees and monthly dues. And those items are generally considered “business value” and are NOT assessable as real estate.
“Remember,” he told me, “you are attempting to value just the real estate, not the business entity.”
In the Dallas Morning News piece, an “outside expert” from the Aassociation of Appraisal Districts was quoted as saying that recurrent lawsuits show “that the process of determining property values is highly subjective and is more so in Texas than most other states.” No duh:
“Texas is one of very, very few states that does not have some form of disclosure of property sales prices,” said Sands Stiefer, president of the Texas Association of Appraisal Districts. “If we had the data, we would be able to come up with a much more accurate value.”
We’ve had this discussion before on DallasDirt: Texas is a non-disclosure state. When you sell a property, buyers can “Z” out the selling price to keep DCAD from taxing on the full sales price. Without the sales price reported, Texas appraisers determine land values using whatever data is available, often last listing price.
That tends to work against homeowners with average priced homes, say under $1.5 million, and in favor of commercial property owners. Why? Because there are more lower-priced properties to use as comparisons. And many million dollar property sales are non-disclosed. As for commercial, virtually every commercial property owner has deep enough pockets to sue over values. And when you sue, DCAD tends to settle because of the sheer volume of the lawsuits. In fact, the News reports that the number of protests over residential property in Dallas is declining, from 69,693 in 2002 to 53,093 in 2011, while the number of protests by commercial owners is on the rise. Commercial protests have increased from 20,298 in 2002 to 24,390 this year.
That is actually interesting, because values went up significantly from 2002 to 2008. Last year, of course, was a down market, most Dallas homes have depreciated in value.
This I did not know: the Texas legislature launched a pilot program to put more appraisal disputes into the hands of administrative law judges, rather than district courts, for properties valued at $1 million or more. Not sure if this will be available in Dallas County, but it is available in 11 Texas counties. The goal is to remove some of the costs associated with protracted legal battles, at least for appraisal districts.