By Yamil Berard
Mike Farah, a real estate attorney in Arlington, is expecting to deliver some bad news to tenants who live in the more than 300 rental properties he owns: Your rent’s going up $200, $300, $400.
“It’s a shame,’’ Farah said. “God, it makes you sick.”
Farah says he’s not the bad guy here. It’s the Tarrant Appraisal District that has raised by more than $2 million the assessed value of his properties, jacking up his tax obligations, he says.
“It’s a trickle-down effect,’’ Farah said, as he waited his turn to appeal a vacant land valuation on a mid-June Saturday morning in the crowded offices of the appraisal district.
The appraisal district is struggling to recover the public trust after a faulty $2 million software conversion put in question the integrity of its appraisal processes. Tens of thousands of protesters like Farah - an unprecedented number - are angry over soaring residential and commercial tax bills that they say were caused by the appraisal district’s failures. Even state lawmakers have weighed in on the agency’s woes.
“These systems are integral to public trust,” said State Sen. Paul Bettencourt, R-Houston, chairman of a state committee on tax reform. “That type of trust takes years to build, and that’s why government has a special responsibility not to do a software conversion poorly. It takes years to build credibility with the public, but you can throw it away with one season of bad performance.”
For years, Tarrant Appraisal District had chugged along like a well-oiled machine; its appraisals came in on time. The public griped about yearly hikes, but they experienced nothing systematically outrageous. Now, taxpayers are seeing double-digit increases to their property values. Farah’s valuation on vacant land near Joe Pool Lake shot up $150,000, he said.
The problems began in October 2014 when the appraisal district upgraded its mass appraisal software after relying on a legacy system that stored and classified 1.6 million property tax records. The switch went south immediately. Work came to a screeching halt, putting millions of dollars’ worth of 2015 appraisals in limbo. This year’s byproduct: higher-than-normal tax bills in 2016 to adjust for last year’s lag. State Sen. Kelly Hancock, R-North Richland Hills, described it as a “two-year catch-up.”
Elected officials, including Fort Worth Mayor Betsy Price, have spoken out in defense of the appraisal district’s efforts to upgrade its software. It was time to make the switch after 30 years on an old system, the mayor said.
Plus, “anytime you make a conversion like that, you have a few issues,’’ Price said. “Probably, it wasn’t the smoothest transition, but if you look at it, it went pretty well.”
Nevertheless, before a packed room in April, Jeff Law, the Tarrant Appraisal District’s chief appraiser, apologized to more than 500 local and state elected officials and taxpayers for the software failures. Law didn’t give specifics on what went wrong, but he did acknowledge problems during implementation.
After Law conceded there were problems, appraisal district leaders have been espousing greater transparency with the public. In June, appraisal data was released to the public that had been tied up in a lawsuit filed by the software companies that operate the new program.
And leaders have been more open to explain how they plan to address problems going forward.
Joe Potthoff, chairman of the board of the appraisal district, said in early June that the appraisal district had received $800,000 in refunds from the software vendor, Thomson Reuters, for missed implementation deadlines. In addition, the company won’t be paid an additional $800,000 for professional services and software expenses until the system passes an independent audit.
“Simply put, the vendor did not provide as smooth a transition with the new software as we all wanted,’’ Potthoff said.
Asked to respond to Potthoff’s statement, David Wilkins, a spokesman for Thomson Reuters, said the company designed the software system to provide accurate assessments and to be transparent to the public. In March, the company updated the software to “better equip (the appraisal district) to effectively manage citizens’ concerns and assessment appeals,” Wilkins said.
“We understand that there are considerable demands from the community on government appraisal offices...” Wilkins said.
How profound a change the public will feel won’t be fully evident until every appeal is heard.
It’s going to be a long summer. Property owners submitted more than 77,400 appeal requests so far this year through late June. That’s more than last year’s 58,218 and the prior year’s 69,953.
Farah’s appeal went swiftly. He was invited into the hearing room by a member of the appraisal review board. Six minutes later, he emerged with a result favorable to him. The appraisal district had set a market value of $471,240 for vacant land he owned near Joe Pool Lake in Grand Prairie. After the appeal, its new value: $289,001.
“Boom, done,’’ an appraiser told Farah.
2016 didn’t get off to a good start for the appraisal district.
The Texas comptroller of public accounts was the first to deliver the distasteful news: The appraisal district hadn’t met its expectations on market values for 2015. Its $142 billion appraisal of property in Tarrant County was too low.
Just how low?
Tarrant Appraisal District was short by tens of millions of dollars, the state comptroller reported. From 2014 to 2015, it had experienced an increase of 5 percent in property values. (Dallas and Denton experienced increases of up to 10 percent over the same period of time. The Tarrant Appraisal District, for 2015-2016, has publicized a projected 14 percent increase, however.)
Leaders of several public school districts went ballistic as the lower estimate meant less money from local property taxes to support education.
“We have a mess on our hands at the appraisal district,’’ Ashley Paz, a Fort Worth school district trustee, wrote in response to questions this summer. Paz pointed to local estimates that showed Fort Worth school district had lost up to $12 million in funding for its 2015-2016 school budget because of the software snafus. That means fewer staff and resources to support the urban district’s growing student population of 86,000.
“That is money we will never be able to recover, and we have no way of knowing if it will happen again,” Paz said.
In March, Austin tax agent Susan Bawcom went public with a failed effort to pry loose raw data on land improvements and other factoids from the appraisal district. Bawcom had tapped such data for years as evidence in appeal hearings. Not this year.
Then, even after Texas Attorney General Ken Paxton ordered the appraisal district to release the data, the appraisal district said it could not. In October 2015, a district court judge in Travis County had ordered a temporary injunction that declared that the data could not be made public; it was proprietary. The software companies that held the data had sued Paxton and the appraisal district to keep it secret.
In April, at a crowded forum at the University of Texas at Arlington, Bettencourt, the Houston senator, rebuked the appraisal district’s failure to release the data as well as its software failures.
“There was no reason for this lawsuit,’’ Bettencourt said later this summer. “None of this behavior needs to occur.”
In early May, Todd Clark, an attorney representing the appraisal district in the suit, met with attorneys for the software companies to try to prompt a settlement.
By May 25, Bawcom’s attorney, Bill Aleshire, was flexing his political muscle. Less than a month later, Bawcom had the data. Without Bettencourt’s involvement, the data dump likely would not have occurred, Aleshire said. “I give the senator (Bettencourt) great credit for the fact that this case settled. Not much cooperation was occurring before then.”
Decades ago, individual local governments set their own property values, creating a mishmash of conflicting appraisals and instances of cronyism. Current law created separate county agencies that appraise property.
An area as large and complex as Tarrant County has 70 different taxing agencies, including cities, schools, the college and hospital districts. The board of the appraisal district is collectively chosen by the elected representatives of the taxing bodies. The bigger your tax levy, the more say you have in appointing members to the appraisal district’s board. The Fort Worth school board, for example, appoints one of the five members.
“We work for them, we are accountable to them, and we will always be accountable to them,’’ said Potthoff, the chairman of the board of directors.
But not everyone agrees that there’s enough accountability to the public. One recurring complaint is that taxpayers don’t understand much about what the boards do or even who the members are.
Tarrant Tax-Assessor Collector Ron Wright is the only elected official on the board, but he does not have a vote.
“Nobody knows who they are, and they have tremendous power,’’ Wright said.
Bettencourt’s tax reform committee expects to issue a report in the fall to boost the transparency of boards. One recommendation could be to create a state position to evaluate boards.
“None of these groups are accountable to anyone in reality,’’ Bettencourt said. “There’s no central state (entity) that they’re responsible to.”
Paz, the Fort Worth trustee, said she would like her colleagues on the Fort Worth school board to pay closer attention to the nomination of candidates to the appraisal district’s board of directors.
This year, when Fort Worth elected its nominee to the appraisal district’s board of directors, she had barely time to study the qualifications of the nominee before her colleagues jumped to vote, Paz said.
“It’s not going to fix (the appraisal district),’’ she said, “but if we set our expectations higher and put an end to the ‘good ‘ol boy’ system, then we can create some accountability when issues arise.”
Mike Flynn, president of Southland Property Tax Consultants, is having a busy summer contending with commercial protests of Tarrant Appraisal District valuations.
Because of issues it’s encountered with a software conversion, TAD hasn’t been able to raise many values over the last two years, but it’s trying to catch up with 2016’s valuations.
“The weighted average value increase appears to be approximately 14 percent verses 2015 final values,” Flynn says. “As would be expected, the number of 2016 protests filed by Southland has increased this year.”
Southland likes to tell clients not to just accept increases in tax appraisals and move on. For more on this interview, please visit fwtx.com/fwinc – FWInc.
Yamil Berard is a Fort Worth-area freelance writer.
By: Scott Nishimura1