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Policy could ban incentive recipients’ tax protests

Tuesday, October 28, 2014 by Michael Kanin

On Monday, City Council Member Kathie Tovo told the Austin Monitor that she has asked city staff to prepare language for a policy that would have the effect of making recipients of City of Austin economic development incentives agree not to protest their property tax valuations for a period of time.

The move comes on the heels of a staff report that indicates some economic development incentive recipients are indeed protesting their property tax values. However, the report did not identify a larger pattern of businesses appealing property tax values after receiving incentives from the city.

The study identified nine projects — of 21 total concluded incentive agreements — that had actually received an incentives payment from the city. Of these, said the report, “four appealed their property tax valuations at least once — none of which were projects that were attracted to Austin through the use of a job-based incentive.”

The four projects identified in the report are the Domain, the Advanced Technology Development Facility, Samsung, and HelioVolt. After comparing their data to “all business-related parcels in Travis County,” however, staff concluded that “the correlation between the increase in incentivized parcels and appealed parcels was not significant enough to make a determination that there is a pattern of appeal.”

That conclusion carried forward to two other looks at the data, which led staff to an even broader finding, delivered in bold print: “Upon analyzing the data in a range of perspectives, staff was unable to establish a pattern of appeal among incentivized parcels.”

Tovo believes the issue warrants a hard look. “It is an issue that we should devote some serious time to thinking about,” she told the Monitor. She suggested that the change in property valuation — should it trend down — could negatively affect the city’s calculations with regard to the incentives agreements. That, she argues, “in essence changes the … assumptions” made when the city enters into such an agreement.

Staff suggests the opposite, arguing that the city should “rely on existing financial protections already provided in the property tax-based incentive policy.” They continue on to report outreach to current incentive holders, “professional organizations that could leverage large member bases for response,” and other municipalities that have sought to restrict property tax appeal valuations. The report offers conclusions based on those interactions.

“There were three main take-aways from their responses,” according to the report. “1) There are no ‘best practices’ for restricting incentivized companies from appealing their property tax; 2) restricting companies that receive incentives from appealing their property tax values seems like a self-defeating strategy; and 3) projects located in a TIF (tax increment financing district) are the only exception to restricting property tax valuation appeals (because financing relies on TIF revenue).”

The study also produced a larger assessment of commercial property on the Travis County Appraisal District register. This includes the fact that “commercial parcels represent 26 percent, or $40,840,754,782, of the total market value in Travis County ($154,755,571,834) despite representing 4 percent (15,382 parcels) of the total parcel count in the County (406,575 parcels).”

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