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Chapter 380 won’t stop firms from tax protests

Friday, December 12, 2014 by Jo Clifton

City Council Member Kathie Tovo’s attempt to prevent companies that enter into Chapter 380 economic development agreements with the city from appealing their property tax appraisals ended with something considerably less than that Thursday, after Council members heard from a Samsung representative about how such an effort might backfire.

Catherine Morse, general counsel and director of public affairs for Samsung, told Council her company pays $25 million a year in taxes and $50 million a year in Austin Energy bills, making it one of the bigger economic engines for the whole region. However, the idea that the company could not protest its tax appraisal from the Travis Central Appraisal District without fear of losing its agreement with the city might jeopardize future expansion.

Morse said that she and other advocates of economic development agreements were very alarmed when they became aware of the proposal Monday. She said Samsung’s appraisals are extremely complicated.

“In 2011, TCAD overvalued our property by $1.3 billion. They admitted it,” Morse said, explaining that the appraisal district sent to Samsung “a rogue appraiser” who disregarded evidence from previous years, among other things. “He even admitted that he based his appraisal on press releases Samsung had issued about how much the company was going to invest.” But that included labor and other costs, she said, adding that Samsung lost confidence in the appraisal district. Ultimately, the company filed suit in order to reduce the appraisal value to a level to which Samsung could agree, she said.

Council Members Laura Morrison and Mike Martinez co-sponsored the resolution with Tovo. The original resolution stated that any multiyear Chapter 380 agreement would contain a provision prohibiting the company from protesting its property tax valuations for the period of the agreement, and directing the city manager to implement policies to ensure that companies that violated that provision would not receive or would have to reimburse incentives.

Council Member Chris Riley, who conceded defeat to Tovo in the recent District 9 election, proposed an amendment substantially altering the effect of the resolution. He had support in crafting that amendment from Council Member Bill Spelman and Mayor Pro Tem Sheryl Cole.

Riley said, “We are telling Samsung that if you go in and protest any aspect of your taxes, no matter how de minimis (inconsequential), we will probably eliminate your entire incentive. That will be the official city of Austin policy with regard to economic development agreements. I just think that goes too far.”

The approved resolution directs the city manager to determine whether a company that has a 380 agreement has lowered its tax valuation so much “that the agreement is no longer revenue-positive for the city. In that event, the city manager shall present the Council with recommendations for adjusting the amount of the incentive commensurate with the reduction in property tax valuation.”

The amendment making that change won approval on a 4-3 vote, with the three sponsors of the original resolution voting no. The final resolution, however, won unanimous approval.

After the hearing, Morse said, “Their own economic development office told them they’re making it very hard to recruit … manufacturers … These rebate agreements kind of level the playing field between Texas and states like Ohio that don’t tax personal property,” like the equipment Samsung and other manufacturers use. “It seems to me that the Council should be thinking, how can we make it easier to grow?” She said it seemed very unlikely that the city would ever face a situation contemplated by the resolution that finally passed.


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