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The most reliable study of ad valorem levies in Texas was conducted by the Legislative Property Tax Committee in 1975. It analyzed appraisals in 35 randomly selected school districts to get a representative sample of statewide practices, and its results were not encouraging to any who believe in fair taxation. Overall, property appraisals in these districts averaged only 60 percent of actual market value \(one district appraised property at an -average of only 11 percent of true value, while even the best district But these averages don’t really give an idea of the proportion of property value that is allowed to escape taxation. Based on reports from all Texas school districts, Craig Foster of the Intercultural Development Research Association figures that $219 billion worth of real and is carried on today’s tax rolls. Foster, who directed the 1975 LPTC study and has 15 years’ experience in this field, has made his own projections that peg the actual market value of taxable property $464 billion. In other words, because of undervaluation, assessors exclude from the tax base over half the value of even those properties they take the trouble to inventory. It would be one thing if everyone were getting a fair share of this tax bonanza, but LPTC’s 1975 study found that the more expensive the property, the more it was undervalued, while the smaller property owners in each category had the highest appraisals. The same pattern of systematic discrimination holds true Foster told the Observer that discrimination is sharpest among single-family residences. It is .the rule rather than the exception, he says, to find $30,000 homes in Texas appraised at 80 percent of actual value, while $100,000 homes are on the books at only 50 percent. The same goes for commercial propertyin the 35-district survey, the smallest, locally owned stores were appraised above market value \(typically at 110 outlets, including national chain stores, got away with valuations capturing only 65 percent of their real worth. Similarly, small hometown industries generally pay close to the full fare, receiving 95 percent appraisals in 1975, but the giant industries are not even paying half their fair share. Says Foster: “The worst abuse of the valuation process is in the industrial category at the level of $200 million to $2 billion market valueit’s not uncommon to find valuations as low as 40 percent of actual value.” Foster’s fmdings document precisely the property tax inequities that have been recognized in a general sense for decades. Practically every legislative session since World War II has produced its own report, always reaching essentially the same conclusion as one published in 1966: “In practice, property tax town. Foster also reported that undeveloped land, including holdings of speculators, was pervasively undervalued in relation to improved property. Much utility property, including that owned by gas and telephone companies, was valued in accordance with unverified reports submitted by the companies themselves, which benefited from a trust not afforded the average homeowner. Commercial property, including regional shopping centers, was valued by outmoded on-site methods rather than by more accurate income production methods. \(That is, it is not how much glass and stone a shopping center boasts that matters: it is how much money the tenants and owners make. The latter will determine selling Taxation of inventories was something of a joke. Inventory values for businesses were “eye-balled” on a persquare-foot basisfor instance, a jewelry store was assigned an inventory’ value for each “square foot” of jewelry. Often these values were vastly different for stores in the same line of business and with virtually the same inventory turnover. One jewelry store all but insisted that it had no stock on handthat its watches and diamonds were flown down from New York one at a time. Many new car dealers reported the same inventory in 1976 that they had in 1969. When the board raised their assessments by nearly 50 percent, our estimate was evidently still so far off that they did not even bother to appeal the reappraisal. Many banks received an illegal 15 percent discount on bank stock, apparently thanks to a special dispensation granted by the Austin city council some 20 years ago. This illegal discount was removed by the board \(once we found out about itthe tax department being reticent to did not appeal. Now and then, the tax department attempted to audit the inventory of large retail stores and other establishments, but typically a few inexperienced auditors were matched against the computer print-outs and accounting whizzes of the major corporations, and the results were predictable. The records were always massive and seemed to indicate that the inventory was at another of the corporation’s outlets on the January 1 assessment date. I am sure the same argument was made to the tax authorities at those other locations. Realtors, as a group, did little to help us make the property tax system more rational. Using specious arguments about confidentiality, the Austin Board of Realtors steadfastly refused to supply the tax department with data on real estate sales. After the board of equalization issued subpoenas against the entire board of directors of the realtors’ associcompromise was reached under which the information would be supplied in the future. The compromise agreement described the Austin Board of Realtors, after months of foot-dragging, as “a public spirited organization made up of Austin citizens vitally interested in the welfare of the city of Austin.” A more accurate description would be that they acted like owners of stills faced with the onslaught of the -`..`revenuers.” A board of equalization exasperated by inequities can, of course, refuse to certify the assessor’s rolls as a fit basis for tax collectionand our board held out until the last minute. But the countervailing pressures from local governments and school districts that depend on the property tax are, to put it mildly, intense. So, in the end, we certified the tax rolls, acknowledging to be true what is true nowhere in Texasthat values were equal and uniform and in accordance with the stated assessment ratio. No mention was made of the omission of intangible property \(stocks, the tax rolls, the existing inequalities among classes of real property, and the special problem of large businesses and utilities. Yet some progress was made. Due to the board’s insistent demands, the tax department began to conduct orientation meetings for new board of equalization members. The realtors apparently have complied with the agreement to provide sales data. An experienced accountant/ auditor was hired, and studies of utility valuations were in the works. Steps were taken to reduce the inequalities between valuations for different areas of the city and properties of different vintage .. But in the absence of tax reform at the state level, the pace of change is slow. During the time that the 1976 board spent trying to bring fairness to property tax administration in Austin, not a single member of the Austin city council publicly supported the board’s efforts. Indeed, our conduct became an issue in subsequent city elections. In 1977, none of us was reappointed. Perhaps that is the most telling indicator of the progress our board had made. Mark Yudof served as chairman of the Austin Tax Board of Equalization for 1976-77. He is the John S. Redditt Professor of Law at the University of Texas. THE TEXAS OBSERVER 5