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The Case of Tobin Hill North

On August 17, 2017 a large group of Tobin Hill neighbors, many wearing Tobin Hill’s orange t-shirts, came to City Council to advocate for a historic district designation for their block of Mistletoe which would be called the Tobin Hill North Historic District, the culmination of a year-long effort. The effort was in response to a developer’s plans to crowd eight two-story single-family homes on one lot in the middle of the block of  bungalows and cottages, plans the neighborhood deemed incompatible.

Neighbors came together and 51% of them agreed to start the designation process. After a meeting in which the Tobin Hill Community Association endorsed the plans,  four public meetings conducted by Office of Historic Preservation (OHP) and countless meetings in living rooms and dining room tables, Historic Design and Review Commission (HDRC) gave its unanimous approval.

But it is at this point the process exposed a weakness in OHP’s procedures: 51% of the residents agreed to attend meetings for information, but no votes are taken after these meetings. It is as if the vote to listen to information is a vote to become an historic district and the confusion becomes acrimonious.

By the time the case made it to City Council on August 17th, the numbers for and against the designation had slipped back and forth.  In the end, no side had the required 51% majority. Out of 88 properties, 11 abstained (13%), 33 (37%) voted for the designation, and 44 (50%) voted against it.  Several people who were not in the district but within the 200’ radius that is sent notices also voted.

But it was not that simple.

The opposition consisted of some sincere neighbors who advocated for property rights and did not want the designation, but many of the opposition were investors who owned property temporarily, but did not live in the neighborhood or even District 1, begging the question for future debate: Should the votes of temporary property owners, non-residents, be weighed the same as people who live in the district (or own property on a permanent basis) and will live with the consequences in a way that is more than just pecuniary?

Out of 44 properties counted in opposition, 22 of them were possessed by non- residents, some of whom owned multiple properties: Half of those 22 properties are owned by just four investors. In other words, investors made up half of the opposition; just four investors made up a full quarter of the opposition.

It became a no-win situation for the residents.

The Councilman met in February 2017 with the investors along with the District 1 Zoning Commission representative in a room in a local restaurant. One of the condo developers later stated at City Council that he had met with Councilman even before he purchased the property.

The neighbors, although they tried, were unable to get an audience with the Councilman. He did not return their calls. His staff, coordinating everyone’s schedule, produced a meeting with the neighbors and the Councilman. He did not show. A public meeting was set up to discuss the Neighborhood Conservation District (NCD), a year-long process for which the Councilman advocated (even after telling another neighborhood that only historic designation would protect them) but by that time frustration and tension engulfed the meeting.

At the the Zoning Commission hearing on May 16th, OHP asked for a third continuance for reasons that are unclear. One of the neighbors was told that someone had called and wanted more information. No presentation was given for the Zoning Commission by OHP. The Commission (with barely a quorum)  voted against the designation, after listening to speakers for and against, critiquing OHP’s process.

Democracy is strongest at a local level.  Our neighborhoods, our communities, our City is a place that we can nurture it, even as it is tested on a national and world stage. Democracy is not easy. It requires transparency and inclusion and a sense of fair play.

Our City government let us down.

City Council members make whatever decisions they choose, and citizens can debate them at the ballot box, but the process of inclusion and transparency was blatantly ignored to the  advantage of developer interests.

At the City Council meeting on August 17th, neighbors came with a real expectation that they would not only speak, but that they would be listened to, that they would be heard. Before the meeting, a compromise to redraw the Historic District had been accepted by the advocates  and it left out the most adamant opposition, a “flipper,” out of the district, a request he had made at the Zoning Commission meeting.  At the end of over two hours of neighbors’ testimony, District 1 Councilman read a statement that demonstrated that their words, their work, and their presence had no bearing whatsoever on any decision, that it had been predetermined. The rest of the City Council simply voted along with little or no comment or questions and certainly no explanations. It seemed clear by their silence that they had made up their minds (with the exception of District 9 Councilman John Courage) beforehand to support their fellow council member instead of the people to whom they are responsible. The compromise was summarily dismissed. Neighbors were thanked for their  “participation” in a display of condescension. This was the not a democratic process and it exemplifies the worst of City government.

When we question why people do not vote, look to the lesson of Tobin Hill North.  If ordinary citizens are not even acknowledged by their elected representatives, why indeed, does it matter for whom they vote? Citizen input and participation become empty words that breeds the worst kind of cynicism in its citizens. It is this kind of cynicism that kills democracy. “Inclusion” becomes an empty show that benefits those with money and power.  I am not suggesting that this Councilman was wrong to meet with the opposition which consisted mostly of the development community; I am forcefully suggesting that he was wrong in not also making himself equally available to the neighbors of Tobin Hill North and listening to their perspective as well. This is not about one Councilmember: They are all, with the exception of Councilman Courage, complicit.

We have a right to expect more.

 

 

 

 

 

 

 

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Rising Property Taxes: Paying a Fair Share

Property taxes in downtown neighborhoods are on a steep incline. We have conversations about them on Next Door and FaceBook and in neighborhood meetings and wonder what is causing the rise and how we can fight it. We talk with our next door neighbors across the fence to see if they are fighting the increase this year.  If you are upset about your property taxes and want to fight them, it may feel as though you are fighting a losing battle. You are right.  You may be able to lower them this year, but the fix is temporary and will not address the systemic issues of rocketing property values.

This issues around our rising property taxes seems complicated, but it comes down to one simple idea: Everyone must pay their fair share. The first part of this series explains the heavy burden that commercial property tax laws put on the average homeowner. The solutions are not complicated, but they will take political will which can come only from a concerted effort on the part of citizens for meaningful change. Corporate and large commercial property owners are able to shift their share of the tax burden on to others by the use of unequal comparables, lowered median values, and deep pocket lawsuits.

Unequal Comparables

One of the biggest reasons that large commercial property owners are able to avoid paying for their fair share of taxes is that they are able to compare, for assessment purposes, their properties with those of lesser value creating a tax loss for which residential property owners are responsible.

In 1997 a third paragraph was added to Section 42.26 P a1 and a 2 of the Texas Tax Code which deals with appraisal ratios. The uniform and equal (sometimes called “equity”) provision passed without notice but it provides a lucrative opportunity or loophole for commercial property owners to exploit to pay less in property taxes. It states:

“The district court shall grant relief on the ground that a property is appraised unequally if the appraised value of the property exceeds the median appraised value of a reasonable number of comparable properties appropriately adjusted.”

Bexar County Chief Appraiser Michael Amezquita states in one of my favorite quotes, “Paragraph 3 is where the money is. Any blind monkey can win that deal.” (County)

This “equity” provision as well as a series of court decisions have rendered the constitutional requirement that property be taxed in proportion to its market value moot.

Corporate and commercial property owners continue to sue and win large reductions in their appraisals regardless of the market value of their property because of the ambiguity and lack of definition of terms like “reasonable number” and “comparable.”

Since enacted, this provision has undergone some revisions but none more significant and more beneficial to commercial property owners than when the words, “appropriately adjusted” was tacked on to the end of paragraph three in 2003 causing a flurry of  litigation. Through interpretation, an overwhelming majority of judges have sided with the property owners, again, because there isn’t a definition of “comparability” in the tax codes.

These reductions in commercial appraisals has meant hundreds of millions of lost dollars for Texas’s school districts, roadways, emergency medical services and fire protection, a loss homeowners shoulder. “Homeowners pay taxes based on something reflecting market value, but corporate taxpayers just don’t,” said Amezquita. “That’s not equal, and what they’re doing puts upward pressure on tax rates.” (County)

Lowered Median Value on Commercial Properties

The effects of the unequal comparisons allowed by the tax codes to commercial properties is that it lowers the tax base down longer term.  When high value commercial properties are compared to those of lower value the median is lowered. This new lower median level creates a level by which all properties can be reduced. Jim Robinson, who retired from HCAD in May 2013 after serving 28 years at the agency states in the Houston Press, “What we see happening time and time again is tax consultants get everything that’s out there and they’ll pick a set of alleged comparables at the very bottom of the list and argue that they should be adjusted to that.”

The result of the drop in median value is a constant and growing erosion of the tax base” on which Texas’s public-school finance channels are dependent.

Deep Pocket Lawsuits

In 2013,  State Rep Mike Villarreal (D) and Austin property tax agent Jim Popp authored HB585 to make administrative changes to the tax code. It was an attempt to address issues of bias, lack of responsiveness and transparency in Appraisal Review Boards and local appraisal districts. Rep. John Otto (R)  added an amendment that states if a property owner wins an appeal of the property’s value (whether through litigation, arbitration, or through a board hearing) the appraisal district would have a higher burden of proof if it wanted to raise the value the next year.

It did not take long for attorneys to act on behalf of their clients: In San Antonio in 2014, JW Marriott Hill Country Resort & Spa, with a construction price tag that nearly eclipsed $600 million, had been able to lower its value by $125 million by winning multiple lawsuits against the Bexar County Appraisal District.

 Bexar County Chief Appraiser Michael Amezquita told the Houston Press: “I’ve been sued every year by [JW Marriott],” Bexar County at the time was facing $10.3 billion in appraisal-reduction litigation compared to the annual $4 billion to $5 billion average. In the 2011 tax year, BCAD’s ten most expensive courtroom losses to class A commercial and industrial property owners resulted in an absence of $1.8 million in tax revenue for San Antonio-area school districts.

“Valero sues every year,” Amezquita added. “H-E-B is suing every year now. They never used to sue me before.” (http://www.houstonpress.com/news/texas-is-losing-out-on-millions-of- dollars-thanks-to-its-defective-property-tax-system-6601492)

In 2016 local news aired a piece on deep pocket lawsuits by commercial and corporate property owners to lower their appraisal values: “These are the cases set for trial, hundreds of them,” declared Deputy Chief Appraiser for Bexar County Mary Kiekie. But she noted, none of these will ever make it to trial, lawyers will settle it in litigation.” Litigation is the ugly thing that nobody knows about,” she explained.

Of their $15 million budget, in 2016, at least $1 million had been spent on lawyers litigating.” It’s shifting the burden from the corporate and commercial properties onto the backs of the homeowners,” Kiekie said. “The tax rates would go down and still generate the same amount if indeed commercial properties were paying at the same rate that residential properties were paying at.”

Corporate lawsuits had more than doubled in 2016 . From 2009 to 2014, they accounted for an average of 474 lawsuits per year. In 2015, that number jumped to 965.

“It’s a game that the tax lawyers and tax agents are playing, and it’s so easily played,” said Kieke. Last year alone, corporations were able to litigate off almost a billion dollars in taxable value.

Kieke says a loss at trial, even if it’s just by a dollar, could mean a death sentence for her office. So they have to litigate.”If the appraisal district loses at trial, we can be responsible for the other side’s attorney fees up to $100,000 per property, per year,” said Kiekie. “So if Valero sues us on all their convenience stores and puts 130 stores into a lawsuit, they can bankrupt us.” (New4SA)

The problem has been exacerbated by Texas’s absence of sales-price disclosure, which gives property owners a running start in property-tax disputes because appraisal districts must rely on private databases to procure sales numbers. Even then, it’s impossible to seize reliable data for every property.

“Whoever heard of doing an appraisal without sales information?” says Amezquita. Idaho, Utah and Alaska are the only other states that lock away all sales figures on taxable properties.

“It’s like boxing with one hand tied behind your back,” says former Houston County Appraisal District (HCAD) Chief Appraiser Jim Robinson, who retired from HCAD in May 2013 after serving 28 years at the agency. “What we see happening time and time again is tax consultants get everything that’s out there and they’ll pick a set of alleged comparables at the very bottom of the list and argue that they should be adjusted to that.” (Houston Press).

And Now: Dark Store Legal Battle

This from the Texas Comptroller:

Dark store theory primarily concerns the property taxation of big-box stores, behemoth department stores, hardware sellers and other outlets often running to 50,000 square feet or more.

The dark store theory of property valuation, championed aggressively by many big-box retailers, suggests that commercial properties should be appraised and valued the same whether they’re operating or shuttered. They favor appraising all big-box properties as if they were vacant or “dark” to calculate property value, arguing these locations will be difficult to sell because they have little appeal to subsequent buyers. In essence, they’re asking that these properties be appraised according to how the next occupant may use it.

Appraisal districts, by contrast, appraise such buildings according to their “highest and best use,” which in practice means appraising them as operating locations.

The difference between these perspectives, as you might imagine, can be significant. Dark store proponents often ask that the value of their property be reduced by more than half, in one instance from $82 to $20 per square foot. Big-box retailers have pushed dark store theory most vigorously, but the practice has spread to other commercial property types as a way to seek tax reductions.

In Texas, the main proponent of the theory has been Lowe’s Home Improvement, which has 141 stores in the state.

Property tax appraisal methods for commercial properties usually rely on “comparables” — the sale value of similarly situated properties — to determine a property’s market value to a hypothetical buyer. Texas Property Tax Code Section 23.01(a) requires taxable property in Texas to be appraised at its market value as of Jan. 1 of each year.

The Property Tax Code requires determinations of appropriate comparable sales to include the property’s condition, occupancy and any legal burdens. Considering vacant properties as comparables for a property that isn’t vacant is akin to using a ghost town as a “comp” for a vibrant city block.

Bexar County Chief Appraiser Michael Amezquita also believes dark store theory is inappropriate precisely due to the use of comparables, because it begins with the assumption that stores should all be appraised as if they were closed.

“It turns all appraisal theory on its head,” he says. “The first step in any appraisal assignment is to determine the highest and best use of a property. The highest and best use of these properties is usually continued use as a big-box retailer. It’s never appropriate to pretend one could only look to sales of failed, vacant stores for comparables.”

The state comptroller’s office estimates Texas cities, counties and school districts will lose $2.9 billion if Lowe’s wins its Bexar County lawsuit and other commercial properties take up the “dark store” legal argument, potentially leaving homeowners to pick up the property tax burden. (Houston Chronicle)

Solutions

The solutions are simple, finding the political will is much more challenging. While we can fault corporate and commercial property owners for shifting the burden of their fair share to the rest of us, they could make the case that anyone would take advantage of what the law allows. However, if loopholes were closed, If commercial property owners paid their fair share, billions of dollars of revenue would be pumped into our tax base possibly lowering the tax rate of residential property owners. There are other factors such as tax abatements and school financing, but the failure of commercial property owners to pay their fair share contributes greatly to the problem.

This is a legislative issue.

In this last legislative session, HB 27, authored by Rep. Drew Springer -Muenster (R) and backed by Comptroller Glenn Hegar, aimed to limit businesses’ ability to use the unusual legal strategy when contesting their property values. The bill passed out of two committees but never made it to the House floor for a final vote.

In 2013, State Senator Wendy Davis (D) and Rep Sylvester Turn (D) co-authored a bill that would have addressed the ambiguous language of the equal and uniform provision.

In 2009, Rep. Michael Villarreal (D), Sen. Leticia Van de Putte (D), and Sen. Jeff Wentworth (R) authored a series of bills that would require sale-price disclosure in the state.

All of these attempts at property tax reform have failed.

It is up to homeowners to demand that all property owners pay their fair share, no more, no less.

 

 

 

 

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Affordable Housing is the Housing We Live in Now

Published in The Rivard Report, July 18, 2017 

https://therivardreport.com/affordable-housing-is-the-housing-we-live-in-now/

Photo by SCOTT BALL / RIVARD REPORT

At a recent Beacon Hill Area Neighborhood Association meeting, neighbors came together to talk about the proposed updates to our Neighborhood Conservation District (NCD5) design standards.  These design standards were originally developed by BH residents in 2005, in partnership with city staff, to address the demolition of Craftsman bungalow homes in favor of more subdivision style homes. This was a grassroots effort to preserve our neighborhood housing stock and to inform future development. The recent and overdue work to update the design standards was a result of changing development trends and the city’s focus on high density infill which allowed for multi storied single family condos to be built on a lot zoned for multi-family development. The updates also addressed issues that included porch requirements, fencing, height, and setback limitations. Many of the NCD standards were actually loosened.

There were many opportunities over the past year for residents and businesses to participate and provide input. Feedback ranged from “The city shouldn’t be able to dictate what I do with my property” to “How can we protect our neighborhood against indiscriminate flippers and developers?” But the most commonly heard and loudly voiced concern was over the ability for residents to be able to stay in their homes in the face of wildly increasing property taxes, partially caused by the new high density infill developments and flipped houses in their neighborhood. “I don’t know how much longer many of us can hang on,” one anguished neighbor said to a crowded room. His neighbors vigorously agreed. The frustration and fear were palpable.

At a recent breakfast organized by the Mayor’s Housing Summit, the Executive Vice President of the Urban Land Institute (ULI) stood before a packed room and denounced neighborhoods as the NIMBYs who would deny affordable housing development in our communities because our design standards make it more difficult for developers to build. Recently Beacon Hill has been criticized for this very thing. The fallacy in a working and middle class neighborhood like Beacon Hill (according to 2015 Census the family median income in BH is just under $37,000 in a predominately 77% Latino neighborhood) is that density and development creates affordable housing. The easy equations belie reality. Density does not equate to affordability. In fact, the quick turnover of flipped houses and the development of luxury condos which has become the model for downtown housing development (like the recent construction of six single family condos on one lot in the middle of a block of mostly single story early 20th century bungalows selling for $300,000+) has contributed to a steep rise in housing prices and property taxes, and many long term residents simply cannot keep up. Local landlords struggle to maintain affordable rental rates when their taxes are skyrocketing.

The “unprotected” neighborhoods of Monte Vista Terrace and Tobin Hill North (part of Tobin Hill) are facing condo developments that are anything but affordable and are incompatible with the character of their neighborhood. Who wins here?  Residents in Tobin Hill North who have been there for generations will face rising property values and taxes, a fear echoed at a recent Zoning Commission meeting where several elders and other neighbors voiced concern over incompatible and expensive developments. Tell the unfortunate residents of Mission Trails that were displaced by city- incentivized development how that tragedy promoted affordable housing. Their affordable housing will be replaced by luxury condos. In working class neighborhoods, affordable housing is the housing people live in now.

Design standards can help maintain stability in neighborhoods, and they help to prevent displacement. In fact, one of the Beacon Hill NCD5 standard updates requires that units built on multi-family lots be built within one structure to help ensure rental housing for the future. In the twelve years that our NCD standards have been in place, there is no instance of where they’ve discouraged the development of affordable housing. Design standards do not prohibit affordable housing: Expensive developments drive up land prices and prohibit affordable housing. Protecting working class neighborhoods could help protect affordability in a hot housing market.

At the same time we’ve updated our standards, Beacon Hill has encouraged thoughtful and neighborhood friendly developers working on affordable housing and density into our community. There are opportunities within the neighborhood for the development of “missing middle” housing and along the corridors for four-story structures creating density. As we work with the city in the future on the Near North Central Plan as part of the SA Tomorrow Comprehensive Plan (which promotes “strengthening [NCDs] to address the appropriateness of new and infill construction through enforceable design standards that allow neighborhoods to define unique character and features and promote compatible infill development” HPCH P9), we look forward to working on issues of density and equity.  But we cannot solve San Antonio’s workforce housing shortage by destroying these early 20th century downtown neighborhoods that are an important part of our city’s history. Once gone, these unique neighborhoods cannot ever be brought back. Once gone, our neighbors cannot ever be replaced.

One of the greatest reasons we struggle with the issue of affordable housing is that San Antonio does not have a comprehensive housing policy. Working together to create one would be a first step to guiding our future. A developer-driven approach to affordable housing, one that primarily favors the builders, is not an answer. If we are serious about providing affordable housing, then we need the political will to do the hard work of building a plan that is equitable and that works. Any workable housing plan must include neighborhoods in the decision-making process instead of a top-down elitist approach that bypasses the democratic process of allowing neighbors to speak for themselves. We must avoid easy answers that promotes a blanket policy of control that may displace neighbors and leaves them vulnerable to predatory practices. Simplistic slogans like YIMBY and NIMBY are just diversions to the complex and difficult work that needs to be done.

In his much acclaimed new book, How to Kill a City: Gentrification, Inequality, and the Fight for the Neighborhood journalist Peter Moskowitz examines the very process that is occurring in our downtown San Antonio neighborhoods in neighborhoods in cities across the U.S. He makes the case that that it is imperative that neighborhoods should decide their future: “So the problem of solving gentrification is not only about economics or urban planning, but about democracy. What would cities look like if the people who lived in them, who made them function, controlled their fate?”

We must not destroy our unique downtown neighborhoods to solve the problem of San Antonio’s affordable housing shortage: We must, instead, develop an equitable and effective housing policy whose process is fair, inclusive, and transparent. We must give the people who live in our neighborhoods a voice in their fate.

 

 

 

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Welcome to the Neighborhood

Change. Challenge. Choice.

Changes can create tension and alienation and ultimately, displacement.

Change can create safer neighborhoods, pedestrian oriented streetscapes which improves the health of its community, and can revitalize local businesses. Change can be a catalyst to solve problems.

The next decade will be about what kind of change we want in our neighborhoods and communities. It will be about educating ourselves and coming together and making our voices heard. These are exciting, as well as frustrating, times. Neighborhoods San Antonio is about exploring issues and concerns, coming up with solutions and ideas, and hearing from the people in our neighborhoods who are making a difference.

Welcome to the neighborhood.