Businesses take issue with process of appraisal

EL PASO, Nov 08, 2009 (El Paso Times - McClatchy-Tribune Information Services via COMTEX) -- WNR | Quote | Chart | News | PowerRating -- Western Refining, El Paso's largest property taxpayer, recently settled a three-year fight over the taxable value of its El Paso refinery, and cut its mammoth tax bill by $5.7 million as a result.

Western is the biggest example of what is a perpetual battle between commercial property owners and the El Paso Central Appraisal District over property valuations set by the district. Those values determine how much tax the property owners will pay.

The district currently has about 200 lawsuits pending over valuations; most of those were filed by commercial property owners, and most are 2008 and 2009 cases, said Dinah Kilgore, executive director and chief appraiser for the Appraisal District. While Western agreed to valuations for the past three years, it's back in court challenging the 2009 valuation of its El Paso refinery.

"We're not trying to get out of paying what is due. We just want to make sure it's fair and accurate," said Gary Hanson, a spokesman for Western Refining.

Western paid almost $35 million in property taxes in the past three years, or an average of $11.6 million per year for 2006 through 2008, according to data from the city of El Paso tax office. That declined to $29.1 million, or $9.7 million a year with the valuation settlement.

The $5.7 million in tax savings from Western's challenge of 2006 through 2008 valuations makes a difference to the company, "especially in these (tough) economic times," Hanson said.

Western Refining had a

profit of $64.2 million in 2008, which includes its other three refineries in New Mexico and Virginia. It had profits of $238.6 million in 2007, and $204.8 million in 2006.

"We disagree with what the fair value is. We follow the appeal process to get as close as we can on value," Hanson said.

The Appraisal District set the 2009 value of Western's El Paso refinery at $561.9 million, which was lowered by the district Appraisal Review Board to $445.8 million after Western protested the valuation. The Review Board is a group of El Paso County residents appointed by the district's board of directors to hear protests and set valuations. Western is now challenging the board's 2009 valuation in court.

The refinery's 2008 valuation was set at $442.8 million in the court agreement, which is $205.4 million lower than the Appraisal District's proposed $648.2 million valuation for 2008.

"We're not saying if it (valuation process) is good or bad," Hanson said. "I know there's a lot of debate if this is the most efficient process. That's for others to make that determination."

Adam Frank, president of River Oaks Properties, the developer and owner of retail shopping centers in El Paso, and the second-largest property taxpayer in El Paso, according to Appraisal District data, doesn't like the valuation process.

"I think it's a bad process," Frank said. "Say you go to court and win the valuation you thought it should be -- the next year, they jack it up again. ... Then you have to fight it (again), hire attorneys. ... Some valuations are too high, and some too low. It's not a good method."

River Oaks is challenging two appraisals in court this year for two shopping centers on the far East Side. The Appraisal District's valuation of the two centers totaled almost $17 million, which was lowered to $15.5 million by the Review Board, court documents show.

River Oaks' properties were valued at $194.5 million by the Appraisal District this year.

The Appraisal District's Kilgore said assessing property values isn't easy in Texas because state law doesn't require public disclosure of property information.

"We do a lot of research," but values are estimated "on facts that are available," Kilgore said. "One thing we're adamant about is, if we are wrong, give us the information, and we'll change it."

The district appraises most commercial property itself. But for Western's refinery and other complex industrial, or large manufacturing properties, the district uses Capital Appraisal Group Inc., an Austin company which specializes in industrial appraisals.

Commercial property sales prices are "almost impossible to get," Kilgore said. And getting information on rents and other income data on commercial properties, which is used to determine a commercial property valuation, isn't given to the district until valuations are protested, she said. The only time property owners are legally required to provide specific data is when a case goes to court, she said.

When an appraisal challenge goes to court, then district officials determine "how far we can go before we cut losses and settle for an (valuation) amount," Kilgore said. Most valuation lawsuits are settled before they go to trial. The last one to go to trial here was years ago when Chevron challenged the appraisal on what is now the Western refinery, Kilgore said.

The Howard County Tax Appraisal District in Big Spring, Texas, spent more than $1 million in a court fight this year with Alon USA over a refinery appraisal, which went to trial, Kilgore noted.

State law also provides a binding arbitration process for properties valued at $1 million or less for property owners who don't want to file a lawsuit to appeal a valuation set by the Appraisal Review Board.

The El Paso Appraisal District has $400,000 in its current budget for all legal costs. But Kilgore did not know how much of that money pays for valuation court cases, which are handled by two law firms in El Paso and Houston.

Most court settlements lower a commercial property value below what the Appraisal District and Review Board set as the value, Kilgore said. "It may not be an accurate market value, but it's a settlement," she said.

"Things always could be tweaked," Kilgore said. Required disclosure of property information and a longer protest period to allow more time to deal with challenges would make the system work better, she said.

But the current valuation system in Texas is better than it was before appraisal districts were established in 1979, Kilgore said. Before that, each taxing entity set valuations at varying percentages of market value. Now, appraisal districts must have property valuations fall within 95 to 105 percent of market value, which is verified by annual studies by the Texas Comptroller's office.

Vic Kolenc may be reached at vkolenc@elpasotimes.com; 546-6421.

For more information: www.epcad.org.

Refinery valuations

These are the appraised valuations of Western Refining's El Paso refinery in recent years as set by the El Paso Central Appraisal District, followed by the valuation set by the district's Appraisal Review Board after Western protested, and the final valuation set through a court agreement after Western filed lawsuits to challenge the valuations:

--2006: $478.9 million, $322 million, $304.9 million.

--2007: $512.1 million, $492.1 million, $366.4 million.

--2008: $648.2 million, $558.2 million, $442.8 million.

--2009: $561.9 million, $445.7 million, lawsuit pending.

Sources: El"Paso Central Appraisal District, court documents.

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