Tax Realty Consultant

Protest consultants help clients cut property bills, affect county roll

Motivated by a cut of the savings, Dallas County’s property tax consultants drive many of the commercial property protests each year by filing hundreds of challenges for their clients.

About 76 percent of commercial property owners who protested in 2006 used a tax consultant, significantly more than homeowners, according to an analysis of 2006 Dallas Central Appraisal District data by The Dallas Morning News.

Nearly half of those were successful.

That’s one of the findings The News made after analyzing 2006 DCAD data on residential and commercial property protests. The analysis studied protest and success rates by census tract to identify trends.

The impact of tax consultants on Dallas County’s tax roll is significant.

With its successful protests, Deloitte & Touche, one of the major firms in the field, removed more than $1 billion from the tax roll in 2006.

The firm handled protests for most of Dallas’ tallest and most expensive skyscrapers, resulting in a reduction of $140 million of taxable value. Overall, Deloitte handled the most commercial protests, with an average 57 percent success rate.

Terry Obeney, owner of Heritage Stonecraft in Garland, said he was forced to hire a tax agent last year to reduce his appraisal after his own efforts failed.

In 2006, it was easy. He just walked into DCAD’s offices with his closing statement, showing how much he paid for the warehouse building that year. DCAD knocked 38 percent off the value.

But last year, the district increased the value to what it was before he bought it. He said he paid a Plano-based company, Real Estate Tax Consultants, about $7,000 to get it reduced again.

“It’s almost like an extra surcharge on your taxes,” he said. “You have to pay the taxes and then pay these guys to keep it reasonable.”

Many of the larger consulting firms automatically file protests for all their clients every year and later focus only on the ones they believe have the best chance of getting a reduction. They say because of that, their success rate is higher.

For a homeowner, though, the chances of winning don’t improve with the help of a tax agent. Generally, one out of two homeowners won their protest, regardless of whether or not they used an agent, according to The News’ analysis.

It’s just as well. Not everyone can afford tax consultants. And firms that work on a contingency basis say the amount of tax savings on modest homes isn’t worth the time and effort.

Only about a quarter of Dallas County homeowners who protested in 2006 used a tax consultant. And most of them lived in affluent neighborhoods.

Tax agents provide a wide range of financial services to minimize taxes, part of which involves negotiating property values with the district’s appraisers and appraisal review boards.

Experts are needed, the firms say, to properly appraise commercial property, much of which is valued on the income generated from rents. The job involves complex calculations that also factor depreciation, expenses, occupancy rates and other variables.

Consultants say they’re providing a necessary service to correct imbalances in the county’s imperfect mass appraisal system. But the firms have also been a drain on the appraisal district’s resources over the years, hiring away many of DCAD’s appraisers.

With the opportunity to earn big money in the private sector, many appraisal district employees and supervisors eventually go to the other side.

“That’s why values are so off,” said Candace Rubin, a local tax consultant. “You have new guys who are inexperienced.”

Even the appraisal district’s longtime chief appraiser made the private-sector leap. In 2005, Foy Mitchell went to work for Marvin F. Poer & Co. as a vice president after serving 23 years as the county’s top appraiser.

Mr. Mitchell said he doesn’t handle any Dallas County property cases because it would be inappropriate given his recent role as chief appraiser.

Mr. Obeney said he believes tax agents use their relationships with their former colleagues at DCAD to win successful outcomes and keep themselves in business.

“I definitely feel there is a bit of a racket going on here,” he said.

Other connections exist between the appraisal district and tax agents.

Paul Pennington, founder of one of the county’s biggest tax firms – P.E. Pennington – is the brother of one of the appraisal district’s highest-ranking employees.

Ken Nolan, Dallas County’s chief appraiser, said David Pennington, the district’s technical services director, is not allowed to work with the Pennington tax firm.

Paul Pennington said he and his brother are never in the same room together during official business – to avoid the appearance of a conflict of interest. That’s been the case since 1982, he said.

Mr. Nolan said many young people fresh out of college are recruited to work for the district. Eventually, he said, many will go to work for a tax-consulting firm after learning the business.

“You can only earn so much money in the public sector,” Mr. Nolan said. “Every consulting firm in town has someone who worked for us.”

Firms often use that fact as a marketing ploy.

“We have a complete and thorough understanding of the appraisal office’s methodologies that can only be obtained by having worked there,” the Hegwood Group touts on its Web site.

One of the Hegwood Group’s partners, John Nisbett, is a former DCAD supervisor. He could not be reached for comment.

The company handled more than 360 residential protests in 2006, a high volume compared with other agents. And Hegwood won all but a couple of dozen – a 93 percent success rate and the year’s best record.

Marvin F. Poer & Co. had the highest success rate with commercial protests among tax agents who handle a high volume of cases. The company won 61 percent of its cases and had a 14 percent average value reduction.

It helped remove more than $498 million from the tax roll with its successful cases. The company, formed in 1964 in Dallas, is one of the nation’s largest property tax firms.
COMMERCIAL PROPERTY
A look at how various categories of commercial property fared in 2006 protests:
Category Number of accounts Success rate Protest rate Amount of reduction
NOTE: Some accounts in a category may include other types of properties.
Mall 10 100% 100% 9.6%
Apartment 3,621 60.2% 73.7% 13.7%
Supermarket 217 58.8% 76% 15.7%
Office building 3,610 58.6% 52.7% 15.4%
Department store 46 55.9% 73.9% 12.7%
Warehouse/industrial 8,919 53.1% 51% 14.0%
Retail strip 2,530 53% 68% 17.7%
Medical office building 904 45.4% 47.2% 19.3%
Hotel/motel 510 44.1% 76.1% 11.7%
Retail store 2,849 38.9% 41.4% 15.7%
Bar 197 37.5% 32.5% 24.7%
Country club 29 36.4% 75.9% 13.5%
Car wash 366 31.3% 30.6% 16.9%
Day care 366 29.5% 21.3% 17.2%
Convenience store/

gas station
957 25.6% 38% 20.2%
Restaurant 1,923 20.7% 54.3% 12.9%
Hospital 48 17.9% 58.3% 22.8%
Nursing home 144 15.5% 49.3% 30.2%
Church 2,419 11.4% 1.5% 28.4%
Governmental building 487 8.3% 2.5% 49.7%

MOST EXPENSIVE COMMERCIAL PROPERTIES
How the top commercial buildings fared in 2006 protests:
Owner Notified Value Certified Value % Change
Texas Instruments $391.5 million $391.5 million 0.0
NorthPark Center $340.5 million $330.8 million -2.9
The Crescent $309.5 million $309.5 million 0.0
Galleria mall $308.1 million $281.2 million -8.7
Chase Tower $193.4 million $193.4 million 0.0
Medical City Dallas $179.9 million $145 million -19.4
Bank of America Plaza $165.7 million $162.4 million -1.9
Trammell Crow Center $163.6 million $150 million -8.3
Fountain Place $161 million $130.4 million -18.9
Bank One Center $155.6 million $132.7 million -14.7

http://www.dallasnews.com/sharedcontent/dws/news/

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