Unintended Consequences of a Property Value Freeze

Lynn Krebs PhD CMI
President and CEO

The Ellis County (TX) Commissioners Court on Tuesday passed a resolution urging the Ellis Appraisal District to “freeze all property tax appraisal valuations in Ellis County at levels set on January 1, 2019 and not in any way implement or utilize the significantly increased property tax appraisal valuations as determined on January 1, 2020.”

While this is merely an urging and is intended to provide property tax relief, I submit that it would cause more harm than good. It would have many unintended consequences and raise several very serious taxpayer concerns, including but not limited to the following:

1)  Inequities: Different property types and industries experienced different market forces over the last year. So, a freeze would disproportionately benefit property owners in the strongest neighborhoods and industries. Additionally, what about properties that experienced various physical changes, demolition and remodeling, deferred maintenance, expansions and other improvements, etc.? Ignoring changes in individual property characteristics would be hugely inequitable and unfair.

2)   Depreciation: This resolution seems to apply to real and personal property. This would be disadvantageous for depreciable personal property and any buildings usually assessed on the cost approach, and could be wildly inaccurate for inventory accounts. While business machinery, equipment, and other assets lost market value due to use, age and other obsolescence, this would keep their values at the higher level without accounting for depreciation from the prior year. Also, what about business inventory accounts? There would be arbitrary winners and losers… lucky for those with additions or higher levels, unlucky for those with lower levels of assets and inventory year-over-year.

3)   Rates: What about tax rates later this year? …what will keep the taxing entities (the county, cities and other governmental units) from raising their tax rates to make up the difference to maintain or grow their budgets? In fact, the Governor’s emergency declaration gives those entities the opportunity to raise more revenue through higher tax rates without taxpayer approval.

These are just a few of the potential negatives that could come from such a move, not to mention the legal challenges that may ensue. In summary, while this is surely meant to help taxpayers, it will likely harm as many or more than it helps.  In fact, we could find ourselves with tremendous inequities, higher tax bills and less opportunity to do anything about it.