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Property Tax Fiduciary 1.11

Section 5.10 – Ratio Studies

Property taxes in Texas have increased sharply because of the ratio study conducted annually by the comptroller. The ratio study is a report card regarding the accuracy and fairness of property tax assessment performed by the appraisal district. It can have a substantial impact on funding for area school districts.

Prior to 1990, most single-family property was assessed at 85 – 90% of market value and most commercial property was assessed at 50 – 60% of market value. This arrangement was acceptable to property owners, appraisal districts and tax entities and was inequitable to homeowners. Homeowners and commercial property owners were satisfied since their assessment was below market value. Homeowners generally did not realize they were taxed inequitably compared to commercial property owners. Tax entities were satisfied with the level of steadily increasing tax revenues. Appraisal districts were satisfied since tax entities (their effective client) were content and the volume of property tax protests was low to moderate. The volume of property tax protests will increase as the median level of assessment increases.

Beginning in the mid- to late-1990s, the Texas Comptroller changed the status quo by pressing appraisal districts to truly comply with the statutory assessment requirements (median level of assessment between 0.95 and 1.05). While it is unclear why and how the appraisal district maintained the appearance of complying with ratio study requirements in the mid- to late 1990s. Although many large appraisal districts meet requirements for single-family, few (if any) meet assessment requirements for commercial property (land, apartments, office, warehouse, retail, etc.).

Appraisal districts need to consistently assess all property at 100% of market value for two main reasons:

  1. To equitably spread the property tax burden among all property owners, and
  2. To ensure school districts do not lose funding.

While the comptroller’s actions to more rigorously ratio study standards have increase sharply, it has also spread the property tax burden more evenly.

Sec. 5.10. Ratio Studies

(a) The comptroller shall conduct an annual study in each appraisal district to determine the degree of uniformity of and the median level of appraisals by the appraisal district within each major category of property. The comptroller shall publish a report of the findings of the study, including in the report the median levels of appraisal for each major category of property, the coefficient of dispersion around the median level of appraisal for each major category of property, and any other standard statistical measures that the comptroller considers appropriate. In conducting the study, the comptroller shall apply appropriate standard statistical analysis techniques to data collected as part of the annual study of school district taxable values required by Section 403.302, Government Code.

(b) The published findings of a ratio study conducted by the comptroller shall be distributed to all members of the legislature and to all appraisal districts.

(c) In conducting a study under this section, the comptroller or the comptroller’s authorized representative may enter the premises of a business, trade, or profession and inspect the property to determine the existence and market value of property used for the production of income. An inspection under this subsection must be made during normal business hours or at a time mutually agreeable to the comptroller or the comptroller’s authorized representative and the person in control of the premises.

Added by 1981 Tex. Laws (1st C.S.), p. 119, ch. 13, Sec. 11; amended by 1983 Tex. Laws, p. 5404, ch. 1001, Sec. 2; amended by 1985 Tex. Laws, p. 6149, ch. 823, Sec. 2; amended by 1989 Tex. Laws, p. 1504, ch. 384, Sec. 9; amended by 1991 Tex. Laws, p. 2908, ch. 843, Sec. 7; amended by 1995 Tex. Laws, p. 2491, ch. 260, Sec. 44.

Cross References:
Median level of appraisal defined, see Sec. 1.12.
Taxpayer protest based on unequal appraisal, see Secs. 41.41(2) & 41.43.
Judicial remedy for unequal appraisal, see Sec. 42.26.

Confidential information obtained by the State Property Tax Board in its school district study remains confidential when used for the ratio study under this section. Op. Tex. Att’y Gen. No. ORD-414 (1984).

These codes affect property owners across the state, in both larger and smaller cities including:

  • Westworth
  • Lavon
  • Irving
  • Willis
  • Wells Branch
  • Cockrell Hill
  • Schertz
  • Anderson Mill
  • Sanger
  • Liverpool
  • Universal City
  • Como
  • Aubrey
  • Point Venture
  • Argyle
  • Richardson
  • Krugerville
  • Deer Park
  • High Island
  • Surfside Beach

The Texas Property Tax Code applies to all property types in Texas including:

  • Fast food restaurant
  • Bar
  • Community shopping center
  • Amusement park
  • Racket club
  • Discount store
  • Motel
  • Power center
  • Funeral home
  • Country club

O’Connor & Associates offers property tax services to all property owners of all land uses across Texas.

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