EL PASO, Texas (KTSM) — El Paso taxing entities may find commercial properties with either stagnant or lower valuations this year due to economic effects from the pandemic.
Residential values are expected to be higher across the board due to strong market demand and higher costs of materials. However, lowered commercial activity last year during pandemic shutdowns may lead to stagnant or lower valuations for business properties.
“Overall, you will probably see either no increase or a slight decrease in commercial values this year,” said Dinah Kilgore, the El Paso Central Appraisal District executive director. “Now, with 2020, we had a lot of issues because of COVID. Your hospitality, your hotels, were down to closed or minimal people that could stay. Travel was almost nil.”
Taxing entities including the city, county, school districts and other special districts generally rely on property taxes to pay for services provided to the public. And, residential properties have largely been where most property tax dollars come from.
Local leaders have made big commitments to increase commercial activity to ease the burden on residential homeowners but, last year, that was a challenge as many service-related businesses had to reduce activity or close their doors.
Central appraisal district preliminary figures suggest residential properties will provide up to $23.5 billion in net taxable values this year, an increase from 2020. And, commercial buildings will provide up to $8.4 billion in net taxable value, though, those numbers may change.
Some businesses did see good economic activity, Kilgore said.
“Your fast-food restaurants, your grocery stores, your box stores — and by box stores, I mean your Lowes, your Home Depots, your Costcos, your Sam’s,” Kilgore said. “All those, they did fantastic.”
So, that may balance some tradeoffs in revenue produced from commercial valuations.
But there are 700 lawsuits against the appraisal district, 10 percent of which is part of the rolls they account for. Normally, the appraisal district sees 250 suits or 4 percent of the rolls.
Suits are the final steps homeowners or property owners may use to lower the valuations of their buildings. Typically, there is a protest, and if that is not satisfactory to the protestor, there is mediation, then a possible suit if things are not concluded.
And, it is difficult for the appraisal district to hold its ground against suits and the appraisals they initially set at times. They are given $500,000 as a defense budget with $150,000 in reserve, which can be easily drained, Kilgore said.
Kilgore added it’s “not enough.”
“Its not unheard of for a lawsuit to go over $1 million or $1.2 million,” she shared.
She said independent reports of a property alone can cost anywhere between $75,000 and $100,000, and suits can last for years. So, officials typically hope mediation can settle disputes before legal costs begin to pile up.
But it’s only the end of May. And, more may come.
“We expect there to be more lawsuits,” she said.
As budget season continues and gets closer to an end, local officials will have to make tough choices about what revenues to consider when balancing their budgets.