… or, rather, how much was it worth in 2006, which was the issue in an ad-valorem tax appraisal dispute which finally reached
decision-stage in one of our local courts of appeals a few years more down the
road ....while the the weeds have been growing.
APPRAISING THE AMUSEMENT PARK sans THE AMUSEMENTS:
The Appraiser was not amused and appealed the reduction in
appraised value obtained by the owner in its successful tax protest to the district court,
and then to the court of appeals. The
decision came down yesterday. Appraiser has yet more reason not to be amused,
as the First Court’s panel assigned to the case, in an opinion by Justice Massengale,
upholds the reductions in the appraised value of the Houston’s premier playground-turned-weedland, which has been sitting vacant in hopes of a brighter future along with the domed -- and now likely doomed -- erstwhile world wonder just North of the 610 South.
 |
| Rare Astroworld antique: Duck on wheels adorning parking lot in West Houston |
Harris County Appraisal District v. Houston 8th Wonder
Property, L.P., d/b/a Six Flags Astroworld (Tex.App.- Houston [1st
Dist.] May 17, 2012, no pet. h.)
O P I N I O N
Appellee Houston 8th
Wonder Property, L.P., d/b/a Six Flags Astroworld successfully protested the
2006 appraised and market values of its commercial property as determined by
appellant Harris County Appraisal District.
See Tex. Tax. Code Ann. § 41.41(a) (West 2008). Both the property owner and the appraisal
district invoked their rights to seek judicial review of the appraisal review
board’s valuation. See id. §§ 42.01,
42.02 (West Supp. 2011). The appraisal
district’s appeal was dismissed for want of jurisdiction. After a de novo bench trial, the district
court entered a final judgment further lowering the appraised value of the
property, and the appraisal district now appeals from that judgment. See id. § 42.28.
We conclude that the
dismissal of the appraisal district’s appeal was error. Despite this error, the ruling that the
appraisal district sought to challenge by its appeal—the appraisal review
board’s valuation—remained at issue in the de novo trial that ensued for the
property owner’s appeal. The record
reflects that the appraisal district was permitted to actually present its
arguments and evidence about the market value of the property, both at trial
and in post-trial briefing, and without any substantive limitation. Because the district court ultimately heard
and determined the appraised value of the property de novo, on this record
there is no basis to conclude that the error probably caused the rendition of
an improper judgment. See Tex. R. App. P.
44.1(a).
We also reject the
appraisal district’s remaining issues on appeal, relating to the admissibility
of expert testimony and the constitutionality of the judgment. Accordingly, we affirm.
Background
Houston 8th Wonder
purchased 104.196 acres of unimproved land in Harris County on May 31, 2006 for
$77,000,000. This property was formerly
the site of the Six Flags Astroworld theme park. The Harris County Appraisal District
appraised 101.833 acres of the purchased tract at a value of $74,668,035 for
the 2006 tax year. The property owner
protested this appraisal to the appraisal review board under section 41.44 of
the Tax Code, presenting two grounds: (1) “Value is over market,” and (2)
“Value is unequal compared with other properties.” The ARB panel “determined that the property
appraisal is incorrect and unequal and the value should be changed.” The ARB reduced both the property’s market
value and appraised value from $74,668,035 to $48,054,000.
Both the property
owner and the appraisal district appealed to the district court. The property owner sought relief for unequal
appraisal, alleging that it was “entitled to have the court order the value
changed to [the] median level of appraisal in accordance with Section 42.26 of
the Texas Tax Code.” The appraisal
district alleged that the “appraised value as determined by the Appraisal
Review Board is far lower than the actual fair market value of the Property as
of January 1, 2006,” and it requested that the court “determine the market
value of the Property and increase its appraised value on the appraisal roll as
authorized by sections 42.23 and 42.24 of the Tax Code.”
The property owner
filed a motion to dismiss the appraisal district’s appeal for lack of
jurisdiction. The district court granted
that relief after a hearing. A de novo bench
trial was conducted on the property owner’s appraised-value challenge. The district court rendered judgment in favor
of the property owner that the appraised value of the subject property was
$31,938,000.00 for the 2006 tax year.
The court also issued findings of fact and conclusions of law. The appraisal district now appeals from that
judgment.
Analysis
I. Appraisal district’s appeal from
appraisal review board’s order
In its second issue,
the appraisal district argues that the district court erred by granting the
property owner’s plea to the jurisdiction because the statutory requirements
for an appeal of an ARB order by the chief appraiser had been satisfied. We review a trial court’s ruling on a plea to
the jurisdiction de novo.
KM-Timbercreek, L.L.C. v. Harris Cnty. Appraisal Dist., 312 S.W.3d 722,
726 (Tex. App.—Houston [1st Dist.] 2009, no pet.).
A. Right of appeal by chief appraiser
Section 42.02 of the
Property Tax Code provides that “the chief appraiser is entitled to appeal an
order of the appraisal review board determining” a taxpayer protest. Tex. Tax Code Ann. § 42.02(a)(1). A chief appraiser who wishes to appeal such
an order of the ARB must (1) obtain written approval of the board of directors
of the appraisal district, (2) file a written notice of appeal within 15 days
of receipt of the notice from the ARB determining the taxpayer protest, and (3)
deliver a copy of the notice of appeal to the property owner whose property is
involved in the appeal. Id. §§ 42.02(a),
42.06(a), (c) (West 2008 & Supp. 2011).
In this case, the chief appraiser obtained written approval from the
board of directors to appeal the ARB order determining the property owner’s
protest. Six days later, the appraisal
district filed a notice of appeal and sent a copy to the property owner. The appraisal district thus satisfied the
statutory prerequisites to appeal the ARB order. The property owner presented three arguments
to the court in support of its plea, each of which we address below.
1. Actual market valuation
controversy.
The appraisal
district’s petition sought a determination of “the market value of the
Property.” The property owner argued in
the district court that its original tax protest had been limited to the
question of equal and uniform appraisal because that was the only relevance of
the evidence it presented to the ARB.
See Tex. Tax Code Ann. § 42.26 (West 2008) (remedy for unequal
appraisal). The property owner thus
argued that the ARB’s order did not implicate market value and there was “no
ARB order for [the appraisal district] to appeal based on market value.” However, the “Property Tax Notice of Protest”
filed by the property owner listed two reasons for protest, namely: (1) value
is over market and (2) value is unequal compared with other properties. In addition, the ARB order actually
determined that the original property appraisal was both “incorrect and
unequal,” and it reduced not only the “appraised” value but also the “market”
value from $74,668,035 to $48,054,000.
Accordingly, the suggestions that the property owner did not challenge
the property’s market value and that the ARB did not actually lower market
value are affirmatively disproved by the record on appeal.
2. Appraisal district’s “standing” to
challenge ARB order.
In a brief supporting
the plea to the jurisdiction, the property owner argued that the chief
appraiser had “no standing to appeal that which he had no standing to
protest.” The court apparently found
this argument persuasive, as its conclusions of law expressly noted that it
lacked jurisdiction over the appraisal district’s appeal because the “Chief
Appraiser has no right of appeal of an ARB order on any basis which the
protesting property owner does not have.”
The consequence of this reasoning is that the property owner’s evidence
and arguments presented to the ARB establish the exclusive parameters for any
subsequent appeal of the ARB ruling by either party to the proceeding. Thus the property owner contended that the
appraisal district could not appeal the order on market-value grounds that had
not been a basis for the original tax protest.
This argument is
apparently premised upon the requirement applicable to property owners that
administrative remedies must be exhausted before seeking judicial review of an
appraisal district’s property valuation.[1]
However, the procedural differences between the avenues of appeal
available to the property owner and the appraisal district require that the
exhaustion principle be applied differently to the two types of appeals. Only the property owner, and not the chief
appraiser or the taxing unit, has the right to protest the appraised value of a
single taxpayer’s property before the ARB.[2]
But both the property owner and the chief appraiser have distinct rights
to appeal the ARB order determining the protest.[3]
Unlike the property
owner, the appraisal district had no prior administrative remedy to exhaust at
the ARB stage of the proceedings. As the
entity responsible for the initial property valuation, the appraisal district
had no right to initiate the protest procedure and no control over what objections
would be presented by the property owner to the ARB. Regardless of what issues were presented by
the property owner, the appraisal district had no grievance until the ARB
altered its determination of the property’s market value and appraised value. The statutory procedure for the appraisal
district to complain about the ARB’s ruling began with its right of “appeal” to
the district court for a trial de novo.
Thus, because the appraisal district contended that the ARB erred by
reducing the property’s market value and appraised value, and it followed the
statutory procedures for initiating an appeal, it had standing to challenge the
ARB’s order in accordance with its statutory right to do so. There was no prior administrative procedure
available to the appraisal district that it failed to exhaust.
3. Relevance of market valuation.
Finally, the property
owner argued that market value, which the appraisal district sought to
challenge in its appeal, is irrelevant to the issue of unequal appraisal, which
was a basis of the property owner’s protest to the ARB and appeal to the
district court. Section 42.26 of the Tax
Code specifies three methods for determining if a property has been unequally
appraised:
The district court
shall grant relief on the ground that a property is appraised unequally if:
(1) the appraisal ratio of the property
exceeds by at least 10 percent the median level of appraisal of a reasonable
and representative sample of other properties in the appraisal district;
(2) the appraisal ratio of the property
exceeds by at least 10 percent the median level of appraisal of a sample of
properties in the appraisal district consisting of a reasonable number of other
properties similarly situated to, or of the same general kind or character as,
the property subject to the appeal; or
(3) the appraised value of the property
exceeds the median appraised value of a reasonable number of comparable
properties appropriately adjusted.
Tex. Tax Code Ann. §
42.26(a). Although market value may not
be necessary to a determination made pursuant to Tax Code section 42.26(a)(3),
it is not irrelevant to a determination of appraisal value made pursuant to
section 42.26(a)(1) & (2). Section
1.12 of the Tax Code defines the term “appraisal ratio” as used in section
42.26(a)(1) & (2) as follows:
An appraisal ratio is
the ratio of a property’s appraised value as determined by the appraisal office
or appraisal review board, as applicable, to:
(1) the appraised value of the property
according to law if the property qualifies for appraisal for tax purposes
according to a standard other than market value; or
(2) the market value of the property if
Subdivision (1) of this subsection does not apply.
Id. § 1.12(b). Because market value is an element of the
calculation of “appraisal ratio” that may be used to determine whether an
appraisal is equal and uniform, the market value is not irrelevant,[4] and the
property owner’s argument to the contrary was incorrect.
We conclude that the
appraisal district had the right to appeal from the ARB’s order. Irrespective of any rights the property owner
might exercise to appeal from an order of the appraisal review board, the Tax
Code separately authorizes the chief appraiser to appeal an ARB order
determining a taxpayer protest. Id. §
42.02(a)(1). In this case, the appraisal
district fulfilled all of the statutory requirements to appeal the ARB’s order
by (1) filing a timely notice of appeal, (2) obtaining written approval of the
board of directors, and (3) notifying the taxpayer that the chief appraiser has
filed a notice of appeal. See id. §§
42.02, 42.06. The appraisal district’s
appeal was not barred for failure to exhaust administrative remedies; it had no
predicate administrative remedy to exhaust in this situation. Finally, market value was not irrelevant to
the questions at issue in this appeal.
Accordingly, we hold that the district court had jurisdiction over the appraisal
district’s appeal.
B. Harm analysis
To reverse the
judgment on appeal, we must conclude that any error probably caused the
rendition of an improper judgment or prevented the appellant from properly
presenting its appeal. Tex. R. App. P.
44.1(a). To make this determination, we
review the entire record. See, e.g.,
McCraw v. Maris, 828 S.W.2d 756, 758 (Tex. 1992). We are also mindful that an erroneous
decision by a trial court can be rendered harmless by subsequent events. See, e.g., Progressive Cnty. Mut. Ins. Co. v.
Boyd, 177 S.W.3d 919, 921 (Tex. 2005).
In the circumstances
of this case, a de novo bench trial mooted the effect of granting the property
owner’s jurisdictional plea. Both
parties had attempted to appeal from the ruling of the ARB—the appraisal
district wanted to increase the ARB’s appraised value of the property, while
the property owner wanted to further decrease that value. After dismissing the appraisal district’s
appeal, the court conducted a trial de novo, in which it was empowered to grant
the relief in favor of either side by either increasing or decreasing the
property values at issue. See Cherokee
Water Co. v. Gregg Cnty. Appraisal Dist., 801 S.W.2d 872, 877 (Tex. 1990). The district court granted relief in favor of
the property owner, further reducing the appraised value of the property beyond
the reduction already achieved in the protest proceeding before the ARB.
If the court had not
dismissed the appraisal district’s appeal, the resulting proceeding still would
have concerned the appraised value of the same property. The appraisal district was not required to
perfect its own appeal for the trial court to have the ability to increase the
property value in its de novo determination of “the appraised value of property
in accordance with the requirements of law.”
Tex. Tax Code Ann. § 42.24(a); see Cherokee Water, 801 S.W.2d at
877. The appraisal district remained
free to present its evidence and arguments in favor of a higher value, and the
record does not show that the appraisal district was in any way prevented from
doing so. Even though the appraisal
district’s appeal was dismissed and the property owner took the position that
evidence of market value was irrelevant to the proceeding, the district court
nevertheless admitted all of the evidence offered by the appraisal district,
including evidence of market value which was admitted over the property owner’s
relevance objections. The appraisal
district also cross-examined the property owner’s valuation expert about his
failure to incorporate market value into his analysis.
The appraisal
district has provided no suggestion of how the erroneous dismissal of its
appeal probably caused the rendition of an improper judgment with respect to
the trial court’s final determination of appraised value. See Tex. R. App. P. 44.1(a). Neither has it demonstrated that the error
probably prevented it from presenting its appeal. See id.
Our review has revealed no such harm.
We therefore overrule the appraisal district’s second issue.
II. Expert testimony
In its first issue,
the appraisal district argues that the trial court abused its discretion in
admitting the testimony of the property owner’s expert, Gerald Teel. The appraisal district contends that Teel’s
testimony was unreliable because of a flawed methodology and his failure to
produce certain documents upon which he relied.
For these reasons, the appraisal district asserts that Teel’s testimony
was no evidence.
Ordinarily, a
challenge to the admissibility of evidence, including whether expert testimony
is reliable, is reviewed for an abuse of discretion. Whirlpool Corp. v. Camacho, 298 S.W.3d 631,
638 (Tex. 2009); see Harris Cnty. Appraisal Dist. v. Kempwood Plaza, Ltd., 186
S.W.3d 155, 157 (Tex. App.—Houston [1st Dist.] 2006, no pet.). A trial court has broad discretion in
deciding whether to admit or exclude expert testimony, and this court will
uphold a trial court’s evidentiary ruling if a legitimate basis for the ruling
exists. See Gammill v. Jack Williams
Chevrolet, Inc., 972 S.W.2d 713, 719–20 (Tex. 1998); Weingarten Realty
Investors v. Harris Cnty. Appraisal Dist., 93 S.W.3d 280, 283 (Tex.
App.—Houston [14th Dist.] 2002, no pet.).
We will reverse only if the court acted arbitrarily, unreasonably, or
without reference to any guiding rules or principles. Kempwood Plaza, 186 S.W.3d at 157.
To be admissible,
expert testimony must be both relevant and reliable. Gammill, 972 S.W.2d at 727; Kempwood Plaza,
186 S.W.3d at 157. Expert testimony is
relevant when it assists the fact finder in determining an issue or in
understanding other evidence. See Tex.
R. Evid. 702; TXI Transp. Co. v. Hughes, 306 S.W.3d 230, 234 (Tex. 2010). As to reliability, the court must examine the
expert’s methodology, foundational data, and whether too great an analytical
gap exists between the data and methodology, on the one hand, and the expert’s
opinions, on the other. See Gammill, 972
S.W.2d at 728; Kempwood Plaza, 186 S.W.3d at 159. “[I]t is the basis of the witness’s opinion,
and not the witness’s qualifications or his bare opinions alone, that can
settle an issue as a matter of law; a claim will not stand or fall on the mere
ipse dixit of a credentialed witness.”
Burrow v. Arce, 997 S.W.2d 229, 235 (Tex. 1999).
When a party asserts
on appeal that an expert’s testimony is insufficient because it is unreliable,
a court will ordinarily consider both the Robinson reliability factors and the
expert’s experience. Whirlpool, 298
S.W.3d at 638; see E.I. du Pont de Nemours & Co. v. Robinson, 923 S.W.2d
549, 556 (Tex. 1995) (identifying factors for courts to consider in evaluating
reliability of expert testimony).
Robinson set out the following list of nonexclusive factors: (1) the
extent to which the theory has been or can be tested, (2) the extent to which
the technique relies upon the subjective interpretation of the expert, (3)
whether the theory has been subjected to peer review and/or publication, (4)
the technique’s potential rate of error, (5) whether the theory or technique
has been generally accepted as valid by the relevant scientific community, and
(6) the non-judicial uses which have been made of the theory or technique. Robinson, 923 S.W.2d at 557. However, not all of these factors may
applicable to a case, like this one, involving specialized but non-scientific
expert testimony. See Weingarten, 93
S.W.3d at 285; see also Kempwood Plaza, 186 S.W.3d at 157. Likewise, when the opponent of the testimony
stipulates that the expert is qualified, an appellate court need not review
that finding. See Kempwood Plaza, 186
S.W.3d at 158.
Because the appraisal
district stipulated that Teel was qualified as a real estate appraiser, we
limit our analysis to the reliability of his testimony. Thus, we will examine his methodology and the
foundational data upon which he relied.
Teel testified that his assignment was to evaluate the subject property
under section 42.26 of the Texas Tax Code.
Section 42.26(a)(3) provides that “[t]he district court shall grant
relief on the ground that a property is appraised unequally if: . . . the
appraised value of the property exceeds the median appraised value of a
reasonable number of comparable properties appropriately adjusted.” Tex. Tax Code Ann. § 42.26(a)(3). The “‘appraised value’ means the value as
determined by Chapter 23 of this code.”
Id. § 1.04(8). Chapter 23 provides
that, “[e]xcept as otherwise provided by this chapter, all taxable property is
appraised at its market value as of January 1.”
Id. § 23.01(a) (West Supp. 2010).
To determine if “the
appraised value of the property exceeds the median appraised value of a
reasonable number of comparable properties appropriately adjusted” under
section 42.26(a)(3), “the appraisal expert determines a reasonable number of
comparable properties. Then, the expert
takes the appraised value of those properties from the public record, and
appropriately adjusts them to the subject property.” In re MHCB (USA) Leasing & Fin. Corp.,
No. 01-06-00075-CV, 2006 WL 1098922, at *3 (Tex. App.—Houston [1st Dist.] Apr.
27, 2006, orig. proceeding) (mem. op.) (quoting Weingarten, 93 S.W.3d at 286)
(examining application of former section 42.26(d), now found at section
42.26(a)(3)). The comparable properties
are adjusted according to factors that tend to influence value, such as
location, age, depreciation, physical characteristics of the property, and
“economic factors.” Id.; see Harris
Cnty. Appraisal Dist. v. United Investors Realty Trust, 47 S.W.3d 648, 650 n.4
(Tex. App.—Houston [14th Dist.] 2001, pet. denied); see also Kempwood Plaza,
186 S.W.3d at 160–61. Finally, “the
appropriately adjusted comparable properties are arrayed and a median is
determined.” Weingarten, 93 S.W.3d at
286.
Section 42.26(a)(3)
does not delineate what specific considerations are relevant for
adjustment. MHCB, 2006 WL 1098922, at
*4. In Harris County Appraisal District
v. United Investors Realty Trust, the parties relied upon values of comparable
properties taken from the appraisal district’s tax rolls, but they made
adjustments for location, traffic, access, age, and depreciation. 47 S.W.3d 648, 650 n.4 (Tex. App.—Houston
[14th Dist.] 2001, pet. denied). The
Fourteenth Court of Appeals held that a protest alleging only that the
appraised value is not uniform and equal does not require independent proof of
the market value of the comparable properties.
Id. at 653. The court explained
that the tax rolls could be used to determine value, with “the only independent
analysis required [being] adjusting the appraised values to put the properties
on equal footing.” Id. This court has also held that an appraiser
may base his adjustments on his personal experience. Kempwood Plaza, 186 S.W.3d at 161
(“Appraising property is not an exact science based on set mathematical
formulas. It is not error for an
appraiser to use his or her personal experience and expertise to make certain
determinations.”).
Teel testified that
he considered adjustments for location to be much more subjective than
adjustments for size of the property, which could be done based on a
well-established logarithmic relationship between size and value that is
commonly used among appraisers in his industry.
Therefore, he considered only properties that had the same “neighborhood
code” on tax rolls of the appraisal district.
He testified that he looked to properties that were being used for the
types of businesses that would potentially form part of the mixed-use, which
was the highest and best use of the subject property. He considered only the unimproved value of
the comparable properties because the subject property was unimproved. He also testified that the comparables were
smaller than the subject property because there were no properties of a similar
size in the relevant location.
Teel’s testimony
makes clear that he followed a statutorily-approved methodology for estimating
an appraised value. See Tex. Tax Code
Ann. § 42.26(a)(3). He used the
appraisal value of the comparable properties as listed in the tax rolls as his
starting point. When he adjusted the
values of the comparable properties, he relied on generally accepted appraisal
principles that are commonly used among professionals in his field. Teel testified that his methodology had been
tested, was generally accepted as valid, and was mandated, to some extent, by
statute. See, e.g., Robinson, 923 S.W.2d
at 557. By choosing to limit the
comparable properties he selected to those near the subject property, he
minimized the extent to which his analysis relied on his subjective
interpretation. See id. We conclude that Houston 8th Wonder met its
burden to show the reliability of Teel’s testimony, and we hold that the trial
court did not abuse its discretion in admitting his testimony. In addition, we further hold that Teel’s
testimony was legally sufficient to support the trial court’s judgment.
Accordingly, we
overrule the appraisal district’s first issue.
III. Constitutionality of the trial court’s
judgment
In its third and
final issue, the appraisal district argues that the trial court’s judgment
determining that the value of the subject property was approximately $31
million was unconstitutional because that value was unrelated to market
value. This court rejected this argument
in Kempwood Plaza. See Kempwood Plaza,
186 S.W.3d at 162. We overrule the
appraisal district’s third and final issue.
Conclusion
We affirm the
judgment of the trial court.
Michael Massengale
Justice
Panel consists of
Justices Jennings, Bland, and Massengale.
--------------------------------------------------------------------------------
[1] “Because the administrative procedures
established by the Code are exclusive of a taxpayer’s other remedies, a
taxpayer must first exhaust all administrative remedies before seeking judicial
review of a taxing authority’s actions.”
ABT Galveston Ltd. P’ship v. Galveston Cent. Appraisal Dist., 137 S.W.3d
146, 152 (Tex. App.—Houston [1st Dist.] 2004, no pet.). The taxpayer’s failure to comply with the
Code requirements, such as not protesting the initial valuation before the
appraisal review board, deprives the reviewing district court of jurisdiction
over the taxpayer’s appeal. See, e.g.,
id. at 152.
[2]
See Tex. Tax Code Ann. § 41.41 (West 2008) (property owner’s right of
protest); see also id. § 41.03(a) (challenge by taxing unit may not include
“the appraised value of a single taxpayer’s property”).
[3]
See id. § 42.01 (right of appeal by property owner); id. § 42.02 (right
of appeal by chief appraiser). Such
appeals are to the district court, and review is “by trial de novo.” Id. § 42.23(a).
[4]
See In re MHCB (USA) Leasing & Fin. Corp., No. 01-06-00075-CV, 2006
WL 1098922, at *4 (Tex. App.—Houston [1st Dist.] Apr. 27, 2006, orig.
proceeding) (mem. op.) (stating that “information regarding both the appraised
and the market value of comparable properties, insofar as this information
shows the need for the ‘adjustments’ contemplated by the statute, including
quality, size, age, and depreciation, could be potentially relevant to a
determination of whether an appraisal district has appraised properties
unequally”).
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