By Hannah Neumann
H-E-B Grocery Co. is suing the McLennan County Appraisal District over a disagreement regarding the H-E-B Plus! store, located at Interstate 35 and South Valley Mills Dr.
Representatives of the grocery chain claim the value of the store was labeled much higher by the appraisal district than its actual worth, causing them to pay higher property taxes than they should be paying.
The lawsuit against the appraisal district was filed in Waco’s 414th District Court this month and does not specify what they believe the appraisal of the store should be.
In appraisal review board hearings over the summer, the company’s argument that the store value needed to be cut was rejected.
The reduction request made by the company would have cut the store’s local yearly property taxes from $569,137 to $240,915.
According to the suit, H-E-B’s investment and market value of $20 million exceeds market value for its location and type, hence the increased tax fee.
However, the lawsuit claims the store was wronged by the appraisal district’s valuation because it exceeds the median value of comparable property in the area.
According to the Texas Property Tax Code, the law states appraisals shall be “equal and uniform.”
H-E-B is represented by managing partner Mark Hutcheson of the Austin-based firm Popp Hutcheson.
“Our firm specializes in property tax,” Hutcheson said. “And we represent H-E-B throughout the whole state.”
While the firm does not comment on specific cases, Hutcheson addressed the issues at hand in the lawsuit.
“Every year the appraisal district values property,” Hutcheson said. “For the most part, they do an OK job, but oftentimes they get it wrong. Tax payers have the right to challenge that evaluation if they think it is wrong.”
Hutcheson said the only process available to taxpayers to challenge the evaluation is to file a protest, and if they are not happy with the protest result, they can file an appeal in district court, which is what H-E-B Grocery Co., has now done.
Hutcheson said the Texas Tax Code provides tax payers two primary claims. One, based upon the market value of the property and the other based upon equal and uniform evaluation.
“Market Value means not what the property is worth to the user, but instead, what it would be worth to someone who comes in and buys the property,” he said. “For commercial real estate, that means what kind of rent could they conceivably get on the property if an investor came in and bought it.”
Hutcheson said a lot of the time, people don’t understand the underlying principles and look at something like cost, and translate it to value.
“That’s a big fallacy,” he said. “It’s easy for the other side, for their own political agendas, to suggest that cost equals value but it doesn’t. So what we try to arrive at is what we think the value would sell for, if one of our clients were going to sell it as of January 1 of the tax year.”
If H-E-B triumphs, the court will rule for a reduction in the supermarket’s value and the appraisal district will have to pay all legal fees.
Andrew Hahn, McLennan County Appraisal District chief appraiser, said he believes the case will end in settlement before it goes to court, as the district can justify the decision and show that the investment H-E-B put into the store is relevant to market value through the cost approach.
“The theory behind the cost approach goes along with the definition of market value sale, and that is that a seller wouldn’t take less than what they actually have in the property,” Hahn said. “If they have that kind of money in it, they’re not going to give it up for less.”
Hahn said the appraisal district should be able reveal the precise cost behind H-E-B’s development and he believes it would probably be above what the store claims it is currently.
Hahn said he doesn’t know how long the suit is likely to continue.
“We believe that it will be resolved in our favor,” Hahn said. “But sometimes it can take quite some time. It just depends on if they’re willing to sit down and go through the information with us.”