Hotels socked hard with tax appraisal hike
Taxable values on motels have increased by as much as 1,000 percent after the Milam County Appraisal District (MCAD) applied an income-based formula to appraise motels in the wake of two good years triggered by the Sandow 5 construction boom.
Speaking of Sandow 5, the new power plant's construction during 2008 more than made up for valuation losses caused by the shutdown of the Alcoa smelter.
Preliminary figures released this week by the MCAD showed net taxable values in the county for 2008 increased by $174,450,422, almost all of that total attributable to Sandow 5.
That's small comfort to Rockdale's motel owners.
Roger Booker, owner of the Kountry Inn, contacted most of his fellow motel owners after seeing his taxable values more than double in the past two years.
"I was shocked," he said, "Most everybody went up around 300 percent and one went up 1,000 percent!"
"Yes, in fact, we actually went up more than 1,000 percent," Joan Ratliff, co-owner of Rainbow Courts told The Reporter. We've protested that value, but it didn't do any good. A district court lawsuit looks to be too expensive. There's no other option but to pay it."
Booker said he couldn't understand the increase. "We haven't remodeled in 15 years," he said. "We haven't really changed our physical plant in 3.5 years. I couldn't figure out why they'd increase us like that.
"Then they told me how they were appraising motels," he said. "They aren't even looking at the motels, so far as renovations or anything like that. They're using a formula based on sales and use tax, based on the business that was done over the year."
That was also Ratliff's experience.
"We couldn't figure it out at first," she said. "First we thought this increase was because of a recent motel sale, that maybe they were using that as justification. But they weren't. It was income based, a formula tied to the sales taxes the motels reported.
"Everybody knows what happened in Rockdale, not just with motels but with trailer parks, over the past couple of years due to the Sandow 5 construction," Ratliff said. "But that was an artificial bubble. That construction is ending and so is the extra motel business associated with it."
She took an attorney from the booming Austin metro area to her hearing with the MCAD's appraisal review board. "He was appalled," Ratliff said.
Ratliff said the formula used by the MCAD uses Census Bureau data which assume 80 percent of revenue reported by motels is used for expenses and 20 percent is profit.
"I don't believe that's correct," she said. "That's very much generalized.
"Other businesses need to know this income-based appraisal system isn't restricted to motels," Ratliff said. "It can be used on any business.
"I believe one factor in an appraisal ought to be the economic climate in an area," she said. "That certainly wasn't done here."
MCAD Chief Appraiser Pat Moraw defended the district's appraisal and the use of incomebased appraisals to determine motel values.
She said appraisers are constantly under pressure from the state to assess values close to the state's own recent ratio studies.
"To be in what's called an appraisal 'confidence level' you must be within five percent of the state ratio study," she said.
"We had dropped out of the confidence level," Moraw said. "We were more than five percent below the state's appraisal numbers."
She strongly defends the use of income-based appraisals for motels.
"That's the only method where there's enough documentation to support an appraisal figure," Moraw said. "I don't feel these (motel) appraisals are overpriced."
And she hasn't seen a large inf lux of angry citizens at the MCAD offices.
"It's actually been quieter than usual," she said.
Moraw said the value of Alcoa's Rockdale Operations dropped by $40,825,860 during the year in which the company closed its smelter and laid off about 1,000 workers.
Alcoa's taxable values dropped from $93,459,780 to $52,633,920.
But Luminant's Sandow Power Company went from $130,300,000 to $303,700,000.
And that's a firm figure.
"The appraisal district and Luminant have agreed upon that figure," Chief Appraiser Pat Moraw said. "It's not going to change. Basically, we agreed with the figure Luminant rendered."
Alcoa's taxable value is still subject to protest, Moraw said.
"It's important to remember these values represent the situation as of Jan. 1, 2009," she said. "A lot of work has been done on Sandow 5 since that date and there's more to come. The next appraisal will reflect the situation as of Jan. 1, 2010, after Sandow 5 has been completed."
Sandow 5 is under a court order to begin operating in August.