"This report is the result of hearing testimony across the state, in eight different cities," said the committee’s chairman John Otto (R-Dayton). "And it was mainly from citizens – business owners, homeowners, land owners, as well as the chief appraisers in the areas that we visited and members of the appraisal review boards."

Many of the recommendations in the report, which was released Dec. 8, involve technical fixes to the appraisal issues cited at the committee’s hearings.

Largely unaddressed in the report is the underlying issue that has prompted most of the controversy: property tax bills have steadily grown faster than inflation.

Some of the appraisal reforms the committee champions, if adopted, would help some aggrieved taxpayers. But would that solve the problem?

"Certainly what Otto and his committee have done is good and necessary," said Michael Quinn Sullivan, president of Texans for Fiscal Responsibility. "But hopefully the Legislature will do something more substantial than just tinkering around the edges … Most Texans and most property owners in Texas have reached the realization that we’ve done all the tinkering we can do. That it really is time for substantial reform, up to and including beginning to phase out property taxes.

"Yes, we need to do these reforms to appraisal districts. Yes, we need to reform the Comptroller’s studies. But at the end of the day, the only reforms looked at with real meaning to it are those things that were outside the Otto committee’s purview. The Otto committee did what it needed to do, but there’s a lot more that needs to be done."

For the most part, the committee avoids specific legislative recommendations but instead highlights broad problems that it believes the Legislature needs to solve or address in 2009.

Here’s a quick summary of the report’s highlights.

* The Comptroller’s Property Value Study. The report recommends changing the value study to an Appraisal Standards Review. The Comptroller’s Property Value Study measures whether appraisal districts are valuing property at what the Comptroller believes is market value. It is controversial among chief appraisers, but the last two comptrollers have defended it vigorously.

At the hearing, Otto emphasized that the Comptroller has made changes to the study, and he wants to work with the Comptroller’s office to arrive at a mutually agreeable solution.

* Consistent reappraisal cycles. Texas law allows appraisal districts to reappraise property every one, two, or three years. Different counties use different cycles. The committee endorsed a statewide standard of reappraisal every two years, consistent statewide.

* Appraisal Review Boards. Appraisal Review Boards hear appeals over property values. The report expresses concern that there is a perception that appraisal review boards are biased against the taxpayer and do not function as well as they could.

* Regional Appraisal Review Boards. The report recommends piloting an optional regional appraisal review board to which taxpayers could appeal. Otto said whereas there might be too little commercial real estate expertise in some rural counties, a regional board might supply the lack.

Effective tax rate. Otto argues the method to calculate the effective tax rate is way too complex and confuses taxpayers. The committee proposes simplifying the calculation and making taxing entities disclose two years’ worth of fund balances.

* Highest and best use protections. Otto cited one witness before the committee whose land value almost doubled overnight when a nearby shopping mall opened. The idea was that the land owner could sell the land and use it for another purpose (like shopping or parking). Otto noted that agricultural valuation is protected, and he argued use of land as a homestead should get the same protection.

* Raising the binding arbitration cap. Texas law allows property owners dissatisfied with an appraisal review board decision to go to district court. This is a very expensive option. In 2003, the Legislature created a binding arbitration alternative to district court for properties valued at less than $1 million. This option, though not used often, is there. The report notes that many owners of commercial property would like this cap raised, a move Otto endorsed. The arbitration is administered under rules prepared by the Comptroller.

* Sales price disclosure. Otto said he does not currently support mandatory sales price disclosure, noting that Florida, after adopting the practice, repealed it in 2008. The report describes sales price disclosure in skeptical terms. "You’re talking about very private, privileged information to begin with," Otto said. "So until you show me the safeguards that are not going to allow that to be disseminated to the general public or to competitors, I have a real basic problem right there … My other concern is — How would you use the information if it was given to you? And I don’t have that conviction that it would be used in the same way, consistently and correctly around this state, if they had it … I understand the need for sales data, the need for wanting it. What I’m concerned about is that all of the sudden it becomes the lazy way to arrive at fair market value, and I don’t think that’s a good thing."

In particular, Otto is concerned the data would not be used properly. He cited one example where appraisers used the contract price on a home, without discounting for builder price concessions.

* Equity protests. The report expresses concerns about how protests on the basis of inequitable appraisals are handled and how that affects appraisal district actions. Otto cited the example of a taxpayer who went to district court and won, only to have to go again in the succeeding three years, because the appraisal district continuously tried to jack up the appraisal on the property to avoid equity protests.

* Election of Central Appraisal District Board. The Central Appraisal District Board of Directors appoints the chief appraiser, sets the budget for the appraisal district, and appoints the appraisal review board. The report suggests electing the appraisal district board.

* Swapping property taxes for sales taxes. Rep. Dan Flynn (R-Van) told his colleagues that this topic is frequently discussed favorably by his constituents in town hall meetings. The report notes that much of the intended school property tax relief was swallowed by appraisal increases and tax increases from other units of government. It also warns that a swap of property taxes for sales taxes could involve substantial increases to the sales tax rate or repealing exemptions, both of which could be politically difficult to accomplish.

But Flynn defended the idea by questioning the morality of requiring someone who has paid the mortgage off on his home to continue paying "rent" to the government for living in it.

* Appraisal cap. The report spells out pros and cons of lowering the existing 10 percent cap on homestead appraisals.

* Disaster reappraisal. Practical problems with the disaster reappraisal law prevented local governments in Galveston from taking advantage of it to lower people’s taxes when their homes were destroyed by Hurricane Ike. The committee recommends studying ways to provide better relief to taxpayers affected by natural disasters, and noted the existing statute has only been used once. The statute allows local government units to lower people’s taxes on a pro-rated basis, when a natural disaster during a year lowers property value.

The Legislature will now convene and will decide which, if any, of the above suggestions are enacted into law.

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