Property owners, including a County official, are getting much more for property than valued on the tax rolls.
Although funding for the expansion of I-35 seems sketchy with or without some sort of toll lane scheme, the Texas Department of Transportation has been busy in 2011 purchasing 126 properties along the corridor for the expanded right-of-way (ROW). Property owners by-and-large have received far more from the State than the tax appraisal values. The project is expected to cost $5 billion, including $1.2 billion for ROW acquisition. TxDOT thinks that as the project currently stands, they will only be able to add new toll lanes, and no new free lanes.
The Lewisville Texan Journal looked at 19 of the properties along the ROW in Lewisville and Hickory Creek, finding that the State spent $40 million on properties valued by the Denton Central Appraisal District on the tax rolls at only $4.8 million.
In some cases, the state purchased only a portion of a larger parcel of property, as was the case with three motels in Lewisville, where the new property line bisected existing buildings, causing the loss of the value of the structure. However, even in those cases, considering the full value of the building, the owners were still over-paid in comparison to the tax valuation.
The Best Value Inn and Suites at 1401 S. Stemmons in Lewisville had a total value on the tax rolls at just $712,124, including both land and improvements on the property. The state paid $4.1 million for just the front 0.4 acres of the 2 acre property. The price represented almost 30 times more than the value of the land itself.
Just North on the same service road, the Super 8 Motel at 1305 S. Stemmons had a total value on the tax rolls of just $445,125 on the total property, including the new ROW. The State of Texas paid $3.6 million.
Denton County Judge Mary Horn, the elected chief of Denton County government, which has pledged almost $600 million to the expansion project, cashed in on a residential property she bought in Hickory Creek in 1994 for $62,500, receiving $993,000 from the State of Texas. The property, which was held in a family trust for Mary and Jim Horn was purchased at a multiple of 13.7 times the taxable value. Horn is spearheading the I-35E Coalition, a project of the Dallas Regional Mobility Council pushing public-private partnership for the project. Horn supported S.B. 1420 which passed in the last session of the Texas Legislature, authorizing the partnerships which allow toll lanes.
Horn's property is along the Southbound service road of I-35 just on the North side of the Lewisville Lake I-35 bridge. The residential property was valued on the tax rolls at just $72,442, with the buildings on the property being basically worthless at only $217. The property was not useful for commercial purposes because it lacks easy access to Northbound I-35, requiring a trip South across the bridge to the nearest turnaround.
All of the ROW deeds we looked at reserved all mineral rights for gas, oil, and sulfur to the original owner. Some, such as Horn's allowed the owner to salvage materials from the property.
We looked at two residential properties in Lewisville, which were bisected, resulting in a required demolition of the home. The properties, valued at $167,407 and $221,335 were purchased by the state for $262,100 and $354,358 respectively, for multiples of 1.6 times the taxable value.
For the 18 properties we examined where there was a DCAD tax value and a TxDOT price, the properties were worth $27 million less than what was paid. In Lewisville alone, we noted 11 properties, under-valued by $20.7 million.
It seems clear that there has either been a failure by TxDOT to pay the fair value of the properties it has acquired, or that DCAD has failed to appraise them properly, resulting in unfair taxation. Either way, it represents a loss to the taxpayers. While we would expect TxDOT to pay a bit more for properties as compensation for inconvenience to the owners, or loss of use or revenue, the multiples in play here seem excessive.
Update - 1/2/2011: LTJ has requested comment from TxDOT, Denton Central Appraisal District, and Mary Horn.
Update - 1/3/2011: TxDOT spokesman Bill Hale says that TxDOT does not use tax assessor appraisals for acquisition, but that the department uses independent real estate appraisers (as we would expect). Hale said that the department does have some discretion to look at appraisals the owner may bring to the table, as well as paying for lost revenue, and the cost of any improvements, amenities, or the loss of access to the remainder that was not acquired. Hale said that the purchases in 2011 were all voluntary sales by the owners, and that they did not have to go to court for condemnation. Hale also confirmed that the $600 million the project had available was not going to be enough to purchase all of the R.O.W. LTJ has submitted an open records request for some of the appraisals.
Update - 1/3/2011: We spoke with Denton County Judge Mary Horn today who provided some background and specific information regarding her property in Hickory Creek that TxDOT recently purchased for $993,000, or 13.7 times the taxable value. Horn says she bought the property in 1994 with the intent of building a house. She says that her kids were still living at home in those days and that they enjoyed the access to Lewisville Lake.
There is a small 1,045 square foot sliver of a parcel of land abutting the property that essentially gave them access to a deep inlet on Lewisville Lake. The sliver of land was valued at $1,800 on the Denton County Appraisal District's tax rolls, and was also purchased by TxDOT. We had previously reported that the parcel was land-locked, since that is how it appears on the DentonCAD map. The aerial map shows no dock or boat launch in the area, but Horn says that there had previously been a dock, and that she thought Corps of Engineers rules would allow it to be reconstructed.
At the time they bought the property, there were renters in the house. Horn says that the Town of Hickory Creek subsequently rezoned the property as commercial, which prevented them from going through with their plans. Horn says that in the interim they've paid taxes on the property and kept it mowed.
The engineering firm hired by TxDOT to acquire properties for the ROW sent the Horns a letter stating that TxDOT was looking to make deals with willing buyers, and proposing to make an offer, says Horn. Horn further stated that it was the state's appraiser who offered the $993,000, and that she and husband Jim decided to accept the offer without further negotiation.
Lewisville Texan Journal had previously requested public records on those appraisals, but has not yet received them.
George Clerihew, Manager of the Sales and Research department of the Denton Central Appraisal District, weighed in on the sale saying that the price seemed high to the district. But Clerihew said it was important to understand the differences in mission between the state's appraisers and the property tax appraisers. While tax appraisers have to be able to support and defend the values solely for taxes, the state can take into consideration a variety of other factors, such as loss of business, access, improvements, value of remainders and so forth. DentonCAD records show that the Horns have not protested any property tax valuations on the property.
"This is an extreme case," noted Clerihew, about the $23.67 per square foot purchase price. As far as frontage through the Hickory Creek and Lake Dallas area, Clerihew said he couldn’t remember anything selling for over $20 a foot. Clerihew explained that ballpark ranges for prime corner frontage such as a gas station or restaurant might go for $12 - 20 per foot, but that frontage such as the Horns' lot might go for $3 to $6 for retail or office.
Horn reiterated that she didn't go looking for the sale, but that she received the letter just like other property owners. Horn stated that she didn't know whether she was legally required to disclose her ownership but that she had disclosed to fellow commissioners, the Denton County District Attorney's office civil division and to TxDOT that she had the property, and that she had bought the property many years ago, before the I-35 expansion project came up. "I've owned this for 17 years, you know; it's not like I acquired it to scoop up a big profit or anything," said Horn.
When asked about her advocacy and whether it would have been as strong if she hadn't had the property, Horn said that it was her job. "Absolutely, it's no secret that I-35 is important to Denton County and the State of Texas," said Horn.
Horn also provided some thoughts about the I-35 expansion project, and was optimistic about it finding adequate funding through investments in future toll revenues. We'll provide more on that in a future post.
The Texas Department of Transportation denied a request for documents by the Lewisville Texan Journal, referring the matter to the Attorney General's office for opinion.
Lewisville Texan Journal received a letter ruling from the Attorney General of Texas' office regarding our open records request for documents related to this. We asked for copies of all appraisals, supporting documents, and correspondence relating to the property in Hickory Creek that was purchased from the Jim and Mary Horn Family Trust.
Texas Department of Transportation had denied our request for documents based on their argument that appraisals were exempt from disclosure, and that they still had other properties to purchase, and this information would hurt their bargaining position. Although we disagree with their withholding the information after the sale, the law did seem to us to support their position.
The AG's office ruled that some portions of what we requested must be released, but that most of the material, including the appraisals, was protected.