Appeals court decision draws widespread condemnation

An appellate decision over a TCAD lawsuit has astounded commercial property owners and attorneys who represent them. If the Texas Supreme Court allows it to stand, the decision may encourage appraisal districts to sue more property owners anywhere in Texas.

Attorneys and organizations representing major commercial property owners—and even two state lawmakers—are so alarmed they have filed amici curiae briefs that criticize the appellate court’s opinion and seek to reverse it. Although not parties to the litigation they have strong interest in the case and have shared insights they hope will influence the Texas Supreme Court if it hears this case. The amici curiae briefs filed with the Third Court of Appeals before it issued its opinion had no effect.

One of the lawmakers, State Representative Hugh Shine (R-Temple) is said to be working on an omnibus bill that among other things would repeal the statute that authorizes chief appraisers to sue property taxpayers. (Despite daily calls and emails, the Bulldog has not been able to independently confirm that. Such legislation is not listed among the bills he has so far introduced in this session, according to the list on his webpage.)

If such legislation were enacted TCAD’s win in this lawsuit may end up being a Pyrrhic victory that ultimately weakens chief appraisers by halting their ability to appeal appraisal review board decisions.

TCAD sues landfill owner

The saga began when TCAD issued a notice of appraised value of $21.2 million for tax year 2019 for a 335-acre landfill near Creedmore in far south Travis County owned by Texas Disposal Systems Landfill Inc. (TDSL).

Property Tax Code Section 41.41 entitles property owners to use any of the nine legal grounds for protesting actions by the chief appraiser, appraisal district, or appraisal review board that adversely affects the property owner.

TDSL filed a protest over the landfill’s value initially on two grounds: Property Tax Code Section 41.41(a)(1) for appraised market value and Section 41.41(a)(2) for unequal appraisal of the owner’s property. But before the Travis Appraisal Review Board (ARB) conducted a formal hearing, TDSL withdrew its market-value protest.

Lorri Michel, attorney for TDSL, told the Bulldog that in its formal ARB hearing TDSL protested the valuation solely on grounds that the valuation was unequal, meaning that TCAD had allegedly pegged its value significantly higher than other landfills—not only landfills in Travis County but also across the 40 counties in which TDSL operates.

After the formal hearing, in July 2019 the ARB issued an order that states, “The subject property was unequally appraised and the appraisal records should be adjusted to reflect a value of $2,800,000.”

The records were adjusted as ordered but TCAD nevertheless took exception. Chief Appraiser Marya Crigler exercised authority under Property Tax Code Section 42.02, which allows a chief appraiser to appeal an ARB order that determined a taxpayer’s protest. TCAD filed suit for a trial de novo, taking to district court all issues of facts or law decided by the ARB in TDSL’s protest as though the ARB had never acted.

Michel calls TCAD’s action “retaliation.”

“We contested those values and prevailed at the ARB,” she told the Bulldog in an interview.

TCAD’s petition states, “the value set by the ARB” results in a “below market value and unequal appraised value.” (Travis Central Appraisal District v. Texas Disposal Systems Landfill Inc., Cause No. D-1-GN-19-006394.)

In response to TCAD’s lawsuit, TDSL filed in district court a plea to the jurisdiction because TCAD had failed to obtain the written approval of the TCAD board of directors before filing suit, as Section 42.02 requires.

Crigler did not have written approval for this specific appeal and instead had relied upon a board resolution approved in May 2017 that had delegated authority to her. The board chair and secretary-treasurer who signed that resolution were no longer on the board when TCAD filed suit.

Further, TCAD’s petition asserted a claim regarding the landfill’s market value, which was not part of the ARB’s order that adjusted the value.

The result was that in February 2020 District Judge Catherine Mauzy signed a court order and final judgment that dismissed TCAD’s lawsuit against TDSL.

Since then, to cure the jurisdictional defect, the TCAD board of directors has three times approved authority for the chief appraiser to file suit under Section 42.02:

August 30, 2021—For 27 properties, 26 of which are owned by Texas Disposal Systems.

June 7, 2022—“to ensure there is no ambiguity as to whether the Board of Directors gave written permission to the Chief Appraiser to appeal the tax year 2019 Appraisal Review Board Order for PID 352532….” (That property ID is for the TDSL landfill.)

September 1, 2022—For 28 properties, 25 of which are owned by Texas Disposal Systems.

The four approvals have been combined and are available here.

TCAD Communications Director Cynthia Martinez, in response to the Bulldog’s request for comment, said in an email, “The TDSL properties are one economic unit, but legally multiple parcels. So multiple parcels had to be authorized. The same parcels are also in litigation for multiple years.”

Third Court of Appeals backs TCAD

TCAD appealed Judge Mauzy’s judgment. In its brief filed with the Third Court of Appeals, TCAD stated the trial court erred “…in concluding that, in an appraisal district’s trial de novo challenge to an appraisal review board’s decision, the appraisal district is limited by arguments that the property owner chooses to raise in the underlying administrative proceeding.” (Cause No. 03-20-00122-CV).

In June 2022, the Third Court of Appeals found in TCAD’s favor, denied TDSL’s request for a rehearing, and remanded the case to district court for further proceedings consistent with its opinion. (Cause No. 03-20-00122-CV).

Asked to comment for this story, Chief Appraiser Crigler, said via email, “We were pleased that the Third Court of Appeals decision continued our efforts to ensure that Travis County businesses pay their fair share of the property tax burden. We look forward to defending that pursuit in front of the Texas Supreme Court, should they take up the case.”

While TCAD rejoices in its victory, the Third Court’s opinion flew in the face of nine amici curiae briefs filed by parties.

“As lawyers who represent taxpayers, just tell us what the rules are,” Michel says. “We can follow them. What we can’t deal with is a changing of the rules without notice. When we have a new decision thrown in it causes a great deal of concern. So this case garnered instant attention” from fellow practitioners.

Those filing amici curiae briefs for the Third Court of Appeals consideration were Representative Shine; Christopher Investment Company; Omni Hotels & Resorts; Texas Public Policy Foundation; Texas Association of Realtors; Walgreen Company, which states that it owns, leases and operates about 750 commercial retail properties in Texas; Texas Apartment Association, which claims that its member companies provide more than 2.3 million homes and pay more than $3.5 billion in annual property taxes; CVS Pharmacy Inc., which it states has more than 800 pharmacies and other business operations in the state; Texas Taxpayers and Research Organization, and Texas Association of Property Tax Professionals.

The latter brief states, “The choice of which, if any, of the many potential issues to protest in a given year and present to the ARB for determination rests solely with property owners.”

In addition, the Texas Association of Property Tax Professionals’ brief states that TCAD is bound by Property Tax Code Section 42.02, and nothing in the statute’s express wording permits the chief appraiser to appeal on issues “beyond the scope of (1) the taxpayer’s protest, (2) the ARB’s determination, and (3) the ARB’s issued order on that determination.”

In other words, TCAD is not permitted to appeal the market value of TDSL’s landfill when the ARB decided that its property value should be lowered because it was unequal, meaning higher than comparable landfills.

TDSL petitions Texas Supreme Court

Under the Third Court’s ruling, TDSL would have to retry the case in district court and defend the landfill’s market value. To avoid that, TDSL in October 2022 petitioned the Texas Supreme Court to review the Third Court’s opinion. (Case No. 22-0620).

If the Third Court of Appeals opinion is allowed to stand, it would authorize appraisal districts to litigate property values outside the parameters of the orders issued by appraisal review boards in response to property owner protests.

TCAD filed it’s response to TDSL’s petition with the Texas Supreme Court January 23^rd, as the court requested.

The Supreme Court has not yet agreed to take up the case, but eight amici curiae briefs have so far been filed in support of TDSL’s petition.

Among those supporting the petition are State Senator Paul Bettencourt, a former Harris County Tax Assessor-Collector. In October 2022 he wrote that the Third Court’s opinion improperly expands a chief appraiser’s right to sue far beyond the Legislature’s intent and misconstrues trial de novo review.

“Despite the absence of an ARB determination on market value, the Court of Appeals improperly found jurisdiction over the appraiser’s alleged market value claim under Section 42.02,” the senator’s letter states. “As such, the court effectively rewrote Section 42.02 to create additional grounds of appeal not contained in Section 42.02. It is the Legislature’s job to write the statutes and the courts’ job to enforce those statutes as written.”

Representative Shine hammered the same point.

In a December 2022 letter to the Supreme Court he wrote, “The court’s failure to recognize Section 42.02’s jurisdictional limits has dire consequences for Texas property owners. The holding allows appraisal districts to sue taxpayers on any protest ground, even when, like here, the protest ground was never raised by the taxpayer or resolved by the Appraisal Review Board.

“This improper expansion of jurisdiction over ARB orders is also likely to chill taxpayers’ willingness to pursue their protest rights because doing so will open them up to lawsuits by appraisal districts on new and additional grounds,” Shine’s letter states.

Among the six others filing amici curiae briefs in support of the Texas Supreme Court taking up TDSL’s case were:

Building Owners and Managers—Texas Building Owners and Managers Association (Texas BOMA) is an organization of more than 2,000 members that it claims collectively support 65,000 jobs and contribute $7.8 billion to the Texas economy. Its October 2022 amici curiae brief states, “Property taxes can be the largest operating expense for commercial property owners in Texas. Texas Disposal Systems Landfill Inc.’s petition for review presents issues that are critically important to building owners and managers throughout Texas.”

Valero Refining—Texas LP—Its brief states that Valero and its affiliates constitute the largest independent petroleum refiner in the world. Valero has substantial real estate holdings in Texas, including numerous refineries, cogeneration units, a payment service center, corporate offices, a wind farm, pipelines, and 11 terminals throughout the state.

“As such, Valero is significantly affected by changes in the state’s property tax laws. The shadow cast over taxpayers’ rights and remedies by the opinion of the Third Court of Appeals is therefore of great concern to Valero and similarly situated taxpayers throughout the state,” its brief states.

Additional key points in Valero’s brief are that a trial de novo standard of review does not expand the trial court’s jurisdiction, and market valuation and uniform valuation are distinct bases of appeal. “The Third Court of Appeals conflates the theories, exposing taxpayers to harassment through discovery abuses and chilling taxpayers’ exercise of their rights.”

TCAD’s single-minded focus on TDSL

TCAD would prefer that the Texas Supreme Court not take up this case. In its 61-page response to TDSL’s petition for review, TCAD addresses one the concerns expressed the in amici curiae briefs—concerning the burdens on property owners and potential chilling effects of allowing the Third Court’s opinion to stand—by claiming it rarely uses the authority given by Section 42.02 to appeal ARB orders.

TCAD’s response states, “TCAD has filed 11 lawsuits against property owners over the last decade….”

TDSL’s attorney Michel says these 11 lawsuits referenced in TCAD’s response filed in the last 10 years covered the years 2010 through 2019, and included the first lawsuit against TDSL (the one now before the Texas Supreme Court).

The legal fisticuffs pitting TDSL against TCAD started in 2009, when TDSL filed suit against TCAD over its valuation of the 345-acre landfill for tax years 2009. 2010, 2011, and 2013 (Cause No. D-1-GN-09-003040). As the Bulldog reported, TDSL prevailed in that litigation at an estimated cost to taxpayers of nearly $1 million. The final judgment was issued in June 2019.

As if smarting from that loss in June 2019 and spoiling for a rematch, TCAD has counter-attacked by initiating four other lawsuits against TDSL in the space of three years, including the case covered in this story (Cause No. D-1-GN-19-006394, filed in September 2019). The three others are:

Cause No. D-1-GN-21-006199—(This one counts double.) In 2021, TCAD sued TDSL twice in the same lawsuit. First, in October 2021 over the ARB’s orders based on an unequal appraisal, and again in November 2021 by adding the ARB’s reinstatement of agricultural appraisals that TCAD had removed. The case is pending in district court.

Cause No. D-1-GN-22-005202 –In 2022 the ARB ordered TCAD to grant TDSL’s request to combine accounts and TCAD sued in September 2022. The case is pending in district court.

Michel says, “The dramatic intensity against TDSL by TCAD is displayed fully by these numbers. TCAD has sued one taxpayer four times after we won at ARB and at the trial court.

“Section 42.02 is the personal retaliatory weapon used by TCAD against any taxpayer who stands up for their rights and prevails.”

In addition to these lawsuits involving TDSL, the Bulldog reported that in April 2019 attorney Michel also won agreed final judgments in the two lawsuits she filed against TCAD on behalf of client Catherine Tower LLC, owner of a 15-story apartment building at 210 Barton Springs Road.

That litigation cost taxpayers nearly $850,000.

Although she has so far prevailed in litigation against TCAD that’s been concluded, Michel told the Bulldog she fervently hopes that Section 42.02 will be repealed in the forthcoming legislation. Personally, that would cost her money.

“If the bill passes, the Lorri Michel annuity fund paid for by the taxpayers of Travis County will come to an end,” because there would be no new cases in which she has to defend against the chief appraiser’s litigation.

Trust indicators: Ken Martin has been covering local government and politics in the Austin area since 1981 and investigating and reporting on Travis Central Appraisal District since 2011. See more about Ken on the About page. Email [email protected].