Angry business owners question profitability in Del Rio

June 17, 2006

Soaring property taxes at fault?

By Bill Sontag
Feature Writer

Whether your workplace is a hole-in-the-wall tattoo parlor or a posh department store, a national chain restaurant or a tiny Tex-Mex café, if you’re on Veterans Boulevard, the land under your property is worth $10.70 per square foot. And your tax bill will be based on that valuation and the assessment of the value of structures on your property.Period.

So says Ricardo Martinez Jr., chief appraiser of the Val Verde County Appraisal District. Martinez also said that average property tax valuations of land hovered around $4 per square foot last year. Moreover, the values were not consistent at that rate, and recent changes require more uniform rates for specific areas and corridors of commerce. The new tax rate for land along Veterans Boulevard this year was set based on an average of sales involving four new businesses. Prices paid for land on which International House of Pancakes, Advance Auto Parts, Jack-In-The-Box and Amistad Bank were or will be built set the tone for appraisal rates. But property owners along the commercial strip city of U.S. Highway 90 are experiencing property valuations, and subsequent tax increases, of 300, 500, 800 percent and more according to merchants there.

“That’s just fact,” said Greg Nebel, owner/manager of the NAPA Auto Parts, 1508 Veterans Blvd. Nebel is moving to a new location on the north end of town, and sustained a huge hit in increased property valuation even before he began to build his new store. “That’s what the market is indicating now,” said Martinez, responding to queries about the issue Wednesday from Blanca Larson, manager for CBL Properties and Plaza Del Sol Mall.

Wednesday night, 65 frustrated property owners – both commercial and residential – filled the Kennedy Room of the Del Rio Civic Center to voice dissent with ballooning property valuations and resulting tax bills. Most questioned and quibbled with Martinez about how he arrived at the dramatic increases. Martha Mendoza, co-owner of McDonald’s Restaurants in Del Rio, explained that her eatery on Veterans Boulevard was valued at nearly 200 percent above last year’s assessment. “This just isn’t fair, just because someone down the street sells their property for $400,000,” said Mendoza, alluding to the system used by the appraisal district to set the flat rate of $10.70-per-square-foot after averaging several property sales along the corridor.

Art De Luna Jr., assistant chief appraiser for Val Verde County Appraisal District, explained that the Wednesday night meeting was called to respond to rumbles heard second-hand from concerned business owners. “We have heard that there’s supposedly an outcry because commercial properties have gone up in appraisal. We’ve heard from a few people [at the district’s office, 132 Foster Drive], but most have not come to the source. So we called the meeting on advice from our board chairman.” Jesse Fernandez, vice president of Del Rio National Bank and chairman of the Val Verde County Appraisal District board of directors, said Thursday night that he and other board members have heard the complaints. “I got some very angry phone calls at my office,” Fernandez said to members of the board, to which Martinez replied that the district office has received only a few such complaints. But those business owners attending the public meeting at the Del Rio Civic Center Martinez attributed much of the problem to a dearth of information about land values, rectified only when sales become public record, were not shy with their questions or their fears. He repeated that county appraisers were not making decisions based on what could be learned about percentage of increase, but rather solely on market values of the property.

Realtor Stan Arledge replied to Martinez that business owners must be allowed to make a success of their enterprise. An example, Arledge said, are apartment owners who, with the tax increase, cannot reap sufficient profit to maintain dependable cash flow. Friday, Nebel agreed: “To pay taxes, you have to increase sales substantially to pay them, and who pays for that? It has to be the consumer. They’re going to put some people out of business … It’s going to stifle growth here. It has to.” Nebel believes the timing of the appraisal and tax notices, whether mandated by state regulations or not, was terrible. “They have gone so high on these appraisals in the middle of the business year, that it’s extremely hard to come up with the funds to pay the taxes they‘re asking.” Giving his own new property construction as an example, Nebel said, “If I’d received that tax notice four days before I did, I’d have put a hold on that project.”

Rachel Beavan, owner/manager of Edwards Graham Insurance, 1906 Veterans Blvd., also took a hit with increased property valuation and taxes. Beavan assessed the Wednesday forum from the perspective of peers in enterprise. “My impression is that it was very frustrating for the small business owners. The appraisal district is doing what they’re supposed to be doing, complying with the state, but when you look at large property tax increases for Home Depot and other big property owners, it’s only an inconvenience for them, a pesky thing they have to pay. “But your small business owner buys the property, and they’re trying to make a living off of it. He ends up having to pay more for taxes than what he had anticipated he would have to pay when he bought the land. “So he’s got to net more, and that means he has to gross a lot more to pay his taxes. “So he has to raise his prices, so what happens? His customers go to Wal-Mart to buy,” Beavan said.

Del Rio LIVE! asked Nebel if he planned to raise prices at NAPA Auto Parts to compensate for the dramatic increase in property taxes. While he acknowledged that some merchants will almost certainly do so, Nebel will not. “I can’t do that. There’s just too much competition in town. I just can’t randomly raise my prices,” Nebel said. So what will he do? “I don’t know. I really don’t. It may mean laying off an employee, but I’m not going to say that I will. My employees are great folks, very faithful.” Nebel’s hope – and optimism – is that sales will increase enough at the new store location to make up the difference between this year’s tax burden, and next. Still he harbors concerns for all the affected merchants, and the ripple effect throughout Del Rio’s business and residential communities. “I’m not just thinking about me; I’m thinking about everybody. This is about the whole community,” Nebel said.

Questions or comments? Contact Bill Sontag directly .