You know, the City used to justify municipal extravagance with the rationalization that we need to swing our tax base from residential properties to commercial and industrial properties. Well, this year valuations went the other way.
Increases in commercial and industrial property values usually lead the way when the El Paso Central Appraisal District releases new certified valuations in July, but this year it’s the modest 2.9% increase in home values.
This year’s commercial and industrial property valuations of $11.4 billion actually fell $184 million below last year, catching the city and probably other taxing jurisdictions by surprise.
In addition, new valuations of multifamily properties came in at $2.1 billion, which is $31 million or 1.4% less than last year.
“In over a decade, I’ve never seen commercial values go down,” said Robert Cortinas, the city’s chief financial officer. “Historically, on the commercial side, we’ll see a 2.8% increase.
“That’s happened every year I’ve been with the city. It just doesn’t make sense.”
As a percentage, the loss in industrial and commercial values isn’t large, just 1.6%. That’s the equivalent of 920 new homes valued at $200,000 suddenly disappearing from the tax roll.
The revenue loss would come to just $155,230 at the city’s tax rate of 83.4 cents per $100 valuation. But the city wasn’t expecting losses in property valuations, particularly not in the very areas it’s worked hard to improve – business and industry.
“When I got the certified values Wednesday, I was very, very shocked at what I saw,” Cortinas said. “The surprising thing is there was a lot of growth.
“We had almost $254 million in new construction in commercial – a 3.5% increase. But it’s on existing commercial property where we saw the decrease.”
When you add a bunch of new commercial properties to a stagnant population base, the supply increases but the demand doesn’t. So of course the value of the existing properties will decrease.
Drive down one of our commercial corridors and look at all the For Rent signs that are popping up in front of empty storefronts.
For Rent signs and vacant lots are the growth industries in El Paso.
All that “development” is just re-slicing the pie. There’s no increase in business. The existing demand is just redistributed.