The Montgomery County Tax Appraiser’s office has indicated it will look into sand mine appraisals after two reports last week by ReduceFlooding.com that showed thousands of acres used for sand mining were not being appraised as sand mines.
17 East Fork Sand Mine Parcels Not Classified as Sand Mines
The first report reviewed 17 parcels of land on the East Fork that comprised one 2000-acre sand mine complex. Seven of those parcels received ag/timber exemptions even though they are used for sand mining. The owner paid only $3,189 in tax on 1741 acres classified as ag/timber, or $1.83 per acre.
Seven other parcels on the East Fork, owned by the same group were classified as “E4 – Vacant Rural Land over 5 acres Non-Ag” or “C1 – All Vacant Res Lts & Vacant Res Tr < 5 Acres.” Of those seven parcels, two were being mined and were definitely not vacant.
Of the 17 East Fork parcels, a total of nine (more than half) were being mined, yet not one of those was classified as being mined. Seven of the parcels being mined received ag/timber exemptions even though they were not “principally” used for agriculture or timber, one of the five standards that land must meet to qualify for that exemption. Two other parcels being mined were classified as “vacant” even though they were clearly not vacant.
35 West Fork Sand Mines Not Classified as Sand Mines
The second report reviewed 36 additional parcels of land on the West Fork. All of those were used for sand mining. However, not one was classified as a sand mine using the code G3 in State Comptroller’s Texas Property Clasification Guide.
- 2 were classified as “A1 – Single-family residential.”
- 6 were classified as “D1 – Qualified Ag/Timber.”
- 1 was classified as “E3 – Other Improvements over 5 acres Non-Ag.”
- 24 were classified as “E4 – Vac Rural Land over 5 acres Non-Ag”
- 1 was classified as “F1 – Commercial (real).”
- 2 were classified as “F2 – Industrial (real).”
“That’s not right.”
Altogether, I sampled 53 different sand mine parcels in Montgomery County.
All 53 were classified as something other than sand mines.
When these inconsistencies were called to the attention of a representative of the Montgomery County Appraisal District, he seemed genuinely upset – not only by the inconsistencies, but by the apparent misclassifications. After reviewing several examples, he said, “That’s not right!” He vowed to look into the issue, asked me to send him a list of the misclassified properties, and said, “I pay my fair share of tax and want to make sure everyone else does to.”
“They Should Be Classified as What They Are – Sand Mines.”
Another official at the State Comptroller’s office verified that G3, the classification for sand mines, was still active and appropriate.
When asked if counties had the discretion to appraise mines as something else, he said, “They should be classified as what they are – sand mines.”
Regarding coding, the State Comptroller’s office does allow counties to create their own designations, for instance S for sand. However, they must report the mines to the state as G3. A quick check of neighboring counties found that some, do indeed, use alternative designations. For instance, Liberty County classifies several sand pits as “S.” Harris County just calls them sand pits. I could see no comparable alternative in Montgomery County.
Multiple Classifications Used for Similar Properties
“Multiple classifications for similar properties are highly unusual,” the official in the State Comptroller’s office said. “And you wouldn’t classify an occupied property as vacant. Maybe at one point in time they were vacant or in timber. But they no longer are. Sounds like they slipped under the radar of the chief appraiser.”
Need for Uniform Standards of Appraisal
He further stated that such appraisals are usually based on estimates of reserves, much like oil and gas. When asked if there was a specific procedure to follow for such appraisals, he said, “There are several appraisal standards and methods such as USPAP. Counties just have to pick one and stick with it, so they can be consistent and justify their appraisals.” USPAP stands for Uniform Standards of Professional Appraisal Practice.
“Usually, sand mine appraisals are based on tonnage, remaining reserves, and a formula for discounted cash flow. The law says you must use standard methods and appraisal practices,” said the source in the Comptroller’s office.
Most Likely an Oversight
The Montgomery County Appraisal District office also felt the appraisal inconsistencies were most likely an oversight. “The number of sand mines out there is minuscule compared to the number of homes, businesses, ranches and farms. They probably just slipped through the cracks. We rely a lot on self-reporting for these types of properties. Owners are supposed to tell us when the use of a piece of property changes.” Other counties also seem plagued by inconsistencies when it comes to sand mine appraisals, though not to the degree Montgomery County is.
Ready for a Rollback?
Mines that were receiving the ag/timber exemption which requires a special application, may be in for a large surprise if the mines are reappraised. According to state guidelines, the properties are subject to a rollback tax dating to the change of use or five years. Reappraisal equals the difference between the timber valuation and the market valuation plus 7% interest per year. Some mines have been using the ag/timber exemption for many years so penalties could add up quickly. See the State of Texas Guidelines for Appraisal of Timberlands in Chapter 2 and the rollback procedures in Chapter 3.
Same Land, Same Owner, Same Use on Different Sides of County Line – A 12X Difference
To put this issue in perspective, let’s look at the lone mine on the East Fork owned by the Guniganti Family Property Holdings LLC. The Harris/Montgomery County line bisects the lower part of the mine.
The land on the Montgomery County side is assessed as “ag/timber” even though it has been a sand pit for thirteen years. Because of the ag/timber exemption, Montgomery County taxes the land based on an assessed value of $56.25 per acre.
Just inches to the south, land on the Harris County side used in an identical fashion is classified as a sand pit. That pit is taxed at its market value, which is $701.73 per acre. That’s more than a 12x difference in the taxable value for land on the same property.
Montgomery County schools and hospitals could have a nice Christmas this year if all that so-called vacant land and timber land in sand mines gets re-appraised.
As always, these are my opinions on matters of public policy, protected the the First Amendment of the U.S. Constitution and the Anti-SLAPP statute of the Great State of Texas.
Posted 10/1/18 by Bob Rehak
398 Days since Hurricane Harvey