Bexar County Texas Falling into Tax Trap

Bexar County Texas Falling into Tax Trap
Recent actions by the Bexar Appraisal District ("BAD") in San Antonio, Texas bring to mind the writings of poet and philosopher George Santayana: "Those who cannot remember the past are condemned to repeat it." In an effort to make up for its own inefficiencies and unbalanced taxing policies, BAD is refusing to recognize tax exemptions for community housing development organizations ("CHDO's") created under statutes passes by the Texas state legislature. CHDO's are nonprofit organizations dedicated to providing and preserving affordable housing across the country.

The Chief Appraiser at BAD apparently thinks he can make up for county financial shortfalls on the backs of CHDO's and affordable housing developers. This is a very shortsighted and ignorant strategy when one examines the origins of CHDO's and the Texas CHDO property tax exemption; and, his timing could not be worse for his constituents.

Once upon a time, Bexar County and the City of San Antonio, and every metropolitan area county and city across the country, were burdened with the financially debilitating responsibility for providing housing for their economically disadvantaged citizens. As we all know, public housing developed, constructed and operated by governmental bureaucracies is condemned to only one outcome – slums.

The capital markets came to the rescue in the 1960's and 70's with the rise in popularity of limited partnership syndications which built or rehabilitated affordable rental housing, as well as market rate housing, and passed tax write-off's to their limited partners. These limited partners often were high income individuals who used the write-off's to shelter income. The glory of the process was that affordable housing was created and preserved.

It is the unfortunate nature of taxing authorities that no good deed will go unpunished if it diminishes tax collections, and the federal government is no exception. In 1986, the U.S. Congress pushed through legislation which effectively eliminated housing limited partnership syndications and cut off the flow of capital to affordable housing. As a minor political concession, it threw affordable housing a bone with the creation of the low-income housing tax credits.

After a decade of working out the kinks, the low-income housing tax credit became a viable method for raising capital to build and preserve affordable housing, but that was not enough. The program became very expensive to join and was highly unpredictable, thereby effectively excluding the nonprofits who are the really dedicated affordable housing developers.

Recognizing that a disconnect was arising between the creation of affordable housing and its primary advocates, the legislatures of Texas and other states created property tax exemptions which would encourage nonprofits to get back into the housing capital process. In Texas, the incentive was created for CHDO's, a style of nonprofit organization recognized by the federal government. The use of the CHDO prerequisite also gave those nonprofits the opportunity to obtain additional financial support through the federal HOME Funds program.

Underlying all of this lawmaking was a desire to shift the moral responsibility for providing low-income housing from local government to the private sector via the nonprofits. The "old wise men" at the top of the governmental hierarchy figured out that this was a small price to pay to get out of the housing business.

Now comes the bureaucrat who ignores history and thinks he can win the hearts and minds of his employer and the taxpayers by collecting a few extra bucks. He also is blind to the fact that the low-income housing tax credit program has been rendered ineffective by the current economic crisis.

Alas, this itinerant public servant will be long gone when those same taxpayers cheering him now are footing the bills for the slums that they will be forced to build when the moral, and possibly the legal responsibility to house the less fortunate shifts back to them.

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