Metro may have to pay taxes on Midtown blocks

More on yesterday's news that Metro is now in the business of land investing: According to county tax officials, the transit agency could end up having to pay taxes on two blocks of Midtown property it's holding for a private developer for several months. Metro's board approved the purchase of the property in question, a two-block, $7.2 million parcel bordered by Main, Holman, Travis and Winbern, on March 22. The seller is developer Robert H. Schultz's RHS Interests, which plans a mixed-use development for the site. RHS can buy the property back from Metro within a year for $7.2 million; for six months after that, the price will be $7.2 million plus interest; and after 18 months, Metro may do whatever it wants to with the property. For Schultz, the deal has two big benefits: The price of the land is locked for 12 months — and during that time, while Metro is holding onto the property, he won't have to pay taxes on it.

Metro, however, might be stuck with the tax bill if the agency doesn't come up with a compelling reason why it shouldn't. "The law is very specific that a political subdivision has to hold property for a public purpose (to qualify for the exemption), and I'm not convinced that what they want to do is a public purpose," Harris County Appraisal District Chief Appraiser Jim Robinson told the Chronicle. "Unless they can convince me otherwise, my intent is to put that on the tax rolls at what they pay for it." Tax Assessor-Collector Paul Bettencourt agreed, saying it's not uncommon for political jurisdictions to pay taxes on certain property — for example, though the county owns the Pillot Building on Congress Avenue downtown, it pays full taxes because the building is leased to tenants. The two Midtown blocks in question were appraised at $4.2 million for 2006 and had a total tax bill of $113,000; according to the Chronicle, "paying taxes for 2007 is not a major concern to Metro." Well, then.

RHS plans to develop retail and residential space on the property along with a parking garage (which Metro might sink some money into and open, in part, to light rail riders) and office space. According to the Chronicle, the property could have a value of up to $30 million with that development, and the value could rise to as much as $100 million if development is carried out on adjacent blocks. Metro expects the project could bring 1,000 new riders a day to its transit system.