H-E-B Grocery Co. is suing the McLennan County Appraisal District over a $20.2 million appraisal for its new flagship H-E-B Plus! store at Interstate 35 and South Valley Mills Drive.

The lawsuit, filed this month in Waco’s 414th District Court, does not specify what the appraisal should be. But in Appraisal Review Board hearings this summer, the company argued that the value should be cut by 58 percent to $8.55 million, a claim the board rejected.

The requested reduction would have reduced the store’s local property taxes from $569,137 to about $240,915 this year.

H-E-B announced in the months before the store opened in August 2013 that it had invested more than $20 million in the store.

But the lawsuit claims that the $20.2 million appraisal exceeds market value for a property of its type and location.

The lawsuit also alleges that the property is valued higher than other similar properties in the county, violating a state requirement that appraisals be “equal and uniform.”

The MCAD valuation “exceeds the median value of a reasonable number of comparable properties appropriately adjusted and is therefore unlawful,” the lawsuit states.

H-E-B is asking the court to determine the median value of comparable properties and reduce the supermarket’s value accordingly. The lawsuit also demands that the appraisal district pay all legal fees if the company prevails, as state law allows.

MCAD Chief Appraiser Drew Hahn said he thinks the district can show that the investment H-E-B put into the store is in fact relevant to the market value of the store.

“If you build it and put $20 million into it, you wouldn’t sell it for less than you have in it,” Hahn said. “That’s most relevant in the first two or three years.”

Other properties

Hahn said attorneys for H-E-B have argued that the new store is overvalued when compared to other properties in Greater Waco such as the Bellmead H-E-B.

The Bellmead store was expanded in 2011 to 114,090 square feet and is valued at $9.7 million. The Hewitt Drive H-E-B Plus!, built in 2003, has 108,917 square feet and is valued at $8.2 million — less than half the per-square-foot valuation of the new H-E-B.

But Hahn said he is confident that the appraisal district can justify the value of the Valley Mills Drive store based on its newness and its ideal location close to Interstate 35.

H-E-B is represented by Mark Hutcheson of Austin-based Popp Hutcheson, the state’s leading firm for companies challenging their appraisals. Hutcheson was out of the office Monday and could not be reached for comment. H-E-B officials could not be reached for comment Monday afternoon.

The H-E-B case isn’t the biggest tax lawsuit the district is facing this year. The owners of the Sandy Creek Power Plant in Riesel are suing the district to reduce a valuation of $884.5 million by $631 million.

Hahn said this year’s MCAD budget includes about $750,000 for legal expenses, including about $500,000 for an expected court judgment in favor of the district’s former landlord, Hoppenstein Properties.

Hahn said it’s hard to know how long the H-E-B lawsuit will take to resolve.

“It just depends,” he said. “If they got real with it, we could settle and we’d be done.”

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