Appraisal District Operations Report
2004 and 2005 Data
Each year the Texas Comptroller’s Property Tax Division (PTD) surveys the State’s 253 county and central appraisal districts (CADs) for information about their operations. The CADs provide final data about their operations from the prior tax year and projected data on budgets and plans for the current tax year.
The Comptroller makes CAD information available for use by legislators, tax officials, taxpayers, media and state agencies. PTD uses the information to project legislative fiscal estimates, to provide background for Appraisal Standards Reviews (ASRs) and as a data source for the PTD’s Annual Property Tax Report. CADs use this benchmark information to compare their own operations to those of other CADs. Full details reported by the CADs are available on the PTD’s Web site at www.window.state.tx.us/taxinfo/proptax/index.html.
Prior to the establishment of CADs in 1981, thousands of taxing units appraised property and assessed taxes independently, resulting in wide disparities in values. As the state began to rely more on local property taxes to fund public schools, and to use school district property values as a measure of wealth to calculate state aid to school districts, centralized local appraisal became necessary to ensure equal treatment of taxpayers.
The resulting system of CADs has greatly improved equity in property taxation and school funding, though there are still wide disparities in the individual characteristics of CADs. Appraisal districts range greatly in size and composition across the state. The differences in responses reported in the PTD’s annual survey reflect the diversity of the CADs and the state itself. While the range in the survey results makes generalized observations difficult, the results demonstrate the massive job that is done by the CADs each year, how local taxing units benefit from this work and the complexity of the CADs’ daily operations.
In 2004, Texas CADs appraised more than 16 million pieces of property in 3,850 taxing units; this was 463,046 more properties than were appraised in 2003, a 2.8 percent increase. The CADs performed this task with operating expenses of about $280 million, a 2.9 percent increase from 2003. The result of these appraisals was a reported $1.5 trillion of property value. In contrast, in 2003 appraised property totaled $1.4 trillion.
The work of an appraisal district is to appraise property within its boundaries. A CAD’s workload increases with the number and kinds of properties it must appraise.
The Operations Survey asks CADs to report appraisals in four broad property types: real, mineral, business personal and individual personal.
Of the 463,046 new property appraisals, the largest increase in 2004 occurred in mineral property. CADs appraised an additional 219,818 accounts (7 percent), for a total of 3,341,011 mineral property accounts.
The number of real property accounts increased by 225,034, creating a total of more than 11.7 million accounts.
The number of business personal property accounts increased by 26,778, for a total of 1.2 million accounts.
Taxable individual personal property decreased by 8,584 accounts, a little more than 5 percent, for a total of 164,573 accounts.
Almost half of Texas’ taxable property accounts are concentrated in 21 of the 253 CADs. Each of these 21 CADs appraises more than 150,000 accounts.
Six of these large CADs handled more than 27 percent of all the taxable property accounts in the state. These six districts have over 300,000 accounts each and include Harris, Dallas, Tarrant, Bexar, El Paso and Travis CADs.
Optional Property Categories
There are a few categories of property that taxing units have the authority to tax or to exempt: freeport property, non-income producing personal property and vehicles leased for personal use.
The Texas Constitution, Article VIII, Section 1-j, defines freeport property as goods, wares and merchandise (other than oil, gas and petroleum products) that leave Texas within 175 days of the date they are brought into or acquired in the state. Counties, cities, school districts and junior college districts may tax or retain the right to tax freeport property. Other special districts must exempt freeport property.
Taxing units may tax non-income producing personal property, if the units follow certain hearing and notice requirements set out in Section 11.14, Texas Tax Code.
Motor vehicles leased for personal use after January 2, 2001, may be exempt from property taxes. Section 11.252, Texas Tax Code, defines these vehicles as passenger cars or trucks with a shipping weight of less than 9,000 pounds. The law defines “personal use” as using the vehicle more than 50 percent of its mileage for activities that do not involve the production of income.
A city, however, may continue to tax personal leased vehicles, if the city adopted an ordinance to do so prior to January 1, 2002.
The taxing units within a CAD are the entities which assess and collect property tax revenues for services provided within the CAD. The most familiar of these are the school districts, cities and counties, but there can also be special purpose districts such as health care, community colleges or utilities.
Each year some taxing units cease to exist and others are formed in response to local community needs. Survey results indicate that there were 3,871 taxing units in 2005 in Texas that imposed local property taxes. Although some taxing units dissolve each year, generally the trend is for the number of taxing units to increase each year. Over the last six years the number of local governments assessing the property tax has grown by 229 (6.4 percent). In 2005, 65 more taxing units were reported in the survey than in 2004. Some of these taxing units serve taxpayers in more than one CAD.
Number of Optional Property Categories Taxed in 2004
Taxing Units with Optional Taxing Authority 2003 2004 Units Retaining Right to Tax Freeport Property 1,516 1,488 Units Taxing Non-Income Personal Property 91 91 Cities Taxing Non-Income Leased Vehicles 76 75
Each CAD is governed by a board of directors that is selected by the taxing units within the CAD. The directors in turn select appraisal review boards (ARBs), which review taxpayer challenges to property appraisals. CADs are also required to have agricultural advisory boards.
Appraisal District Boards
The board of directors establishes the goals and policies of the CAD and is responsible for selecting the chief appraiser and approving the members of the agricultural advisory board. Texas has a total of 1,564 CAD directors, with an average of six members on each CAD board. Boards in 68 CADs have established staggered two-year terms.
Most board members are citizen appointees of the taxing units in the CAD. But almost 40 percent, or 632 directors, are taxing unit officials—that is, they are county tax assessor-collectors, school board members, county judges, county commissioners, city council members or other elected officials. They represent the interests of the respective taxing units that appoint them.
State law requires that if a taxing unit does not appoint the county tax assessor-collector to the CAD board, then the county assessor-collector serves as a non-voting CAD director. County tax assessor-collectors are ineligible to serve on the CAD board, however, if they are chief appraisers or if the county commissioners court contracted for county taxes to be collected by another taxing unit or the CAD.
CAD boards in 213 districts have legal counsel on retainer to advise them on disputes that may arise regarding the valuation of properties. CADs reported that 200 boards purchased liability insurance for errors and omissions on the tax roll. The average coverage per board was more than $1 million.
Appraisal Review Boards
Appraisal review boards (ARBs) are separate entities appointed by CAD directors to handle taxpayer protests and taxing unit challenges. Each CAD’s board of directors determine the number of ARB members to appoint, with a minimum of three members.
For tax year 2005, there were 1,504 ARB members, up from 1,492 in 2004. Some 21.9 percent, or 330 of the members, are newly appointed. That compares to 351 new ARB members in 2004. ARBs average six members on the board. Most ARB members receive a per diem fee for their ARB service.
ARBs retained legal counsel in 98 CADs. ARBs in 173 CADs were provided liability insurance at more than $1 million per ARB.
Agricultural Advisory Boards
Section 6.12, Tax Code, requires the chief appraiser, with the advice and consent of the CAD’s board of directors, to appoint three or more members to an agricultural advisory board. The advisory board advises the chief appraiser on the appraisal and use of land designated for agricultural, open space or timberland appraisal.
There are 185 CADs that have active agricultural advisory boards, with 726 members.
Each CAD’s board of directors approves an annual operating budget. Final 2004 CAD operating expenses totaled $279 million, or an average of $16.95 per appraisal. The average 2004 CAD operating budget exceeded $1 million, 3 percent more in expenses than in 2003.
The 2004 expenditures for individual CADs vary by size and type of property appraised. The lowest cost per appraisal was Jack CAD at $2.14. At the other end, Somervell CAD reported the highest cost at $50.58 per appraisal. This range in operating costs per appraisal reflects the type of property being appraised by each CAD. For example, 60 percent of Jack CAD’s appraisals are mineral properties. Each interest, or share, in a mineral lease represents an account, and while the number of accounts within a lease can be numerous, only one appraisal is necessary per lease (the value is pro-rated among the share holders). Therefore, the costs per account for mineral properties seem unrealistically low. Somervell CAD, on the other hand, is home to the Comanche Peak nuclear facility and has a high concentration of industrial property that requires great expertise to appraise. The higher cost of appraising industrial property is reflected in Somervell’s high cost per parcel.
CAD expenses are paid by local taxing units according to the proportion of their property tax levy to the total property taxes levied by all the taxing units in the CAD. Since local taxing units fund CAD budgets, the taxing units may veto the CAD budget adopted by the CAD’s board of directors. Taxing units in five CADs vetoed their 2005 budget, as allowed by Section 6.06, Tax Code.
Most appraisal districts are administered by chief appraisers who oversee a staff of professional appraisers, administrative and support personnel and sometimes one or more computer programmers. A CAD board may contract with a taxing unit for a taxing unit’s tax office to serve as the appraisal office. Sixteen CADs contract with a taxing unit for this service and maintain a board of directors but no employees.
Employment arrangements within the CADs vary with the CAD size and workload. The largest CADs commonly have as many as 200 staff members, while a small CAD may employ only part-time appraisers or contract for appraisal work. The chief appraiser may perform the appraisals in these small districts. On average, chief appraisers earned $53,000 annually in 2005. Ninety-two percent of the chief appraisers received employment benefits, such as expense accounts, mileage, medical insurance and retirement programs.
Statewide, employment in the CADs is growing. There were 88 new full-time positions in 2005. Full-time CAD employees numbered 4,195 in 2005, compared to 4,107 in 2004. Professional appraisers total 1,516, or 36.1 percent, of full-time CAD employees.
Salaries for CAD appraisers in 2005 on average ranged from $25,000 to $38,000. The highest paid appraisers earned about 4 percent more in 2005 than 2004. Appraisers must be registered with the Board of Tax Professional Examiners (BTPE) and must either be a registered professional appraiser (RPA) or be enrolled in training to become one within five years of their employment as an appraiser. CADs reported that 2,098 of their employees are registered with the BTPE. Statewide, 1,238 appraisers have obtained the RPA designation, 231 are registered Texas assessors, 126 are registered Texas collectors and 54 individuals have all three designations. Ninety-three percent of the CADs budget funds for training staff to meet or retain state certification standards.
Some 227 CADs provide staff with employment benefits, including insurance and retirement programs.
State law requires CADs to reappraise property in their districts at least once every three years. Many CADs reappraise property every year. For the 2004 tax year, 191 CADs, or 75.4 percent, reported complete reappraisals, while 149 CADs planned to reappraise for the 2005 tax year.
In their last reappraisal, 173 CADs used both in-house staff and an outside appraisal firm for their reappraisal. In the remaining districts, 67 CADs used staff only and 13 CADs used appraisal firms alone for the reappraisal. The Stephens CAD appraises all property for Haskell CAD.
Effective January 1, 2004, Section 6.025, Tax Code, required chief appraisers to agree to one appraised value for any property located in overlapping appraisal district boundaries. If the appraisers do not agree by May 1, then each chief appraiser sets the value at the lowest appraised value determined. Most CADs had taxing units with boundaries in other counties and therefore had property overlapping an adjoining CAD. Only six reported that they did not. CADs that overlap must contractually agree to work together on setting one value on these properties.
Taxpayers are required to report the value of income producing tangible personal property and are permitted to report the value of other property - a process called “rendition.” CADs reported that property owners filed 817,028 renditions, up from 531,302 in 2003. Of those renditions filed, CADs reported that 537,654 were renditions for business personal property totaling almost $140 billion in taxable value.
The increase in renditions may be attributed to new penalties for not rendering business personal property that began in tax year 2004.
Appraisal Notices and Taxpayer Protests
Under certain conditions, CADs are required to mail notices of appraised values to taxpayers by a certain time each year. If the owners’ property values are higher than the previous year, higher than the owners’ rendered value, or new to the appraisal roll, the taxing unit must mail a notice containing the proposed taxable value and the estimated taxes. A “shorter” version with no estimated taxes is required if none of the above conditions are met and the property has been reappraised in the preceding year, has changed ownership, or the owner requests a notice.
CADs mailed over nine million notices of property value in 2004. In response to those notices, property owners filed 784,727 written protests, 4.4 percent more than the 751,292 filed in the previous year on 2003 values.
Of these protesting taxpayers, 422,995 met with CAD staff in informal hearings to attempt a settlement. ARBs scheduled 421,542 formal hearings, an increase of 61,799 hearings or 17.2 percent more hearings than in 2003. About one-third of the taxpayers, 115,363, were “no shows” for their scheduled hearing. Exhibit 5, below, shows the percentage of the appraisals that were protested during the period 1999-2004.
Taxing units also may file written challenges to the ARB if they disagree with CAD decisions. In 2004, 11 taxing units—compared to four in 2003—filed challenges.
After an ARB approves the appraisal records, it may change the records for specific reasons set forth in Sections 25.25 and 41.411, Tax Code.
In 2004, the most common late changes were for “one-third over-appraisals” allowed by Section 25.25(d), Tax Code, Exhibit 6. Property owners may request a Section 25.25(d) hearing for the ARB to lower an incorrect appraisal that exceeds the correct value by more than one-third. Other changes include the correction of property incorrectly included on the appraisal roll; clerical errors, multiple appraisals of the same property; failure to send notice of property value; inaccuracies that do not increase the amount of taxes; and changes that require the chief appraiser and taxpayer to agree jointly that the ARB should correct the tax roll.
Reasons for Changing ARB Appraisal Record
Reason Late Filed Protest Number of Properties Value of Properties No Notice Given 2,663 $864,639,690 Inaccurate Changes 444 $83,093,842 Clerical Errors 3,111 $1,014,709,194 Multiple Appraisals 903 $256,557,772 Inclusion of Property 1,650 $153,747,602 One-Third Over Appraisal 5,032 $1,293,693,233 Joint Motion 2,278 $562,134,711
Property owners who disagree with the ARB’s decision on their property may file suit in district court. As of the survey’s reporting date, taxpayers had filed 3,682 lawsuits challenging their 2004 values, compared to 3,325 lawsuits at the same time in the previous year. The number of lawsuits filed is increasing faster than the growth in property appraisals, as shown in Exhibit 7. This prompted the Legislature to adopt a law that offers taxpayers the option to enter into binding arbitration as an alternative to litigation. As of 2005, property owners now have the option of binding arbitration to challenge the opposed value of real properties with values of $1 million or less.
CADs reported that 16 lawsuits filed relating to 2004 values were resolved through non-binding arbitration. Another 2,041 lawsuits were still pending for tax year 2004 and prior years.
Assessing & Collecting
While all CADs appraise property, some CADs have additional duties for assessing or collecting property taxes. In 2004, 142 CADs also performed the assessing functions, including calculating effective and rollback tax rates, publishing required notices and preparing tax bills.
In 2004, 118 CADs also collected property taxes. CADs that collect taxes establish a separate collection budget. These CADs budgeted an average of $140,000 to perform the 2004 collection function. CAD collection budgets ranged from $2,650 on the low end to a high of $1.1 million.
The Comptroller’s Property Tax Division produces a number of publications that may be helpful to taxpayers, taxing entities and CADs.
Many CADs also mailed the Comptroller’s office a copy of their 2004 appraisal budget, and some CADs that collect taxes provided copies of their 2004 collection budgets.
To request any CAD’s survey, appraisal budget or collection budget, please send an e-mail to the Comptroller’s PTD at email@example.com or call the PTD’s technical assistance hotline at 1-800-252-9121. In Austin, call 305-9999.
PTD also uses CAD surveys, to update names and addresses of CAD directors, ARB members and chief appraisers. This information is contained in the Appraisal District Directory 2005, now in a more compact version.
County appraisal districts and county tax offices receive complementary copies of both books. Anyone, however, may purchase either book by sending a check or money order for $10 each to:
Comptroller’s Property Tax Division
P. O. Box 13528
Austin, Texas 78711-3528
Both books, as well as all other PTD publications, are available for viewing on the Comptroller’s Web site at www.window.state.tx.us/taxinfo/proptax/index.html.