In July 2004, the Holliday Independent School District (ISD), located in Archer County, Texas, was identified as one of 54 school districts in the state meeting the criteria that initiate an Appraisal Standards Review (ASR) of the county appraisal district that served them. In April 2005, the Comptroller's Property Tax Division (PTD) began an Appraisal Standards Review of the Archer County Appraisal District (Archer CAD).
Appraisal Standards Reviews
The 78th Legislature, Regular Session, directed the Comptroller's office to conduct appraisal standards reviews of county appraisal districts if the Comptroller finds in its annual Property Value Study (PVS) that the appraisal district has one or more "eligible" school districts. Eligible school districts are those that meet all of the following conditions:
- the district's values are invalid in the most recent property value study;
- the district's values were valid in the two studies preceding the most recent study; and
- the district's local value is above 90 percent of the lower threshold of the margin of error.
In Texas, public education is paid for by a combination of state and local funds. Local funding comes from local property taxes. The chief appraiser of each county appraisal district (CAD) determines local property values, and school districts set tax rates that determine the amount of local tax revenue. Appraisal districts, under most circumstances, are required by law to appraise property at or near market value. Market value, in simple terms, is the price for which a property would sell under normal conditions. State funding is based on the total taxable property value within each school district as determined by the PVS.
The PVS independently estimates the taxable property value in each school district to ensure that state values reflect market value, which in turn ensures that school districts have approximately the same number of dollars to spend per student, regardless of the school district's property wealth or lack of property wealth. School districts with less taxable property value per student receive more state dollars for each pupil than districts with more value per student. The state's fair distribution of school funding depends largely on the Comptroller's taxable value findings.
By conducting appraisal standards reviews, the Comptroller's office helps school districts to understand the reason for the invalid finding so they can effectively work with the appraisal district to correct the problems and achieve market values. ASRs identify problems and recommend changes in procedures or methods to improve appraisal accuracy.
An ASR examines and evaluates a county appraisal district's (CAD) appraisal practices including appraisal planning, appraisal procedures and methodology, and application and adherence to appraisal standards. The Tax Code and Comptroller rules are the major criteria used to measure the appraisal district's performance. The evaluation of the appraisal district's appraisal methods are based on a comparison of local methods and procedures to those generally accepted by the mass appraisal industry in Texas. The Tax Code dictates certain appraisal procedures or standards such as the Uniform Standards of Professional Appraisal Practice (USPAP), specifically Standard 6: Mass Appraisal and Standard 7: Personal Property. Also the International Association of Assessing Officers (IAAO) Standards on Assessment are used as guidelines on the operation of an assessment office.
The two principal focuses of the review are to determine why a school district served by the CAD was deemed eligible and to make recommendations to improve appraisal practices so the school district's values can be determined valid in future studies. The review evaluates five broad functional areas of CAD operations, including information processing systems, district staffing, property mapping and discovery, appraisals and appraisal standards.
The review methodology includes a self-assessment completed by the CAD, staff interviews, reviews of written policies, procedures, plans, financial and management audits, and assessments of manual and automated records systems.
As the result of the review process, the Comptroller's office is issuing this report of its findings that includes recommendations for change and commendations for exemplary district appraisal practices. The appraisal district is required by law to comply with the recommendations within one year of the release of this report. If the Comptroller determines that the appraisal district board of directors failed to take remedial action within one year after the issuance of the review, the Comptroller shall notify the district judges serving in the county, who shall appoint a five-member board of conservators to implement the recommendations. The board of conservators shall exercise supervision and control over the operations of the appraisal district until the Comptroller determines under Section 403.302, Government Code, that in the same year the taxable value of each school district for which the appraisal district appraises property is the local value for the school district. The appraisal district shall bear the costs related to the supervision and control of the district by the board of conservators.
While the review team found several commendable practices implemented by dedicated and hardworking district employees, Archer CAD is facing a number of challenges in achieving and maintaining consistent valid findings, including:
- managing district operations;
- documenting procedures and appraisal methods; and
- planning reappraisals.
Key Findings and Recommendations
Manage District Operations
Expand the detail of the budget to include the benefits proposed for each position and a list of each proposed capital expenditure as required by Section 6.06 of the Tax Code and post notice of public hearing on the proposed budget as required by Section 6.062. Section 6.06, Tax Code requires CAD board of directors to adopt budgets that list all positions in the district, individual staff salaries with their benefits, and all proposed capital purchases. The 2002, 2003, and 2004 adopted district budgets did not break out the individual capital expenditures and did not have a detail benefits section. Also, they did not post the notice of public hearing on the proposed budget as required by Section 6.062. By expanding the budget as recommended, not only will the CAD be in compliance with the law but citizens and participating taxing units will better understand the budget.
Develop a job description and an objective set of evaluation measures for the chief appraiser position and annually evaluate the chief appraiser. The district has had the same chief appraisers for a long period of time. The district was unable to produce a job description for the chief appraiser position, nor any written evaluations of the chief appraisers. By developing a written job description and evaluation measures, the board of directors can evaluate the chief appraiser objectively based on performance.
Develop a comprehensive written policy and procedures manual for administrative operations. Archer CAD lacks well-documented policies and procedures to guide the day-to-day operations of the district in areas such as payroll processing, accounting, purchasing and related functions. Written procedures help guarantee tasks are performed correctly and provide useful training tools for new employees. By having a written policy and procedures manual for district operations, the district ensures consistency in performing daily functions and the procedures act as an internal control mechanism.
Document Procedures and Appraisal Methods
Revise all contracts to include a detailed description of the work to be performed with deliverable dates and establish contract monitoring procedures. The Archer CAD does not monitor its contracts and agreements. Monitoring contracts allows an organization to keep track of service providers and ensure services and goods are delivered on time. By developing procedures for contract monitoring, the district will ensure it receives external appraisals and other services when its needs them.
Prepare and issue to each appraiser detailed appraisal procedures manuals that provide local procedures and practices for each type of property the staff appraises and tie these local procedures to the existing Marshall & Swift procedures. The Archer CAD has not developed an appraisal procedures manual that the appraisal staff can reference in completing their appraisals although the chief appraiser says she has procedures. The chief appraiser periodically works with each appraiser to try to get the appraisers to appraise consistently. Procedure manuals are also useful as evidence during appraisal review board hearings and for demonstrating that the district is complying with its own policies. CADs must use similar appraisal methods and techniques and apply these to the same or similar properties, while taking care to account for the contributions of individual property characteristics on value.
Adopt a detailed reappraisal plan that, at a minimum, includes the vital steps in the process, explains exactly how and when the steps will be executed, and explains how sufficient resources will be allocated to follow the plan. The district has a one-page reappraisal plan that is insufficient for guiding district reappraisals of property. Section 25.18, Tax Code, requires appraisal districts to implement a plan for reappraisal. The written reappraisal plan does not give any detail as to the steps to be performed, staffing levels, workflow or the costs associated with plans and goals. The plan does not discuss how market areas might be grouped to provide sufficient sales for appraisal model analysis and development. A good reappraisal plan not only provides for reappraisal of all real property in a district at least once every three years, but also can be a roadmap for performing the work.
The review team identified some commendable practices in Archer CAD that other county appraisal districts may do well to review and implement where appropriate.
The district has a fully operational information processing services that staff members know how to operate. Archer CAD contracts with Pritchard & Abbott (P&A), Inc. of Fort Worth, Texas for: software (Deed mapping, Bentley Products, MicroStation Products & GeoGraphics, and TMC database software applications, etc.); hardware (one data processing controller, one telephone modem, and one telephone line); maintenance; and technical support. P&A provides on-line data processing of real properties. The CAD completes an appraisal notice check list and sends it to P&A annually. This process is used to ensure that Archer receives all of its annual property appraisal notices and that the appraisal notices are mailed out in a timely manner.