Chapter 1
Findings of the Property Value Study and Summary
Overview of Property Value Study
The annual PVS estimates the total taxable property value in each school district in Bailey CAD. With a few notable exceptions, the law requires all CADs and PTAD to appraise property at market value. Market value, in essence, is the price a willing buyer would pay a willing seller for the property under normal conditions. Agricultural land and timberland, however, are appraised according to the productivity value of the land's category.
The CAD determines the local appraisal roll value and certifies it to each school district; these values become the districts' tax roll values. Each school district must submit an annual self-report of its property values to PTAD, which audits the reports for accuracy.
PTAD's estimate of the total taxable value in a school district, called the state value, is made by estimating market value or by accepting the local appraised value in each property category and then adding these category values for an overall school district value. PTAD then deducts the school district's self-reported, state-mandated homestead exemptions, disabled veterans exemptions, value limitations, reinvestment zones, freeport exemptions, the loss between market value and productivity value of qualified agricultural lands, the school tax ceiling for homeowners over age 65 or with a disability and other state-mandated exemptions.
PTAD issues a preliminary and a final PVS each year. School districts and CADs may protest the findings of the preliminary PVS through an administrative hearings process. This process requires the protester to file a written protest with supporting documentation within 40 days of the issuance of the preliminary PVS. PTAD may amend the findings of the preliminary PVS based on the submission of a written protest, a conference between PTAD and CAD representatives or a formal hearing. A hearings examiner appointed by the Comptroller's general counsel holds the formal hearing; this person is not a PTAD employee. A school district that disagrees with the hearing examiner's final decision may appeal it to Travis County district court.
When conducting the property value study, PTAD assigns property to various categories, such as residential, commercial and rural property, so like property can be studied together.
In general, a ratio indicates the percentage of market value, as determined by PTAD, at which a CAD appraises a property or group of properties. A ratio of 1.0 indicates appraisal at market value–the legal standard. Generally, appraisals with ratios that are close to the standard, for instance between 0.95 and 1.05, are considered reasonably accurate for a property group.
Eligible School Districts
In the 2006 PVS, Muleshoe ISD fell outside the study's statistical margin of error and became an eligible school district, leading to this ASR. The statistical margin of error or confidence interval is a range of school district values that the Comptroller has accepted.
Muleshoe ISD
Five property categories were tested in Muleshoe ISD:
- Category A, Single-Family Residential;
- Category D, Rural Real;
- Category F1, Commercial Real;
- Category J, Utilities; and
- Category L1, Commercial Personal.
Single-family property (A) made up 32 percent of the total test value and 26 percent of the ISD's value. A review of the Category A sample ratios in the 2006 PVS indicates that the CAD appraised from as low as 47 percent to a high of 152 percent of market value, with a weighted mean ratio of 0.8401.
Rural real property made up 28 percent of the total test value and 21 percent of the ISD's value.
Rural property includes two subcategories: productivity value of qualifying acres (D1), primarily farm and ranch land that qualifies for the special productivity appraisal; and non-qualifying acres and farm and ranch improvements (D3), which are primarily rural homes and land that do not qualify as farm, ranch or timberlands. The differences in value between qualified and non-qualified rural land are wide since qualified land is appraised using a special statutory method to determine the land's productivity value, and non-qualified property is based on what the land would sell for in an open-market transaction.
Subcategory D1 made up 15 percent of the total test value and 11 percent of the ISD's value. The category ratio of the qualified rural values tested was 1.3012.
Non-qualified property (D3) made up 13 percent of school district's test value and 10 percent of the ISD's value. The CAD appraised rural homes and non-qualified rural land from as low as 42 percent to a high of 149 percent of market value, with a weighted mean ratio of 0.7904.
Commercial real property (F1) made up 9 percent of the total test value and 8 percent of the ISD's value. A review of the Category F1 sample ratios in the 2006 PVS indicates that the CAD appraised from as low as 55 percent to a high of 340 percent of market value, with a weighted mean ratio of 0.9549.
Utility property (J) made up 8 percent of the total test value and 11 percent of the ISD's value. A review of the Category J sample ratios in the 2006 PVS indicates that the CAD appraised from as low as 98 percent to a high of 107 percent of market value, with a weighted mean ratio of 1.0199.
Commercial personal property (L1) comprised 22 percent of the total test values and made up 13 percent of the ISD's value. A review of the Category L1 sample ratios in the 2006 PVS indicates that the CAD appraised from as low as 60 percent to a high of 112 percent of market value, with a weighted mean ratio of 0.9755.
While these figures show the range of property ratios in Bailey CAD, a clearer measure of appraisal performance includes how many of these ratios were within 10 and 25 percent of the median ratio. The median ratio is the ratio in the middle of all the other ratios when sorted by size.
These figures, in conjunction with the coefficients of dispersion (CODs) outlined below, measure the consistency of a CAD's property appraisals at the same percentage of market value, without regard to value. A low COD combined with high percentages indicates equitable appraisals; while a high COD paired with low percentages indicates inequitable appraisals.
The median ratio for single family residences (A) in Muleshoe ISD was 84 percent, with 36 percent of the ratios within 10 percent of the median and 79 percent within 25 percent of the median.
The median ratio for non-qualified farm and ranch property (D3) in Muleshoe ISD was 86 percent, with 17 percent of the ratios within 10 percent of the median and 44 percent within 25 percent of the median.
The median ratio for commercial real property (F1) in Muleshoe ISD was 97 percent, with 41 percent of the ratios within 10 percent of the median and 68 percent within 25 percent of the median.
The median ratio for utility property (J) in Muleshoe ISD was 100 percent, with 100 percent of the ratios within 10 percent of the median and 100 percent within 25 percent of the median.
The median ratio for commercial personal property (L) in Muleshoe ISD was 99 percent, with 86 percent of the ratios within 10 percent of the median and 95 percent within 25 percent of the median.
Bailey CAD Summary
The Bailey CAD's overall median ratio was 0.92.
Single-family (A) sample ratios ranged from 0.47 to 1.52. The median ratio was 0.84.
Non-qualified rural real (D3) sample ratios ranged from 0.42 to 1.49. The median ratio was 0.87.
Commercial real property (F1) sample ratios ranged from 0.55 to 3.40. The median ratio was 0.98.
Utility (J) sample ratios ranged from 0.98 to 1.07. The median ratio was 0.84.
Commercial personal property (L1) sample ratios ranged from 0.60 to 1.12. The median ratio was 1.00.
Coefficient of Dispersion
The COD, the primary measure of appraisal uniformity, measures the average percentage by which individual ratios vary from the median ratio. According to IAAO's Property Appraisal and Assessment Administration, a low COD indicates that appraisals within a category of property are uniform, while a high COD indicates property is being appraised at inconsistent percentages of market value. A COD that is very low, however, may indicate "sales chasing," a form of unequal appraisal.
According to IAAO's Standard on Ratio Studies, CODs for Category A, Single-Family Residences, should generally be 15 or less, and 10 or less for new and fairly homogeneous areas. For Category C, Vacant Lots, and for income-producing property, the COD should be 20 or less. For other real property and personal property, CODs should reflect the nature of the property, market conditions and the availability of reliable market indicators.
The 2006 COD for Bailey CAD Category A was 17.17; Category D was 30.59; Category F1 was 29.73; Category J was 17.46; and Category L1 was 2.53.
The 2006 COD for Muleshoe ISD Category A was 17.44; Category D was 30.93; Category F1 was 30.13; and Category L1 was 5.14.
These numbers indicate relative inconsistency or lack of uniformity in appraisal in categories D and F1 in both the CAD and ISD.