Findings of the Appraisal
This chapter of the report addresses commendations, findings and recommendations from the ASR of the Calhoun CAD in two sections:
2.1 Commendable Practice
2.2 Key Recommendations
Calhoun CAD formed in 1981 and became active in 1982. As of January 2009, Calhoun CAD had 15 full-time employees, with two supervisors and five appraisers. Calhoun CAD contracts with an appraisal services firm to appraise minerals, utilities and industrial property.
PTAD office asked the CAD's board of directors to complete a survey about its activities. The 21-question survey covers board policies and procedures, chief appraiser and staff and property appraisals. Three of the five board members responded.
Responding board members gave Calhoun CAD generally high marks, responding in the affirmative to most questions. All three agreed the board-approved reappraisal plan complies with all the requirements of Property Tax Code Section 25.18, and the board understands the statutory requirement to maintain property appraisals at, or near, market value. All respondents strongly agreed board member training requirements are stipulated in board policy and each strongly agreed that the board maintains a comprehensive, well-documented set of policies and procedures to guide the operation of the appraisal district.
All agree the board has a written job description and performance plan for the chief appraiser; that the board uses measurable criteria to evaluate the chief appraiser annually; and that an open line of communication exists between the board and chief appraiser. All three expressed confidence in the chief appraiser and believe the chief appraiser effectively manages the day-to-day operations of the appraisal district. All three members agreed staff appraisers are knowledgeable, perform their jobs well and have the skills, experience and credentials to appraise property appropriately.
In December 2007, the Port O'Connor Municipal Utility District (MUD) board of directors hired an independent consultant to scrutinize if Port O'Connor MUD taxpayers were bearing an unfair share of the county's tax burden. Port O'Connor is located in the southern part of the county. To determine levels of appraisal within the CAD, the consultant tested sales against the CAD's appraised values. The results showed properties in Port O'Connor MUD and in the northern part of the county being appraised at similar levels, but that generally property was being appraised below market value. Chapter 1 identified a lack of uniformity in appraisal in Categories A, C and D in Calhoun CAD.
To assist the CAD in improving its appraisal processes, the consultant proposed 12 recommendations, including four regarding staff, two each on field procedures, sales analysis and technological enhancements, and a recommendation each on appraisal schedules and public relations. In October 2008, the CAD board of directors hired the consultant to conduct a follow up review and to report on the implementation status of his recommendations. By January 2009, the CAD had implemented six recommendations, five recommendations were in progress or near completion and one recommendation had not been implemented.
As part of its review process, PTAD identifies CADs' best practices. These commendable practices may improve efficiency or, in some instances, address past operational weaknesses. These commendations provide other appraisal districts ideas for improving their own operations. PTAD identified one best practice at Calhoun CAD.
Calhoun CAD's geographic information system (GIS) exceeds mapping requirements established by Comptroller Rule 9.3002 and improves productivity.
Texas Comptroller's Property Tax Rule 9.3002 addresses mapping as follows:
(a) All appraisal offices and all tax offices appraising property for purposes of ad valorem taxation shall develop and maintain a system of tax maps covering the entire area of the taxing units for whom each office appraises property.
(b) Each tax map system shall be drawn to scale and delineated for lot lines or property lines or both, with dimensions or areas and identifying numbers, letters or names for all delineated lots or parcels.
(c) Each tax map shall be divided into sections drawn at a scale large enough to serve the purposes of property assessment. Developed or subdivided areas may be drawn at a different scale than undeveloped or unsubdivided tracts.
(d) The tax map, each section thereof, and each parcel thereon shall be assigned numbers in accordance with a parcel identification numbering system. Such numbers shall be recorded on the tax map, section and parcel. The identifying number for each parcel as recorded on the tax map shall also be recorded on the appraisal card maintained for that parcel.
(e) The tax map system shall be annually updated to incorporate any new subdivisions or property transfers as indicated by the filing of subdivision plats or deeds with the county clerk's office of the county or counties in which the taxing units for whom each office appraises property are located.
(f) Any information required by these sections may be maintained in electronic data processing records rather than physical documents.
(g) Development of tax map systems (or substantial progress toward development) shall be completed by Jan. 1, 1983.
(h) Appraisal offices and tax offices failing to establish a tax map system as required in this section may be judged to be in compliance upon a showing to the board that a tax map system substantially equivalent to that required in this section has been established.
According to the CAD's cartographer, Calhoun CAD began digitizing its maps in 2002. At that time, the mapping was a standalone system and not integrated with the CAD's appraisal system. In August 2007, the CAD contracted with its appraisal software vendor to convert the digitized maps into a GIS base map and integrate the mapping and appraisal systems. The cost to develop the base map and integrate the systems was $60,024.
The CAD's maps are updated using information from newly filed deeds for parcel splits and combinations. The CAD also maps new subdivisions recorded with the county. The CAD sends new field notes, surveys and plats to its mapping software vendor monthly. The vendor digitally updates the CAD's maps and places the new information on the mapping server for the CAD to access. The mapping server is housed at the mapping vendor's headquarters in Plano and is backed up daily. The cartographer stated the vendor completes the updates in two to four weeks. The cost for maintaining and updating the GIS in 2008 was $14,013, and included:
- updating the GIS from deed splits and property divisions;
- inputting newly platted subdivisions;
- updating property identification numbers for merged properties; and
- modifying taxing jurisdiction boundaries for annexations and de-annexations.
Maps show parcels for each real property account in the CAD, along with its property identification number linked to the appraisal system. The system draws all maps to scale and can be accessed through the automated appraisal system.
In addition to parcel coverage, the GIS data layers include:
- subdivision boundaries;
- survey/abstract boundaries;
- taxing entity boundaries;
- roads and streets;
- ownership and deed references;
- legal descriptions;
- rivers, streams and creeks;
- flood zones; and
- aerial photography.
The CAD uses the mapping system in the reappraisal process by plotting sales electronically to determine market areas. The system can color code sold parcels and neighborhoods making it easier to define market areas. Areas selected for reappraisal can also be displayed on maps. The GIS provides appraisers with an efficient and quick reference for locating property and appraisers can print maps on demand from personal computers.
In January 2009, the CAD enhanced its GIS by replacing its older one-dimensional aerial photos with orthogonal and oblique digital images. The new technology allows appraisers to view property images from directly overhead and from different oblique angles. The cost of the imaging system was $60,450.
The county's emergency management system has expressed interest in participating in the GIS. The chief appraiser hopes other entities will want to use the GIS and contribute toward maintenance of the system. To that end, the CAD will present a demonstration of the improved GIS to local taxing jurisdictions.
According to IAAO's Standard on Digital Cadastral Maps and Parcel Identifiers, a good mapping system is essential for the location, identification and inventory of all parcels within a jurisdiction.
Calhoun CAD developed a geographic information system that exceeds industry standards, improves work productivity and can be shared by local jurisdictions.
2.2 Key Recommendations
As part of the review process, PTAD makes recommendations to address challenges identified during its review of a CAD. Below are recommendations addressing key challenges associated with Calhoun CAD's appraisal activities.
Calhoun CAD does not regularly update land schedules.
IAAO's Property Appraisal and Assessment Administration, Chapter 7, Land Valuation states:
Accurate land values are crucial to an effective assessment system. They contribute to the accuracy of appraisals of improved properties and ensure that land owners pay their fair share of taxes. Accurate land values promote well-informed land use decisions by both the public and private sectors. Urban economists and planners have long recognized that outdated land values contribute to inefficient land use and undesirable growth patterns.
The CAD's level of appraisal for vacant lots dropped dramatically in 2007 to 69.56 percent of market value, which was down from 97.29 percent in 2006. Exhibit 1 shows the CAD's appraisal history for the period 2005-07 for 15 selected Category C properties from the Calhoun CAD's 2007 PVS. Also included are the sales prices from the 2007 PVS and how they compare with the 2007 CAD values.
Vacant Lot Value History
Sample Properties in Calhoun CAD, 2005-07
|74236||Account did not exist.||Account did not exist.||$8,250||$25,600||0.3223|
|73182||Account did not exist.||$1,500||$5,000||$6,300||0.7937|
|71982||Account did not exist.||$20,580||$58,800||$55,000||1.0691|
|73671||Account did not exist.||Account did not exist.||$10,000||$8,000||1.2500|
|74271||Account did not exist.||Account did not exist..||$69,075||$50,000||1.3815|
Source: ASR Category C Sample, Calhoun CAD 2005-07 Appraisal Records.
When comparing 2007 CAD values with recent sales, none of the sampled properties fall within an acceptable margin of error of 0.95 - 1.05. Eleven accounts fall below 0.95 and four accounts exceed 1.05.
Only three accounts show annual value changes, seven accounts had one value change during the three-year period and two accounts have remained unchanged for three years. Three accounts were new for 2007, suggesting a changing market with new subdivisions being carved out of larger rural tracts. Exhibit 2 confirms that the land characteristics in Calhoun County ISD are changing, with an increase in vacant lots and a decrease in rural tracts.
Land Characteristic Changes
Calhoun County ISD, 2005-08
|PVS Year||Category C Parcels||Subcategory D1 Parcels|
Source: Texas Comptroller of Public Accounts, 2005, 2006 and 2007 Property Value Studies, Calhoun County ISD and Property Tax System, Calhoun County ISD Stratification Report, 2005-07 and Preliminary 2008.
From 2005 to 2008, the CAD saw an increase of 1,227 vacant lots, or a jump of nearly 20 percent. During the same period, rural tracts decreased by 333, or a little more than 6 percent.
The current chief appraiser was unable to explain how land schedules for the years 2005-07 were developed and maintained, since this was done by the former chief appraiser who served from 1994-2007. In 2007, the local multiple listing service stopped providing the CAD access to its sales records, negatively affecting the CAD's ability to effectively analyze land markets and maintain its land schedules.
The chief appraiser stated he felt the development of new subdivisions in the Port O'Connor area restricted to custom-built luxury style homes contributed to the CAD's poor finding in the 2007 PVS. He stated waterfront and water-view lots sell for a premium and the CAD has a hard time keeping up with Port O'Connor's accelerated real estate market.
According to the chief appraiser, in 2008, the CAD increased its vacant lot schedules by as much as 800 percent in some areas. In spite of the CAD's efforts to increase its vacant lot schedules, its appraisals fell short with 2008 Preliminary PVS results showing a weighted mean ratio of 77.66 percent. The 2008 Preliminary PVS results are still subject to protest.
The CAD's Subcategory D3 appraisals have also been declining, which is another indication that the CAD's land schedules are not being properly maintained. This is outlined in Exhibit 3.
Subcategory D3 Non-Qualifying Acres
and Farm/Ranch Improvements
Calhoun County ISD, 2005-08
Source: Texas Comptroller of Public Accounts, 2005, 2006 and 2007 Property Value Studies, and 2008 Preliminary PVS, Calhoun County ISD.
The Real Estate Center at Texas A&M University, in its 2008 report Texas Rural Land Price by Land Market Areas, found rural land prices in Calhoun and surrounding counties increased 46 percent from 2006 to 2007 and 61 percent from 2005 to 2007.
The Texas Chapter of the American Society of Farm Managers and Rural Appraisers, in its report Trends in Texas Rural Land Values for the Year 2007, stated improved pastureland and native pastureland sales were active in Calhoun and neighboring coastal prairie counties with prices increasing due to demand from recreational buyers.
According to The Handbook of Texas, land elevations in Calhoun County range from sea level to 50 feet above sea level and about one-fourth of the county is under water. Influences of the Gulf of Mexico, area bays, man-made canals and flood-prone areas add to the complexity of land appraisals in the CAD.
The complexities of coastal property present unique challenges to land appraisals. The CAD assigns one appraiser to appraise all land in the county, but does not have written manuals or procedures to guide the appraiser in developing land schedules or performing appraisals. The current land appraiser, hired in 2008, was an appraisal clerk in the CAD for six years and is a registered professional appraiser (RPA). The appraiser successfully completed state-approved appraisal classes, but would benefit by having locally written procedures and instructions for appraising land.
According to the CAD's appraisal manual, the CAD uses market data to appraise land. Size, location and use are factors affecting land values and the CAD values land by the acre, square foot, front foot or lot based on the factors. The appraisal manual has numerous land schedules based on square footage, front footage, acreage and subdivision lots, but lacks instructions for determining which appraisal method to use and when to use it.
By keeping land appraisals at market value, the CAD can ensure that all property owners are treated fairly. Because land values are integral components of all improved properties, maintaining land values at market levels can improve overall appraisal performance for residential and commercial appraisals.
Update land schedules and test them against sales of vacant tracts.
Calhoun CAD has not calibrated its residential and commercial building cost schedules.
Property Tax Code Section 23.01 states:
(a) Except as otherwise provided by this chapter, all taxable property is appraised at its market value as of Jan. 1.
(b) The market value of property shall be determined by the application of generally accepted appraisal methods and techniques. If the appraisal district determines the appraised value of a property using mass appraisal techniques, the mass appraisal standards must comply with the Uniform Standards of Professional Appraisal Practice. The same or similar appraisal methods and techniques shall be used in appraising the same or similar kinds of property. However, each property shall be appraised based upon the individual characteristics that affect the property market value.
IAAO's Standard on Mass Appraisal of Real Property, Section 2, states "valuation schedules and models should be consistently applied to correct, complete and up-to-date property data."
Results of the 2007 PVS indicate the CAD is not appraising single-family residences and commercial real property at market value. The 2007 PVS in Calhoun County ISD resulted in a ratio for single-family residences of 0.8451 and 0.8963 for commercial real property. The CAD appealed the results, but changes made to the study as a result of the appeal did not prevent Calhoun County ISD from receiving an invalid finding.
A review of PVS results from 2005 to 2007 suggests the CAD's ratio study analysis and subsequent appraisal schedule maintenance for single-family residences in Calhoun County ISD failed to adequately recognize an accelerating real estate market (Exhibit 4).
Calhoun County ISD, 2005-08
|PVS Year||Single-Family Residences||PVS Ratio|
Source: Texas Comptroller of Public Accounts, 2005, 2006 and 2007 Property Value Studies, Calhoun County ISD and 2008 Preliminary PVS.
While Calhoun County ISD is experiencing a yearly increase in the number of single-family residential parcels, the PVS ratio for this property category is declining. Although it improved in the Preliminary 2008 PVS, the appraisal ratio is still outside the expected level.
The chief appraiser stated ratio studies are used to develop trend factors or neighborhood market adjustments. The factors are used to adjust the CAD's building costs schedules in areas with increasing or decreasing market trends. Base residential building costs were updated in August 2001. IAAO's Property Appraisal and Assessment Administration, Chapter 8, states "while trend factors are useful, building costs must be updated periodically because of changes in labor and material costs." Schedules trended over a long period lose accuracy, consistency and credibility. IAAO's Standard on Mass Appraisal of Real Property states building costs need to be updated before each appraisal cycle.
The reviewer examined 20 single-family residential appraisals. The CAD used market adjustments on 14 of the accounts to arrive at an appraised value. Exhibit 5 shows the 14 accounts, respective market adjustments, their 2008 appraised value and their appraisal ratios.
Market Adjustment Summary Single-Family
Source: 2008 Calhoun CAD Appraisal Records.
Exhibit 5 shows the combination of the CAD's building costs and market adjustments yielded appraisals outside the confidence interval of 0.95 to 1.05 in 11 of 14 accounts and indicates the CAD needs to re-examine how it develops market adjustments. The CAD's land values may also be affecting its residential appraisals. Five of the properties in Exhibit 5 experienced no changes in land values from 2007 to 2008, seven accounts had increases in land values and two accounts had reductions in land values.
IAAO's Property Appraisal and Assessment Administration, Chapter 20, Sales Analysis and Mass Appraisal Performance Analysis states, "Stratification permits analysis of mass appraisal performance within and between property groups."
Exhibit 6 shows the 2005-07 PVS weighted mean ratios by value stratum for single-family residences in Calhoun County ISD and indicates a lack of appraisal uniformity between value stratums.
Weighted Mean Ratios by Value Stratum
Calhoun County ISD, 2005-08
|Stratum||2005 Weighted Mean Ratio||2006 Weighted Mean Ratio||2007 Weighted Mean Ratio||2008 Weighted Mean Ratio|
Source: Texas Comptroller of Public Accounts, 2005, 2006 and 2007 Property Value Studies, Calhoun County ISD and 2008 Preliminary PVS.
Exhibit 6 shows a lack of appraisal uniformity between stratum levels for each study year and below market appraisals in all stratums for 2006 and 2007. In 2008, all stratums showed some improvement, except for homes ranging between $68,463 and $113,958. All, except the lowest valued properties, were still outside the expected level.
The CAD uses locally developed schedules and Marshall and Swift's Commercial Valuation Guide (M&S) to appraise commercial real property. M&S updates its schedules annually, but the CAD's local commercial schedules have not been updated since 2002. The PVS ratio for commercial real property has decreased from 0.9574 in 2005 to 0.8963 in 2007. Exhibit 7 shows the 10 accounts the reviewer examined with their respective base building costs, their 2008 appraised value and their appraisal ratios.
Building Cost Summary
Commercial Real Property
Calhoun County ISD
Cost per Unit
Sale Price (S)
or PTAD Appraisal (A)
Source: ASR Category F1 Sample, 2008 Calhoun CAD Appraisal Records.
Exhibit 7 shows only three commercial appraisals within the acceptable confidence interval of 0.95 to 1.05. Eight of the 10 accounts had the same appraised values in 2008 and 2007. The land value of nine accounts did not change between 2007 and 2008.
The chief appraiser stated that commercial sales are difficult to verify and oftentimes contain intangibles, such as name recognition, that influence sales prices. Commercial property appraisals declined in 2007. In the 2008 Preliminary PVS results, the CAD saw an improvement in commercial property appraisals, but the appraisal level remains below market value at 93.74 percent, an indication that the CAD's commercial real property schedules are inaccurately calibrated.
Exhibit 8 shows the COD for single-family residences and commercial real property in Calhoun CAD from 2005-07.
Coefficients of Dispersion Single-Family
Residences and Commercial Real
Calhoun CAD, 2005-08
Source: Texas Comptroller of Public Accounts, 2005, 2006 and 2007 Property Value Studies, Calhoun CAD and 2008 Preliminary PVS.
Exhibit 8 shows significant differences between the CODs in 2007 compared with other years and reflects large variances in appraisal uniformity between property types. Residential properties are above the recommended standard in both 2007 and 2008. Inaccurate appraisal schedules and poorly designed reappraisal procedures contribute to large CODs.
Ratio studies conducted by the CAD for years 2005-08 are not archived and the reviewer was not able to determine how the CAD uses ratio study results to calibrate its appraisal schedules.
According to the chief appraiser, in February 2009, the CAD converted its residential and commercial building cost schedules to schedules developed by M&S. He stated the CAD is currently testing the schedules against sales and local construction costs and will use the new schedules in 2009. In addition, the CAD will implement new depreciation schedules. Currently, the CAD uses a straight-line depreciation schedule based on a property's age. Straight-line deprecation is commonly used among many appraisal districts. The chief appraiser stated appraisers will begin basing depreciation on the observed condition of the property. By observing annual depreciation amounts by condition, the chief appraiser states that more accurate depreciation levels for each class of property can be developed.
By maintaining properly calibrated appraisal schedules, the CAD can help ensure that accurate and uniform values are produced.
Brazoria CAD, for example, was able to improve its appraisal schedules by plotting sales on maps to identify market areas needing updated schedules, improving data collection procedures and observing how neighboring appraisal districts develop and maintain appraisal schedules. These efforts resulted in higher levels of appraisal performance and valid PVS results.
Test residential and commercial building schedules for accuracy using sales and local construction costs and update accordingly.
Calhoun CAD does not have written procedures for generating, analyzing and using ratio studies to improve appraisal performance.
IAAO's Standard on Ratio Studies, Section 4.6 Evaluation and Use of Results, states, "A properly designed ratio study is a powerful tool for analyzing appraisal performance and suggesting strategies for improvement." Section 18.104.22.168 recommends that appraisal districts use ratio study results to monitor appraisal performance, establish reappraisal needs, test appraisal procedures, define market areas and update appraisals.
The Calhoun CAD reappraisal plan includes IAAO standards as the methods CAD appraisers must follow regarding appraisal practices and procedures. The chief appraiser said ratio studies are generated several times a year, but copies of ratio studies are not kept beyond the study year. The CAD's records control schedule filed with the Texas State Library - State and Local Records Management Division, states ratio and other statistical studies that measure appraisal level and consistency are to be kept as long as administratively valuable. The control schedule also states sales lists used to support appraisal values in a specific year need only be retained until certification of that year's appraisal roll.
The CAD's appraisal system currently retains 13 years of historical appraisal data, from 1997-2009. According to the chief appraiser, ratio studies can be generated for prior years, but if a property's characteristics have changed since the sale date, the property's current value will be represented in the ratio study instead of the property's value at the time of the sale. The chief appraiser has been with the CAD since 1985 and became chief appraiser in January 2008. He stated he wants to make the appraisal process more transparent and has assigned a staff person to work with the software vendor to make changes to the ratio study program, which will allow the CAD to replicate ratio studies used in prior years. This will provide taxpayers an explanation as to how the CAD arrived at appraised values in prior years. The chief appraiser stated enhancements to the ratio study program should be completed in March 2009.
Because ratio studies were not available to the reviewer, it could not be determined how or if the CAD uses ratio studies to improve its appraisal performance, determine market adjustments and establish reappraisal needs.
Ratio studies compare the market value of individual properties in a representative sample of similar properties with the local appraised value for each property in the sample. In a ratio study, a property's market value is typically represented by its sale price.
The Calhoun County Appraisal District Reappraisal Plan 2007-2008, page 9, "Performance Test," states the following:
The property appraisers are responsible for conducting ratio studies and comparative analysis. Ratio studies are conducted on property located within certain neighborhoods or districts by appraisal staff. The sale ratio and comparative analysis of sale property to appraised property forms the basis for determining the level of appraisal and market influences and factors for the neighborhood. This information is the basis for updating property valuation for the entire area of property to be evaluated. Field appraisers, in many cases, may conduct field inspections to insure the accuracy of the property descriptions at the time of sale for this study. This inspection is to insure that the ratios produced are accurate for the property sold and that appraised values utilized in the study are based on accurate property data characteristics observed at the time of sale. Also, property inspections are performed to discover if property characteristics had changed as of the sale date or subsequent to the sale date. Sale ratios should be based on the value of the property as of the date of sale not after a subsequent or substantial change was made to the property after the negotiation and agreement in price was concluded. Properly performed ratio studies are a good reflection of the level of appraisal for the district.
Instructions for implementing the CAD's ratio study policy do not exist and the CAD did not provide evidence showing that staff adheres to the policy.
By developing ratio study procedures and adhering to the CAD's ratio study policy, the CAD's ratio study becomes a valuable tool to help ensure accurate appraisal levels are maintained, appraisal schedules are properly calibrated and reappraisal needs are met. Effective CADs conduct frequent ratio studies with associated appraisal maintenance, ensuring necessary adjustments are made to produce values at or near market.
Nueces CAD, for example, has a computerized appraisal system and conducts ratio studies within property classes by ISD and county to determine appraisal performance. The CAD bases reappraisal and value maintenance decisions for some properties or locations on the ratio study results.
Develop written procedures for generating, analyzing and using ratio studies to improve appraisal performance, including methods for developing local market adjustment factors.
Continue to work on developing ways to retain electronic versions of older ratio studies.
Calhoun CAD does not have locally written guidelines for appraising qualified open-space land and lacks documentation supporting productivity values.
Property Tax Code, Section 23.51, sets out the requirements a CAD must adhere to in appraising rural real property. The chief appraiser indicated that the CAD uses Property Tax Code Section 23.51, and the Manual for the Appraisal of Agricultural Land, published by the Comptroller's office in 1990, to determine if acreage in Calhoun CAD qualifies for agricultural appraisal. Local guidelines establishing standards for degrees of intensity typical for agricultural operations in the CAD do not exist.
The Subcategory D1 for Calhoun County ISD fell from 0.9799 in 2005 to 0.8441 in 2007. The 2008 Preliminary PVS shows the CAD continuing to appraise land below value at 75.33 percent. The CAD's Subcategory D1 ratios are steadily declining, which is an indication its land schedules are not being properly maintained.
Exhibit 9 shows Calhoun CAD's productivity values for dry cropland are inconsistent with other appraisal districts in the region.
2007 Dry Cropland Productivity Values
Calhoun and Neighboring Counties
Percent of County's
Acres in Dry Cropland
|Average of surrounding counties||16.30||291.12||298.18||97.63|
Source: Texas Comptroller of Public Accounts 2007 Property Value Studies, Calhoun, Aransas, Jackson, Matagorda, Refugio & Victoria CAD Productivity Values Reports.
The average ratio for dry cropland in neighboring counties was 97.63 percent while Calhoun CAD's dry cropland values produced a ratio of 75.17 percent.
Lack of locally written procedures explaining how the CAD approves and values land that qualifies for productivity use may be contributing to the differences, as well as Calhoun County ISD's 2007 PVS invalid finding.
The process of determining degree-of-intensity standards is helpful in the agricultural appraisal process used for determining net to land. Determining degrees-of-intensity and deriving net to land require performing some procedures in common, like an identification of local categories of land, their productive capacity within the area and an analysis or breakdown of the steps in production in terms of the inputs. Because the law does not state what degree of intensity qualifies a particular type of land, the chief appraiser must set the standards according to local agricultural practices.
The CAD was not able to locate documentation supporting its 2007 and prior years' productivity values. The CAD has an agricultural appraisal advisory board, but could not document when the board last met. The chief appraiser stated because he was unable to find information on the net-to-land calculations for the past five years, he used the 2007 productivity values in 2008. Results of the 2008 Preliminary PVS show overall productivity values fell to 75.33 percent from 84.41 percent in 2007.
Calculating productivity values requires gathering historical income and expense data for the inputs of production that are typical for a land category in the area, finding the net income and applying an income capitalization method to it. Where local guidelines for establishing typical degree-of-intensity standards do not exist, it is possible that some of the critical steps for determining net to land also will not exist. For example, it is important to know what typical income and expenses are shared, if any, between landowners and lessees and to what degree.
The Calhoun CAD Productivity Values Report from the 2007 PVS shows that the ratio for the productivity value of all qualifying acres was 84.41 percent. Productivity value ratios for the component land classes were 93.76 percent for irrigated cropland, 75.17 percent for dry cropland, 111.50 percent for improved pasture and 100 percent for native pastureland. The dispersion of ratios within land classes is significant and indicates lack of accurate appraisal performance. Dry cropland comprises nearly one-fourth (24.72 percent) of all qualified acres in Calhoun CAD. Calhoun County ISD received an invalid finding in the 2007 PVS due in part to low dry cropland productivity values.
The primary dry crops in Calhoun CAD are corn, cotton, sorghum and soybeans. Income is derived from shared lease arrangements and typical expenses include fertilizer, insecticides, herbicides, harvesting, hauling, drying, crop insurance, management fees and taxes. Income and expense information considered by the CAD was not available.
An agricultural advisory board can provide staff with expert advice in the calculation of productivity values by providing accurate agricultural income and expense data typical in Calhoun County. The agricultural advisory board can also be instrumental in developing local guidelines for agricultural use. The CAD needs to take advantage of its agricultural appraisal advisory board's expertise to improve its productivity values.
Local agricultural guidelines provide consistency and uniformity in calculating productivity values and help eliminate subjectivity in the decision-making process. By clearly defining what prudent management factors are for the area and what minimum standards meet the degree of intensity requirements, both CAD staff and taxpayers benefit from written local guidelines for understanding agricultural appraisals.
Erath CAD, for example, has developed a process in which the chief appraiser works with the agricultural appraisal advisory board to collect income and expense data and establish local guidelines for granting agricultural use. Erath CAD's chief appraiser also uses the process to obtain data for degree of intensity standards, stocking ratios, acreage requirements and minimum management factors necessary to qualify for agricultural use.
Develop locally written guidelines for appraising open-space agricultural land and annually calculate net-to-land values as required by Property Tax Code Section 23.51.
The chief appraiser should meet regularly with the agricultural appraisal advisory board and enlist the expertise of the neighboring CADs to help ensure that agricultural appraisals are developed accurately.
Calhoun CAD does not have written procedures for analyzing and adjusting sales.
IAAO's Standard on Ratio Studies, Section 6.4, Screening Sales, states appraisal districts must have written screening, analyzing and adjusting sales procedures to help analysts make valid and uniform judgments. Each sales analyst should be thoroughly familiar with these procedures as well as underlying real estate principles.
The CAD's deed clerk routinely mails sales surveys to buyers and sellers for all recorded deed transactions. Deed transactions serve as the basis for the CAD's sales database. The clerk enters the grantor, grantee, deed volume and page, sales date and sales price, if shown, on the deed. The surveys request information such as the sales price, down payment, type of financing and type of improvement or personal property included in the sale. The deed clerk, a registered professional appraiser (RPA), uses this information to determine if a sale needs adjusting and meets the requirements of a market transaction. The clerk said the number of surveys mailed each month varies, but estimates 1,400 letters are mailed annually with a 30 to 40 percent response rate.
Other sources of sales information come from local realtors. The CAD is attempting to regain membership to the local multiple listing service (MLS), which was terminated by MLS over a disagreement. The CAD makes its sales information available to the Comptroller.
Guidelines for analyzing and adjusting sales are not written, but instead are based on the deed clerk's knowledge and experience. The clerk has been with the CAD for five years and has 25 years of deed and title experience.
When responses to the sales questionnaires are received, the deed clerk enters the information into the appraisal system's sales database. Based on her knowledge of non-market sales, the clerk enters a validation code to let appraisers know if the sale meets the requirements of an arms-length transaction, as defined by IAAO. According to IAAO's Standard on Ratio Studies, Section 6.4.1, Sales Generally Invalid for Ratio Studies, non-market sales include those:
- involving government entities and public utilities;
- involving charitable, religious or educational institutions;
- involving financial institutions;
- between relatives or corporate affiliates;
- of convenience;
- settling an estate;
- that are forced; and
- of doubtful title.
IAAO requires that sales be analyzed to determine if adjustments are needed for personal property, financing, assumed leases and time.
If a respondent indicates that personal property or other items were included in a sale, the clerk notes the information on the account's comment screen and makes an adjustment to the sales price, if the respondent also provides a value of the non-real estate items. If a value is not provided, the clerk gets a copy of the settlement statement from the title company or contacts the respondent.
The CAD's reappraisal plan states sales must be verified and serve as the basis for ratio studies used to test appraisal accuracy and uniformity. The reappraisal plan does not, however, contain the criteria for sales verification and does not provide instructions for performing adjustments.
Without common guidelines for determining how to verify, confirm and adjust sales, the CAD risks using sales for appraisal maintenance that do not accurately reflect current market value. Sales confirmation and validation is critical in determining local market values. Calhoun County ISD received an invalid finding in the 2007 PVS, primarily because single-family residences, vacant lots, rural land and commercial real property tested with below market appraisals.
Written guidelines help appraisal staff in selecting and adjusting sales for assigning values and as evidence before the appraisal review board. They also help to maintain continuity should there be a change in personnel. Knowing what analysis needs to be done, when to perform the analysis and how to perform it is key to maintaining continuity and a high level of appraisal accuracy. By providing comprehensive, written guidance to appraisal staff, Calhoun CAD can help assure that sales data are applied consistently as valid indicators in achieving market value.
Nueces CAD, for example, has a written market analysis procedures manual that describes the processes used to obtain sales information and the procedures necessary for sales confirmation. Written procedures assure the market analyses are done consistently, regardless of personnel changes.
Establish written procedures for gathering, screening, analyzing and adjusting sales data.
Calhoun CAD's appraisal manual lacks local procedures and directives for completing land and business personal property appraisals.
IAAO's textbook, Property Appraisal and Assessment Administration, Chapter 1, The Ad Valorem Tax System, describes the importance of written procedures or standards of practice and states they may incorporate or be contained in laws, regulations, policy memoranda, procedural manuals and guidelines, appraisal manuals and schedules. Repeated tasks, particularly those done by more than one person, should be described in guidelines or manuals. There should be a procedure for establishing standards of practice, including regularly updating manuals. Procedures are required for monitoring the quality of appraisals, editing data and reviewing appraisals.
The Calhoun County Appraisal District Appraisal Manual was developed in 2002. The 229-page manual contains detailed instructions, procedures and appraisal schedules for residential and commercial property. The manual also contains the CAD's current land schedules, updated in 2008, but does not include procedures for land appraisals or instructions on how or when to use the land schedules.
The CAD's appraisal manual describes how personal property is appraised as follows:
The Personal Property schedule values furniture, fixtures, and equipment as well as inventory that is taxable by law. This schedule is based on cost less depreciation. The data to develop these schedules is compiled from various sources including cost manuals and acquisition information provided by the property owner. Sales information of personal property or inventory is difficult to obtain due to the lack of a local organized database. Most personal property values are taken from State personal property schedules; however, many methods are used, including sales of similar property, if available. Due to such a wide variety of personal property, the appraiser must rely on experience and judgment in many cases.
Personal Property depreciation is normally estimated using straight-line depreciation and applying a "percent good" to the property, regardless of age; however, other methods can be used to approximate loss in value, depending on the available information."
In 2007, Calhoun CAD's 1,744 business personal property accounts made up about 2 percent of the CAD's total reported appraised value. The CAD has one personal property appraiser who also appraises all commercial real property.
According to the appraiser, personal property values are reviewed every year by examining renditions filed by business owners and estimates 85 percent of all businesses in Calhoun CAD render their personal property. Renditions are confidential documents used by business owners to declare the value of their business personal property. The personal property appraiser stated those business owners who do not render are assessed a 10 percent penalty as required by Property Tax Code Section 22.28.
The personal property appraiser reviews renditions for accuracy and reasonableness based on his appraisal knowledge and experience. The CAD does not have a manual to guide the appraiser in the review of renditions or in the reasonableness determination. To appraise personal property that has not been rendered, the personal property appraiser stated he uses the personal property schedule found in the out of print Comptroller's Field Appraisers Guide and compares values of similar businesses. The guide is outdated and not sufficient for use in valuing personal property.
The CAD calculates depreciation using a schedule based on industry standard estimates of economic lives for various types of business personal property. The personal property appraiser stated personal property is discovered by driving the county, reviewing newspapers and Comptroller sales tax reports, subscription to a business vehicle listing service and word-of-mouth. The appraiser has been with the CAD for four years and is working toward a RPA designation. The CAD's appraisal manual lacks personal property appraisal procedures and instructions for appraising and discovering personal property and evaluating renditions.
The ASR reviews a sample of the CAD's appraisal records; 58 parcels were selected from Calhoun County ISD's 2007 PVS. The sample included 20 Category A, 15 Category C, eight Subcategory D3, 10 Category F1 and five Category L properties.
The exercise helps determine if one can arrive at the same or a similar appraised value as the CAD by using the CAD's appraisal procedures and manuals. The reviewer used the CAD's written appraisal procedures, classification guides, appraisal schedules and depreciation tables to arrive at appraised values for the sampled properties.
Accompanied by the chief appraiser, the reviewer conducted an on-site inspection of each property using maps prepared by the CAD. Information pertaining to property characteristics contained on the CAD's appraisal cards was examined for accuracy. Age, condition and size were reviewed for reasonableness. Using descriptions of property classifications found in the CAD's residential classification guide, the reviewer classified each property based on type and quality.
Residential property was classified as either frame or brick veneer with quality ratings from one to 18, with one being the lowest quality and 18 being the highest quality. Condition ratings range from a high of AAA-plus to a low of D-minus. Using the CAD's calculated square footages for each building component, such as living area, porches and garages, the reviewer applied the corresponding costs per square foot from the appraisal manual and calculated a replacement cost new. For example, a frame class 3 house (211.03) with 576 square feet of living area has a base cost per square foot of $41. The reviewer used the CAD's estimated effective age of the improvement and depreciation table to arrive at a depreciation factor and applied the factor to the replacement cost new to calculate the current value of the improvement.
The reviewer calculated land values by applying the appropriate unit value from the CAD's land schedule for the land code found on the appraisal card. For example, if the appraisal card showed a land code of L81A, he appraised the land at $60,000 per acre, the unit cost per acre for land table L81A. The reviewer combined the improvement and land values to arrive at the total property value. The same procedures were used to appraise the commercial real sample. Commercial personal property was appraised by reviewing business personal property renditions.
Exhibit 10 shows the weighted mean ratios between the reviewer and CAD appraisals for the five categories of property audited.
Sample Appraisal Results
Calhoun County ISD
|Category||Parcels||Audit Sample Value||
|Weighted Mean Ratio|
Non-Qualifying Acres and Farm
and Ranch Improvements
Source: ASR Sample Appraisals & Calhoun County CAD 2008 Appraisal Records.
The results of the audited appraisal sample did not show any material differences between the reviewer's appraisals and the CAD's values. The fact that the reviewer was able to replicate most of the CAD's values does not suggest the values are reflective of current market value; it just means that they are reflective of the steps taken by the CAD.
Because the reviewer was an experienced appraiser, he was able to use the CAD's residential and commercial appraisal procedures, land schedules and business personal property renditions to complete the appraisals without additional instructions. It is unlikely that someone without appraisal experience could apply the CAD's land schedules and review business personal property renditions without written instructions. Calhoun CAD staff and taxpayers would benefit by having land and business personal property appraisal procedures explaining each step in the appraisal process and instructions detailing how and when to use them.
The CAD's residential and commercial appraisal procedures contain instructions for classification, depreciation and using appraisal schedules - information that should also be included in procedures for appraising land and business personal property.
An effective appraisal manual serves as a training tool for new appraisers and promotes appraisal consistency among all appraisers. Procedures included in the manual should focus on measuring, classification, identifying property attributes, applying depreciation and valuing sites. Calhoun CAD staff and taxpayers would benefit by having written procedures explaining each step in the appraisal process and instructions detailing how and when to use the CAD's appraisal manuals, guides, schedules and tables.
If the CAD experienced a change in appraisal personnel, the lack of detailed appraisal procedures manuals could cause inconsistent appraisals and may cause property values to deviate from market value. This market value deviation could cause Calhoun County ISD to receive additional invalid findings in the state's property value study. If the level of appraisal (percentage of market value) varies between property categories, or from taxpayer to taxpayer, some taxpayers may bear more than their fair share of the local tax burden.
Property Tax Code Section 23.01 mandates that CADs appraise property by applying generally accepted appraisal methods and techniques if the CAD is using mass appraisal standards. This section also requires CADs to comply with the USPAP and apply similar appraisal methods and techniques to the same or similar properties. CADs must account for the contributions of individual property characteristics to value. A comprehensive appraisal procedures manual can ensure that the CAD meets these standards and requirements.
Williamson CAD, for example, maintains an updated set of procedure manuals for the appraisal of all property types and classes in the appraisal district. It provides on going training for use of its appraisal manuals, field procedures, codes, classifications and appraisal records.
Develop appraisal procedures that provide instructions and local guidelines for completing land and personal property appraisals.
Calhoun CAD's reappraisal plan lacks specific data required by Property Tax Code, Section 25.18, and IAAO.
Section 25.18, Tax Code, states:
(a) Each appraisal office shall implement a plan for periodic reappraisal of property approved by the board of directors under Sec 6.05(i).
(b) The plan shall provide for the following reappraisal activities all real and personal property in the district at least once every three years:
(1) identifying properties to be appraised through physical inspection or by other reliable means of identification, including deeds or other legal documentation, aerial photographs, land-based photographs, surveys, maps and property sketches;
(2) identifying and updating relevant characteristics of each property in the appraisal records;
(3) defining market areas in the district;
(4) identifying property characteristics that affect property value in each market area, including:
(A) the location and market area of property;
(B) physical attributes of property, such as size, age and condition;
(C) legal and economic attributes; and
(D) easements, covenants, leases, reservations, contracts, declarations, special assessments, ordinances or legal restrictions;
(5) developing an appraisal model that reflects the relationship among the characteristics affecting value in each market area and determines the contribution of individual property characteristics;
(6) applying the conclusions reflected in the model to the characteristics of the properties being appraised; and
(7) reviewing the appraisal results to determine value.
The IAAO textbook, Property Appraisal and Assessment Administration, Chapter 13, Mass Appraisal, states that the required activities for all reappraisals must include the following steps in the order given:
- Performance Analysis - Determines whether or not the values are consistent with the market and if the values are equitable and that ratio studies are the primary tool for the analysis.
- Reappraisal Decision - Use statutes or administrative rules. This may include a cyclical schedule in which jurisdictions are physically reviewed and revalued. It is also noted that the reappraisal requires careful planning along with a major commitment of resources.
- Analysis of Available Resources - This step is performed before defining goals and objectives. This includes evaluating the staff, budget, existing systems and practices, data processing support and existing data and maps. The publication also stresses that an adequate budget is crucial in that it can overcome deficits in other areas.
- Planning and Organization - IAAO emphasizes that this is the most important aspect of reappraisal as it identifies the target completion date and performance objective, specific plan of action and timeline. The plan should also include definitions of critical activities with completion dates, assignment of responsibilities, and establishes data collection and field work standards.
- System Development - This produces the procedures, methods, manuals, and software for the mass appraisal system.
- Pilot Study - This study tests procedures in several portions of the jurisdiction. It should include a ratio study to verify if the system produces reliable and accurate values and point out needed modifications.
- Data Collection - After procedures and forms are made, tested and approved, the data collection can start. IAAO stresses that quality control is essential.
- Production of Values - This begins with a market analysis, model development, model calibration and calculation of preliminary values. The ratio study then assesses the consistency and validity of the values between each property type and area. After the models provide acceptable results, they can be used to produce values.
- Preparation of Appraisal Roll.
- Final Performance Analysis.
- Data Maintenance.
- Value Updates.
On Aug. 31, 2006, the CAD board of directors approved a biennial reappraisal plan for the 2007 and 2008 tax years. Three board members responding to the Comptroller's Appraisal District Board of Directors Questionnaire believe that the board-approved reappraisal plan complies with all requirements of Property Tax Code Section 25.18. On Dec. 18, 2008, the board approved the Appraisal Plan 2009 - 2010 Calhoun County Appraisal District.
The plan states the CAD's reappraisal policy is to conduct a general reappraisal of taxable property every year. According to the chief appraiser, in addition to a general reappraisal based on an annual analysis of market sales, specific areas are designated each year for physical inspections so that at the end of the three-year reappraisal cycle required by Property Tax Code Section 25.18, all taxable property in the CAD has been inspected.
In 2007, although not specified in the reappraisal plan, the chief appraiser stated the towns of Port O'Connor and Seadrift and properties along the Intracoastal Waterway and Guadalupe River were reappraised. In 2008, the city of Port Lavaca and surrounding beach areas were reappraised.
A sample of 58 real property appraisal cards selected from the Calhoun County ISD 2007 PVS found last appraisal inspection dates as far back as 1998 and as recent as 2008. Two appraisal cards did not show an appraisal date.
Exhibit 11 shows the distribution of last inspection dates for the sample appraisal cards.
Last Recorded Appraisal Inspection Dates
Sampled Real Property Cards, Calhoun County ISD
|Category||2005 & Prior||2006||2007||2008||No Year|
Source: Texas Comptroller of Public Accounts 2007 Property Value Study Calhoun County ISD & Calhoun CAD 2008 Appraisal Records.
Exhibit 11 shows 17 accounts or 29.3 percent of the audited appraisal cards have not been inspected within the last three years and indicates that appraisers are not adhering to the reappraisal plan and Property Tax Code Section 25.18.
According to the chief appraiser, in 2008, an additional appraiser was hired and each of the CAD's five appraisers has been assigned specific geographic responsibilities for the 2009-10 reappraisal cycles. This will allow appraisers to cover more areas and give the chief appraiser a better means of monitoring reappraisal activity and individual job performance.
To accomplish their reappraisal tasks, appraisers print appraisal cards (worksheets) for each parcel located in a designated reappraisal area. Appraisers carry the worksheets with them and note any changes to the property since the property's last inspection. The appraisal date and appraiser's name are noted on the worksheet. An appraisal clerk enters the information gathered in the field into the CAD's automated appraisal system and recalculates the data resulting in new appraised values. The worksheets and newly calculated appraisal cards are returned to the appraisers for their review.
According to the chief appraiser, the appraisers review the results for accuracy and uniformity by analyzing prior and current year values and comparing appraised values of similar properties. Edit reports are generated from the automated appraisal system showing large differences between current and prior year values. The chief appraiser stated each difference is verified before appraisal notices are mailed.
The CAD uses a contractor to appraise minerals, utilities and industrial properties. A summary of the contractor's reappraisal procedures is presented as an attachment to the CAD's board-approved plan.
Neither reappraisal plan specifies which properties or areas the CAD will physically inspect each year, explains staff assignments, or contains a timeline or calendar designating critical dates for beginning and completing reappraisal activities.
IAAO's Property Appraisal and Assessment Administration, Chapter 13, Mass Appraisal, provides vital elements for an effective work plan, such as the decision to physically inspect property and inclusion of a timeline or calendar for performing reappraisal tasks.
A detailed reappraisal plan, if executed properly, provides a roadmap for CAD staff to follow and explains how the CAD proposes to maintain market value appraisals. Effective appraisal districts develop and properly execute a complete reappraisal plan, helping ensure that taxpayers are treated equitably in assigning property values. A reappraisal plan also serves as the communication tool that demonstrates to the board the methods used by appraisal staff. The reappraisal plan sets forth the manner in which the staff will conduct its appraisals.
Amend the 2009-10 reappraisal plan to include a description of specific areas to be physically inspected in each year, staff assignments and a timeline for completing each step in the reappraisal process.