In July 2004, the Oglesby Independent School District (Oglesby ISD), located in Coryell 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 Coryell County Appraisal District (Coryell 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's office 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 for Professional Appraisal Practices (USPAP), specifically Standard 6: Mass Appraisal and Standard 7: Personal Property. Also the International Association of Assessing Officers Standards (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 pursuant to the annual property value study, 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 severable commendable practices implemented by dedicated and hardworking district employees, Coryell CAD is facing a number of challenges in achieving and maintaining consistent valid findings, including:
- managing office operations;
- documenting and implementing procedures; and
- reappraising regularly and consistently.
Key Findings and Recommendations
Manage Office Operations
Expand the budget format to comply with the Tax Code. The CAD's budgets lack the detail necessary to comply with Section 6.06(a) of the Tax Code. The 2003, 2004, 2005 and 2006 budgets contain the information for employee benefits but only in total dollar amounts rather than in a breakdown by staff position as required in Tax Code Section 6.06(a). Complying with the budget requirement ensures that public and participating taxing units receive enough information to be assured adequate staffing exists and staff are being compensated fairly.
Evaluate the chief appraiser annually using objective measures. The board does not have a written process for evaluating chief appraisers, nor is there evidence of any informal review process for assessing chief appraiser performance. In November 2005 the chief appraiser noted that an objective set of evaluation criteria has been developed and is being presented to the board for approval at the December meeting. An evaluation process based on the existing job description will help the board retain a chief appraiser who will meet the board's needs and allow the board to provide the chief appraiser with feedback on work performance.
Permanently retain an agricultural appraisal advisory board. Coryell CAD did not have an Agricultural Appraisal Advisory Board (Ag board), whose purpose is to advise the chief appraiser on the appraisal and use of agricultural land, until the board met and approved its establishment on September 15, 2005. Ag boards must have three members and meet three times annually at the call of the chief appraiser, as required in Tax Code Section 6.12. By appointing the required Ag board and conducting the required annual meetings the board and chief appraiser support the CAD in improving its appraisal and classification of agricultural land.
Monitor the 2005-06 staffing changes for positive results, with adjustments as needed. In 2003 and 2004 Coryell CAD was understaffed for appraisal purposes based on IAAO standards while reporting a large increase in locally appraised parcel counts in 2003 and a corresponding large decrease in 2004. The 2003 self reported parcel counts data appear to be in error and are not aligned with historical trends. In November 2005 the chief appraiser noted that the parcel count inconsistencies were resolved in February 2005, as part of the conversion to the True Automation software system. Staffing evaluation and changes were addressed by the board and chief appraiser through the 2006 budget process, which resulted in two new positions and shifted some non-appraisal duties away from appraisers, allowing them to focus on property appraisal full time. Successful appraisal districts monitor parcel counts in all categories to ensure all properties within district boundaries receive the appropriate property appraisal treatment using adequate appraisal resources, ensuring accurate property assessments for school and other tax purposes.
Document and Implement Procedures
Complete written procedures for developing, maintaining and monitoring professional services contracts. Numerous service and/or vendor contracts are a standard part of Coryell CAD operations but the district does not have a formal written contract monitoring process or maintain contract documents. Contract monitoring is informal and in many cases not in effect because copies of the current contracts were not on file with the district. In November 2005 the chief appraiser noted that written procedures for monitoring CAD contracts are in development, and all contracts have been reviewed for terms and are available for inspection at any time. By following IAAO's standard for monitoring contract performance, the district ensures that staff monitors are assigned so that critical vendor deadlines are monitored and met, and deliverables are received and paid for timely.
Maintain a board-approved, up-to-date written administrative procedure manual. Coryell CAD does not have documented policies or written procedures for how to perform day-to-day operations, such as paying bills, issuing payroll, or creating a budget. In November 2005, the chief appraiser noted that written procedures are being developed and the manual is planned for presentation and approval at the December 2005 board meeting. A procedures manual ensures taxpayers and staff are aware of how the appraisal district accomplishes the tasks and goals of the district.
Produce a written manual for gathering and analyzing sales. Coryell CAD does not have a documented process for analyzing and gathering sales. Appraisal district staff gather sales data by individually researching deed recordings and local permits to identify property transactions. In November 2005 the chief appraiser noted that all staff has been trained in sales management and implementation with the True Automation software system and written instructions for the integrated process are being developed for presentation at the January 2006 board meeting. Written procedures ensure that appraisers know how market analyses are expected to be performed, and help ensure consistency between appraisers.
Reappraise Regularly and Consistently
Adopt and follow a complete reappraisal plan. Coryell CAD does not have an adequate written reappraisal plan to ensure the execution of timely and accurate appraisals or conduct ratio studies as stated in its reappraisal plan. In February 2005 the district gained the capability to prepare ratio studies with its recently acquired PACS software system from True Automation. In November 2005 the chief appraiser noted that the need was recognized and a reappraisal plan has been drafted, which is scheduled for board review in January 2006. A detailed reappraisal plan, if executed properly, helps ensure school district values are valid in the PVS, avoiding the possibility of a school district receiving less than the expected amount of funding from the state.
The review team identified some commendable practices in Coryell CAD that other county appraisal districts may do well to review and implement where appropriate.
The district recently acquired an automated appraisal system that exceeds Tax Code requirements. In February 2005 Coryell CAD management chose to upgrade the district's existing capabilities by contracting with True Automation for hardware, software and professional services. The system can analyze sales data, perform ratio studies, display pictures of all properties and keep historical appraisal data on each property for 10 years. Appraisal districts with successful appraisal programs use systems that meet or exceed Tax Code requirements.
Coryell CAD management improved communication with taxpayers located in its largest population center while increasing overall appraisal district operating efficiency. The Copperas Cove satellite office, located in the largest population center in the county, did not effectively support Coryell CAD's current operations and was officially closed on October 1, 2005. Change was effected through the 2006 budget process with the chief appraiser presenting the pros and cons of keeping the office open, and alternatives. Closing the satellite office and adopting the chosen alternative is providing improved and timely communication with Copperas Cove residents through the local newspaper, expanded web access and information, expanded phone access and onsite "person to person" assistance at the Coryell County Tax Office annex on Fridays. Adopting the chosen alternative has also eliminated staff being based in two separate locations, removed the need for a separate building in another town and facilitated staff coordination, supervision and management support.