Findings of the Appraisal Standards Review
This chapter addresses findings, commendations and recommendations from the appraisal standards review of the Culberson CAD in two sections:
2.1 Generally Accepted Appraisal Practices
2.2 Other Recommendations
Generally Accepted Appraisal Practices
Three general appraisal methods or approaches–cost, income and market–must be considered in determining the market value of property. The appraiser must use the method most appropriate to a particular property.
The CAD can find more information about the approaches to determine or appraise value in appraisal textbooks and IAAO Standards. Appraisers usually determine the value of producing mineral deposits, such as oil, gas and coal and the value of many utility and commercial properties by using the income approach to value. Most appraisal districts contract with consultants to appraise mineral and utility properties. The chief appraiser can provide information that helps the contractor decide the proper method to use to appraise mineral and utility properties.
Culberson CAD contracts with an appraisal services firm to conduct many of the appraisal and valuation activities of the CAD. The firm has two appraisal services contracts with the CAD. The firm appraises mineral, industrial, utility and related personal property accounts as outlined in one contract. In the second contract the appraisal firm appraises new and altered real property and commercial or business properties, develops agricultural value schedules and serves as an advisor to the chief appraiser and ARB. Over the past three years, the firm has also helped the chief appraiser update the residential and commercial schedules for the CAD. The chief appraiser and firm appraiser said the CAD and firm have developed a process whereby the firm appraiser reviews any changes in value before the information is entered into the CAD's appraisal system.
Culberson CAD does not have an appraisal procedures manual that provides detailed procedures to guide staff in consistently performing appraisal activities.
According to Chapter One, The Ad Valorem Tax System, in IAAO's textbook, Property Appraisal and Assessment Administration, standards of practice 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. The publication states that there needs to be a procedure for establishing standards of practice, including regularly updating manuals. Performance and progress reviews contribute to effective and efficient appraisal district operations. Procedures are required for monitoring the quality of appraisals, editing data and reviewing appraisals.
Standards of practice include:
- manuals – establish work procedures;
- procedures – promote uniformity of approach to tasks;
- policy memoranda – set performance goals; and
The chief appraiser provided a list of schedules to the review team as the appraisal manual currently in place. The schedules appear to pertain to an entity other than Culberson CAD as they list many different types of property, including 40 types of apartments, 16 types of banks and 20 different types of bowling alleys. The town of Van Horn has a very limited number of apartments, one bank and no bowling alleys. The CAD updated the residential schedules in April 2006. The other categories have been updated from as long ago as 1987. There were no instructions or guidelines provided related to the schedules.
After reviewing the draft, the chief appraiser explained that the CAD created the schedules in conjunction with their appraisal services vendor. They also explained that the schedules were created in anticipation of future growth in the CAD, which is why bowling alleys and several different types of banks are listed. The chief appraiser also expressed that the CAD and the appraisal services vendor are going to begin updating the schedules to eliminate items that do not apply to the CAD. They are also going to begin working on creating appraisal procedures manuals.
There were no detailed written procedures to guide appraisers in performing fieldwork, in determining how to apply depreciation or in performing an appraisal using the cost approach.
A detailed appraisal manual outlines the steps that appraisers need to perform during fieldwork to gather specific information about properties such as the age, condition, construction details and physical dimensions of the building or the dimension, shape and location of the land on which the real property is found. Lack of detailed appraisal procedures manuals may cause inconsistent appraisals and may cause property values to deviate from market value. This market value deviation may cause Culberson County's school district to receive an invalid finding in the state's PVS. If the level of appraisal (percentage of market value) varies from taxpayer to taxpayer, some taxpayers may bear more than their fair share of the local tax burden.
Property Tax Code Section 23.01 requires property to be appraised by applying generally accepted appraisal methods and techniques. It also requires appraisal districts to comply with USPAP and to apply similar appraisal methods and techniques to the same or similar properties, while taking care to account for the contributions of individual property characteristics on value.
Jefferson CAD, for example, has a detailed operations manual to ensure that its staff consistently follows proper procedures in appraising property. The manual outlines the steps for appraisers to follow in gathering specific information about properties and the land on which they are located. The CAD's supervising appraisers use the written appraisal procedures manual to teach the appraisal staff how to be consistent in the appraisal of property. The appraisal procedures manual is also useful as evidence during ARB hearings and for demonstrating that the district is complying with its own policies.
Develop an appraisal manual that includes detailed procedures for conducting fieldwork activities, developing appropriate values and timely updating of property schedules.
Culberson CAD lackswritten agricultural use guidelines and does not have net-to-land calculations and agricultural schedules.
Approximately 99 percent of the open-space agricultural land in Culberson County is native pastureland and, in the 2005 PVS, the CAD had an overall ratio of 0.86 for productivity value of qualified acres and a ratio of 0.91 for the native pastureland sub-category. The CAD could not provide calculations of average net-to-land for the review team and did not submit lease rates used in calculating productivity value. The Culberson-Allamoore ISD unsuccessfully appealed the 2005 PVS findings because the CAD could not provide evidence that the values determined by the PVS were incorrect.
Some of the steps listed in the Comptroller's Manual for the Appraisal of Agricultural Land to calculate productivity value based on a typical cash lease include:
- gather as many leases as possible for each year of the five-year period. In most cases, you will need to gather four to six leases per year to develop a reliable net-to-land value for a specific land class;
- determine a lease rate for each year based on the most common lease rate, not an average lease rate;
- establish a lease rate for each year of the five-year period. Property Tax Code Section 23.51 (4) defines the net-to-land base period as the five-year period preceding the year before the appraisal;
- determine typical landowner expenses;
- for each of the five base years, subtract the expenses from the typical lease rate, the remainder is the net-to-land value;
- average the five net-to-land values for each of the five years to obtain the overall net-to-land value for the land class for the five-year period; and
- divide this net-to-land value by the capitalization rate to obtain the agricultural use value for the class.
Appendix E of the manual contains an example of this process.
The CAD relied on leases of land owned by the state and managed by the General Land Office. These leases are atypical because the state does not pay expenses such as property taxes and fence construction. In discussing the appropriate handling of atypical leases the manual states, "Appraisers should adjust these leases to typical terms before using them to estimate typical net lease payments." The CAD did not make these adjustments, and the result was low native pasture land values.
By maintaining and adjusting agricultural use schedules, and developing and using written agricultural use guidelines, the CAD will be able to provide confirmation of correct productivity values, explain how the agricultural qualifications are applied and help ensure that accurate productivity values and net-to-land calculations are used for assessing taxes.
While productivity values were historically consistent on the Culberson-Allamoore ISD self-reports, with only a 4 percent change in the number of acres from 2003 to 2006, Category D1, Qualified Agricultural Land, productivity values went up 50 percent from 2003 to 2006. Even though the ISD's overall values were valid in the 2004 and 2006 Property Value Studies, Category D1 ratios were still very low for productivity value, with a ratio of 0.8222 in the 2004 PVS and 0.8660 in the 2006 PVS. In the preliminary 2007 PVS, values in the Culberson-Allamoore ISD are invalid, and the ratio for D1 is 0.8426.
The appraisal processes for determining degrees of intensity and deriving net-to-land have procedures in common, such as an identification of local categories of land, the land's productive capacity within the area and an analysis or breakdown of the steps of production in terms of the inputs. Where local procedures for establishing typical degree-of-intensity standards do not exist, an essential step in the qualification process could be lacking. If Culberson CAD has established local land categories, then a degree-of-intensity standard should be established for each of these categories.
In setting degree-of-intensity standards for an appraisal district, a chief appraiser should follow a process similar to the steps outlined in the Comptroller's Manual for the Appraisal of Agricultural Land:
- analyze each type of commodity production in the area;
- analyze the breakdown in typical steps in producing the commodity;
- specify how much time, labor, equipment (e.g., inputs), are typical for each level;
- determine the typical minimum levels involved for each step;
- the degree-of-intensity specifications address these levels of input in detail for each step of the enterprise;
- it is the chief appraiser's decision on what constitutes an "area" for defining "typical" agricultural intensity;
- for a common crop, the chief appraiser looks to farming (ranching) practices within the county; and
- for crops that are rare, the chief appraiser may need to consider a multi-county region.
Local guidelines that establish the degree of intensity of a prudent manager in the area must be applied in a flexible and reasonable manner. When applied in such a way, local guidelines can help the CAD maintain operations if key staff members are lost and can help the public understand how the CAD qualifies land for the special agricultural appraisal. Local guidelines, however, may not be used to unreasonably deny agricultural appraisal. For example, an owner who keeps eight cattle on 10 acres should not be denied the special appraisal because the guidelines state that a cattle ranch must have nine cattle for every 10 acres, if the owner is otherwise clearly qualified.
The absence of local agricultural guidelines can contribute to inconsistency and lack of uniformity in calculating productivity values and hinder the decision-making process. By clearly defining prudent management factors for the area and the minimum standards that meet the degree-of-intensity requirements, both CAD staff and taxpayers benefit from written, local guidelines for understanding agricultural valuations. The CAD should apply these standards in a reasonable and flexible manner.
Wharton CAD, for example, has developed a written pamphlet for agricultural use guidelines, land productivity valuation, agricultural use qualifications for open space special evaluations and an explanation of how agricultural productivity values are calculated. It sets minimum guidelines to qualify for agricultural use, 1-d and open space 1-d-1 and animal stocking rates.
Develop agricultural land schedules using methodologies from the Property Tax Code and Manual for the Appraisal of Agricultural Land and develop written agricultural use guidelines.
The CAD should also review and analyze the guidelines on an annual basis and consider the addition of wildlife management. By adding wildlife management to the guidelines, the CAD will have more comprehensive procedures for granting and denying agricultural and wildlife exemptions.
Culberson CAD has not established an agricultural appraisal advisory board (ag board).
According to the chief appraiser, the appraisal district has not had an ag board since 1990. At that time, the chief appraiser tried to appoint members to the ag board with the approval of the CAD board of directors. There were no identifiable taxpayers who met the qualifications for appointment to the board, including ownership of qualified property and residency in the appraisal district for at least five years who were willing to serve. Since that time, the chief appraiser has not tried to reconstitute the ag board.
Property Tax Code Section 6.12, requires the chief appraiser, with the board's consent, to appoint an ag board. The ag board must meet at least three times a year. Its function is to advise the chief appraiser on the valuation and use of land designated for agricultural use. The ag board must have at least three members who meet specific qualifications. Two members must own qualified 1-d, 1-d-1 agricultural or 1-d timber land (rural real property that is appraised based on its productivity value rather than on its market value) and have lived in the appraisal district for at least five years. One member should be a representative or committee member of the Farm Service Agency. Ag board members may not be CAD employees or serve on the CAD board. Members are appointed to two-year staggered terms. The board serves in an advisory capacity only and has no decision-making authority.
While an ag board is not required, the function of the ag board is to advise the chief appraiser on the major issues dealing with agricultural and timber appraisal-net-to-land, degree-of-intensity standards and other agricultural use and appraisal issues. The CAD has not completed the Comptroller's annual Farm and Ranch Survey for the past five years. The Comptroller's Farm and Ranch Survey information is compiled and analyzed to establish a productivity value that is used as part of the PVS. The independent estimate is also useful for detecting instances where property values are inaccurate.
The ag board can provide a valuable source of information for the chief appraiser. Often board members are familiar with local land use and typical production practices and costs. Ag board members are usually aware of crop yields and can help the chief appraiser identify land classes and develop a system for placing land in the proper category. The classification of native pastureland, already determined to be the largest agricultural land class in Culberson County, is based on how well the soil produces. An ag board is also instrumental in determining degree of intensity standards for agricultural operation in the appraisal district by assisting the chief appraiser in the analysis of the steps involved in each type of agricultural operation and the typical level of inputs and types of commodity production in the CAD.
Upon review of a draft of the ASR, the chief appraiser commented that on Jan. 9, 2008, the board of directors chose not to have an ag board. They made this decision because the last attempt, in 1990, was unsuccessful. By not using an ag board, Culberson CAD misses an opportunity to increase communication between the ranching community and loses a valuable source of information used to develop accurate agricultural land use schedules that may in turn help the CAD achieve better D1 ratios in future Property Value Studies.
In 2005 the Bandera CAD, for example, reinstituted its ag board after several years of operation without a board. The chief appraiser appointed three qualified members who meet to review and comment on appraisal procedures for agricultural land. Bandera CAD had invalid values in the 2005 PVS and was able to correct the values in the 2006 PVS, especially in D1 productivity values. The CAD has an overall D1 ratio of 1.04 in the 2006 PVS.
Reinstitute the agricultural advisory board and recruit qualified members to serve.
Culberson CAD's two written reappraisal plans do not have the information necessary to perform appraisal duties effectively as outlined in Property Tax Code Section 25.18.
Beginning in 2006, each appraisal district was required by state law to develop a reappraisal plan that provides for reappraisal activities of all appraisal districts' real and personal property at least once every three years. Culberson CAD has two plans, one developed by the chief appraiser and one developed by the CAD's outside appraisal firm.
The appraisal firm's plan has not been formally adopted by the board and is not specific to Culberson CAD. It describes the planned reappraisal activities for mineral, industrial, utility and related personal property accounts. This plan addresses the Property Tax Code requirements for those types of accounts. The plan uses USPAP standards as the basis for its appraisals, and it states that the types of properties typically appraised are unique, complex and "special purpose" and that these categories do not normally have sufficient market data to support rigorous use of all USPAP mass appraisal mandates. However, the firm does "employ mass appraisal techniques with regard to the definition and identification of property characteristics and model specification and application." The plan requires reappraisal of property at least once every three years and specifically addresses the reappraisal of mineral interests and industrial, utility and related personal property. For each of these categories, the plan describes the appraisal resources to be used, the valuation approaches to be used, data collection and validation procedures and the valuation analysis and review procedures.
The chief appraiser, using examples from other CADs, developed the second reappraisal plan. The board approved this plan after a public meeting on Sept. 13, 2006. Prior to this plan, properties were reappraised on an as-needed basis according to the chief appraiser.
The board-approved reappraisal plan consists of the following:
- a statement of the applicable state laws;
- a two-page outline of the steps in a reappraisal plan;
- a two-page description of the plan; and
- a one-page project work plan that is specific to Culberson CAD.
The project work plan describes Culberson CAD in terms of square miles, number of taxing units and number of parcels. The project plan describes the number and certifications of the employees and states that the CAD follows the Property Tax Calendar as published by the Comptroller.
The project work plan further divides reappraisals into two categories: real property and personal property. For real property, the project plan states that CAD staff carries out field inspections and that rural properties are inspected first. CAD staff inspects each parcel for changes and inspects agriculture land for changes in use. The plan states that photographs are taken and linked with the property account on the computer. The plan cites building permits and copies of deeds as sources of information. The number of real estate parcels is identified, as well as the number of parcels that overlap with Hudspeth-Allamoore ISD. Hudspeth CAD sets the values for this ISD.
For personal property, the plan states the CAD will use information in the form of renditions and government reports. The plan lists 298 business personal property accounts. This plan does not meet the requirements of the Property Tax Code because it does not provide enough detail to provide for reappraisal as required by law.
According to Property Tax Code Section 25.18 and USPAP Standard 6, a functional reappraisal plan includes the following activities:
- identifying properties to be appraised;
- identifying and updating in the appraisal records the relevant characteristics of each property to be appraised;
- defining market areas;
- identifying property characteristics that affect property value in each market area;
- developing an appraisal model that reflects the relationship among the property characteristics affecting value in each market area;
- calibrating the model to determine the contribution of the individual property characteristics affecting value;
- applying the conclusions reflected in the model to the characteristics of the properties being appraised; and
- reviewing the appraisal results.
The CAD's board-approved reappraisal plan mentions some of the elements required by the Property Tax Code, such as the reappraisal cycle, the mass appraisal report and value defense. The CAD's approved reappraisal plan does not contain most of the elements required by the Property Tax Code. Topics such as annual activities, identifying and updating relevant property characteristics and valuation methods by property type are not covered. The plan mentions market areas, but does not provide specific market areas, such as the town of Van Horn.
The reappraisal plan also does not identify the property characteristics affecting property value in each area. It does not identify similar factors for the building component, such as size, age, condition or construction type. Similarly, the plan does not identify the relevant characteristics of each property to be appraised and how the CAD's appraisal records are updated with the characteristics.
The plan identifies two appraiser positions, the chief appraiser and the deputy chief appraiser, but does not describe the specific appraisal activities to be performed by the outside appraisal firm.
In addition, the plan's narrative references a CAD other than Culberson and describes activities that are not performed by the CAD or the appraisal firm. For example, the plan references board policies related to the reappraisal plan that do not exist. It also references Marshall & Swift schedules, although the CAD does not use them, and references ratio studies that cannot be documented.
After a review of the ASR, the chief appraiser commented that the CAD is in the process of working toward a plan for reappraisals every three years.
A comprehensive reappraisal plan details how and when the appraisal district plans to perform each of the activities mentioned by the Property Tax Code. A well-executed reappraisal plan ensures all parcels are identified and each parcel is appraised in a timely manner, so the school districts receive their appropriate amount of state funding. It also ensures uniform and fair taxpayer treatment in the payment of property taxes.
Hunt CAD, for example, has a comprehensive reappraisal plan that addresses the work to be performed by each appraiser. The plan calls for the reappraisal of all real property at least once every three years and annual inspections of business personal property. Each reappraisal plan provides detail as to the steps performed, timelines, staffing levels and a workflow analysis culminating in certified appraised values. The plans for residential and commercial properties list specific procedures for determining how the appraisal district should use sales in reappraising property and how it should use the internal ratio study to determine the need for reappraisals in each market area.
Develop a reappraisal plan that includes consistent changes in local market activity, helps ensure values are equitable and consistent with the market, defines the role of the outside appraisal services firm and meets the requirements of the Property Tax Code Section 25.18.
The CAD does not perform ratio studies on a consistent basis and has not documented the use of ratio studies in developing property schedules.
A ratio study examines the relationship between market values and appraised or assessed values. Sales or independent appraisals may be indicators of market values. Appraisal districts use ratio studies to identify market areas whose appraised values no longer reflect the market and that may be contributing to insufficient market values indicated in the PVS. In such cases, the appraisal district can use the results to revise appraised values to bring them closer to market value. Third parties also can use ratio studies to determine the appraisal district's actual appraisal performance.
The chief appraiser said the appraisal software is capable of providing ratio studies and that she performs the ratio studies annually. She also runs ratio studies for fee appraisers who request them, but does not use ratio studies to develop schedules because lack of sales information is a historical problem. According to the chief appraiser, there are few sales in the sparsely populated county and the sales they have are speculative land sales by developers, including auctions over the Internet and sales of undivided interests, that have distorted sales.
The appraiser from the appraisal firm stated that he used ratio studies in the development of the new schedules, but did not share them with the CAD. The chief appraiser said she has not asked for the ratio studies.
The appraisal firm provided ratio studies for 2005-07. Two 2005 ratio studies were sent in for Category A. One of the studies contained six sales and had a median ratio of 0.7041. The other 2005 study contained three sales and had a median ratio of 0.5796. The 2006 ratio study contained 18 sales and had a median ratio of 0.8472, while the 2007 study contained 15 sales with a median ratio of 0.8372.
Following the review of the ASR, the chief appraiser commented that the CAD would do ratio studies on an annual basis.
Even in CADs without significant growth, such as Culberson CAD, a trend analysis of ratio study results that is performed on a scheduled basis such as quarterly or semi-annually, allows the chief appraiser to identify or predict market movements. The chief appraiser can then determine how to adjust local schedules. Without this analysis, the CAD may delay needed adjustments, which can cause the CAD's values to fall outside accepted PVS ranges. The results of a trend analysis may also assist in the appeal process to show the taxpayer how values have changed over time.
Nueces CAD, for example, performs ratio studies within property classes, by school district and county at least quarterly to determine appraisal performance. The CAD staff makes reappraisal and value maintenance decisions for types of properties or locations based on ratio study results.
Perform ratio studies in a timely manner to forecast trends and adjust market values.
Culberson CAD has an outdated manual mapping system, which is not integrated with the appraisal system, limiting the CAD's ability to identify and reappraise property on a timely basis.
Currently, the CAD relies on paper maps, some dating back to inception of the district. The CAD has three types of maps, including:
- countywide property ownership maps that were purchased in 2003 and updated by hand;
- plat maps of various subdivisions and parcels dating back to 1988, used at the start up of the CAD and updated by hand; and
- two maps for the town of Van Horn, a large-scale ownership map with tax ID numbers and ownerships indicated and a small-scale city map.
The chief appraiser stated that all maps are updated as needed; however, the chief appraiser indicated that the person responsible for mapping left the CAD in May 2006 and has not been replaced. Maps have not been updated since that time. According to the chief appraiser, the Van Horn maps are updated to keep them coordinated, but a limited review of the maps indicated this not the case. For example, the Matt Clark subdivision was drawn on the small-scale map, but not on the large-scale map of Van Horn. The chief appraiser indicated that this subdivision was more than a year old.
According to the chief appraiser, maps are not available for all parts of the CAD. The chief appraiser noted in the self-assessment questionnaire that maps have not been updated in a timely manner to reflect ownership changes. The lack of proper mapping may have contributed to the invalid values in the 2005 PVS. The Culberson-Allamoore ISD appealed the 2005 PVS values, citing that these were owner-financed sales for the lots and that the sales were outside the intended use for the properties. The PTD values for Category C, Stratum 2, were more than double the amount of local value. One particular parcel in Stratum 2 in the PVS had a ratio of 0.1250. The ratio for Stratum 2 was 0.4011. In Stratum 4, the CAD had a ratio of 0.7755. The CAD overall ratio for Category C, Vacant Lots, was 0.7103. Proper mapping may help ensure that all properties in the county are accounted for and that the intended use for Category C, Vacant Lots, is determined on a consistent basis as the highest and best use changes or any changes to the improvements on such properties change the economic benefit to the land.
The lack of ownership maps may have also been a factor in the invalid finding for Category D1, Qualified Agricultural Land. Appraisal districts without ownership maps must develop a procedure for obtaining acreage breakdowns. The chief appraiser is responsible for determining the number of acres in each land class for each individual farm or ranch. This is especially difficult for appraisal districts that have not developed or have outdated land ownership maps.
Texas Comptroller's Property Tax Rules Section 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 bedrawn 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 January 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 [Comptroller] that a tax map system substantially equivalent to that required in this section has been established.
Culberson CAD maps have properties that are not completely delineated by lot lines or property lines, do not include identifying numbers, letters or names for all delineated lots or parcels and have not been updated annually. Outdated maps make it difficult to locate property and may make the reappraisal process less accurate.
The chief appraiser commented, after examination of the ASR draft, that the CAD has set funds in its budget to have some mapping done for the year 2008 and that the properties inside the city limits are kept up as the CAD receives new deeds for property owners. The chief appraiser stated that the mapping company the CAD uses does not update its maps on an annual basis. The CAD last purchased maps from the company in 2003. The chief appraiser also commented that the CAD has maps that were drawn in 1988 that really come in handy – they have the owner and the deed records – and that the maps were drawn to scale.
The chief appraiser also mentioned that the CAD is working with the Rio Grande Council of Governments to update its paper mapping system to meet the requirements of Comptroller Rule 9.3002.
Cooke CAD, for example, maintains a computer system with integrated appraisal, collection, database and mapping system. All the maps are digitized and are integrated with the appraisal system. Security and privacy for CAD staff, taxpayers and the public are also protected throughout the integrated system. The CAD has integrated its appraisal software and geographic information systems providing staff and taxpayers better access to data.
Implement a mapping system that complies with Comptroller Rule 9.3002 to ensure timely appraisals.
If the CAD can not create a paper mapping system that complies with Comptroller Rule 9.3002 within one year of the release of this report, the CAD should consider purchasing an automated mapping system.
During the course of the review process, the review team identified certain management and operational issues that may not be directly related to the appraisal process, but can have a direct impact on the ability of the district to accurately and consistently carry out its mission of property appraisal. The CAD is not obligated to implement these recommendations, but as Texas governmental entities, appraisal districts are required to comply with all applicable existing laws.
Governance and Management
The quality of the property tax system depends largely on an appraisal district's board of directors (board). The board should provide knowledge, judgment and expertise to establish policies and procedures for the appraisal district's organization and operation.
The Culberson CAD's board of directors consists of five members (Exhibit 6). The taxing entities appoint board members who serve two-year terms. Three of the 2006 board members are elected officials. Two are Culberson County Commissioners, and the other is a member of the Culberson County-Allamoore ISD Board of Trustees.
Culberson CAD Board of Directors Members
|Board Member||Entity Member Represents||Start Date|
|John T. Jones||Culberson County||1989|
|Don Collins||Culberson County Hospital District/Groundwater Conservation District||1998|
|Manuel Molinar||Culberson County||1989|
|Ruben Robledo||Culberson County-Allamore ISD||2003|
|Edwin Easley||Culberson County Hospital District /Groundwater Conservation District||1994|
Source: Culberson CAD, November 2006.
The board has the following primary responsibilities established by Property Tax Code:
- establish the appraisal district's appraisal office, Section 6.05;
- adopt the appraisal district's annual operating budget, Section 6.06;
- approve appraisal contracts, Section 6.05 and Section 25.01(b);
- hire a chief appraiser, Section 6.05;
- hire a taxpayer liaison officer (in counties with a population of more than 125,000), Section 6.052;
- appoint appraisal review board members, Section 6.41;
- set general policy on the appraisal district's operation, Section 6.05;
- contract for annual financial audit, Section 6.263; and
- designate the district depository, Section 6.09.
The Comptroller's office asked the board to complete a written survey about its activities. Three of the five board members responded. The survey includes board policies and procedures; chief appraiser and staff; property appraisals; appraisal review boards; and budgeting and financial management. Board members who responded gave Culberson CAD high marks in all categories. Of the three respondents, just one respondent disagreed with any of the survey questions. This respondent disagreed with the statements regarding the inclusion of board member training requirements in board policy, the evaluation of the chief appraiser process and the periodic bidding of the auditor's contract.
Culberson CAD's adopted budget does not provide enough information to meet Property Tax Code requirements.
The Property Tax Code Section 6.06 requires an appraisal district to list in its budget:
- each proposed position with associated salary and benefits;
- each proposed capital expenditure; and
- an estimate of the amount of the budget allocated to each taxing unit.
Culberson CAD provided adopted budgets for 2003 through 2007. Each budget was similar in format and included separate line-item budgets for appraisal and collections functions. The percent of budget and amount allotted to each taxing entity for 2007 was listed and is shown in Exhibit 7.
Culberson CAD Appraisal Budget Allocations to Taxing Entities, 2007
|Taxing Entity||Tax Levy||Percent||Allotment|
|Culberson-Allamoore Independent School District||$3,589,183||49.24%||$85,082|
|Culberson County Hospital District||1,514,158||20.77%||35,889|
|Town of Van Horn||282,107||3.87%||6,687|
|Culberson County Groundwater Conservation District||95,279||1.31%||2,264|
Source: 2007 Culberson CAD budget.
The 2007 adopted budget included a comparison of the proposed 2007 budget to the 2006 budget. None of the budgets provided a listing of each proposed position with associated salary and benefits. Line items for capital expenditures were not included in any of the budgets for the three years reviewed. According to the chief appraiser, the CAD does not budget for capital items annually. She indicated that if capital items are needed during the year the budget would be amended; however, the CAD rarely purchases capital items.
In the 2007 budget process, the chief appraiser mailed the final allocation separately to the taxing entities after the final budget was adopted on Sept. 13, 2006. The CAD's budget process includes holding hearings, publicizing them and adopting the budget.
Exhibit 8 presents Culberson CAD's 2005-07 adopted budgets for appraisals. Staffing has remained the same over the three years except that the allowance for a part-time clerical position has increased by $200. This position was most recently used to update maps for the CAD. Capital items are included in the budget when replacement items, such as computers, are needed. Increases in the budget are due to increased travel for required classes and expected increases in the number of physical inspections. Other recent changes in the budget are increases in the travel allowance due to increased cost of gasoline, postage and workers' compensation insurance. In 2007, the CAD's budget included funding to maintain the records retention schedule and an audit of the CAD's retirement plan.
Culberson CAD Adopted Appraisal Budgets
2005 through 2007
|Deputy Chief Appraiser||21,630||13.8%||22,928||14.3%||24,074||13.9%||11.3%|
|Retirement (Pension Plan)||4,509||2.9%||4,728||3.0%||4,891||2.8%||8.5%|
|Retirement Annual Report Fee||200||0.1%||200||0.1%||200||0.1%||0.0%|
|Life Insurance (Whole Life)||600||0.4%||657||0.4%||657||0.4%||9.5%|
|Internal Service Fund (Health Ins.)||4,660||3.0%||3,500||2.2%||3,850||2.2%||(17.4%)|
|Texas Workforce Commission||214||0.1%||126||0.1%||540||0.3%||152.3%|
|Total Salaries and Benefits||$67,430||43.0%||$69,179||43.3%||$72,263||41.8%||7.2%|
|Board of Directors||1,500||1.0%||1,500||0.9%||1,500||0.9%||0.0%|
|Board of Review||1,500||1.0%||1,500||0.9%||1,500||0.9%||0.0%|
|Record Retention Expense||0||0.0%||0||0.0%||3,500||2.0%||NA|
|Repairs/Maintenance: Office Equipment||300||0.2%||300||0.2%||300||0.2%||0.0%|
|Computer - Telstar (unlimited usage)||360||0.2%||290||0.2%||290||0.2%||(19.4%)|
|Legal Notices & Advertisements||400||0.3%||400||0.3%||400||0.2%||0.0%|
|Travel: Local Car Allowance||200||0.1%||0||0.0%||1,500||0.9%||650.0%|
|Education: Tuition, Fees||2,000||1.3%||2,000||1.3%||2,500||1.4%||25.0%|
|Dues and Membership||300||0.2%||250||0.2%||250||0.1%||(16.7%)|
|Bonds, General Liability, Fire Insurance||2,000||1.3%||2,000||1.3%||2,000||1.2%||0.0%|
|Texas State Pension Review Board (Retirement audit)||0||0.0%||0||0.0%||1,500||0.9%||NA|
|Contracts: Appraisal Services|
|Online Data Processing||17,794||11.4%||18,910||11.8%||18,910||10.9%||6.3%|
|Real Property & Business Personal Property-Keep Up||16,000||10.2%||16,000||10.0%||16,000||9.3%||0.0%|
|Total Other Expenses||$89,302||57.0%||$90,748||56.7%||$100,528||58.2%||12.6%|
Source: Culberson CAD budgets 2005, 2006 and 2007.
Exhibit 9 presents Culberson CAD's 2005-07 adopted budgets for collections.
Culberson CAD Adopted Collections Budgets
2005 through 2007
|Deputy Tax Collector||18,927||39.1%||20,063||41.0%||19,295||39.5%||1.9%|
|Internal Service Fund||1,452||3.0%||845||1.7%||900||1.8%||-38.0%|
|Texas Workforce Commission||207||0.4%||63||0.1%||270||0.6%||30.4%|
Source: Culberson CAD budgets 2005, 2006 and 2007.
The collections budgets are similar in format to the appraisal budgets and do not provide a detailed listing of each proposed position with associated salary and benefits. Line items for capital expenditures are not included in any of the budgets for the years reviewed. The chief appraiser indicated that if capital items were needed during the year, the budget would be amended.
The comprehensive budget information required by state law ensures that the public, board and taxing units will have sufficient information to understand how public funds are spent. Without it, the board and taxing entities may not be able to determine if the proposed budget provides the necessary resources for the CAD to conduct its activities.
Jefferson CAD, for example, has a model budget document printed in the 2005 ASR that contains all of the necessary details required by the Property Tax Code. Each budget lists the benefits for each staff position and lists of any proposed capital expenditures.
Expand the adopted budget format to comply with Property Tax Code requirements by including staff benefit costs by position and itemized lists of any capital items budgeted.
The board does not evaluate the chief appraiser's job performance annually and has not developed an evaluation tool that outlines specific goals and performance expectations.
The chief appraiser, appointed in 1988, said that the board has never evaluated her formally or informally. She indicated that she has always had the support of the board and that the board would not approve raises for her position if they did not approve of her job performance. The chief appraiser also indicated that a formal evaluation would be helpful by providing feedback on specific goals and expectations.
Two of the board members strongly agreed with the statement that they evaluated the chief appraiser annually and that the evaluation is formally documented and based upon measurable criteria while the other board member who responded disagreed. When questioned during interviews, the board chairman and one other board member said that the evaluation was oral and informal. The board chairman indicated that if the board was not satisfied with the chief appraiser's performance, the person in the position would be replaced.
A written evaluation format is a resource for the board and chief appraiser to clearly define expectations and measure
actual performance. Without it, evaluations are based on subjective observations rather than on actual performance. By not evaluating the chief appraiser's performance in writing annually, both the board and chief appraiser forego the chance to mutually communicate concerns and issues, provide feedback regarding performance, identify any necessary corrective actions needed to meet the board's goals and objectives and develop a strategy to implement the actions.
Lee CAD, for example, has developed a comprehensive evaluation system that includes an annual evaluation of chief appraiser performance. The board has developed a job description for its chief appraiser that includes objective evaluation measures that the board uses to evaluate the chief appraiser in writing annually.
Evaluate the chief appraiser annually using a formal evaluation tool that sets specific performance goals and board expectations.
Resources and Management
In organizing and administering a county appraisal district, the chief appraiser is responsible for hiring, firing and training personnel; ensuring compliance with a wide range of legal requirements; and maintaining policies and procedures for the district's effective operation.
Exhibit 10 profiles the Culberson CAD staff.
Culberson CAD Positions,
Certifications, Years with Culberson CAD and Salaries
|Position||BTPE Certification(s)||Years with CAD||Salary|
|Chief Appraiser/ Tax Assessor/Collector||RPA/RTA||18||$36,000|
|Deputy Chief Appraiser||Level II RPA||5||$24,074|
|Deputy Tax Collector||None||2||$19,295|
Note: The chief appraiser's total annual salary includes $30,263 as chief appraiser and $5,737 as Tax Assessor/Collector.
Source: Culberson CAD, November 2006.
CAD employees who conduct appraisals must be registered professional appraisers (RPAs) or be working towards certification as an RPA; the latter must be certified within five years of their hire date. Interim certifications include Class II and Class III. In addition, RPAs must recertify every five years to remain registered. The Culberson CAD chief appraiser is properly registered, and the deputy chief appraiser is in the process of obtaining certification with one remaining class to take before sitting for the exam.
Culberson CAD does not have documented business procedures for functions such as payroll, purchasing and accounting to provide guidance to employees or continuity in case of employee turnover.
The chief appraiser confirmed during the onsite visit that there are no written business procedures for areas such as payroll, purchasing and accounting. The chief appraiser performs these duties using a manual set of books. The board approves a list of payments each month before the checks are mailed or distributed. In the absence of written procedures, the chief appraiser relies on her extensive experience.
Comprehensive business operating procedures describe processes and how staff should perform tasks. Detailed procedures improve consistency among employees resulting in reduced errors and misunderstandings. They are also an important tool for the CAD to ensure it can perform its business functions consistently if an appraisal district employee is absent or leaves the CAD.
According to Chapter One, The Ad Valorem Tax System in IAAO's textbook, Property Appraisal and Assessment Administration, standards of practice 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. The publication further states that there needs to be a procedure for establishing standards of practice that include updating manuals on a regular basis. Performance and progress reviews contribute to effective and efficient operations of appraisal districts. Procedures are required for monitoring the quality of appraisals, editing data and reviewing appraisals.
Standards of practice include:
- manuals – establish work procedures;
- procedures – promote uniformity of approach to tasks;
- policy memoranda – set performance goals; and
Erath CAD, for example, has a well-written policy and procedures manual for managing operations. The administrative policies covered in the manual include:
- a comprehensive master plan;
- fiscal accounting;
- the budget and the auditing process;
- the deposit and investment of funds;
- contracts and agreements;
- long-range planning; and
- scheduled reappraisal policy.
The Erath CAD manual is readily available to the public and complies with Comptroller rules.
Develop and implement comprehensive business operations procedures.
Culberson CAD does not have job descriptions for its staff positions to help ensure that each position's job duties are clearly defined and that the employees meet board expectations.
The chief appraiser stated that job descriptions have never been developed for the chief appraiser position or the two staff positions: deputy chief appraiser and deputy assessor-collector. The chief appraiser also indicated that, based on the length of her experience in the CAD and the small number of staff, she was able to effectively monitor job performance and set expectations.
The three board members who responded to the survey gave mixed responses to the statement that "the board has a written job description and performance plan for the chief appraiser." One board member strongly agreed with the statement, while the two other board members indicated that they did not know. All three indicated in their surveys that the chief appraiser effectively manages the day-to-day operations of the appraisal district; that staff members are competent and good at their jobs; and that staff members are monitored by the chief appraiser to ensure that they are faithfully following the policies and procedures set out by the board.
In an interview, the board chair indicated that the process was informal and that the chief appraiser was doing a good job in working with the board and managing the day-to-day operations of the CAD.
Complete and accurate job descriptions are an important management tool to communicate expected performance and to manage staff's roles consistently. They also help organizations comply with laws such as the Americans Disability Act (ADA). Job descriptions can also assist organizations in determining if a position is required to report and receive overtime pay under the Fair Labor Standards Act (FLSA) by identifying whether or not the job duties meet the standards defined in the regulations.
The Appraisal District Director's Manual recommends a written job description for each position in the appraisal office. The manual states, "The chief appraiser and/or supervisors should review job descriptions periodically and update as necessary."
Evaluating staff and documenting performance in writing is a recognized human resources best practice. Many CADs have implemented systematic staff evaluation approaches.
In Bandera CAD for example, each employee has at least one evaluative conference annually to discuss the written evaluation. The employee's performance of assigned duties and other job-related criteria provides the basis for the annual employee evaluation.
Develop job descriptions for all positions and perform annual evaluations to ensure that CAD staff perform minimum job duties and meet board expectations for the position.
Information Processing and Data Collection
Computers have become a necessity for all appraisal districts. The use of computers allows the district to amass large amounts of data, perform complex tasks that otherwise would take hundreds of staff hours to perform manually and more accurately analyze trend data to ensure accurate valuation of similar properties.
Technology infrastructure is the underlying system of cabling, phone lines, hubs, switches, routers and other devices that connect the various parts of an organization through a wide area network (WAN) and a series of local area networks (LANs). Maintaining a strong infrastructure and integrating the various systems used by the appraisal district is critical to increased staff productivity, the reduction of costly data errors and better customer service to users, members of the community and the taxing units dependent on the appraisal district's information.
Culberson CAD does not have a written disaster recovery plan that helps prevent the loss of appraisal records, maps or financial information or describes how to resume operations in case of a disaster.
Culberson CAD appraisal records are located at the vendor's office and accessed via workstations in the appraisal district office. The chief appraiser relies on the software vendor to back up the system as appropriate. Maps and financial records are kept manually in the CAD office and are not copied or backed up.
The lack of a disaster recovery plan exposes the CAD to the loss of essential records that would hinder effective operations of the CAD or would result in additional time and effort to reconstruct records after a loss.
The National Center for Education Statistics' publication, Safeguarding Your Technology, identifies the key elements in disaster recovery planning (Exhibit 11).
Key Elements of a Disaster Recovery Plan
|Build a disaster recovery team||Identify a disaster recovery team that includes key policymakers, building management, end users, key outside contractors and technical staff.|
|Obtain and/or approximate key information||
Develop an exhaustive list of critical activities performed within the organization.
Develop an estimate of the minimum space and equipment needed to restore essential operations.
Develop a timeframe for restarting initial operations after a security incident.
Develop a list of key personnel and their responsibilities.
|Perform and/or delegate key duties||
Develop an inventory of all computer technology assets, including data, software, hardware, documentation and supplies.
Set up a reciprocal agreement with comparable organizations to share each other's equipment or lease backup equipment to allow the organization to operate critical functions in the event of a disaster.
Make plans to procure hardware, software and other equipment as needed to ensure the organization can resume critical operations to soon as possible.
Establish procedures for obtaining off-site backup records.
Locate support resources the organization needs, such as equipment repair, trucking and cleaning companies.
Arrange with vendor to provide priority delivery for emergency orders.
Identify data recovery specialists and establish emergency agreements.
|Specify details within the plan||
Identify individual roles and responsibilities by name and job title so that everyone knows exactly what they need to do.
Define actions needed in advance of an occurrence or undesirable event.
Define necessary actions at the onset of an undesirable event to limit damage, loss and compromised data integrity.
Identify actions required to reestablish normal operations.
|Test the plan||
Test the plan frequently and completely.
Analyze the results to improve the plan and identify further needs.
|Deal with damage appropriately||
If a disaster actually occurs, document all costs and videotape the damage.
Be prepared to overcome downtime on your own; insurance settlements can take time to resolve.
|Give consideration to other significant issues||
Do not make a plan unnecessarily complicated.
Make one individual responsible for maintaining the plan, but have it structured so that others have authorization and training to implement if needed.
Regularly update the plan whenever system changes occur.
Source: Adapted from National Center for Education Statistics, Safeguarding Your Technology, November 1998.
Prudent appraisal districts have plans to recover data and continue appraisal district operations with minimal interruptions in disaster situations. Key items in the plan include instructions for alternate office locations and communications, and recreating appraisal, mapping and tax collection systems.
Develop and implement a comprehensive disaster recovery plan that confirms the disaster recovery plans of the software vendor and specifies backup and recovery activities for the maps and financial records that are maintained locally.
Appraisal districts have three primary responsibilities: property discovery, property listing and property appraisal. Although much attention is placed on the appraisal process itself, discovery and listing are equally important.
Another important appraisal district responsibility is the administration of exemptions. An exemption excludes all or part of a property's value from taxation. Texas law grants a number of total and partial exemptions. Between January and May, the chief appraiser decides which taxpayers and properties will receive exemptions.
The chief appraiser is legally responsible for preparing the appraisal roll within a statutory timeframe.
Property Tax Code Section 5.07(a) requires the Comptroller to prescribe the contents of all forms necessary for the administration of the property tax system in the state. Section 11.43(f) requires the Comptroller to prescribe exemption applications, though not by rule. The forms must be uniform and the Comptroller may approve substitute forms in certain circumstances. A review of Culberson CAD's forms and applications showed they were in compliance with state laws.
Appraisal districts also must file various reports to the taxing units and the state and comply with a host of laws, rules and regulations. Property Tax Code Section 5.07 requires the Comptroller to prescribe a uniform record system to be used in submitting data for school district and appraisal district annual studies required by law.
Culberson CAD has an effective records retention process that exceeds state requirements.
In February 2002, the CAD, working with an outside vendor, conducted an organized review of its existing records. This was the first time the CAD had reviewed its records that had accumulated since the beginning of the CAD in 1981. In the process, the CAD identified and labeled all CAD records, including permanent records that are retained indefinitely and records that should be destroyed after a required period. The vendor destroyed records that met the criteria for destruction at that time and developed destruction schedules for future years. The chief appraiser updated the CAD's records control schedule with the Texas State Library and Archives Commission to reflect new records and related retention schedules. The CAD has budgeted funds to bring the vendor back to the CAD in 2007 to label new records and to destroy records that meet the destruction criteria.
The chief appraiser credits the new process with enabling the CAD to manage its records more efficiently by reducing the amount of storage needed and making the records readily accessible. The knowledge of the vendor regarding retention schedules was an important factor in the willingness of the CAD staff to destroy records.
The chief appraiser also commented that CAD records were updated again in January 2008.
Culberson CAD's organized review of CAD records helps the CAD reduce the amount of storage needed and makes records readily accessible.