Findings of the Appraisal Standards Review
This chapter of the report addresses findings and recommendations in two sections:
2.1 Key Findings and Recommendations
2.2 Other Recommendations
On June 16, 2008, the Dickens CAD board unanimously voted to separate the County Tax Assessor-Collector's office from the County Appraisal District. On Sept. 2, 2008, the Dickens CAD chief appraiser resigned. A new chief appraiser was hired on Sept. 22, 2008. The views and comments in the following recommendations are those of the previous chief appraiser.
Key Findings and 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 Dickens CAD's appraisal activities.
Dickens CAD lacks written appraisal procedures manuals. IAAO's Property Appraisal and Assessment Administration, Chapter 1, The Ad Valorem Tax System, describes the importance of written procedures or standards of practice and states the following:
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.
Dickens CAD uses cost-based schedules to appraise improvements. The chief appraiser stated the schedules were in place when she became chief appraiser in October 2006. At the time of the on-site visit, she did not know how the schedules were developed or when they were last updated. The schedules contain building costs for residential, commercial and other improvements such as barns, sheds, carports and pools.
The residential building cost schedules are distinguished by construction type (frame or brick veneer) and building class. There are seven building classes in each construction type, ranging from the lowest, class 1, to the highest, class 7. Within each class, the appraiser has the option to classify an improvement as a plus or minus. For example, a residential frame house class 4 (RF4), containing 1,000 square feet, has a base building cost of $18.96 per square foot; RF4- (minus) carries a building cost of $18.16 per square foot; and RF4+ has a base building cost of $19.76 per square foot.
The CAD lacks written instructions and procedures for classifying residential improvements and how to use the building cost schedules to complete an appraisal. The chief appraiser stated she spent a few weeks with the former chief appraiser reviewing property while he discussed the differences between property classes. The CAD's reappraisal plan refers to the USPAP mass appraisal standard as its appraisal standard, but appraisers do not have a procedures manual that incorporates the standard with local practices.
Commercial building costs are divided among commercial class codes ranging from C020 to C600. The CAD lacks written instructions, procedures and explanations on how to classify commercial improvements or use the building cost schedules to complete an appraisal.
Land appraisals, which are based on size, location and use, are valued either by front-foot (a land measure being one foot in width along the frontage of a property) or by acre. The CAD has numerous land schedules with front-foot values ranging from $5 to $50 per front-foot and market values per acre ranging from $175 to $1,200. At the time of the on-site visit, the chief appraiser stated she did not know when the land schedules were last updated, but she plans to update the schedules in 2008 with the assistance of a contract appraiser. The CAD lacks written instructions and procedures for using and applying the land schedules.
In 2006, Dickens CAD's business personal property accounts made up less than 1 percent of the CAD's total reported appraised value. The CAD uses a contract appraiser to appraise business personal property. According to the chief appraiser, the contractor is sent copies of personal property renditions filed by taxpayers each year. The CAD mails rendition forms to all business owners each year in January. The chief appraiser reports a high rate of compliance. Renditions are confidential documents used by business owners to declare the value of their business personal property. Businesses may be assessed a 10 percent penalty as required by Property Tax Code, Section 22.28. The contractor reviews the renditions and returns them to the CAD with his opinion of appraised value. The contractor stated renditions are checked against Marshall & Swift's personal property schedules and on-site inspections are made when additional information is needed to complete an appraisal.
CAD staff enters the contractor's appraised values into the automated appraisal system. The chief appraiser said that when appraising property that has not been rendered, renditions of similar businesses are considered. The CAD does not have guidelines for the following:
- directing the contracted appraiser in the review of renditions,
- determining reasonableness of appraised values,
- explaining appraisal processes and procedures, or
- defending the contractor's values.
The CAD lacks a comprehensive personal property appraisal manual that includes directives and guidelines for appraising and discovering personal property and evaluating renditions. The contracted appraiser did not provide written procedures for personal property appraisals but stated he uses the CAD's renditions and also derives unit values for personal property which can be applied to square-footage. He indicated that the dissimilarity among personal property accounts in Dickens CAD precludes use of standardized schedules or tables, but he does check the reasonableness of appraised values versus like property in other counties in the region.
The CAD contracts with an outside appraisal firm to appraise the CAD's industrial, utility and mineral accounts. Utilities are appraised using the unit value technique. The unit value technique requires the appraiser to determine the entire utility company's market value. The utility company's value is then apportioned to each taxing unit based on an agreed measure of the company's presence in the taxing unit, such as miles of track, historical cost or number of meters. The unit appraisal is widely accepted as the preferred income technique for appraising utility property. Industrial property is typically appraised using the cost approach and minerals are appraised using the income approach. No manual is available for use in explaining or defending the contractor's appraisals to the public.
Part of the ASR required the reviewer to review five Category D2, Non-Qualified Acres and Farm and Ranch Improvement, sample property by appraising the property using CAD appraisal procedures manuals. Three of the samples had improvements and two were vacant land. Because the CAD lacks procedures instructing appraisers how to classify property, apply schedules, depreciate improvements and complete appraisals, the reviewer was unable to determine the criteria the CAD used. For example, an account contained a single-family residence which the CAD classified as a residential frame Class 2 (RF2), but the reviewer had no guidelines for determining what constitutes a frame Class 2 versus another class. Another account, containing 70.5 acres, used three different land tables with values per acre ranging from $275 to $750, with no explanation how the acreage was classified or how unit values were determined.
Currently, the chief appraiser is the CAD's only staff appraiser and is completing the second year of the state's five-year registered professional appraiser certification program. Detailed appraisal procedures are essential training tools for new appraisers and promote appraisal consistency among all appraisers.
Lack of detailed appraisal procedures manuals could cause inconsistent appraisals and result in property values that deviate from market value. This market value deviation may cause school districts in Dickens CAD to receive an invalid finding in the state's PVS. If the level of appraisal (percentage of market value) varies within or between property categories, or from taxpayer to taxpayer, some taxpayers may bear more than their fair share of the local tax burden. In addition, instructions on how to use the CAD's appraisal manuals will help taxpayers better understand the appraisal process.
Property Tax Code Section 23.01 mandates that property be appraised by applying generally accepted appraisal methods and techniques if the appraisal district is using mass appraisal standards. This section also requires appraisal districts to comply with USPAP and apply similar appraisal methods and techniques to similar property. Appraisal districts should account for the contributions of individual property characteristics in determining value. A comprehensive appraisal procedures manual will help ensure that these standards and requirements are attained.
After reviewing the ASR report draft, the current Dickens CAD chief appraiser/tax assessor-collector noted that, in actuality, the only on-site training she received upon assuming the role of chief appraiser in October 2006 lasted half a day. In a letter to PTAD, the current chief appraiser noted that, before assuming her current position, her job duties entailed county tax office matters relating to Texas Department of Transportation car titles and licensing, alcoholic beverage licenses and posting property tax payments. The extent of her involvement in the appraisal office up to that point was printing appraisal cards, providing taxpayer assistance regarding appraisals and exemptions and performing the appraisal office filing tasks.
Nueces CAD, for example, has well-written policies and procedures manuals that address residential, commercial and land appraisal procedures. The procedures include staff responsibilities, appraisal methods, market analysis procedures and guidelines for open-space appraisals. The CAD's Commercial Procedures Manual discusses when and how to use the three approaches (cost, market and income) for valuing commercial property. It also contains a classification guide showing pictures of various types of commercial buildings to assist the commercial appraiser in classifying property in a uniform and consistent manner. The CAD's Personal Property Procedures Manual includes job descriptions and assignments, an outline of the discovery process and appraisal schedules.
Prepare a detailed local appraisal procedures manual that provides directives for each type of property the CAD appraises.
Dickens CAD does not perform ratio studies.
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 January 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 Ratio Studies, Section 4.6, Evaluation and Use of Results, states the following:
A properly designed ratio study is a powerful tool for analyzing appraisal performance, evaluating CAMA system models, and suggesting strategies for improvement.
The Dickens Central Appraisal District Reappraisal Plan for Tax Years 2007 and 2008 states the following:
Ratio studies are used to analyze appraisal accuracy and uniformity overall and by market area within property reporting categories. They are used to determine where appraisals meet acceptable standards and where it does not. This is where we check the equity of existing values and the consistency of values with market activity. By calculating the mean, median and weighted mean ratios. In each reappraisal year of this plan, that will be the starting point for establishing the level and accuracy of appraisal performance.
The chief appraiser stated that she was not aware the CAD needed to conduct ratio studies, and could provide no evidence that any had ever been performed. IAAO's Property Appraisal and Assessment Administration, Chapter 20, Sales Analysis and Mass Appraisal states:
A ratio study compares appraised values to market values. In a ratio study, market values are usually represented by sales prices; actual prices may be adjusted for time of sale, financing, personal property, or other considerations. Of common interest in ratio studies are the level and uniformity of the appraisals or assessments.
According to the chief appraiser, not enough arm's-length sales occur in the county to use ratio studies, and the Comptroller's PVS is used by the CAD to determine what property categories need to be adjusted. Use of the PVS in lieu of locally performed internal ratio studies is inappropriate because of the following:
- PTAD determines the final PVS values about 18 months after the appraisal date and application of the findings to the next appraisal date, would mean the findings and valuations are two years old;
- the PVS is a statistics-driven diagnostic tool used to estimate school districts' aggregate local value for the indirect equalization of intergovernmental transfer payments, and as such,
- it uses a weighted mean average which is the preferred estimator for indirect equalization, whereas Section 6.3, Contrasting Measures of Appraisal Level, of the 2007 IAAO Standard on Ratio Studies, states the preferred estimator that local jurisdictions should use for monitoring appraisal performance is the median.
The CAD's automated appraisal system has a ratio studies module, but the chief appraiser said she is not familiar with the program.
Since PVS results are released in the year following the appraisal date, the PVS cannot be used in lieu of internal ratio study analyses for performing timely appraisal maintenance. Market data from a period closer to the Jan. 1 appraisal date is preferred. While a limited sales base could cause the margin of error of a ratio study sample to widen, IAAO suggests expanding the time period to increase the window from which sample sales may be drawn. This can be a useful tool for ratio study analysis and appraisal schedule maintenance, but IAAO also recommends tracking changes in price levels over time and adjusting sale prices for time if required.
IAAO's Property Appraisal and Assessment Administration, Chapter 8, The Cost Approach, states appraisers should stratify ratio studies to ensure appraisal accuracy. IAAO recommends value stratification as a means to measure appraisal performance within and between property groups and to reduce distortion from over- or under-representation of value strata with different levels of appraisal.
To be an effective tool in measuring local appraisal performance, CADs should ensure data used in ratio studies is as accurate as possible. In addition, CADs review property characteristics such as class, size, age and value. Stratifying sales information according to property characteristics is useful in identifying lack of appraisal uniformity among property types. Stratifying by construction class tests the accuracy of base building costs, stratifying by size determines if size affects building or land costs and stratifying by age evaluates the accuracy of depreciation schedules.
By performing frequent ratio studies that apply generally accepted mass appraisal standards specified in IAAO's Standard on Ratio Studies and USPAP Standard 6: Mass Appraisal, Development and Reporting, Dickens CAD's ratio studies can be valuable tools for use in calibrating schedules, deciding reappraisal priorities or defending values. By using ratio study methods the CAD can make necessary adjustments to produce values at or near the market.
Nueces CAD, for example, conducts ratio studies within property classes by school district and county to determine appraisal performance. The CAD bases reappraisal and value maintenance decisions for some property or locations on the ratio study results.
Perform sales ratio studies as specified in the reappraisal plan to ensure the CAD appraises all categories of property at current market value.
Dickens CAD's method of determining productivity values for qualified acreage produces inconsistent results.
Property Tax Code Section 23.41(a) states the following:
Land designated for agricultural use is appraised at its value based on the land's capacity to produce agricultural products. The value of the land based on its capacity to produce agricultural products is determined by capitalizing the average net income the land would have yielded under prudent management from production of agricultural products during the five years preceding the current year.
Property Tax Code Section 23.51(4) explains how to calculate a land's net income and states the following:
"Net to land" means the average annual net income derived from the use of open-space land that would have been earned from the land during the five-year period preceding the year before the appraisal by an owner using ordinary prudence in the management of the land and the farm crops or livestock produced or supported on the land and, in addition, any income received from hunting or recreational leases. The chief appraiser shall calculate net to land by considering the income that would be due to the owner of the land under cash lease, share lease, or whatever lease arrangement is typical in that area for that category of land, and all expenses directly attributable to the agricultural use of the land by the owner shall be subtracted from this owner income and the results shall be used in income capitalization. In calculating net to land, a reasonable deduction shall be made for any depletion that occurs of underground water used in the agricultural operation.
A contract appraiser is responsible for calculating the CAD's productivity values. The chief appraiser stated the contractor is given copies of Farm and Ranch Surveys completed by the CAD's agricultural advisory board, as well as copies of surveys obtained from local agencies such as the Farm Service Agency and the Natural Resources Conservation Service. Annually, the Comptroller's office mails Farm and Ranch Surveys to appraisal districts, agricultural advisory boards and other county agencies to obtain local agricultural income and expense information for determining productivity values. Using data from the surveys, PTAD calculates productivity values for each reported category of agricultural land within each appraisal district. PTAD's results are weighed against the values reported by each appraisal district and the resulting ratios are included in the PVS.
Exhibit 1 compares the 2006 PVS Category D1: Productivity Values to Dickens CAD values.
2006 Productivity Values
|Land Class||Number of Acres||CAD/Acre||CAD Value||PTAD/Acre||PTAD Value||Ratio|
Source: 2006 PVS, Dickens CAD.
Native pasture, the largest land class in Dickens County, represents 75.5 percent of all qualified acres. A comparison of the CAD's native pasture productivity values to PTAD's indicates a ratio of 0.8879. The same analysis for dry-cropland indicates a ratio of 0.7854. Together, the two land classes represent more than 96 percent of all qualified acres in the CAD and their combined results contributed to the overall category ratio of 0.8680.
The contract appraiser attributes the difference between the CAD's and PTAD's estimates to water well expenses. The contractor stated water well expenses average in excess of $0.40 per acre, but PTAD's research found water well expenses averaged about $0.18 per acre over the previous five-year period. The CAD appealed the 2006 PVS Category D1 findings, but did not submit any supporting documentation and PTAD made no changes to the values.
The CAD's failure to maintain productivity values at current year levels in 2006 contributed to Patton Springs ISD receiving an invalid finding in the 2006 PVS. If the CAD fails to improve its methods for calculating productivity values, unequal levels of appraisals will continue among qualified land classes.
Property Tax Code Section 23.51 establishes 1-d-1 requirements for calculating productivity values. Prudent appraisal districts establish best practices by complying with the provisions of the law and employing methods of obtaining agricultural income and expense data, which include agricultural advisory board involvement and surveys.
Improve methods for obtaining data for calculating productivity values.
Dickens CAD does not adhere to its board-approved reappraisal plan.
Property Tax Code Section 25.18 states the following:
(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
(6) characteristics affecting value in each market area and determines the contribution of individual property characteristics;
(7) applying the conclusions reflected in the model to the characteristics
(8) of the properties being appraised; and
(9) reviewing the appraisal results to determine value.
IAAO's, 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.
In September 2006, the CAD's board of directors approved a biennial reappraisal plan for the tax years 2007-08. The plan calls for all property in the CAD to be reappraised every year.
The plan was approved before the current chief appraiser was hired in October 2006. According to the chief appraiser, about one-third of the county is reappraised each year and the former chief appraiser reappraised a portion of Patton Springs ISD in 2006, although he could not remember where he stopped. The chief appraiser stated that 2007 was a reappraisal year for the city of Spur and that part of Spur ISD and the city of Dickens will be reappraised in 2008, and part of Patton Springs ISD, if time permits.
The CAD does not have a documented method of selecting or tracking property in a reappraisal year. Because appraisal cards do not show the last appraisal date, it is impossible to determine when property was reappraised. The practice in place is contrary to the board-approved reappraisal plan, which requires an annual reappraisal of all property.
Dickens CAD's 14-page reappraisal plan states ratio studies will be used to measure appraisal accuracy and uniformity and to maintain appraisal schedules, but according to the chief appraiser, ratio studies are not performed and appraisal schedules have not been updated recently. The plan also states sales letters will be mailed to buyers of property, but the CAD does not perform this task. The chief appraiser stated she did not think the CAD has ever mailed out sales questionnaires.
The reappraisal plan refers to the Mass Appraisal Report required annually by USPAP Standard 6, but the CAD provided no evidence to show that mass appraisal reports are prepared at the conclusion of each tax year. The chief appraiser was not familiar with this document. USPAP Standard 6 requires appraisal districts to prepare annual mass appraisal reports to provide the public a better understanding of what an appraisal district does and how it performs appraisals. A mass appraisal report describes, in general terms, the mass appraisal techniques used by an appraisal district to appraise property for ad valorem tax purposes.
Exhibit 2 compares the CAD's 2007-08 reappraisal plan with Property Tax Code Section 25.18(b).
Dickens CAD Reappraisal Plan
Comparison Among Required Elements of a Reappraisal Plan
Property Tax Code Section 25.18 Requirements
|The plan shall provide for the following reappraisal activities all real and personal property in the district at least once every three years:||
Activity in Plan?
|Extent to Which Activity Performed|
|(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;||Yes.||Cannot identify which property was reappraised because appraisal cards lack last appraisal date.|
|(2) identifying and updating relevant characteristics of each property in the appraisal records;||Yes.||Cannot identify which property was updated because appraisal cards lack last appraisal date.|
|(3) defining market areas in the district||Yes.||Cannot identify market areas due to lack of market data.|
|(4) identifying property characteristics that affect property value in each market area, including:|
|(A) the location and market area of property||Yes.||Data shown on appraisal card.|
|(B) physical attributes of property, such as size, age, and condition;||Yes.||Appraisal cards lack age information, year built, effective year built.|
|(C) legal and economic attributes;||Yes.||Economic depreciation shown on appraisal cards.|
|(D) easements, covenants, leases, reservations, contracts, declarations, special assessments, ordinances, or legal restrictions.||Yes.||Special assessments shown on appraisal cards.|
|(5) developing an appraisal model that reflects the relationship among the property characteristics affecting value in each market area and determines the contribution of individual property characteristics;||Yes.||CAD has valuation model and cost schedules.|
|(6) applying the conclusions reflected in the model to the characteristics of the properties being appraised; and||Yes.||CAD does not conduct ratio studies based on property characteristics.|
|(7) reviewing the appraisal results to determine value.||Yes.||CAD does not conduct appraisal performance ratio studies.|
Source: Property Tax Code Section 25.18(b) and Dickens CAD Reappraisal Plan 2007-08.
Effective appraisal districts develop and properly execute a complete reappraisal plan, helping ensure that taxpayers are treated equitably in assigning property taxes. 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. Without a detailed reappraisal plan, Dickens CAD does not have a step-by-step explanation of how the CAD will accomplish its reappraisal activities. A detailed reappraisal plan, if executed properly, provides a roadmap to help ensure that school districts receive valid values in the PVS and possibly preclude a school district from receiving less than the expected amount of funding from the state. By not biennially developing a credible plan, Dickens CAD does not demonstrate what resources it needs and how it must allocate them to meet the goals and objectives of an effective reappraisal plan.
Jefferson CAD, for example, has a detailed reappraisal plan that explains exactly how and when reappraisals take place and how sufficient resources will be allocated to follow the plan. The reappraisal plan ensures the execution of timely and accurate reappraisals on an annual basis and is reviewed each year and updated when changes are needed.
Adhere to a board-approved reappraisal plan to meet reappraisal goals and objectives.
Dickens CAD lacks procedures for gathering and validating sales.
IAAO's Property Appraisal and Assessment Administration, Chapter 5, Data Collection and Management, states the following:
Sales data are needed for specifying and calibrating valuation models and for sales ratio studies. The reliability of any valuation model or sales ratio study depends on the quantity and quality of its data. Sales data must be collected, edited and adjusted to obtain valid indicators of market value.
IAAO's Standard on Ratio Studies stresses the importance of analyzing and adjusting sales and states the following:
If sales prices have been generally rising, ratios for sales that occurred after the assessment date tend to understate the overall level of appraisal. Similarly, sales ratios for sales that occurred before the assessment date tend to overstate the level of appraisal. If prices are generally declining, an opposite pattern results.
IAAO describes three basic sources for obtaining sales data: deeds, buyers and sellers and third-parties. Deeds are a good source of sales information in areas requiring full disclosure of sales prices. When sales prices can not be obtained from deeds, IAAO recommends contacting the buyers and sellers. A common practice among appraisal districts and PTAD is to mail questionnaires or surveys to each buyer and/or seller when a deed is filed with the county clerk. Questionnaires should state the purpose of the letter and questions should focus on determining the following:
- sale price,
- sale dates,
- relationship, if any, of buyer to seller and
- a description of all property included in the transfer.
Telephone and face-to-face interviews with buyers and sellers are also good sources for obtaining sales information. Third-party sources include Realtors, multiple listing services, title companies and fee appraisers.
The chief appraiser stated deeds are the primary source of sales information in the CAD and only about 100 real estate transactions are filed annually. According to the chief appraiser, there are no Realtors in the county, and because Texas does not require disclosure of sale prices when deeds are filed, most sale prices are obtained by word of mouth. The CAD's reappraisal plan states sales letters are mailed to buyers, but the CAD does not mail sales surveys or questionnaires and the chief appraiser stated she was not familiar with this practice and did not think the CAD had ever mailed sales questionnaires to property owners. PTAD shares sales information obtained via its sales letters with the CAD.
When sales are obtained, the chief appraiser reviews them to determine if they represent arms-length transactions. According to the chief appraiser, sales between family members or sales not exposed to the open market are not considered market sales. The CAD does not have written guidelines for validating these sales.
According to IAAO, examples of non-market sales include those that:
- involve government entities and public utilities;
- involve charitable, religious or educational institutions;
- involve financial institutions;
- are between relatives or corporate affiliates;
- are of convenience;
- are settling an estate;
- are forced; and
- are of doubtful title.
Without common guidelines for determining how to obtain, verify, confirm and adjust sales, the CAD risks using sales for appraisal maintenance that do not accurately reflect current market value. Confirmation and validation of sales is critical in determining local market values. Results of the 2007 PVS show below market values for rural land not used in agriculture and rural improvements in both Patton Springs and Spur ISDs.
IAAO's Standard on Ratio Studies, Section 6.4, Screening Sales, requires appraisers to analyze sales to determine if they need to adjust them for personal property, financing, assumed leases and time. Appraisers need to document procedures for adjusting sales and support them with market data. The standard states the following:
To help analysts make wise and uniform judgments, screening procedures should be in writing, and each sales analyst should be thoroughly familiar with these procedures as well as underlying real estate principles.
Written guidelines help appraisers in gathering and adjusting valid sales for the following:
- compiling representative samples for ratio study analyses;
- calibrating appraisal models; and
- defending values.
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, Dickens CAD can help ensure that appraisers apply sales data consistently as valid indicators in achieving market value.
Nueces CAD, for example, has a market analysis procedures manual that describes the processes used to obtain sales information and the procedures necessary for sales confirmation. Written procedures assure the CAD performs market analyses consistently, regardless of personnel changes.
Develop and adopt written procedures for gathering, analyzing and adjusting valid sales data.
Dickens CAD's appraisal cards lack required information.
Comptroller Rule 9.3001, which establishes the standard on appraisal cards for all appraisal districts, states:
(a) All appraisal district offices appraising property for purposes of ad valorem taxation shall develop and maintain a system of appraisal cards for all parcels of real estate which each office is required to appraise.
(b) On each parcel of residential or commercial real estate, a separate appraisal card shall be developed and maintained which contains the following items of information related to the land:
(1) the legal description of the land (this provision shall not be interpreted to require field note descriptions);
(2) the account number of the property;
(3) a section indicating zoning classification (if any);
(4) a section indicating street improvements (e.g.: unimproved, graveled, paved);
(5) a section indicating utilities available (e.g., water, sewer, electricity, gas);
(6) a section indicating basic measurements of the land (e.g., frontage, depth, acreage);
(7) a section for computation of the land value;
(8) a section for any remarks by the appraiser relevant to the parcel;
(9) the identification of each taxing unit in which the property is taxable.
(c) On each parcel of residential or commercial real estate the appraisal card shall contain the following items of information related to the improvements on the parcel:
(1) a diagram of all improvements on the parcel indicating perimeter measurements;
(2) separate sections indicating the type of construction for the foundation, floor, exterior walls and roof;
(3) a section indicating the date of appraisal and the initials of the appraiser;
(4) a section indicating the use type of the improvements (e.g., single-family, duplex, apartment, store, warehouse, factory, etc.);
(5) a section indicating additional details of construction (e.g., porches, garages, storage buildings, fireplaces, etc.);
(6) a section indicating depreciation calculation related to the improvements;
(7) a section for the computation of the improvement value;
(8) a section for any remarks or comments by the appraiser relevant to the improvements on the parcel;
(9) in addition to all the information listed in this subsection, each appraisal card shall indicate the amount of appraised value of property included in the parcel for each category classification required by the annual school district report of property value.
(d) On each parcel of rural or acreage real estate, an appraisal card shall be maintained which shall contain the following items of information related to the parcel:
(1) all information required under subsection (c)(1)-(9) of this section for each improvement located on the parcel;
(2) all information required under subsection (b)(1), (2), (3), (8), and (9) of this section related to the land;
(3) a section indicating the size of the parcel and the number of acres in each of the following use categories:
(B) dry cropland;
(C) improved pasture;
(D) native pasture;
(F) timber; and
(G) barren or waste;
(4) a section indicating road access (e.g., paved, gravel, dirt, unimproved, none);
(5) a section indicating utility availability (electricity, gas, sewer, etc.);
(6) in districts with irrigated land, a section indicating the number and capacity of irrigation wells or the number of acres covered by irrigation permits;
(7) in addition to the information listed in this subsection, each appraisal card shall indicate the amount of appraised value of property included in the parcel for each category classification required by the annual school district report of property value.
(e) Any information required by these sections may be maintained in electronic data processing records rather than in physical documents.
(f) Appraisal district offices failing to establish an appraisal card system as required in this section may be judged to be in compliance upon a showing to the board that an appraisal card system substantially equivalent to that required in this section has been established.
The CAD's appraisal cards are designed to comply with the data required by Comptroller Rule 9.3001, but the data fields designating the date of appraisal and appraiser's initials, required by Subsection(c)(3), are missing.
The CAD's reappraisal plan states that all property is to be reappraised annually with inspections to begin Nov. 1 of the previous tax year. The chief appraiser stated appraisal dates and appraiser initials are found on working copies of appraisal cards and was unaware the information needed to be transferred to the automated appraisal system. The automated appraisal system is used to generate appraisal cards. The chief appraiser or contract appraiser carries working copies of appraisal cards into the field and makes changes to property characteristics on the cards. The appraisers date and initial the working copies. A data entry clerk enters the appraisal changes from the working copies into the automated appraisal system, but the appraisal inspection date or appraiser initials are not recorded. The chief appraiser stated that she is now aware of the requirement, and that data entry currently in progress will include the appraisal date and appraiser's initials.
Appraisal cards summarize how appraisal districts arrive at a property's appraised value. Recording appraisal dates is critical to the reappraisal process. The date signifies the year in which the appraisal applies and confirms a reappraisal occurred. By generating records showing appraisal dates, appraisal districts can determine if all property subject to a reappraisal have been reviewed and if reappraisal plans were followed. Without appraisal dates property owners have no way of knowing when their property was last appraised or if the appraisal represents current market value.
An appraiser's initials provide further validation to the reappraisal process by establishing a contact person for appraisal questions to specific property.
By omitting the date of the inspection and the appraiser's name from the appraisal card, the CAD cannot ensure the integrity of its appraisal data records and does not comply with statute. Given a reappraisal plan that requires annual reappraisals, including inspections of all taxable property, Dickens CAD cannot show when reappraisals or reinspections occurred or if the appraisal was preformed by a qualified appraiser. It may preclude the chief appraiser from knowing where the last reappraisal left off or, when there is a change in leadership, knowing where to begin the next annual reappraisal.
USPAP Standard 6: Mass Appraisal, Development and Reporting requires the disclosure of appraisers and appraisal dates on all mass appraisals, as does Comptroller Rule 9.3001.
Maintain appraisal cards in compliance with Comptroller Rule 9.3001.
Dickens CAD's maps do not comply with Comptroller Rule 9.3002.
The 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 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 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 board that a tax map system substantially equivalent to that required in this section has been established.
IAAO's Property Appraisal and Assessment Administration, Chapter 1, The Ad Valorem Tax System, points out that an accurate set of maps showing every parcel of real property is the most important tool in identifying and locating taxable property. Chapter 7, Land Valuation, notes that a complete set of maps showing parcel boundary lines is required for land appraisals and Chapter 17, Mapping System Management, states "a good mapping system is essential for the location, identification and inventory of all parcels within a jurisdiction."
According to the chief appraiser, Dickens CAD uses a county map purchased from a map company and plat maps for the cities of Dickens and Spur. The most recent county map was purchased in 2008 and shows ownership at the time the map was made. The plat maps show the lots and blocks of the two incorporated cities. The chief appraiser stated the plat maps are several years old. None of the maps contain parcel identification numbers linked to the appraisal system. Ownership is updated in the appraisal system, but the chief appraiser stated maps are not updated regularly because of time constraints. The CAD does not have a cartographer and the chief appraiser stated the CAD does the best it can with limited funds.
Exhibit 3 shows the required mapping elements set forth by Comptroller Rule 9.3002 and the status of the CAD's maps.
Dickens CAD Mapping Status
Comptroller Rule 9.3002 Required Mapping Elements
|Mapping Requirement||CAD Mapping Status|
|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.||The CAD's mapping system consists of a county ownership map and old plat maps for the cities of Dickens and Spur.|
|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.||Each map is drawn to scale, delineated for property lines and contains identifying numbers, letters or names.|
|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.||Each CAD map is divided into sections and drawn to scale.|
|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.||None of the CAD maps have parcel identification numbers corresponding to parcel identification numbers on appraisal cards.|
|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.||The CAD's maps are not updated annually.|
|Any information required by these sections may be maintained in electronic data processing records rather than physical documents.||The CAD does not have electronic maps.|
Source: Comptroller Rule 9.3002, Dickens CAD.
The CAD cannot identify and list all parcels for property tax purposes if its mapping system is inadequate. The basic function of locating all county parcels geographically is critical to the reappraisal process. Given the status of the CAD's maps, the on-site reviewer would have been unable to locate property without the assistance of the chief appraiser. The chief appraiser is the CAD's only staff appraiser and must rely on situs addresses or personal knowledge of the area to locate property. This hinders field work and places the CAD at risk of not completing scheduled reappraisals in a timely manner. Displaying parcels to identify market areas also helps to insure fair and equitable appraisals.
Brown CAD, for example, has a fully functional computerized mapping system. The mapping and appraisal systems are integrated. The CAD maintains all mapping data layers to industry professional standards. The mapping coordinator regularly updates maps to reflect changes in ownership and boundaries. All parcels have a unique identification number.
Develop a timeline and workplan to develop maps that comply with Comptroller Rule 9.3002.
Options available to the CAD include hiring full- or part-time mapping staff, outsourcing the mapping to a third party, coordinating with local governments for mapping services to help lower the cost of acquisition or consulting with CADs cited in best practices.
During the course of the review process, PTAD identified a management and operational issue that may not be directly related to the appraisal process, but could indirectly affect the CAD's ability to conduct appraisals accurately and consistently. Dickens CAD is not obligated to implement this recommendation, but it is provided here for consideration as an additional way to enhance operational effectiveness and efficiency. Appraisal districts, as Texas governmental entities, are required to comply with all applicable laws.
Dickens CAD lacks written procedures for monitoring contracts.
IAAO's Standard on Contracting for Assessment Services, Section 5, Monitoring Contract Performance, states, "contracts must be continually monitored to ensure that all completed items meet required standards."
The 2006 PVS indicated productivity values developed by a contract appraiser failed to represent current conditions, with an assigned countywide ratio of 0.8680, and Patton Springs ISD received an invalid finding.
Dickens CAD contracts appraisal services with two separate appraisal companies. One firm appraises business personal property, develops productivity values and assists with other appraisals as requested. The CAD was unable to locate this outside appraiser's contract, but 2006 invoices reflect payments of $4,500 in three invoices of $1,800, $1,800 and $900. Under the caption "work performed," the invoices list "40, 40 and 20 percent of Contract." Under the caption "Property Appraised," the invoices list only "Dickens County." The contractor stated he has performed appraisals for the CAD for about 15 years. The chief appraiser stated the contractor assisted in developing new land schedules in 2008.
Successful administration of appraisal contracts and projects depends on accurate and timely information about the cost, schedule and quality standards of the appraisal project. Although timely submission and payment of invoices ensures the consideration of the contract does not fail, additional documentation is needed. By drafting a statement of work including specific contract deliverables, the contract manager identifies what is needed, whether it can be measured and how it is measured. The statement of work includes description, schedule, time, quantity, quality and standard of acceptance. It can also specify what reports the vendor must include that, with the statement of work, provide documentation for performance reports, work schedule updates, cost reports, project timelines and quality monitoring. Without written contract monitoring procedures, the CAD and the contractor depend on memory of the appraisal work performed. The documentation that follows from contracting procedures mitigates risk, since parties are unlikely to share the same recollection if a claim or dispute ever arose over performance. Dickens CAD contract monitoring does not include a description of the deliverables, scheduling or standards of performance or acceptance.
In January 2008, the CAD extended the contract of its second contract appraiser for the 2008 tax year for a fee of $15,720, which is for the appraisal of CAD minerals, utilities and industrial property. The contractor has appraised these CAD properties since 1988. Also in January 2008, the CAD signed a software licensing addenda with the minerals appraiser acting as licensor of the CAD's mass appraisal system software and its tax billing and collection system software for annual royalty fees of $10,500 and $6,900, respectively. The chief appraiser stated that she is responsible for monitoring the contracts and approving payment for services rendered, but she did not document the procedures used to manage CAD contracts.
Unless specified elsewhere in the contract, the chief appraiser is responsible for acceptance of all goods, services and deliverables under CAD contracts; further, the same laws, statutes, standards and requirements that apply to chief appraiser under the Property Tax Code, also apply to a CAD contractor, who must likewise comply with the Property Tax Code in the capacity as the chief appraiser's agent. If Dickens CAD permits contractors to underperform and not meet all of the generally accepted and legally mandated mass appraisal standards, the resulting appraisal performance will not be equitable and uniform, and unexpected levels of school funding may result.
Hansford CAD, for instance, successfully prepares, manages and monitors its contracts while meeting IAAO contracting standards. Hanford CAD ensures that all contract requirements are being met.
Develop written guidelines for monitoring professional service contracts.