Findings of the Appraisal Standards Review
This chapter of the report addresses findings, commendations and recommendations from the appraisal standards review of the Fannin CAD in five sections:
2.1 Governance and Management 2.2 Generally Accepted Appraisal Practices 2.3 Resources and Management 2.4 Information Processing and Data Collection 2.5 Assessment Administration
The quality of the property tax system depends largely on the appraisal district's board of directors. The directors should provide knowledge, judgment and expertise in establishing policies and procedures for the appraisal district's organization and operation.
Fannin CAD's board of directors (board) consists of five countywide (at large) elected members and the Tax Assessor-Collector, a nonvoting member (Exhibit 6). Voting members listed below are serving a two year term for 2006-08.
Board of Directors Members
Board Member Entity Member General Area Start Date Occupation Elected Official(Yes or No) Mr. John Burnett (Chair) City of Bonham 1/2004 Retired-Goodyear No Mr. Doyce Taylor (Vice Chair) Bonham ISD 1/2004 Owner-McCraw Oil Company No Ms. Donna Baugh (Secretary) Commissioners Court 1/2004 Texoma Council of Governments No Mr. David Blackerby * Smaller cities and towns 10/2005 Retired-Real Estate Broker No Mr. David Farris Sam Rayburn and smaller ISD's 1/2004 TXU Corp. No Pam Sweet-Richardson Tax Assessor-Collector 1/2003 Tax Assessor-Collector Yes Source: Fannin CAD, December, 2005. *Mr. David Blackerby is fulfilling the un-expired term of Mr. Ronnie Cooper.
The board has the following primary responsibilities:
- establish the appraisal district's office;
- adopt the appraisal district's annual operating budget;
- approve appraisal contracts;
- hire a chief appraiser;
- hire a taxpayer liaison officer (in counties with a population of more than 125,000);
- appoint appraisal review board members; and
- set general policy on the appraisal district's operation.
The Comptroller's office asked the board to complete a written survey about its activities. Two of the six board members responded. The survey is broken down into board policies and procedures; chief appraiser and staff; property appraisals; appraisal review boards; and budgeting and financial management. Board members who responded gave Fannin CAD good marks.
Fannin CAD's chief appraiser restructured the budget to comply with Government Accounting Standards Board Statement 34 (GASB-34), which requires historical budget comparisons as well as depreciation dates, replacement dates and costs of assets. The CAD uses budget calendars in addition to the Comptroller's office Property Tax Calendar in developing the budget.
The budgeting process begins with the chief appraiser asking for operating needs from each department. The chief appraiser then meets with department supervisors to discuss those needs. Next, the chief appraiser meets with the board and reviews the proposed budget items line by line with the board. During the current chief appraiser's tenure, no budget has been amended and CAD spending has remained under approved budget operating levels.
The current chief appraiser has an effective public relations outreach and monitoring program that promotes stability and benefits the CAD and taxpayers through increased operating efficiencies and enhanced communications that have led to increased public trust. The CAD had five chief appraisers in five years until June 2004 when the current chief appraiser was appointed. Several key events and consistent staffing instability at the top level caused a decline in public trust.
The first event occurred about four years ago when the board and taxing units discovered a misuse of funds which initiated criminal actions. Soon thereafter, the chief appraiser at the time left the state. In 2003, the CAD's third chief appraiser in the last five years directed an annual reappraisal with only two staff appraisers responsible for appraising about 13,500 properties each. The chief appraiser's reappraisal plan and directives resulted in many CAD staff leaving and about 1,400 Notices of Protest were filed the first week after Notices of Appraised Value were mailed. Subsequently, the taxing entities demanded the chief appraiser be fired. Upon the chief appraiser's refusal to resign, the chairman of the board was recalled; the chief appraiser departed shortly after the chair recall.
The extreme instability and resulting loss of credibility with the public led the current chief appraiser to identify existing status quo practices that weren't working and change practices to focus on public relations and public service as a high priority. Some of the chief appraiser's key actions and new adopted practices are listed in Exhibit 7, with old practices and results for comparison.
Fannin CAD Comparison
Summary of Old and New Actions or Practices and Results
Old Actions/Practices New Action or Practice Results/Benefits Little interaction with public through attending civic meetings or giving presentations Attending and/or giving talks at numerous meetings with local civic organizations Increased citizen awareness and understanding of property tax issues, leading to decreased misinformation and exposure to accurate, timely information Status quo ― no evaluation or discussion of what CAD is doing to educate public about property taxes Requesting budget increases with justification for public service announcements and installing public computer terminals in CAD Increased citizen access to and awareness of property tax information, leading to decreased misinformation and easy access to correct information for greater public trust (a) Limited access to CAD staff to discuss taxpayer issues prior to formal hearing and (b) Low priority for CAD staff to be routinely available to talk with public about issues (a) Expanded appeals process to encourage informal, direct staff - taxpayer communications for appeal issue resolution prior to formal protest and hearing(b) Installed "year-round" open door policy for property owners to meet directly and informally with appraisal, mapping and collection CAD staff Reduced protests by 50 percent Infrequent communication with city and county offices regarding common property ownership issues Established routine communications with city and county office staff for common property-related issues Open communications and routine discussions with the City of Bonham Building Inspector, County Health Inspector and District Attorney's Office on matters involving property ownership Source: Fannin CAD chief appraiser, December 2005.
Fannin CAD has had a significant amount of poor public image to overcome. The chief appraiser's new practices and actions have produced tangible beneficial results for CAD staff through reduced protests and made significant strides in restoring the taxpayer's confidence in CAD operations by demonstrating to taxpayers and the public that the CAD is trustworthy and serving the public interest.
The chief appraiser improved public relations and re-established public trust by identifying and replacing ineffective status quo activities with successful public outreach practices.
The chief appraiser enhanced the regular board notification process with an advance notice action tool that concisely advises board members about key appraisal district issues and actions needed at upcoming board meetings. As an employee attending past board meetings, the current chief appraiser had observed management-board communication difficulties and wanted to avoid them during his tenure as chief appraiser. Based on those observations, the chief appraiser created the report and added it to the regular process of supplying a board agenda and information packet. Past information packets had included much detail with many pages; no simple summary or action list was included. This addition has helped to establish and maintain clear and open communications with the board by clarifying the key items and actions needed up front and in a concise format.
The added key communication tool that helps to promote timely decision-making and clear communication is the Chief Appraiser Report, which is given to each board member at least one week prior to monthly board meetings. Providing this information to the members in advance of the board meetings allows each member time to prioritize and review the issues and action items in advance and offers the opportunity for requesting additional information or analysis to be brought to the meeting. The advance notice also allows board members to request additional topics not listed and reprioritize discussion topics.
Each issue in the report has a title, which is underlined. Next to each issue title is type of action requested/required of the board, followed by a short summary explanation. Topics detailed in past Chief Appraiser Reports include agricultural advisory board, appraisal review board, employee handbook, contract appraiser, True Automation training, annual audit and security monitors. For example, in the September 2005 Chief Appraiser Report, the following issues were reported:
- Agricultural Advisory Board: (action) The county extension agent who serves on our agricultural advisory board has been appointed/transferred to Grayson County. The replacement needs to be approved by the board of directors.
- Thomas Y. Pickett Company, Inc.: (information/discussion) New additions to their appraisal list are attached. It is historical that properties with $1 million in collective value, utility companies, high end unique properties, and [...] are contracted to an outside agency for appraisal. We have reviewed the T.Y. Picket property list and made adjustments. Legacy Ridge is the financial majority of this proposal.
The chief appraiser and the board have made strategic planning and goal setting a priority. The Chief Appraiser Report is an action tool that ensures key issues are brought before the board monthly, promoting timely decision-making towards meeting operational goals and objectives.
Fannin CAD has added a successful communication practice giving board members concise advance notice of pending issues and actions needed at monthly board meetings.
Fannin CAD had five chief appraisers in five years until June 2004 when the current chief appraiser was appointed. The chief appraiser position's high turnover caused prevalent CAD instability and work interruption, as other staff hired by the chief appraisers, such as the office managers and receptionists, also departed when or soon after the respective chief appraisers left. Exhibit 8 presents a summary of chief appraiser terms and major events/impacts during each term.
Fannin Chief Appraisers, Terms and Major Events
Chief Appraisers Terms Major Events 1 6/88-7/01 Software Conversion Errors (CPS to The Software Group), Reported Misuse of Funds 2 7/01-12/01 Interim Chief Appraiser, Staff Turnover 3 1/02-8/03 2003 Reappraisal-Inaccurate & Inequitable Valuations, Staff Departures, Recall of Board Chairman, Staff Turnover 4 8/03-6/04 Software Conversion (The Software Group to True Automation), Staff Turnover 5 6/04-Current Rebuilding process for Appraisal Data Base, Staffing, Technology Needs, Etc. Source: Fannin CAD, December 2005.
In addition, the previous boards had not formally installed a detailed chief appraiser job description, hiring procedures or succession planning, all of which aid in minimizing transition impacts when employees depart.
The current board formally evaluates the current chief appraiser annually, in writing based on a detailed job description, and working together the chief appraiser and board set written goals for each upcoming year. In addition, CAD succession planning is progressing and chief appraiser hiring practices are being documented for future use.
By completing and documenting succession planning and other adopted board practices, Fannin CAD's board and leadership can plan for risks such as inevitable staffing and operational changes while minimizing widespread negative transition impacts on appraisal district operations and taxpayers.
Maintain stability in CAD leadership and operations by completing succession planning and chief appraiser hiring procedures.
Fannin CAD's budget lacks the detail necessary to comply with Section 6.06, Tax Code.
Appraisal boards are required by law to hold a public hearing on the budget. The board held the public hearing for the 2004 budget on July 15, 2003. The public hearing for the 2005 budget was held on August 17, 2004 and for the 2006 budget was held July 5, 2005.
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.
Exhibit 9 presents the salary detail for each budget year as it appeared in the budget documents since each year was presented differently.
Fannin CAD Adopted Budgets ― Salary Detail Only
2004 Through 2006
Chief Appraiser $42,400 Chief Appraiser Personnel $307,914 Senior Appraiser (2)* 57,845 Business Manager Field Appraiser (2)* 35,461 Data Manager Office Manager 34,278 Senior Appraiser Collectors (2)* 34,923 BPP Appraiser Senior Collector 23,670 Data Entry Appraiser System Administrator/Data Entry 18,720 Field Appraiser Mapper / GIS 20,613 Field Appraiser Field Appraiser Collector Counter Collections Counter Collections Mapping/Deeds Total Salaries $267,910 $273,446 $307,914 Source: Fannin CAD, 2004, 2005 and 2006 Adopted Operating Budgets.
* When multiple positions are indicated, the budget amount represents the total dollars for all positions.
** The 2005 salary budget detail did not include salaries for individual positions but did include employee names for filled positions. The names are not shown here for privacy reasons and also because employee names are not a budget requirement.
# The 2006 salary budget detail did not include individual positions or salaries, just one lump sum.
Exhibit 10 presents Fannin CAD's 2004-06 adopted budgets with total salaries but without the salary detail.
Fannin CAD Adopted Budgets ― Without Salary Detail
2004 Through 2006
Total Salaries $267,910 40% $273,446 41% $307,914 40% 15% Benefits Sick Time Reimbursement $5,491 $0 $0 Health Insurance 66,752 66,592 76,580 Retirement 11,420 9,057 10,500 Workers Compensation 1,418 4,000 4,000 TWC 756 3,500 3,500 Medicare 4,140 3,950 3,500 FICA 17,701 18,000 19,800 Ret. Supp. Death 514 500 500 Total Benefits $108,192 16% $125,000* 19% $119,780* 16% 11% General Books & Subscriptions $800 $1,000 $1,250 Dues & Memberships 3,841 3,500 3,500 School Tuition 4,500 3,000 5,300 School Per Diem 2,300 2,000 3,000 School Hotel 2,520 3,000 6,000 Conferences 741 500 500 Conference Per Diem 350 350 350 Conference Hotel 1,400 1,000 1,000 OutsideTravel 3,400 3,000 4,000 Legal Services 4,000 15,000 30,000 Audit 4,000 4,000 4,000 Insurance & Bond 3,650 3,000 3,000 Building Debt Service 18,526 11,500 0 Building Interest 2,474 0 0 Building Maintenance 5,000 5,000 0 Utilities 9,000 9,000 12,360 Telephone 5,400 5,400 5,400 Dumpster Service 1,102 1,100 1,400 Custodian Service 6,500 6,500 7,000 General Supplies 8,000 8,000 8,400 General Equipment 0 0 500 Equipment Maintenance 1,500 500 500 Equipment Rental 6,025 6,250 6,250 Equipment Repairs 500 200 500 Postage 30,100 25,000 30,000 Postage Rental 3,732 2,500 0 Postage Supplies 150 500 700 Postage Maintenance 700 200 300 Lawn Care 2,000 2,000 2,500 Contingency 20,000 30,000 30,000 Total General $152,211 23% $153,000 23% $167,710 22% 10% Appraisal Appraisal Firm $17,000 $15,250 $15,250 ARB 4,000 4,000 6,000 ARB Conference 1,000 500 1,000 ARB Per Diem 1,000 1,000 1,500 Appraisal Travel 12,420 14,400 17,280 Appraisal Supplies 6,500 6,500 7,000 Appraisal Equipment 800 1,000 1,000 Mobile Equipment 1,500 1,000 1,000 Auto Roll Wheels 500 500 500 Multiple Listing Service 0 0 2,000 Appraisal Total $44,720 7% $44,150 7% $52,530 7% 17% Collection Legal Notices $3,000 $3,000 $6,000 Collections Supplies 8,200 8,000 8,000 Computer Computer Maintenance** $30,725 $12,500 $21,000 Computer Repair 1,400 500 1,000 Collection Equipment 400 400 400 Collection Total $11,600 2% $11,400 2% $14,400 2% 24% Fax Machine & Internet 0 0 1,500 Elec. Communication 3,000 2,000 0 Computer Equipment 9,000 2,500 1,500 Computer Interest 2,121 0 0 Computer Loan 18,249 43,220 43,200 Computer Total $64,495 10% $60,720 9% $68,200 9% 6% Mapping Mapping Deeds $0 $2,700 $0 Drafting Supplies 2,000 1,000 600 Deed Transfers 10,000 1,200 1,400 Drafting Maintenance 500 500 0 Drafting Equipment 0 0 1,000 GIS Training 1,000 0 0 Mapping Total** $13,500 2% $2,700 0% $3,000 0% -78% GIS /Required Aerial Photo** $0 $0 $30,421 30,421% Grand Total $662,628 100.0% $670,416 100.0% $763,955 100.0% 15% Source: Fannin CAD, 2004, 2005 and 2006 Adopted Operating Budgets.
* Totals do not represent the sum of the items in the category because health insurance costs were estimated pending notification of actual costs from insurance provider ― the chief appraiser adjusted the budget subcategory total to allow for additional costs.
** The mapping and GIS functions shifted from mostly in-house in 2005 to fully-contracted with True Automation in 2006, so category and subcategory funds shifted accordingly.
Each budget contained a section entitled salaries or personnel and a section entitled benefits. The 2004 budget presented CAD positions and associated salaries but combined similar positions and failed to present the benefits per position. The 2005 budget listed CAD positions but failed to list both the salaries and the associated benefits to each position. The 2006 budget failed to list positions, salaries and corresponding benefits.
For the 2005 and following budgets the CAD adopted a policy to not make public benefits per position in the operating budget due to the provisions of the Health Insurance Portability and Accountability Act of 1996 (HIPAA) which address the security and privacy of health data. Fannin CAD's chief appraiser said that their auditor raised the concern at the end of 2004 and when asked, legal counsel said the auditor was probably correct and advised that in light of HIPAA provisions individual employee benefits not be included in the CAD's budget. The law does not require a listing of benefits for each individual employee.
A budget review shows that benefits per position were not included in any of the 2004, 2005 or 2006 budget presentations, only the total cost of benefits by type. The legal counsel's advice seems to have been integrated in the 2006 budget document only by completely removing individual position names. Benefits are still included in the 2006 budget by type.
In practice the CAD has active employees and pays 100 percent of an employee's medical premium, and contributes to the employee's retirement after 10 years of tenure. From the 2004 to 2006 budget Fannin CAD is moving farther away from Tax Code compliance: no listing of budgeted positions, no listing of individual salaries for budgeted positions and no listing of benefits with costs for each budgeted position.
Based on legal advice, however, Fannin CAD contends that benefit information cannot be disclosed in the budget, even when it is provided on a per position basis, rather than by person. No case law or attorney general's opinion exists on the subject. The matter must be resolved legally, and until it is, the statute cannot be ignored. With 56 percent of the 2006 budget going to wages and benefits, both taxing units and the public need the detail required by state law to be assured the number of CAD staff is sufficient to perform the work and that the staff is correctly compensated.
Failing to provide transparent disclosure of how funds are intended to be spent denies interested parties a complete public inspection of the proposed budget, as provided in Tax Code § 6.062(c).
Jefferson County Appraisal District, for example, has developed and uses a model budget for appraisal district operations. Successful appraisal districts prepare budgets that clearly indicate how funds are intended to be spent, ensuring tax code compliance while providing a complete public inspection for taxpayers and interested parties.
Amend the budget format to comply with the Tax Code while seeking an Attorney General's opinion concerning the HIPAA provisions in question.
Until spring 2006, Fannin CAD's procurement processes for outside appraisal services did not require or include a written contract document.
The CAD annually procures industrial, utilities and complex commercial property appraisals from an outside appraisal firm. The chief appraiser told the reviewer that TYP has been hired for appraisal services for four years, 2002-06. In 2005 and 2006, the CAD budgeted $15,250 each year for an outside appraisal firm. Capitol Appraisal Group, Inc. was the previous contracted appraisal firm.
In practice, Fannin CAD and TYP have developed a verbally defined process that is followed annually. Exhibit 11 presents a summary of Fannin CAD's professional services contracts as provided by the CAD.
Professional Service Contracts
Contract Service Provided Contract in Writing Key Terms and Conditions 2005-06Dollar Amount Thos. Y. Pickett &
Appraisal of Utilities, Industrial, and Complex Commercial Accounts Only List of Properties for 2005, Complete contract for 2006 No for 2005,
Yes for 2006
$15,250 Government Capitol Corp. Lease-Purchase of GIS Integration, Implementation, Software and Hardware Yes Yes $70,070 True Automation GIS PC Desktop Equipment, Training and Maintenance Yes Yes See lease-purchase agreement True Automation Appraisal and Collection Software/Communications Equipment Installment Agreement Yes Yes $107,078 Adami, Lindsey & Company Financial Audit for the fiscal year ending December 31, 2005 Written Response
Yes $4,000 Source: Fannin CAD, December 2005 and April 2006.
During the budget preparation period, the CAD reviews the industrial, utility and complex commercial accounts in order to present a current list of accounts to TYP. The current list of properties to be appraised by TYP is presented to the board of directors during the budget approval process. Once approved, the property list is forwarded to TYP. TYP then uses the account listing as a work plan and forwards the list back to the CAD with on-site inspection dates or completion dates for the accounts to be appraised.
CAD staff and TYP also combine efforts in appraising some properties. In appraising General Cable, a large industrial property, the CAD appraises the land and buildings and TYP appraises the business personal property. CAD staff and representatives of TYP scheduled a joint walk-through of the property to ensure proper accounting and no double assessing of assets.
Fannin CAD verbally requires the appraisal work by TYP to be completed 14 days before the first day of ARB hearings. The CAD reserves the first day of ARB hearing for appeals involving TYP appraised property.
Fannin CAD and TYP have had a four year professional relationship and a practical but undocumented process both parties follow for the combined delivery of services. The lack of a formal written signed agreement leaves each party vulnerable if deadlines or deliverables are not met.
In subsequent discussions between the chief appraiser and reviewer after the on-site visit, the chief appraiser told the reviewer that he has contacted TYP and asked them to begin working on a written agreement for the appraisal services. In April 2006 the chief appraiser provided a written copy of an executed written agreement with TYP for 2006 and 2007.
For a complete appraisal roll, the appraisal district is required to have all of the appraisal information complete and entered in the appraisal district system before the appraisal notices are run. Without a written, signed document showing contractual dates for specific deliverables, the CAD has no recourse to compel the vendor to perform the services within a prescribed timeframe and the vendor has no recourse if the CAD refuses payment in exchange for the provided services.
IAAO's Standard on Contracting for Assessment Services, Section 4, requires contracts to have specific provisions. These provisions include:
Detailed description of the work to be performed includes:
- The time frame, delivery date, and other requirements of the project;
- The amount and terms of the contract delineating all expenses;
- Authorized signatures of the assessment agency and other parties;
- Performance standards;
- Required documentation;
- Payment provisions;
- Termination rights and compensation or penalty payments to the agency in the event of failure to perform, or unavailability of funds;
- Arbitration of contractual disputes; and
- Confidentiality agreements.
A written agreement between parties minimizes risk to and protects parties by defining the legal obligations of each party for the services to be provided and offers a legal framework to resolve any disputes.
Continue to require and execute a written professional appraisal services contract that includes provisions required by the IAAO Standard on Contracting for Assessment Services.