Chapter 2:
Findings of the Appraisal Standards Review
This chapter of the report addresses findings and recommendations from the ASR of Garza CAD.
Garza CAD formed in 1981 and became active in 1982. As of January 2009, Garza CAD had three full-time employees, with one supervisor. Garza CAD contracts with two professional appraisal services firms. The firms appraise all property categories in the CAD with some assistance from CAD employees.
Each board member in Garza CAD was mailed an Appraisal District Board of Directors Questionnaire, with two board members completing and returning the questionnaire. Both agreed that the appraisal staff is knowledgeable and performs the job well.
Key Recommendations
As part of the review process, PTAD makes recommendations to address challenges identified during its review of a CAD. Below are recommendations addressing key challenges associated with Garza CAD's appraisal activities.
FINDING
Garza CAD has not consistently identified and reported to PTAD on the typical lease arrangement in the CAD for use in productivity calculations.
Property Tax Code Section 23.51(4) 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. For land that qualifies under Subdivision (7) for appraisal under this subchapter, the chief appraiser may not consider in the calculation of net to land the income that would be due to the owner under a hunting or recreational lease of the land.
The Manual for the Appraisal of Agricultural Land section on Determining Net to Land Values, adopted by Comptroller Rule 9.4001, states the following:
Net to land, remember, is the average annual net income that a class of land would be likely to have generated over the last five-year base period. Until 1987, appraisers based net to land primarily on owner-operator budgets. The law now requires appraisers to determine net to land using a cash or share lease method.
Under a lease method, net to land is the rent that would be due to the property owner under a cash lease, share lease, or other typical lease arrangement, less expenses typically paid by the owner. In a cash lease, the rent is a fixed amount. In a share lease, the rent is a share of the gross receipts for the year, less a share of certain expenses.
Garza CAD calculates productivity values using the cash lease method for all qualified acreage, which includes irrigated cropland, dry cropland, improved pastureland and native pastureland. Exhibit 1 shows the breakdown between irrigated cropland, dry cropland, barren, improved pasture and native pasture; the land classes in Southland ISD and Post ISD.
Exhibit 1 illustrates the 2007 PVS differences in cropland calculations between Garza CAD and PTAD, the number of acres and percentage of the total acreage in the CAD.
Exhibit 1
Productivity Value Comparison
2007 PVS Results
Post ISD
| Land Class | Number of Acres | Percentage of Total Acres | CAD Reported Value/Acre | PTAD Value/Acre |
|---|---|---|---|---|
| Irrigated Crop | 4,989 | 1.02% | $252.27 | $336.95 |
| Dry Crop | 71,365 | 14.55% | 131.97 | 222.48 |
| Barren | 107,984 | 22.01% | 3.03 | 3.03 |
| Improved Pasture | 2,900 | 0.59% | 36.07 | 48.57 |
| Native Pasture | 303,271 | 61.83% | 28.91 | 40.58 |
Southland ISD
| Land Class | Number of Acres | Percentage of Total Acres | CAD Reported Value/Acre | PTAD Value/Acre |
|---|---|---|---|---|
| Irrigated Crop | 6,531 | 8.94% | $259.93 | $347.16 |
| Dry Crop | 29,945 | 40.97% | 135.97 | 229.24 |
| Barren | 9,525 | 13.03% | 3.03 | 3.03 |
| Improved Pasture | 1,375 | 1.88% | 36.09 | 48.60 |
| Native Pasture | 25,715 | 35.18% | 28.85 | 40.50 |
Source: 2007PVS results.
The CAD has an Agricultural Advisory Board (ag board) consisting of a Farm Service Agency representative, a local rancher and a local farmer/rancher. The ag board meets three times per year and met consistently during the past six years, according to the chief appraiser.
The CAD protested the Category D1 results in the 2007 PVS. The appeal was launched because of a request to change the grazing lease rate for native pastureland for 2004 and 2005 and to include a brush control expense of $0.50 for 2003 through 2005. PTAD changed the grazing lease for native pastureland to $4.00 for 2004 and 2005, based on seven farm and ranch surveys and nine affidavits submitted by Garza County landowners. PTAD staff did not recommend including a brush control expense. In the 2005 farm and ranch surveys, more than 60 percent of the respondents indicated that brush control was not a typical expense in the area. As a result, the expense was changed from $0.20 to $0.
PTAD annually gathers agriculture information in the Texas Farm and Ranch Survey from the Chief Appraiser, CAD ag board, Texas AgriLife Extension Office, USDA Farm Service Agency (county executive director), Agricultural Credit Association (president or branch manager) and any other relevant source. The information is compiled by PTAD and used to establish a productivity value that is part of the annual PVS. The survey gathers information and practices that are typical in the CAD, such as the following:
- County Information (crop conditions, market or regional conditions, predominant cropland lease agreements)
- Cash lease prices for all land classes
- Hunting lease prices for all land classes
- Expense information
- Share lease information for irrigated cropland and dry cropland
- Other information such as fencing, sources of water (irrigation), and comments relating to productivity values
One of the ways PTAD uses the survey information is to determine the typical lease arrangement in a CAD. Exhibit 2 illustrates Garza CAD's historic farm and ranch survey typical lease arrangement (cash or share) results by respondent.
Exhibit 2
Typical Lease Arrangement Reporting (Share or Cash)
2001-05
Irrigated Cropland
| Respondent | 2001 | 2002 | 2003 | 2004 | 2005 |
|---|---|---|---|---|---|
| Chief Appraiser | Share | Share | Cash | Cash | Share |
| Ag Advisory Board | Share | Cash and Share | Not reported | Cash | Share |
| TAEX County Agent | Share | Not reported | Not reported | Not reported | Not reported |
| Farm Service Agency | Share | Cash and Share | Not reported | Cash | Not reported |
Dry Cropland
| Respondent | 2001 | 2002 | 2003 | 2004 | 2005 |
|---|---|---|---|---|---|
| Chief Appraiser | Share | Share | Cash | Cash | Not reported |
| Ag Advisory Board | Share | Cash and Share | Not reported | Cash | Share |
| TAEX County Agent | Share | Not reported | Not reported | Not reported | Not reported |
| Farm Service Agency | Share | Cash and Share | Not reported | Cash | Not reported |
Source: Texas Farm and Ranch Surveys submitted to PTAD from 2001-05.
Calculating cropland productivity values using the cash method or share method is the main difference between Garza CAD's approach in developing productivity values and PTAD's. Garza CAD calculates cropland values using the cash method while PTAD uses the share method, because that is the method reported the most on the farm and ranch surveys for 2001-05.
The PVS results in Exhibit 3 show the Category D information for Garza CAD for 2005-07.
Exhibit 3
Garza CAD Category D Comparison
2005-07
Subcategory D1
Acres and Farm and Ranch Improvements
| Year | Post ISD | Southland ISD |
|---|---|---|
| 2005 Local Value | 18,533,470 | 3,710,910 |
| 2005 PTAD Value | 20,754,166 | 3,611,240 |
| 2005 Ratio | 0.8930 | 1.0276 |
| 2006 Local Value | 18,188,640 | 3,737,930 |
| 2006 PTAD Value | 18,450,639 | 4,631,884 |
| 2006 Ratio | 0.9858 | 0.8070 |
| 2007 Local Value | 18,895,890 | 3,731,400 |
| 2007 PTAD Value | 21,672,084 | 3,901,914 |
| 2007 Ratio | 0.8719 | 0.9563 |
Subcategory D3
Productivity Value Qualified Acres
| Year | Post ISD | Southland ISD |
|---|---|---|
| 2005 Local Value | 18,383,300 | 6,513,870 |
| 2005 PTAD Value | 24,630,571 | 6,696,812 |
| 2005 Ratio | 0.7464 | 0.9727 |
| 2006 Local Value | 19,545,020 | 6,687,120 |
| 2006 PTAD Value | 29,198,355 | 9,246,562 |
| 2006 Ratio | 0.6694 | 0.7232 |
| 2007 Local Value | 19,874,740 | 6,589,360 |
| 2007 PTAD Value | 30,332,892 | 10,269,023 |
| 2007 Ratio | 0.6552 | 0.6417 |
Source: 2005-07 PVS results.
Exhibit 3 illustrates the differences between Garza CAD productivity calculations and PTAD productivity calculations. Exhibit 2 demonstrates an inconsistency by reporting parties in determining whether a cash lease or share lease is typical in Garza CAD. The Texas Farm and Ranch Survey section, County Information, includes the following request:
If cropland farming is typical in your county, please indicate the predominant cropland lease agreement during the last year.
Responses to the question are cash lease, share lease or not typical. The surveys, typically completed by the chief appraiser, ag board and farm service agency representative, have not been consistent between respondents or from year-to-year, as shown in Exhibit 2.
With the assistance of the ag board, the CAD could more accurately develop productivity values by determining if a cash lease or share lease is typical in the CAD and using the appropriate methodologies to calculate productivity values. Gathering and reporting accurate and consistent information through the annual Texas Farm and Ranch Survey is critical. PTAD relies on this information to calculate and establish productivity values that are used as part of the annual PVS.
The Comptroller's Manual for the Appraisal of Agricultural Land, Part 3, Agricultural Appraisal Process, states the following:
To put an effective productivity appraisal system in action, the appraiser must complete five steps:
1) Develop a land classification system.
2) Estimate the net to land per acre for each class or sub-class.
3) Divide the class' net to land by the year's capitalization rate to find the value per acre in each class.
4) Classify all qualified agricultural land according to the land classification system.
5) Use the schedule to calculate productivity value for individual parcels of land.
In response to the draft report, the chief appraiser stated the following:
The typical lease arrangement in the Garza CAD will be determined and reported consistently to PTAD through the annual Texas Farm and Ranch Survey.
The Ag Board will hold a meeting to discuss and determine the typical lease arrangement and the Texas Farm and Ranch Survey will be completed at the time of the meeting.
The Ag Board will discuss and determine the expenses and income for each property type. These expenses and income will be used in the calculation of productivity. Darrel Lisenbe will calculate productivity values by using the expenses, income, and the appropriate methodology determined by the Ag Board.
RECOMMENDATION 1
Determine the typical lease arrangement in the CAD, report consistently to PTAD through the annual Texas Farm and Ranch Survey and calculate productivity values according to the appropriate methodology, cash lease method or share lease method.
FINDING
Garza CAD's maps do not comply with Comptroller Rule 9.3002.
The Comptroller's Property Tax Rule, 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 states that an appraiser, "must have complete maps of all property in the jurisdiction, updated regularly to show changes in parcel boundaries or other physical characteristics."
Garza CAD uses maps from several different origins including soil maps, plat maps and published maps. The soil maps have abstract and survey names handwritten and boundary lines for the abstracts and surveys. The CAD uses subdivision plat maps filed with the county clerk. For example, the CAD refers to newer, developed subdivision plat maps for areas around the lake, south of the city of Post, as this area was recently developed.
The CAD uses an ownership map published by a regional company. It includes abstract and/or survey numbers, owner names and road numbers. The map has only parcel owner names and does not contain any acreage amounts or unique identifying numbers for parcels. These maps are published annually; the CAD copy is the 2008 edition.
While completing the on-site review, the published ownership maps were used to locate sample properties. The maps provided adequate guidance to identify the sample properties.
The CAD does not currently have staff dedicated to mapping. The CAD stated that ownership splits and any combinations are entered into the computer assisted mass appraisal (CAMA) system and that hard copies are filed with notes and history of the changes.
Exhibit 4 illustrates the Comptroller rule elements and the current status of the CAD's maps.
Exhibit 4
Garza CAD
Compliance with Rule 9.3002
On Tax Maps
|
Comptroller Rule 9.3002 Mapping Requirement |
Description of CAD's Level of Compliance with Specific Sections of Rule 9.3002 |
|---|---|
| Does the CAD draw its tax map system to scale and delineate lot and property lines with dimensions or areas and identifying numbers, letters or names for all delineated lots or parcels? | The CAD uses soil topography maps for rural areas, city plat maps, subdivision plat maps and maps published for use in the petroleum industry. |
| Does the CAD divide the tax map into sections drawn at a scale large enough to serve the purposes of property assessment? | The CAD has not developed an in-house mapping system, but relies on published maps from outside sources and recorded subdivision plats. |
| Does the CAD tax map assign each section and each parcel numbers in accordance with a parcel identification numbering system? | The CAD uses a published map that is marked by block number, abstract number, survey and owner number. Primarily used for more rural type properties. |
| Does the CAD record these numbers on the tax map, section and parcel? | Yes. Marked on large county map. |
| Does the CAD also record the identifying number for each parcel as recorded on the tax map on the appraisal card maintained for that parcel? | Yes, the appraisal card will have the same identifying system as the map. |
| Does the CAD annually update the tax map system to incorporate any new subdivisions or property transfers as indicated by the filing of subdivision plats or deeds with the county clerk's office? | The CAD relies on annually obtaining published maps from outside sources and does not enter partitions or combinations of property on maps. |
| Does the CAD maintain information required by Rule 9.3002 in electronic data processing records rather than physical document? | The CAD does not have electronic maps. The CAD indicated on the IAAO Questionnaire that budget constraints were a limiting factor in obtaining electronic maps. |
Source: Comptroller Rule 9.3002 and Garza CAD maps.
The CAD cannot readily identify parcels that have split on the current maps. These parcels might be located in or around cities or in rural areas of the county. Locating and correctly identifying property is critical to a successful CAD operation.
In response to the draft report, the chief appraiser stated the following:
The Garza Central Appraisal District has not implemented a GIS system because of the expense. We have been able to locate property by the use of the maps in our office.
A meeting of the Board of Directors will be held, after the ASR is received, for a discussion and vote on implementing a GIS system. If the Board votes to implement a GIS System, the expense will be included in our next budget.
If the vote of the Board is in favor of implementing a mapping system, the process will begin by requesting bids for completion of work within three years and that all maps will be updated and ensured that they will be in compliance with Comptroller Rule 9.3002. A time frame of two months will be allowed to receive bids and allow the CAD time to gather information that may be needed in order to make a bid.
After the bids are received and voted on, the CAD will work with the company to develop a plan and time line to complete the system in three years. When the plan is written, it will be submitted to the ASR Project Manager.
IAAO's Property Appraisal and Assessment Administration Chapter 17, Mapping System Management, states "Complete and accurate maps and ownership records are essential to the assessment office." The CAD relies heavily on local knowledge of staff and, in the event of turnover, efficiency would be lost. A good mapping system can help the CAD identify areas of change in development, redevelopment or market value.
RECOMMENDATION 2
Develop a procedure to update maps to ensure compliance with Comptroller Rule 9.3002 and a plan and timeline to update all maps within the next three years.