Executive Summary
In July 2007, the Texas Comptroller of Public Accounts identified Goliad Independent School District (Goliad ISD), located in Goliad County, as one of 43 school districts meeting the criteria that initiate an Appraisal Standards Review (ASR) of the appraisal district that serves them. In October 2007, the Comptroller's Property Tax Division (PTD), with assistance from contractors, began its review of the Goliad County Appraisal District (Goliad CAD).
School Districts, the Property Value Study and Appraisal Standards Reviews
Texas funds public education by a combination of state and local funds. Local funding comes from property taxes assessed by a school district's board of trustees. The state bases its funding on the amount of money per student that can be raised locally. The state's funding formula sends more money to districts that are less able to raise money locally because of insufficient taxable property value.
Each school district in the state is served by a county appraisal district charged with appraising its property at market value. The chief appraiser of each appraisal district determines the property values that, after approval by the appraisal review board, its school districts will use to set tax rates.
PTD conducts an annual Property Value Study (PVS) that assigns a value to all taxable property within each school district for state funding purposes. The PVS, an independent estimate required by the Texas Legislature, is intended to help the state ensure equitable school funding. The PVS ensures equity by detecting instances in which school property values are not at market value and adjusting them to market value for use in the state's funding formula.
The Comptroller's property values do not directly affect local values or property taxes. But when study statistics give the Comptroller a high degree of confidence that the aggregate local value for property categories tested in the study is lower than the state's estimate of the correct value, and that aggregate local value is more than 5 percent below the state's estimate, the school district may receive less state funding than it expected. School districts may protest the state's preliminary determination of their property value through an appeals process. Understanding the reasons for the differences in valuation, however, can be critical for school districts and the appraisal districts that serve them.
The Legislature has granted a two-year grace period for school districts whose state funding is adversely affected by PVS findings. During this grace period, school districts can work with their appraisal districts to correct any inaccuracies or inconsistencies, before state funding is lost. To aid this process, the ASR provides the appraisal district and its local taxing units with an independent assessment of their appraisal standards.
By law, to be eligible for the grace period, a school district must have an invalid local value that does not exceed the state value; valid local values for the two preceding years; and a current aggregate local value for tested property categories that is at least 90 percent of the lower limit of the margin of error.
Appraisal Standards Reviews
PTD performs ASRs when a school district is eligible for the grace period. ASRs recommend changes in procedures or methods that can improve appraisal accuracy and compliance with state law and appraisal standards. The results can help school districts understand the reason for the invalid finding, so that they can work with their appraisal districts to correct problems and ensure that all properties in the district are valued fairly and accurately.
In conducting an ASR, PTD examines and evaluates appraisal practices including methodologies, planning and procedures, and the application of and adherence to generally accepted appraisal standards and practices. The Property Tax Code and Comptroller rules are the major criteria used in the review.
The Property Tax Code requires appraisal districts to use certain generally accepted appraisal procedures or standards, such as the Uniform Standards of Professional Appraisal Practice (USPAP), specifically Standard 6: Mass Appraisal, Development and Reporting, as well as the International Association of Assessing Officers' (IAAO's) technical standards. In addition, ASRs rely on other generally accepted standards when reviewing appraisal procedures and methods.
The two principal purposes of the ASR are to determine why the local value is invalid and to recommend improvements to appraisal practices. Upon completing the review process, the Comptroller issues a report of findings that includes commendations for exemplary appraisal practices and recommendations for improvements. The law requires appraisal districts to comply with the Comptroller's recommendations concerning appraisal methods and procedures within one year of the report's release.
If PTD finds that the CAD's board of directors has failed to comply with the ASR recommendations within one year of their issuance, state law requires the Comptroller to notify the judge of each district court in the county. The district judge(s), in turn, must appoint a five-member board of conservators to implement the recommendations. This board of conservators supervises and controls the CAD's operations until each school district it serves has valid local values in the annual PVS. The CAD must bear the costs for this supervision.
Key Findings and Recommendations
Below is a summary of the ASR's recommendations. These recommendations address the problems and challenges identified in the detailed findings found in Chapter 2 of this report. In total, PTD makes five recommendations:
Request the CAD's oil, gas and minerals appraisal firm to review its appraisal process to ensure it is using proper analysis techniques, and closely adhere to the monitoring and performance requirements contained in the new contract for appraisal of minerals.
Develop a work plan and timeline for converting appraisal data to the new automated appraisal system.
Revise the reappraisal plan to describe how the CAD will accomplish its reappraisal activities, including how it will identify the type of properties or how many properties the CAD will appraise in the reappraisal year and how the reappraisal will proceed from one area to the next.
Develop a timeline and devote necessary resources to develop maps that comply with Comptroller Rule 9.3002 and that contain parcel identification numbers linked to the appraisal system.
Develop appraisal procedures manuals that provide instructions and local procedures for completing appraisals.