Chapter 2
Findings of the Appraisal Standards Review
This chapter addresses findings, commendations and recommendations from the ASR of the Grayson CAD in six sections:
2.1
Governance and Management
The quality of the property tax system depends largely on the appraisal district's board of directors (board). The board should provide knowledge, judgment and expertise in establishing policies and procedures for the CAD's organization and operation.
The Grayson CAD's board consists of six members (Exhibit 6).
Exhibit 6
Grayson CAD
Board of Directors Members
| Board Member |
Entity Member Represents (elected by) |
Start Date | Occupation | Elected Official(Yes or No) |
|---|---|---|---|---|
| L.D. Byrd | At-Large | 2004 | Cleric/Sales | Yes - Gunter ISD school board |
| Norman Gordon | At-Large | 2004 | Realtor | No |
| Kiki Osterman | At-Large | 2004 | Office Mgr. | No |
| Alvaro Zorrilla | At-Large | 2000 | Mechanic | Yes - Sherman ISD school board |
| John Ramsey, non-voting | NA | Grayson County Tax A/C | Yes - Grayson County Tax Collector | |
| Wayne King, Chairman * | At-Large | 2002 | Consultant | No |
* Took oath of office in June 2006.
Source: Grayson CAD, March 2006.
The participating taxing entities of Grayson County elect five board members. The taxing entities nominate candidates and divide their votes among the nominees. The five individuals who receive the most votes are elected to the board for two-year terms. Those elected represent the taxing entities as a whole and have no allegiance to any particular member taxing entity. By statute, John Ramsey, the county tax assessor-collector, serves as a non-voting member. Two other board members are elected officials serving on school boards.
The board has the following primary responsibilities:
- establish the appraisal district's appraisal 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 13-member appraisal review board appointed by the board has met the requirements for membership established by the Tax Code.
Audits of the CAD's financial records are conducted in accordance with the Tax Code. No adverse findings or recommendations were issued in the 2003, 2004 or 2005 audits. Any required management response is written by the chief appraiser with approval of the board.
The board has established policies as required by Section 6.04 of the Tax Code and evaluates the chief appraiser each year. In 2005, the board began formally evaluating the chief appraiser using a written evaluation form. Previous annual evaluations were informal and oral.
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. The two board members who responded gave Grayson CAD high marks, strongly agreeing or agreeing with positive responses. One respondent disagreed that board members attend required annual training and that the chief appraiser's evaluation is formally documented and based upon measurable criteria.
Copies of the budgets for 2004, 2005 and 2006 were reviewed. The budgets contained a listing of each proposed position reflecting its salary as required by Section 6.06 of the Tax Code, and contained most, but not all of the information on benefits assigned to each position. The budgets included a list of proposed car allowances for each proposed position, but other employee benefits are budgeted by category, reflecting the amount budgeted for each benefit category.
Section 6.062 of the Tax Code requires the board to hold a public hearing on the proposed budget and publish the hearing notice in a newspaper of general circulation in the county. Section 6.06 also requires the chief appraiser to prepare and deliver a proposed budget to the board of directors and each taxing entity before June 15.
Grayson CAD has provided proper notice and held hearings required by the Tax Code. The budget was advertised properly and printed in the Herald Democrat newspaper. The CAD identified all capital expenditures during this time.
Exhibit 7 presents Grayson CAD's 2004-06 adopted budgets.
Exhibit 7
Grayson CAD Adopted Budgets 2004 through 2006
Salaries & Benefits
| 2004 Budget | Percent | 2005 Budget | Percent | 2006 Budget Amended 10.25.05 | Percent | Percentage Increase (Decrease) 2004-2006 | |
|---|---|---|---|---|---|---|---|
| Salaries | $903,000 | 53.60% | $926,900 | 53.21% | $963,000 | 50.46% | 6.64% |
| Health/Dental Insurance | 140,000 | 8.31% | 145,000 | 8.32% | 150,000 | 7.86% | 7.14% |
| Retirement and Life Insurance | 95,500 | 5.67% | 94,400 | 5.42% | 120,400 | 6.31% | 26.07% |
| 401(a) Employer Contributions | 38,800 | 2.30% | 40,040 | 2.30% | 41,500 | 2.17% | 6.96% |
| Worker's Compensation | 11,000 | .65% | 11,500 | .66% | 11,000 | .58% | .00% |
| Unemployment Insurance | 4,200 | .25% | 4,500 | .26% | 4,000 | .21% | (4.76%) |
| Medicare Insurance | 13,500 | .80% | 14,000 | .80% | 14,000 | .73% | 3.70% |
| Total Salaries and Benefits | $1,206,000 | 71.59% | $1,236,340 | 70.97% | $1,303,900 | 68.32% | 8.12% |
Operational Expenses
| 2004 Budget | Percent | 2005 Budget | Percent | 2006 Budget Amended 10.25.05 | Percent | Percentage Increase (Decrease) 2004-2006 | |
|---|---|---|---|---|---|---|---|
| General Office Supplies | $8,000 | .47% | $8,000 | .46% | $8,000 | .42% | .00% |
| Computer Supplies | 8,000 | .47% | 8,500 | .49% | 9,000 | .47% | 12.50% |
| Postage and Freight | 23,000 | 1.37% | 25,000 | 1.44% | 26,000 | 1.36% | 13.04% |
| Telephone | 14,000 | .83% | 14,000 | .80% | 14,500 | .76% | 3.57% |
| Toiletry and Paper Products | 750 | .04% | 750 | .04% | 750 | .04% | .00% |
| Utilities | 13,500 | .80% | 15,000 | .86% | 15,500 | .81% | 14.81% |
| Legal Notice and Advertising | 2,500 | .15% | 2,500 | .14% | 2,500 | .13% | .00% |
| Printing and Forms | 10,500 | .62% | 10,500 | .60% | 10,500 | .55% | .00% |
| Education and Travel | 10,500 | .62% | 11,000 | .63% | 12,000 | .63% | 14.29% |
| Professional Dues and Memberships | 3,800 | .23% | 4,000 | .23% | 4,000 | .21% | 5.26% |
| Subscriptions and Publications | 6,500 | .39% | 6,500 | .37% | 6,500 | .34% | .00% |
| Mileage and Car Allowance | 66,600 | 3.95% | 74,400 | 4.27% | 74,400 | 3.90% | 11.71% |
| Insurance and Bonds | 10,000 | .59% | 11,000 | .63% | 12,000 | .63% | 20.00% |
| Bank Service Charges | 200 | .01% | 100 | .01% | -0- | .00% | .01% |
| Meeting Expenses | 600 | .04% | 650 | .04% | 700 | .04% | 16.67% |
| Repairs - Equipment and Building | 8,000 | .47% | 8,500 | .49% | 9,000 | .47% | 12.50% |
| Documents and Microfilm | 2,000 | .12% | 2,000 | .11% | 1,800 | .09% | (10.00%) |
| Total Operational Expenses | $188,450 | 11.19% | $202,400 | 11.62% | $207,150 | 10.85% | 9.92% |
Contracts and Professional Services
| 2004 Budget | Percent | 2005 Budget | Percent | 2006 Budget Amended 10.25.05 | Percent | Percentage Increase (Decrease) 2004-2006 | |
|---|---|---|---|---|---|---|---|
| Pictometry | $0.00 | .00% | $0.00 | .00% | $85,800 | 4.50% | New for 2006 |
| Financial Auditing | 4,000 | .24% | 4,200 | .24% | 4,200 | .22% | 5.00% |
| Legal Counsel | 9,000 | .53% | 10,000 | .57% | 15,000 | .79% | 66.67% |
| Minerals and Utilities Appraisal | 53,000 | 3.15% | 53,000 | 3.04% | 53,000 | 2.78% | 0.00% |
| Appraisal Review Board | 21,500 | 1.28% | 25,000 | 1.44% | 26,500 | 1.39% | 23.26% |
| CAMA Software-Support and Maintenance | 33,500 | 1.99% | 35,000 | 2.01% | 37,000 | 1.94% | 10.45% |
| Janitorial Service | 5,000 | .30% | 5,000 | .29% | 5,200 | .27% | 4.00% |
| Technical Equipment Service and Maintenance (GGDC) | 19,000 | 1.13% | 20,000 | 1.15% | 18,000 | .94% | (5.26%) |
| Capitol Appraisal -Industrials | 8,500 | .50% | 9,000 | .52% | 9,000 | .47% | 5.88% |
| Grayson Pro-Tech Alarm | 600 | .04% | 600 | .03% | 600 | .03% | 0.00% |
| Elevator Maintenance | 1,500 | .09% | 1,750 | .10% | 2,000 | .10% | 33.33% |
| Government Records Service Contract | 8,600 | .51% | 8,600 | .49% | 8,600 | .45% | 0.00% |
| ESRI Mapping Maintenance | 10,600 | .63% | 10,750 | .62% | 12,600 | .66% | 18.87% |
| Maintenance Contracts -Equipment | 13,500 | .80% | 14,000 | .80% | 14,000 | .73% | 3.70% |
| Trash Disposal Service | 1,300 | .08% | 1,300 | .07% | 900 | .05% | (30.77%) |
| Total Contracts and Professional Services | $189,600 | 11.26% | $198,200 | 11.38% | $292,400 | 15.32% | 54.22% |
Contingency Funds
| 2004 Budget | Percent | 2005 Budget | Percent | 2006 Budget Amended 10.25.05 | Percent | Percentage Increase (Decrease) 2004-2006 | |
|---|---|---|---|---|---|---|---|
| General | $20,000 | 1.19% | $20,000 | 1.15% | $20,000 | 1.05% | .00% |
| Special Dedicated Litigation Fund | 5,000 | .30% | 5,000 | .29% | 5,000 | .26% | 0.00% |
| Special Dedicated Capital Fund | 2,500 | .15% | 5,000 | .29% | 5,000 | .26% | 100.00% |
| Total Contingency Funds | $27,500 | 1.63% | $30,000 | 1.72% | $30,000 | 1.57% | 9.09% |
Capital Expenditures
| 2004 Budget | Percent | 2005 Budget | Percent | 2006 Budget Amended 10.25.05 | Percent | Percentage Increase (Decrease) 2004-2006 | |
|---|---|---|---|---|---|---|---|
| One-time Projects | $33,000 | 1.96% | $35,000 | 2.01% | $35,000 | 1.83% | 6.06% |
| Furniture, Fixtures, and Equipment | 25,000 | 1.48% | 25,000 | 1.44% | 25,000 | 1.31% | .00% |
| Capital Outlay - Building Improvement | 15,000 | .89% | 15,000 | .86% | 15,000 | .79% | .00% |
| Total Capital Expenditures | $73,000 | 4.33% | $75,000 | 4.31% | $75,000 | 3.93% | 2.74% |
| 2004 Budget | Percent | 2005 Budget | Percent | 2006 Budget Amended 10.25.05 | Percent | Percentage Increase (Decrease) 2004-2006 | |
|---|---|---|---|---|---|---|---|
| Grand Total | $1,684,550 | 100.00% | $1,741,940 | 100.00% | $1,908,450 | 100.00% | 13.29% |
| Allowance for Projected Interest and Miscellaneous Income | $5,500 | $4,000 | $6,000 | 9.09% | |||
| Budget Carryover | $25,000 | $0.00 | $35,627 | 42.51% | |||
| Budget amount billable to Taxing Entities | $1,654,050 | $1,737,940 | $1,866,823 | 12.86% |
Source: Grayson CAD, March 2006.
FINDING
Grayson CAD's contracts for professional appraisal-related services do not reference or define deliverables.
The Contract for Professional Appraisal Services with Pritchard & Abbott, Inc. (P&A) does not include the dates when services should be delivered or list properties to be appraised. The agreement with Capitol Appraisal Group, Inc. (CAG) does not state when appraisals of selected industrial properties are to be completed. The contracts with True Automation, Inc., Government Record Services and ESRI are for maintenance as necessary. Therefore, a timeline of deliverables is not necessary.
On October 24, 2004 the board entered into a two-year contract with P&A for appraisal services. The contract covers services for tax years 2005 and 2006.
P&A is to provide appraisals on mineral, utility, pipeline, and railroad property in the county. The contract does not identify specific properties to be appraised or note when the appraisals must be submitted to the CAD. In addition to appraisals, P&A will present testimony to the appraisal review board. The board agreed to pay P&A $53,500 in 2005 and $53,500 in 2006 for these services. The contract calls for quarterly payments of $13,375. The board has the option of extending the contract for the 2007 and 2008 tax years at the same fee.
The chief appraiser indicated that he is responsible for monitoring these contracts, which is done by reviewing and approving invoices for payment based on services rendered. Further, the chief appraiser is one of two signatories required for issuing a check for payment. All check registers are submitted to the board for review.
Exhibit 8 presents a summary of Grayson CAD's professional services contracts.
Exhibit 8
Grayson CAD Professional Service Contracts
| Contract | In Writing (Yes or No) | Key Terms and Conditions | 2003 Budget | 2003 Actual | 2004 Budget | 2004 Actual | 2005 Budget | 2005 Actual |
|---|---|---|---|---|---|---|---|---|
| True Automation, Inc. | Yes | Appraisal Software and Support | $44,000 | $27,719 | $33,500 | $31,319 | $35,000 | $32,802 |
| Pritchard & Abbott, Inc. | Yes | Professional Appraisal Services | $53,000 | $53,500 | $53,500 | $53,500 | $53,000 | $53,500 |
| Capitol Appraisal Group, Inc. | Yes | Professional Appraisal Services | $7,500 | $4,820 | $8,500 | $4,820 | $9,000 | $4,000 |
| Government Record Services | Yes | Deed Records | $8,400 | $8,556 | $8,600 | $8,556 | $8,600 | $8,556 |
| ESRI | Yes | Mapping Software and Support | $0.00 | $0.00 | $10,600 | $13,176 | $10,750 | $12,600 |
Source: Grayson CAD, March 2006.
For several years, the CAD has signed a letter of agreement with CAG for the inspection and appraisal of selected industrial properties. The chief appraiser holds a MAI designation and appraises most of the CAD's industrial properties but relies on CAG's expertise in the high tech computer industry and industrial manufacturing field to appraise or assist in the appraisal of selected industrial properties. The chief appraiser indicated that CAG was chosen because of its experience in appraising similar properties in Travis County. Some of the industrial properties CAG has appraised or assisted the CAD in appraising over the years are MEMC Electronic Materials, Fisher Controls, Globitech, Texas Instruments, Raytheon, Pilkington and Certainteed.
On February 18, 2005, the CAD signed a letter of agreement with CAG for the appraisal of personal property associated with the MEMC and Certainteed plants for the 2005 tax year. The cost for the two appraisals was $8,000, to be paid semi-annually. The agreement did not state when CAG would complete and deliver the appraisals to the CAD. According to the chief appraiser, the appraisals were received in a timely manner and appraisal notices were mailed in accordance with the Tax Code. At the time of this review, an agreement with CAG for 2006 had not been formulated.
Section 25.19 of the Tax Code provides that "By May 15 or as soon thereafter as practicable, the chief appraiser shall deliver a clear and understandable written notice to a property owner of the appraised value of the property owner's property if:
(1) the appraised value of the property is greater than it was in the preceding year;
(2) the appraised value of the property is greater than the value rendered by the property owner; or
(3) the property was not on the appraisal roll in the preceding year."
In order to prepare its appraisal roll each year, the CAD must have all of the appraisal information complete and in the appraisal district system before the appraisal notices are printed.
Grayson CAD has two separate contracts with appraisal firms offering the same services. The CAD has not put these contracts up for competitive bid in the last 20 years. Instead, the P&A contract has been renewed each year and the CAG contract was never bid, but instead done by letter agreement annually.
IAAO's Standard on Contracting for Assessment Services, Section 4, recommends contracts have specific provisions, including the timeframes when services or goods will be delivered. The IAAO standard for monitoring contract performance recommends the tax appraiser to monitor the provisions in the contract. This IAAO standard also recommends establishing a project review committee for projects that affect several departments or that have multiple objectives. A project review committee can provide the CAD with an effective mechanism for coordination, monitoring, and reviewing. Section 5.5 states that contract monitors are generally hired to review the services and products provided under the contract (the monitor may also be an independent third party). An effective monitor must be thoroughly familiar with the request for proposal (RFP) and successful bid, and, in fact, may also have served as a consultant in development of the RFP or selection of the successful bidder. The contract monitor must stay in close contact with the project and review major tasks in a timely manner.
RECOMMENDATION 1
Revise contracts for professional appraisal services to include dates for deliverables and properties to be appraised.
By revising contracts to include dates and deliverables, the CAD will clearly define its needs and protect both parties by detailing rights and responsibilities.
It may be an effective strategy for Grayson CAD to have different appraisal services to assess overall value, but a request for proposal for future services might also be desirable to determine if one vendor might supply all services at a reduced rate.