FINDINGS OF THE APPRAISAL STANDARDS REVIEW
This chapter of the report addresses the findings, commendations and recommendations from the appraisal standards review of the Hansford County Appraisal District in five sections:
The quality of the property tax system depends on the appraisal district's Board of Directors (board). Individuals serving on the board bring knowledge, judgment and expertise in establishing policies and procedures for the district's organization and operation.
The appraisal district was formed in 1981 and became active in 1982. The district Board of Directors consists of six members. Members of the board are listed in Exhibit 4.
Board of Directors Members
Board Member Represents Starting Date Mark Sheets, Chair Spearman ISD January 2003 Terry Sherrill Gruver ISD January 1999 Jerry Hart Pringle-Morse CISD January 2002 Butch Reed Hansford County January 2001 Chad Logsdon City of Gruver January 2004 Ginger Turner City of Spearman January 2000 Linda Cummings County Tax Office* January 2005 *Nonvoting member
Source: Hansford CAD March 2005.
Six of the seven board members are also elected officials. Mark Sheets is a Spearman ISD board member, Terry Sherrill is the Gruver ISD board president, Jerry Hart is the Pringle-Morse ISD board president, Ira Reed is the Hansford County Commissioner for Precinct 1, Chad Logsdon is a City of Gruver Commissioner and Linda Cummings is the Hansford County Tax Assessor-Collector.
The board hires a chief appraiser as the chief operating officer of the appraisal district and 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 (districts in counties having a population of over 125,000),
- appoint appraisal review board members, and
- make general policy on the appraisal district's operation.
The board received a written survey about board activities to complete. Five of the six board members responded, with summary responses presented by the survey section in the following paragraphs.
Board policies and procedures
Four-fifths of the board members believe that they maintain a well documented set of policies and procedures; and agree with the questions asked. Yet, three-fifths of board members do not believe: that personnel policies are distributed to all staff in the CAD and that they are made available to applicants and the public upon request; that board policies are reviewed and updated at least every two years; or that there exist annual training sessions for board members. And finally, all responders believe that there is not a board policy requiring board member training.
Chief appraiser and staff
Four fifths of board members agree that the district is being managed effectively. Three-fifths of board members believe that: staff members are competent and good at their jobs; that the board conducts annual evaluations of the chief appraiser; and that the board evaluation of the chief appraiser is formally documented and based upon measurable criteria.
Three-fifths of board members believe that it has a policy, which outlines a periodic reappraisal plan, and four-fifth of board members believe that their colleagues understand the statutory requirements to maintain property appraisals at or near market value.
Appraisal review boards
Four-fifths of board members believe that the board has a well documented policy for appointing appraisal review board members and that the board follows the law and its own policy in the way in which it deals with appraisal review board members. Three-fifths of members believe that they monitor the training attended by appraisal review board members to ensure that all members are in compliance with statutory requirements.
Budgeting and financial management
All board members believe that: they annually adopt a budget that is in compliance with state law; have considerable input into the budgets development; they have an external audit contract that is periodically bid and auditors are rotated periodically; they have a depository contract that provides a market rate of interest and a comprehensive list of needed services to the district; they monitor the performance of contractors after a contract is signed and that they regularly solicit feedback from the public on controversial topics, particularly as it deals with financial matters.
Hansford CAD successfully prepares, manages and monitors its contracts while meeting IAAO contracting standards. The district has contracts with the following organizations: Ochiltree CAD (outsourcing of appraisals for oil and gas reserves, utilities, commercial and industrial real and personal property), all entities in the county (collection of property taxes), and employing the chief appraiser. Hansford CAD also has a contract with Next Generation Software, Inc. to provide software for the appraisal and collection functions of the district and the mapping system contracted through Pritchard & Abbott, Inc and an external audit contract. The deputy chief appraiser is responsible for supervising the contract with the Ochiltree CAD; the chief appraiser is responsible for supervising all other contracts except the chief appraiser employment contract, which is managed by the board.
CAD management routinely reviews vendor performance and contract terms, requesting bids for services when needed to ensure receiving the best value at a reasonable cost. For example, the district employs different external auditors every few years to ensure both receiving the best value and maintaining an independent review of the district's finances. In spring 2004, the board initiated requesting bids for the district's outsourced professional appraisal services, to ensure continued payment of market rates while receiving a quality product. When the decision is made, bids are requested, reviewed by district staff and presented to the board for discussion and decision. With board approval a selection is made.
The district most recently changed audit firms at the end of 2002-03. A review of the most recent available audits, for 2000-01, 2001-02 and 2002-03 showed conformance with Generally Accepted Accounting Principles (GAAP) and other requirements; no significant or insignificant issues were identified according to the audit findings.
IAAO's Standard on Contracting for Assessment Services, Section 4, requires contracts have specific provisions, including the timeframes when services or goods will be delivered.
All contracts reviewed exceeded the IAAO standard by explaining what the services each vender/individual is expected to perform, what the district gets, and when the delivery dates of services can be expected. Contract terms are tied to the relevant Tax Code sections so statutory deadlines are automatically part of the contracts. In the contract with Ochiltree CAD payments are not tied directly to deliverables, instead terms provide for 4 equal payments in specified months, about quarterly. This is a reasonable alternative to directly linking deliverables to payments in this instance because the contracted appraisal function has activities year round with specific statutory deadlines.
The district's adopted process ensures timely receipt of quality deliverables and timely payment according to contract terms.
Hansford CAD's process for managing and monitoring contracted services provides continual oversight in compliance with IAAO standards.
The Hansford CAD board of directors has not officially adopted the policies and procedures they use to run the district. Although survey results indicate that board members believe that they do have board policies and procedures in place, informally referring to the Comptroller's Appraisal District Director's Manual as needed is not a substitute for making and adopting an official policy and procedures manual. While no official manual exists, the board adopted a resolution with a procedure for electing directors as created by SB 621, 66th Legislature, effective January 1, 2003.
Missing board policies or actions that the Tax Code and/or Chapter 171 of the Local Government Code require include board policies addressing public access and interaction, and conflict of interest statements from board, staff and appraisal review board members with a policy documenting the requirements.
According to interview responses from both the chief appraiser and deputy chief appraiser, no conflict of interest statements exist in the district for staff, board and appraisal review board members because none are needed-no conflicts exist. No informal policy exists for this practice.
In the absence of these policies, the public has the expectation of conduct and no assurances that no conflicts exist with staff, board or appraisal review board members and that the public are informed about what appraisal boards do or how to interact with the board when desired.
Implement and document required appraisal board policies and practices.
Hansford CAD's budget does not fully meet certain requirements of the Tax Code. The district operates with an October 1 through September 30 fiscal year following the general budget policies noted in the 2002-03 Independent Auditors' Report financial notes.
Note 1 - Summary of Significant Accounting Policies
Budgets and Budgetary Accounting
- The proposed budget is prepared by the board.
- The board provides for a public hearing on the appraisal district budget.
- Prior to October 1, the budget is legally adopted by decision of the board.
- No expenditure of the district may exceed the budget, unless the original budget is amended by decision of the board.
- The budget for the Proprietary Fund is adopted on a basis consistent with generally accepted accounting principles (GAAP) on the accrual basis of accounting.
- All appropriations lapse at the end of the year and may be re-budgeted the next year.
Tax Code Section 6.06(a) requires that the chief appraiser include in the budget a list showing each proposed position, the proposed salary for the position, and all benefits proposed for the position. As presented in Exhibit 5, Hansford CAD's adopted appraisal and collection budgets for 2004-05 and 2003-04 that do not detail the benefits proposed for each position. Instead, the benefits are listed as a lump sum for all employees. Benefits are not the same for each employee, for example, the chief appraiser's contract provides a $50,000 life insurance policy and $300 monthly car allowance.
The district's 2004-05 and 2003-04 budgets' were adopted on August 18, 2004 and August 6, 2003, respectively. Protests from several of the district's taxing entities were received each year within the 30 day publication timeframe; since less than a majority of tax entities filed protests, the board was not required to propose a revised budget prior to adoption.
Hansford CAD Appraisal and Collection Budgets
2003-04 and 2004-05
2004-05 2003-04 Budget Line Item Description Appraisal Budget Collection Budget Appraisal Budget Collection Budget Administrative Expenses #6410 Board of Directors $0 $0 $0 $0 #6412 Board of Review 1,500 - 1,500 - #6414 Contract Appraisal Fees 36,000 - 24,500 - #6416 Legal Services - - - - #6418 Audit 2,660 1,140 2,660 1,140 #6420 Education/Travel 7,000 - 7,000 - #6422 Bonding 368 782 320 680 #6426 Insurance 2,950 - 2,800 - #6432 Travel Allowance 10,000 - 10,000 - Subtotal $60,478 $1,922 $48,780 $1,820 Fixed Assets #6620 Office Furniture - - - - #6640 Office Equipment - - - - Subtotal $0 $0 $0 $0 Office Supplies and Expenses #6312 Office Supplies $6,000 $1,500 $6,000 $1,500 #6314 Postage and Freight 4,620 1,380 4,620 1,380 #6318 Computer Support 13,100 - 13,100 - #6320 Legal Publications 400 - 400 - #6322 Dues and Memberships 800 - 800 - #6324 Books and Subscriptions 1,850 - 1,500 - #6328 Equipment Rental 640 160 640 160 #6330 Telephone 2,640 660 2,640 660 #6332 Utilities 2,800 700 2,800 700 #6334 Janitorial Services and Supplies 4,240 1,060 4,240 1,060 #6336 Maintenance and Repairs 2,880 720 2,880 720 #6338 Maintenance Agreements - - - - #6339 Lease Contract Copy Machine 2,400 - 2,400 - Subtotal $42,370 $6,180 $42,020 $6,180 Reserves #6820 Computer Maintenance $1,000 - $1,000 - #6840 Computer Upgrade 3,500 - - - Subtotal $4,500 $0 $1,000 $0 Salaries and Benefits #6111 Chief Appraiser $38,720 $9,680 $37,280 $9,320 #6112 Deputy Chief Appraiser 30,950 - 29,250 - #6113 Senior Appraiser 21,320 - 20,120 - #6114 Collection Clerk I 17,152 4,288 16,032 4,008 #6114 Collection Clerk II 15,816 3,954 14,776 3,694 #6141 Retirement 17,644 2,406 16,896 2,304 #6142 Health and Life 24,754 3,376 25,520 3,480 #6143 FICA 792 108 792 108 #6145 Workman's Compensation 792 108 792 108 Compensation Package +4% - - n/a n/a Subtotal $167,940 $23,920 $161,458 $23,022 Totals $275,288 $32,022 $253,258 $31,022 Source: Hansford CAD budget documents for 2003-04 and 2004-05.
With more than 60 percent of the appraisal budget allocated to wages and benefits, both taxing units and the public need the detail on positions and benefits required by state law to be assured the number of staff in the district is sufficient to perform the work and that each staff member is fairly compensated.
In Hansford CAD a majority of the parcels and property tax fees come from producing oil and gas minerals. Since these parcels are held mainly by a few corporate owners, only a small collection staff is needed as compared with the parcel count. While the collection budgets remained essentially the same, the appraisal budget increased by about $20,000 from 2003-04 to 2004-05, mainly due to increased contract appraisal fee expense.
The board voted to expand the scope of appraisal work and request bids for the mineral, utility and industrial appraisal contract in the spring of 2004, with the letter request for proposals sent in June. Ochiltree CAD, the previous provider, was the awarded the current contract for tax year 2005, which included about 40 additional large commercial/industrial accounts-all of Hansford CAD's feedlots, grain elevators and swine production facilities. The $11,500 cost increase from $24,500 to $36,000 annually is attributed to the 40 additional large commercial/industrial accounts, with an average annual cost of $300 each.
Expand the budget format to comply with the Tax Code.
In organizing and administering an appraisal district, the chief appraiser is responsible for hiring, firing, and training personnel, for ensuring compliance with a wide range of legal requirements and for the maintenance of policies and procedures for effective appraisal district office operations. The district is also required to comply with Comptroller rules concerning application forms and appraisal records.
The chief appraiser is required by law to prepare and certify an appraisal roll for each taxing unit participating in the district. Certification of the appraisal roll for the 2003 and 2004 tax years by the district was completed according to the law.
Hansford CAD does not have complete written administrative procedures manuals. The only written documentation that addresses administrative functions are job descriptions tied to specific staff members. When a position becomes vacant, there is no manual to help an employee learn how to do, for example, field appraisal work or process payroll. Teaching and learning of appraisal and administrative procedures is done by word of mouth with experienced staff training new staff.
While it does not have written procedures for operating the district office, the district does have a publication entitled Hansford Appraisal District-Appraisal Manual-2003 to assist its appraisers. These procedures, however, do not assist staff in running the office.
A policy tells a person, department, group of individuals what they must do, whereas as procedure enumerates how it can be accomplished.
Well-written and organized procedures:
- implement and assure compliance with board policies as well as document the intent of those policies;
- protect the institutional knowledge of an organization, so that as experienced employees leave, new employees have the benefit of the others' years of experience;
- provide the basis for training new employees; and
- offer a tool for evaluating employees based on their adherence to procedures.
Section 23.12 of the Tax Code requires all appraisal districts to have documented policies and procedures. In addition, since many of the staff have been employed by the district for several decades, the established processes and knowledge base would be lost if any unplanned departures happened suddenly. To be effective, policy and procedure manuals are updated and kept current at all times. This means setting up a system for regular updates and distribution, as well as periodic reviews to ensure that all old policies are removed when no longer needed.
Jefferson CAD, recently reviewed by the Comptroller's office, maintains a current and comprehensive policy and procedure manual detailing procedures for payroll, accounting, purchasing, etc.
Develop a complete, written administrative procedures manual.
Appraisal districts use information technology to provide detailed records that are easily accessible to staff and the public. Information technology systems allow staff to effectively manage large amounts of data on individual properties and make the appraisal process more efficient.
Hansford CAD has a contract with Next Generation Software, Inc. to provide software for the appraisal and collection functions of the district. The district has had a long relationship with this small specialized vendor. This system allows the district to exceed the requirements of Section 23.01 of the Tax Code, which requires that all appraisals must consider the individual characteristics of the subject property. The system also allows the district to run ratio studies on sold properties in order to update the appraisal schedules, and it assists the district in the record keeping for ownership, exemptions, and values.
The software can also show a picture of properties from different views assisting the appraisal review board during the appeal process. As such, the district is currently updating photographs of residential and commercial properties, including rural barns and other outbuildings. The photographs will be entered into the computer and then can be displayed on an appraisal card. The appraisal card can then provides updates of measurements of any improvements that have been made on the property. This will allow the appraiser and taxpayers to ensure the correct property is being appraised. This new process will also assist the district in the reappraisal process by showing improvements that existed at the last inspection of the property.
For disaster recovery and data backup, data is backed up daily and stored in a vault onsite. Additionally, Next Generation Software, Inc. has an on-line copy of appraisal data.
Hansford CAD has an automated appraisal software system with data backup that exceeds Tax Code requirements.
Hansford CAD is in the process of assigning unique parcel identifiers but the same identifiers are not consistently being used on the both the appraisal maps and appraisal cards. The review team tested the integrated system by choosing unique parcel identifiers and then attempting to locate the appraisal card and map location. Property identified on an appraisal card cannot be easily located on a corresponding map, even though the district's mapping system, contracted for through Pritchard & Abbott, Inc. is integrated with the appraisal system software and database. In addition, property first found on a map cannot be easily matched with its corresponding appraisal card because the unique parcel identifier on the map is not always found on the appraisal card.
Overall, unique parcel identification numbers shown on the maps were not found on the corresponding appraisal cards; appraisal cards could not be easily matched with mapped locations. Districts that use the same unique parcel identifier on both maps and appraisal cards find it easier for district staff and the public to gather geographic and appraisal information about specific properties using limited information as a starting point.
Use unique parcel identifiers on maps and appraisal cards.
Personnel and human resources management are a critical function of appraisal districts. Successful management of personnel includes efficient recruiting, hiring, classification and compensation, benefit administration, training and development and performance evaluation. Compliance with equal employment opportunity statutes and other applicable federal and state laws and the establishment of fair and workable policies, procedures and training are important for the recruitment and retention of competent staff.
The Hansford CAD staff is organized as outlined in Exhibit 6.
Hansford County Appraisal District
Positions, Certifications, Years with Brewster CAD and Salaries
Position BTPE Certification Years with Brewster CAD Salary Chief Appraiser CTA, RTA, RPA 23.0 $48,400 Deputy Chief Appraiser CTA, RTA, RPA 19.0 $30,950 SeniorAppraiser RPA 11.0 $21,320 Collection Clerk I RPA 10.0 $21,440 Collection Clerk II None* 0.2* $19,770 *After six months successful employment training and certification needs are determined.
Source: Hansford CAD and Board of Tax Professional Examiners, 2005.
Appraisal district staff who appraise property are required to be Registered Professional Appraisers (RPA) or to be working towards certification as an RPA. Staff that is in collections must be working towards the Registered Texas Assessor (RTA) or Registered Texas Collector (RTC). Staff must be certified within five years of their hire date. Interim certifications include Class II and Class III. In addition, RPAs must re-certify five years from the date of first certification and every five years while registered. All Hansford CAD staff has current BTPE certifications in all positions requiring certification.
Hansford CAD has a comprehensive employee handbook. First adopted by the board in 1988, the handbook is reviewed and updated regularly as needed. For example, after attending a Northern Plains Chapter of TAAO legal briefing in 2004, it was decided the handbook needed a policy about personal use of the internet and visiting non-job-related web sites while on the job. Updates also routinely occur after staff's attendance at professional meetings, allowing them to keep current on federal and state employment regulations and legal requirements in dealing with employees.
The handbook presents a work philosophy within which all staff are expected to function; a listing of all taxing entities that the CAD provides appraisal and collection services; the administrative structure of the CAD; numerous employee policies and regulations; the compensation and benefits package the CAD provides; the scheduling of work performance evaluations; how disciplinary processes and grievance procedures; drug abuse policy, etc. A comprehensive employee handbook keeps employees, management and the public aware of employee rights and responsibilities.
Hansford CAD has a complete employee handbook that is updated as needed.
Hansford CAD has an established practice of annually evaluating all non-contract staff and a separate performance evaluation process for first year employees. The board has approved all employee job descriptions.
Each job description consists of a general statement that the CAD is an equal opportunity employer and does not consider race, color, creed, age, or sex in matters of employment. A general position summary statement defines the position. The knowledge, skills, and abilities portion of the job description defines what credentials are required before being hired or what credentials or skills must be attained in a timely manner after being hired. Duties and responsibilities point out that the employee is not limited to the job responsibilities listed on job description, but is responsible to perform other duties as needed.
The chief appraiser evaluates the deputy chief appraiser annually. The deputy chief appraiser does annual written evaluations for each staff member. During the first year of employment, staff are evaluated at 3 months by the chief appraiser; at six months and one year of employment by the deputy chief appraiser. Beginning with the first year of employment, staff are evaluated using employee appraisal and performance evaluation documents specifically adopted by the district. The process requires both staff and manager to complete the evaluation documents and to meet to discuss both sets of ratings prior to finalizing the performance evaluation.
The tools used in the evaluation process offer a foundation upon which both the employee and the district can monitor work expectations. Furthermore, the instruments' design is such that there are numerical scales and open ended portions so that comments can be made when appropriate. The three staff evaluation instruments that focus on general work functions and job skills are evidence of a "best practice" in employee evaluations. All instruments have rating scales along with a supporting details or general comments section; these open-ended sections allow for the individualizing of job functions. These evaluation instruments, because of the use of a numeric rating system and the comments sections, will be able to measure change over time in the employees' job performance.
Hansford CAD has approved employee job descriptions with an excellent non-contract employee evaluation process.
The chief appraiser has never been formally evaluated by the board during 23 years of employment, all by annual contract, since the appraisal district was established in 1982. This is the only contract employee position in the district. Only a few appraisal districts in the state employ their chief appraiser as a contract employee. While the chief appraiser does have a complete job description, the reviewer found that the chief appraiser's annual contract renewals are the only indication of some kind of board review or evaluation process being applied.
However, according to the Hansford CAD self evaluation questionnaire responses, three-fifths of board members agreed that, "...the board conducts annual evaluations of the chief appraiser; and that the board evaluation of the chief appraiser is formally documented and based upon measurable criteria." The chief appraiser said that her contract is her evaluation in that having a contract translates to work and not having a contract translates to no work. In addition, the chief appraiser has made it known publicly that she intends to retire in 2006. Through interviews, the reviewer learned from the chief appraiser that the board is currently discussing whether they want to use a different kind of performance evaluation system for the chief appraiser position.
Chief appraisers are responsible for ensuring that competent staff are hired, procedures are documented, appraisals are performed, employees are evaluated and all other functions performed by an appraisal district. Having a qualified chief appraiser is important to effective district operations.
Without an objective system in place to ensure that the board and chief appraiser are in agreement as to what is expected of the chief appraiser, performance evaluations, when conducted, may be subjective and based on emotion rather than actual performance.
A good performance evaluation system outlines the behaviors expected of the chief appraiser and what the board expects the chief appraiser to accomplish each year.
Establish a written, annual evaluation process for the chief appraiser position.
In appraisal circles there are generally three approaches to value-cost, income, and market-that a chief appraiser must consider in determining the market value of property. The chief appraiser must consider all three and use the method most appropriate in appraising a particular property.
Through fieldwork, the appraiser gathers specific information about properties (condition of the property, age of the property, construction details, physical dimensions, etc.). In addition, the appraiser gathers information about the land on which the real property is located (dimension of the land, its location, topography for vacant lots/rural tracts, etc.) Most appraisals are accomplished by entering the accumulated property characteristics into the computerized valuation model. The model, when directed, produces a taxable value for each property based on the property's characteristics that the appraiser then reviews for reasonableness and accuracy.
As part of their computerized model, Hansford CAD uses cost-based schedules to appraise improvements. The cost-based schedules are based on annual updates to reflect local factors and market influences. Additionally, the system provides areas for historical ownership changes, exemptions, and comment areas for pertinent information. The data on the appraisal cards can be produced as hardcopy and is stored in the computer. Ownership changes are obtained from the Hansford County Clerk's land records. New construction, additions, or changes are obtained from city permits.
Ochiltree CAD also appraises Hansford CAD's minerals and utilities. Minerals are appraised using the income approach, which involves estimating the income likely to be generated by selling the minerals. Utilities are appraised using the unit value technique. The unit value technique requires the appraiser to determine the market value of the entire utility and apportion the value to each taxing unit within the appraisal district.
The district uses cost-based schedules to appraise real property improvements. The cost-based schedules used by the appraisal district are purchased as a subscription service from Marshall & Swift/Boeckh (MS/B). MS/B provides residential and commercial building cost data necessary for real estate cost valuations and is widely considered by the appraisal profession as the authority in cost appraisal. Their cost data allows appraisers to develop replacement costs for hundreds of property types, construction types and property uses. The data also provides a basis for depreciating values of properties as well as developing values for other contributing property features and improvements such as swimming pools, fences and storage buildings.
Hansford CAD subscribes to two products that MS/B offers: the Residential Cost Handbook, for the cost appraisal of residential and multi-family properties, and the Marshall Valuation Service Manual for the valuation of commercial properties. When appraising residential property, Hansford CAD appraisers use a market-derived adjustment factor called a "local modifier" to adjust the MS/B cost values to an appraised value that is reflective of their local market conditions. The local modifier is developed by appraising confirmed residential sales using the MS/B residential cost data in the handbook. Any disagreement between the sales price and the appraised value results in an adjustment factor. By applying this method to sales in a neighborhood or concentration of residential property, the CAD can determine an appropriate overall local modifier from the pattern of adjustment factors that are developed. The agreed upon local modifier can then be applied to all cost appraisals of similar properties in that area. The cost appraisals are then considered to be "market adjusted."
When appraising commercial property, Hansford CAD applies an "economic adjustment" factor to their cost appraisals. The economic factors are discriminately applied to areas or properties that they deem need an adjustment. The CAD's use of economic factors is subjective and is based on the appraiser's experience and knowledge of the local commercial market conditions.
The district has compiled a 45 page publication, Ag-Use Valuation Schedule-2004-Hansford County that it uses as a productivity schedule and updates annually. The information in these schedules is based on local information and typical farm practices of the area. Information supplied by governmental sources is used to determine the number of acres planted, harvested and yields. Each year the oldest data is dropped and a new year is added so the information added stays in the calculations for five years. This information is computerized to allow for convenient insertion of each year of new data.
Sales ratios are an important part of Hansford CAD's appraisal process. Ratio studies are produced on a regular basis and demonstrate a uniformity and conformity recommended in IAAO standards.
Obtaining and processing sales information is vital for the district to determine the accuracy of their values. It is especially difficult in rural areas without access to a Multiple Listing Service and with local realtors, lending agencies, and appraisers concerned about privacy issues.
Letters are mailed to both buyers and sellers of real estate transactions recorded in the Hansford County Clerk's land records. The procedure for entering sales data into the computer is the first item in the district's manual, Hansford Appraisal District-Appraisal Manual-2003. The sales information is coded in order of priority; that is, a sales price confirmed by the buyer has greater priority than one that the district has calculated by promissory note value. If a buyer has requested confidentiality, the price is entered in an alphabetic form so that the price is not shown on the computer or the appraisal card. Appraisal cards of the transferred property are attached to the sales letter. The clerk enters information about the property that the district may not have, such as the number of bedrooms, bathrooms, year built, basement, etc. These sales letters and attachments are put into a notebook according to classification. The book is not available to the public due to the confidential information.
Ratio studies based upon the sales information received are produced for category A and can be produced in many different ways (per school district, per residential classification, or per time period, for example.) Sales ratios are not run for commercial, vacant or rural land, or for multi-family properties because of the scarcity of such sales.
Frequently running and using category A ratio studies helps to enable the district to keep its values current. If the ratio study in the market area shows the appraised values do not reflect the market, the CAD appraises the available sales to determine the market adjustment factors. The market adjustment factor is the percentage the appraisal district uses to adjust the appraisal schedules to reflect the market value.
There are many years (volumes and volumes) of ratio studies in the CAD. As part of this review the team examined several ratio studies and found that the 2003 ratio studies indicated strong appraisal uniformity and equality.
Hansford CAD solicits sales information and uses that information to produce analytical ratios to determine accuracy of appraisals.
Hansford CAD's reappraisal plan lacks detail for both in-house and contracted appraisals. Hansford CAD has a reappraisal plan that consists of a one-page policy statement that has four parts. The four parts are shown as follows.
- All taxable personal and mineral properties within the boundaries of the appraisal district shall be appraised each year.
- All taxable real property within the boundaries of the district shall be reappraised as often as is warranted in the judgment of the chief appraiser, with said real property being reappraised at least once every three years.
- Re-measuring of a property shall not be construed to be a part of the reappraisal process, but is an ongoing method of upkeep of the physical records.
- The appraisal process shall employ generally accepted appraisal practices using available data; and that the appraisal methodology shall be applied to each category of property as determined by the chief appraiser guided by the provisions of the Texas Property Tax Code.
Section 25.18 of the Property Tax Code requires appraisal districts to implement a plan for reappraisal, which provides for the reappraisal of property within the district once every three years. A comprehensive reappraisal plan is critical to the success of the district in many ways including: budgeting, market analysis, continuity of district performace during staff changes, as well as a directive for current staff.
Hansford CAD operates by reappraising one third of the district each year, assuming the workflow and costs are consistent so the district does not address budgeting in the reappraisal plan. For contracted appraisals, comprising about 80 percent of the district's parcel count, reappraisal occurs each year.
The reappraisal plan does not link the appraisal district's budget, training, contracting, market analysis, field inspections and data processing in one document. The appraisal district's policy includes statements about some of these elements but the board has not adopted a plan that includes documentation of how the appraisal district staff will implement the reappraisal plan. In addition, the board has not adopted or reviewed the work plan the staff would follow to accomplish the reappraisal policy.
Lack of a detailed reappraisal plan could cause the execution of the plan to go awry, and result in property values that deviate from market value, like the mineral appraisal pricing errors that caused Hansford CAD to meet the eligibility requirements for this review.
According to USPAP Standard 6, a functional reappraisal plan includes the following activities:
- identifying properties to be appraised;
- identifying and updating in the appraisal records the relevant characteristics of each property to be appraised;
- defining market areas;
- identifying property characteristics that affect property value in each market area;
- developing an appraisal model that reflects the relationship among the property characteristics affecting value in each market area;
- calibrating the model to determine the contribution of the individual property characteristics affecting value;
- applying the conclusions reflected in the model to the characteristics of the properties being appraised; and
- reviewing the appraisal results.
At the present time an appraiser locates, measures, classifies, and determines depreciation, and other factors on all real estate. The deputy chief appraiser produces the ratio studies and assists the chief appraiser with the improvement schedules (cost based adjusted to reflect market information). Collection clerk I works with the assistant chief appraiser on mobile homes. Collection clerk II reviews the renditions and is responsible for assessing personal property. While these processes go on in practice, not having written documentation is a missing link in ensuring successful reappraisal.
A reappraisal plan provides for a physical inspection of the properties being appraised. Hansford CAD records property characteristics that include, but are not limited to: the Comptroller's property category code, the location and market area of property, the physical attributes of the property such as the size, age, condition, and construction type; the number of bathrooms, bedrooms, etc.; the present of amenities such as central air conditioning; any legal and economic attributes or restraints; and the presence of easements, covenants, leases, special appraisals, or other legal restrictions.
For contracted appraisals, a reappraisal plan provides checks and balances to ensure parameters used in the appraisals are correct and alerts CAD and ISD management to question when ratios deviate from an acceptable range. Spearman ISD met all three criteria and became classified as an eligible district due to flawed gas prices found in only two mineral lease appraisals. According to the contract appraiser, safeguards exist, including individual appraisal review by owners of record or their representatives to ensure the most correct information is used in the valuation. However, in tax year 2003 both of these owners missed the mistake as well as the research firm that supplied the gas prices, so the values were not corrected.
For tax year 2004 mineral appraisals the contractor modified the process to improve data quality before appraisal analysis was performed-as a result, Spearman ISD and Hansford CAD fell within confidence interval limits in the 2004 PVS.
Expand the reappraisal plan.
Hansford CAD lacks property classification manuals that describe and define the characteristics of each class of property.
Hansford CAD had an appraisal manual adopted in 1982 that provided the characteristics of twenty-one classifications of frame and brick veneer improvements using classifications from RF1 (Single Family Residence, Poor Quality 400-600 Sq Ft) to RV7+ (Single Family Residence, Excellent Quality 2500-5000 Sq Ft). RF represents residential frame; RV represents residential brick veneer. However, that original manual cannot be found. The classifications and schedules from the original manual were computerized and titled Hansford Appraisal District-Appraisal Manual-2003. However, this manual's content is not adequate for training new personnel or explaining to taxpayers how the manual is used. Rather than employing a procedures manual for appraisers to reference, the appraisal district relies on personal training provided by the chief appraiser and assistant chief appraiser. While the district has enjoyed employees with great longevity that situation could change at any time. In fact the chief appraiser is planning to retire in 2006.
The district reappraises one of the three school districts each year. The cost schedules for each Category A-Single Family Residence classification are adjusted, if necessary, during each reappraisal to reflect the market values as determined by sales ratios. The sales ratios are based upon sales throughout the county so the schedules for all district entities are adjusted. The schedules price per square foot is adjusted downward each 200 square feet due to the economy of scale; that is, the larger the improvement, the less the cost per square foot for each unit of construction such as foundation, roof, floors, etc. The manual includes the percentage of the main area cost to be applied to the additional features of the improvement. For example, the unit price of an attached garage and/or a finished basement will be valued at 35 percent of that of the unit value of the main area. A finished upper story will be valued per square foot at 65 percent of that of the main area per square foot.
The manual is mainly useful to an experienced Hansford CAD appraiser. The characteristics of each improvement classification are not presented in an easily viewed manner. The manual contains no photographs or sketches to illustrate the various classifications. A manual with illustrative photos would be helpful to the field appraiser when reviewing property and when explaining to an appraisal review board or taxpayer the factors determining how an improvement was classified.
A depreciation schedule is included in the manual. Again, this schedule is not easily understood. There are no procedures to determine which depreciation schedule to use or how or when to apply the depreciation.
A majority of the commercial/industrial schedules are based upon frame and veneer construction similar to that of the residential schedule. Commercial improvements are valued by cost basis as determined by MS/B according to construction type, and to some degree, by use. The district uses economic modifiers on some commercial properties such as vacant lots, grain elevators and feed yards. There is no description of what constitutes the characteristics of the classifications. This makes it difficult for a property owner, new staff member or anyone reviewing the schedules to know which schedule to use on a commercial improvement.
Personal property schedules, especially for mobile homes, pipelines and commercial vehicles, are included in the manual. Personal property values are largely based on taxpayer renditions. The personal property appraiser has access to the Field Appraiser's Guide-April 2003 published by the Texas Comptroller of Public Accounts. The MS/B guides are also available for complex or unusual personal property. However, there is no manual to guide the appraiser in the review of renditions, or in the reasonableness determination.
Hansford CAD staff appraisers use the income approach in the calculation of agricultural productivity values.
Ochiltree County Appraisal District's (OCAD) contract for performing Hansford CAD's mineral, utility and commercial/industrial properties accounts for more than 32,000 parcels on the Hansford tax rolls. This includes multiple and miniscule mineral leases and interests. OCAD uses the income approach on mineral properties, specifically, the discounted cash flow technique. Using this technique, OCAD projects the net income for each year of the property's remaining economic life. They then discount each of those net incomes to the present value. This technique is a common and accepted income appraisal standard for income producing property, but no manual is available for use in explaining or defending the mineral appraisals to the public.
Ochiltree CAD appraises Hansford CAD's utility property using the industry standard unit value technique. The unit value technique is a technique that requires the appraiser to determine the market value of the entire utility company. The utility company value is then apportioned to each taxing unit based on an agreed measure of the company's presence in the taxing unit such a miles of track, historical cost or number of meters. The unit valuation is widely accepted as the preferred income technique for appraising utility properties, but again, no manual is available for use in explaining or defending the appraisals to the public.
Hansford CAD's sole reliance on the experience of the chief appraiser, assistant chief appraiser and field appraiser for their knowledge of the district's classifications does not ensure required generally accepted appraisal methods and techniques are consistently applied to the same or similar properties, while taking care to account for individual property characteristics in the appraised value.
Expand the existing property classification manual.