Chapter 1
Findings of the Property Value Study and Summary
Overview of Property Value Study
The annual PVS estimates the total taxable property value in each school district in Harris CAD. With a few notable exceptions, the law requires all CADs and PTAD to appraise property at market value. Market value, in essence, is the price a willing buyer would pay a willing seller for the property under normal conditions. State law, however, requires CADs to appraise agricultural land and timberland according to the productivity value of the land's category.
The CAD determines the local appraisal roll value and certifies it to each school district; these values become each school district's tax roll values. Each school district must submit an annual self-report of its property values to PTAD, which audits the reports for accuracy.
PTAD estimates total taxable value in a school district, called the state value, by estimating market value or by accepting the local appraised value in each property category and then adding these category values for an overall school district value. PTAD then deducts the school district's self-reported, state-mandated homestead exemptions, disabled veterans exemptions, value limitations, reinvestment zones, freeport exemptions, the loss between market value and productivity value of qualified agricultural lands, the school tax ceiling for homeowners 65 or older or with a disability and other state-mandated exemptions.
PTAD issues a preliminary and a final PVS each year. School districts and CADs may protest the findings of the preliminary PVS through an administrative hearings process. This process requires the protester to file a written protest with supporting documentation within 40 days of the issuance of the preliminary PVS. PTAD may amend the findings of the preliminary PVS based on the submission of a written protest, on the results of a conference between PTAD and CAD representatives or as a result of a formal hearing. A hearings examiner appointed by the Comptroller's general counsel holds the formal hearing; this person is not a PTAD employee. A school district that disagrees with the hearing examiner's final decision may appeal it to Travis County District Court.
When conducting the PVS, PTAD assigns property to various categories, such as residential, commercial and rural property, so PTAD can study like property together.
A ratio is used to indicate the percentage of market value, as determined by PTAD, at which a CAD appraises a property or group of property. A ratio of 1.0 indicates appraisal at market value-the legal standard. The industry considers appraisals with ratios close to the standard, for instance between 0.95 and 1.05, reasonably accurate for a property group.
Eligible School Districts
The PVS identified Houston ISD as an eligible district when its local value fell outside of the confidence interval limit determined by the 2005 PVS.
The PVS tested six property categories in Houston ISD: Category A, Real Property: Single-family Residential; Category B, Real Property: Multifamily Residential; Category C, Real Property: Vacant Lots and Tracts; Category D: Rural Real Property; Category F1, Real Property: Commercial; and Category L1, Personal Property: Commercial.
Category A made up 56 percent of the total test value and 52 percent of the school district's value. A review of Category A sample ratios in the 2005 PVS indicates that the CAD appraised from a low of 55 percent to a high of 146 percent of market value, with a weighted mean ratio of 0.9839.
Category B made up 8 percent of the total test value and 8 percent of the school district's value. A review of Category B sample ratios in the 2005 PVS indicates that the CAD appraised from a low of 47 percent to a high of 205 percent of market value, with a weighted mean ratio of 0.9395.
Category C made up 2 percent of the total test value and 2 percent of the school district's value. A review of Category C sample ratios in the 2005 PVS indicates that the CAD appraised from a low of 28 percent to a high of 148 percent of market value, with a weighted mean ratio of 0.8485.
Category D made up less than 1 percent of the total test value and less than 1 percent of the school district's value. Category D includes two subcategories. Category D1, Real Property: Qualified Agricultural Land is primarily farm and ranch land that qualifies for the special productivity appraisal; and Category D3, Real Property: Non-Qualified Land, which is primarily rural homes and land that do not qualify as farm, ranch or timberlands. The differences in value between Category D1 and Category D3 are wide since Category D1 is appraised using a special statutory method to determine the land's productivity value, and Category D3 is based on what the land would sell for in an open-market transaction.
Category D1 made up less than 1 percent of the total test value and less than 1 percent of the school district's value. The category ratio of Category D1 values tested was 1.2036. Category D3 made up less than 1 percent of school district's test value and less than 1 percent of the school district's value. The CAD appraised Category D2 from a low of 23 percent to a high of 103 percent of market value, with a weighted mean ratio of 0.6747.
Category F1 made up 23 percent of the total test value and 22 percent of the school district's value. A review of Category F1 sample ratios in the 2005 PVS indicates that the CAD appraised from a low of 22 percent to a high of 183 percent when compared to a sample of market sales and PVS appraisals, with a weighted mean ratio of 0.8258.
Category L1 comprised 10 percent of the total test values and made up 9 percent of the school district's value. A review of Category L1 sample ratios in the 2005 PVS indicates that the CAD appraised from a low of 71 percent to a high of 105 percent of market value with a weighted mean ratio of 0.9510.
These figures, in conjunction with the coefficients of dispersion (COD) outlined on upcoming pages, measure the consistency of a CAD's property appraisals at the same percentage of market value, without regard to value. A low COD combined with high percentages of market value indicate equitable appraisals; while a high COD paired with low percentages of market value indicate inequitable appraisals.
While these figures show the range of property ratios in Harris CAD, a clearer measure of appraisal performance indicates how many of these ratios were within 10 and 25 percent of the median ratio. The median ratio is the ratio in the middle of all the other ratios when sorted by size. These numbers indicate relative uniformity in appraisal in the CAD and ISD, except for rural and commercial properties, which show a lack of uniformity in appraisal.
The median ratio for Category A in Houston ISD was 98 percent, with 82 percent of the ratios within 10 percent of the median and 99 percent within 25 percent of the median.
The median ratio for Category B in Houston ISD was 98 percent, with 62 percent of the ratios within 10 percent of the median and 89 percent within 25 percent of the median.
The median ratio for Category C in Houston ISD was 94 percent, with 49 percent of the ratios within 10 percent of the median and 75 percent within 25 percent of the median.
The median ratio for Category D3 in Houston ISD was 72 percent, with 9 percent of the ratios within 10 percent of the median and 36 percent within 25 percent of the median.
The median ratio for Category F1 in Houston ISD was 91 percent, with 46 percent of the ratios within 10 percent of the median and 76 percent within 25 percent of the median.
The median ratio for Category J, Real and Personal Property: Utilities, in Houston ISD was 101 percent, with 46 percent of the ratios within 10 percent of the median and 69 percent within 25 percent of the median.
The median ratio for Category L1 in Houston ISD was 98 percent, with 73 percent of the ratios within 10 percent of the median and 97 percent within 25 percent of the median.
Harris CAD Summary
In addition to the PVS geared to measuring appraisal performance for school districts, PTAD conducts a study on overall CAD appraisal performance by aggregating samples collected for the school district study to the appraisal district level. PTAD calculates statistical measures of appraisal level and uniformity in each property category and for the CAD overall. The measure of appraisal level is the median. The measures of appraisal uniformity include the COD, the percentage of properties within 10 and 25 percent of the median and the price-related differential (PRD). Together, the median level of appraisal, the COD, the percentage of properties within 10 or 25 percent of the median and the PRD enable the PVS to address the legal requirements that appraisals be equal, uniform and at 100 percent of market value.
Exhibit 1 graphically depicts the levels of CAD appraisals in four property categories, with 99 percent of Category A within 25 percent of market value and Category F1 reaching 75 percent within this level of market appraisals.
Exhibit 1
Harris CAD Appraisal Levels
Source: Texas Comptroller of Public Accounts, 2005 PVS
Harris CAD's overall median ratio was 0.99. Category A sample ratios ranged from 0.37 to 1.94, with the median ratio at 0.99. Category B sample ratios ranged from 0.47 to 2.05, with a median ratio of 0.98. Sample ratios for Category C ranged from 0.28 to 1.48 and had a median ratio of 0.94. Category D3 sample ratios ranged from 0.17 to 1.09, with a median ratio of 0.91. Sample ratios for Category F1 ranged from 0.22 to 1.94 and had a median ratio of 0.96. Category J sample ratios ranged from 0.54 to 1.0057 and had a median ratio of 1.01. Finally, sample ratios for Category L1 ranged from 0.60 to 2.17 and had a median ratio of 0.97.
Coefficient of Dispersion
The COD, the primary measure of appraisal uniformity, measures the average percentage by which individual ratios vary from the median ratio. According to IAAO's Property Appraisal and Assessment Administration, a low COD indicates that appraisals within a category of property are uniform, while a high COD indicates the CAD is appraising property at inconsistent percentages of market value. A COD that is very low, however, may indicate "sales chasing," a form of unequal appraisal.
According to IAAO's Standard on Ratio Studies, CODs for single-family residences should generally be 15 or less, and 10 or less for new and fairly homogeneous areas. For vacant lots and for income-producing property the COD should be 20 or less. For other real property and personal property CODs should reflect the nature of the property, market conditions and the availability of reliable market indicators.
The 2005 CODs for Harris CAD were as follows:
- 5.73 for Category A;
- 10.41 for Category B;
- 18.28 for Category C;
- 24.36 for Category D;
- 13.33 for Category F1;
- 10.42 for Category J; and
- 8.20 for Category L1.
Following are the 2005 CODs for Houston ISD:
- 5.52 for Category A;
- 11.53 for Category B;
- 17.61 for Category C;
- 30.99 for Category D;
- 18.24 for Category F1; and
- 3.61 for Category L1.