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Chapter 2:
Findings of the Appraisal Standards Review

This chapter addresses the findings and recommendations of the appraisal standards review of the Haskell CAD.

Key Findings and Recommendations

As part of the review process, PTD makes recommendations to address challenges identified during its review of a CAD. Below are recommendations addressing key challenges associated with Haskell CAD's appraisal activities.

FINDING
Haskell CAD does not effectively use ratio studies to measure appraisal performance.

Property Tax Code Section 23.01 states:

IAAO's Standard on Ratio Studies, Section 4.6, Evaluation and Use of Results states:

A properly designed ratio study is a powerful tool for analyzing appraisal performance and suggesting strategies for improvement.

Results of the 2006 PVS indicate the CAD is not appraising the county's rural land at market value. Exhibit 1 lists 2006 PVS results for Sub-Category D3: Rural Real for each school district in the CAD.

Exhibit 1 shows the CAD is not appraising rural land at market value. Category D: Rural Real property comprises over 54 percent of the CAD's total appraised value.

Exhibit 1
Sub-Category D3: Rural Real
2006 PVS Results, All ISDs

School District	Category	2006 PVS Ratio
Haskell	D3	0.4753
Rule	D3	0.9193
Paint Creek	D3	0.6723

Source: Texas Comptroller of Public Accounts, 2006 Property Value Study.

The CAD's rural land appraisal ratios have a history of being below market value. Exhibit 2 lists PVS results for Sub-Category D3 from 2004-06 for all Haskell CAD school districts.

Exhibit 2
Sub-Category D3:
Rural Real 2004-06 PVS, All ISDs

School District	Category	2004 PVS Ratio	2005 PVS Ratio	2006 PVS Ratio
Haskell	D3	0.9383	0.8047	0.4753
Rule	D3	0.9431	0.8890	0.9193
Paint Creek	D3	0.9621	0.9258	0.6723

Note: Haskell CAD's ratio studies for 2004-06 were destroyed by the CAD.
Source: Texas Comptroller of Public Accounts, 2004, 2005, 2006 Property Value Studies.

The COD demonstrates how tightly or loosely individual sample ratios are clustered around the sample's median ratio. A lower COD indicates better appraisal uniformity and consistency. The IAAO recommended COD for rural land appraisals is 20 or less. In 2006, the PVS showed the COD for Category D, Rural Real, in Haskell CAD to be 19.65. When compared to the 10.98 COD in 2004 and 17.75 COD in 2005, the 2006 COD of 19.65 indicates increasing appraisal inconsistency and lack of uniformity.

Research conducted by the Real Estate Center at Texas A&M University in 2007 indicated rural land values in Haskell and surrounding counties increased 34 percent from 2005 to 2006 and nearly 70 percent from 2004 to 2006.

The Texas Chapter of the American Society of Farm Managers and Rural Appraisers in its report, "Trends in Texas Rural Land Values for the Year 2006," stated that the demand for pastureland and farmland has been high in Haskell and neighboring counties, resulting in large price increases. Exhibit 2 shows Haskell CAD has not kept in step with market trends, as disparities between CAD appraised values and local sales increased.

The chief appraiser said native pasture in the eastern part of the county has been selling at record high prices and he knew the CAD's rural land appraisals were below market value in 2006. According to the chief appraiser, buyers from the Dallas - Fort Worth metroplex are purchasing rural land for recreational use and weekend ranches. He said the rate at which land prices accelerated in 2005 and 2006 caught him off guard, and the 2006 rural land schedules were not updated. The CAD's rural land schedules were updated in 2007, however, in the preliminary 2007 PVS, Rule and Paint Creek ISDs are still below the confidence interval for Category D1.

Another area of concern identified by the 2006 PVS was Category A, Single-Family Residential, in Haskell CISD. The PVS showed houses appraised at 93.01 percent of market value. The chief appraiser acknowledged residential building schedules have not been updated in "four or five years" because he felt there was insufficient market data. The CAD relies on sales information from Realtors, fee appraisers and CAD-generated sales letters. The chief appraiser said approximately 350 sales letters are sent out every year, and he estimates a 20 percent response rate to the letters.

Ratio studies compare the market value of individual properties in a representative sample of similar properties to the local appraised value for each property in the sample.

Ratio studies performed by the CAD prior to 2006 were not archived.

According to the chief appraiser, once appraisal values are certified, ratio studies are destroyed. Ratio studies are performed three times annually: at the beginning of the year; in March, after the fieldwork is completed; and in April, after the schedules are updated; and the CAD lacks storage space for the volume of paper generated.

The chief appraiser acknowledged that the CAD's ratio studies could be improved by eliminating data in the reports that could produce erroneous statistical measurements. For example, the CAD's automated appraisal system accesses the entire sales database, including sales that have no recorded sales price. These sales are included in the ratio study calculation, therefore, producing ratios that are not meaningful. To correct this problem and produce ratio studies having meaningful results, CADs must make sure that all sales in its ratio studies are arm's length transactions and have verified sales prices.

The chief appraiser advised that he also uses the PVS to analyze the CAD's appraisal performance and to identify areas lacking appraisal uniformity. The PVS is not designed to act as a local ratio study and its annual lag makes it ineffective in making timely changes based on changing market conditions.

To be an effective tool in measuring its appraisal performance, appraisal districts must ensure that data contained in ratio studies is as accurate as possible. In addition, property characteristics such as class, size, age and value should be reviewed. Stratifying sales information according to property characteristics is useful in identifying lack of appraisal uniformity among property types.

By improving ratio study methods, the CAD will ensure necessary adjustments are made to produce values at or near the market. Effective appraisal districts conduct frequent ratio studies with associated appraisal maintenance, thus ensuring necessary adjustments are made. Failing to effectively use ratio studies to perform appraisal maintenance can result in unequal appraisal of properties, which can result in an increased number of protests.

Nueces CAD, for example, has a computerized appraisal system and conducts ratio studies within property classes by school district and county to determine appraisal performance. The CAD bases reappraisal and value maintenance decisions for some properties or locations on the ratio study results. In addition, Nueces CAD was able to improve its land appraisals by physically inspecting all land and aggressively pursuing sales information.

RECOMMENDATION 1
Improve methods of using ratio studies to eliminate unequal levels of appraisal and make certain that all categories of property are appraised at current market value.

Options available to the CAD include stratifying sales by value, class, location, size and age. If the ratio study in a market area shows the appraised values do not reflect the market, an appraisal district should appraise the available sales to determine the market adjustment factor. The market adjustment factor is the percentage the appraisal district uses to adjust the appraisal schedules to reflect the market value.

FINDING
Haskell CAD does not have written procedures for analyzing and adjusting sales used in ratio studies.

IAAO's Standard on Ratio Studies, Section 6.4, Screening Sales, discusses the importance of analyzing and adjusting sales and states:

To help analysts make wise and uniform judgments, screening procedures should be in writing, and each sales analyst should be thoroughly familiar with these procedures as well as underlying real estate principles.

The CAD's deed clerk routinely mails sales surveys, also referred to as sales letters, to grantors and grantees for all recorded deed transactions. The surveys request information such as the sales price, down payment, type of financing and type of improvement or personal property included in the sale. The chief appraiser said of the 350 surveys mailed each year, about 20 percent are returned to the CAD.

Deed transactions serve as the basis for the CAD's sales database. When responses to the sales surveys are received, the clerk enters the information into the sales database. The clerk enters the grantor, grantee, deed volume and page, sales date and sales price, if shown, on the deed. The chief appraiser uses this information to determine if a sale needs adjusting and meets the requirements of a market transaction. Other sources of sales information are Realtors and fee appraisers. The CAD makes its sales information available to the Comptroller's office.

The chief appraiser said he and the deed clerk analyze the sales to determine if they are arms-length transactions and if they need to be adjusted to accurately reflect market conditions. Guidelines for analyzing and adjusting sales are not written, but are based on the chief appraiser's and clerk's knowledge and experience. For example, according to the chief appraiser, sales are used during the appeals process to help support the CAD's appraised values and to produce ratio studies to measure appraisal performance and conduct appraisal schedule maintenance.

According to IAAO's Standard on Ratio Studies, Section 12, examples of non-market sales include the following:

• Sales involving government entities and public utilities;
• Sales involving charitable, religious or educational institutions;
• Sales involving financial institutions;
• Sales between relatives or corporate affiliates;
• Sales of convenience;
• Sales settling an estate;
• Forced sales; and
• Sales of doubtful title.

According IAAO's textbook, Property Appraisal and Assessment Administration, Chapter 5, Data Collection and Management, the following sales data should be collected whenever necessary:

• sales price – single most important information about any sale;
• names and addresses of buyers and sellers – allows appraiser to contact for additional information on the sale;
• relationship of buyer and seller – helps distinguish an arms-length transaction;
• property address, parcel identifier and legal description – links sale to CAD records;
• type of transfer and deed – also helps identify an arms-length transfer;
• interest transferred – what property rights are included in the sale;
• instrument number – unique identifier helps identify subject property;
• personal property – the price needs to be deducted from the sales price;
• financing – the terms can affect the price and need to be accounted for; and
• date of transfer – needed for determining time of sale adjustments.

Without common guidelines for determining how to verify, confirm and adjust sales, the CAD risks using sales for appraisal maintenance that do not accurately reflect current market value. Confirmation and validation of sales is critical in determining local market values, especially for single-family residences and rural land and improvements. Haskell CISD received an invalid finding in the 2006 PVS, primarily because Category A, Single-Family Residential, tested with a weighted mean ratio of 0.9301 and Subcategory D3: Rural Real tested with a weighted mean ratio of 0.4753. While the other two Haskell CAD school districts received valid findings in 2006, they also tested low in the rural land category, with Rule ISD receiving a weighted mean ratio of 0.9193 and Paint Creek ISD receiving a weighted mean ratio of 0.6723. Research shows land values accelerating at a high rate, and adjusting sales for time in an increasing market needs to be considered.

Written guidelines help appraisers when selecting and adjusting sales for assigning values and as evidence before the appraisal review board. Knowing what analysis needs to be done, when to perform the analysis and how to perform it is key to maintaining continuity and a high level of appraisal accuracy. By providing comprehensive, written guidance to appraisal staff, Haskell CAD can help assure that sales data is applied consistently as a valid indicator in achieving market value, particularly for single-family residential.

For example, Nueces CAD has a market analysis procedures manual that describes the processes used to obtain sales information and the procedures necessary for sales confirmation. Written procedures assure that market analyses are done consistently, regardless of personnel changes.

RECOMMENDATION 2
Establish written procedures for analyzing and adjusting sales data, based on IAAO standards.

FINDING
Haskell CAD's maps do not comply with Comptroller Rule 9.3002.

Texas Comptroller's Property Tax Rules Section 9.3002 addresses mapping as follows:

The IAAO's Property Appraisal and Assessment Administration, Chapter 1, The Ad Valorem Tax System, points out that an accurate set of maps showing every parcel of real property is the most important tool in identifying and locating taxable property. Chapter 7, Land Valuation, notes that a complete set of maps showing parcel boundary lines is required for land appraisals and Chapter 17, Mapping System Management, states "a good mapping system is essential for the location, identification and inventory of all parcels within a jurisdiction."

According to the chief appraiser, the CAD uses county maps purchased from a map company, soil maps, 9-1-1 maps and plat maps. The most recent county maps were purchased in 2000 and show ownership at the time the maps were made. The chief appraiser drew in county roads. The 9-1-1 map shows the house point and situs address assigned by the 9-1-1 emergency system to property outside incorporated areas of the county. The plat maps are old and show the lots and blocks of incorporated areas drawn in by the chief appraiser. The areas are updated, though not on a regular basis. Soil maps are used to identify soil types. None of the maps contain parcel identification numbers linked to the appraisal system. Ownership is updated in the appraisal system, but the chief appraiser said maps are not updated regularly because of time constraints. A lack of mapping resources plays a large role in outdated maps. The CAD does not have a cartographer and the chief appraiser said the CAD does the best it can with limited funds. Little time is left for updates after the chief appraiser is done with reappraisal activities and management responsibilities.

Exhibit 3 shows the required mapping elements set forth by Comptroller Rule 9.3002 and the status of the CAD's maps.

Exhibit 3
Required Mapping Elements and Haskell CAD Mapping Status

Mapping Requirement	CAD Mapping Status
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.	The CAD's mapping system consists of outdated oil production maps, 9-1-1 maps, soil maps and old lot/block maps.
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.	The maps are not drawn to scale or delineated for property lines, nor do they contain identifying numbers, letters or names.
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.	Each CAD map is not divided into sections and drawn to scale.
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.	None of the CAD maps have parcel identification numbers corresponding to numbers on appraisal cards.
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.	The CAD's maps are not updated annually.
Any information required by these sections may be maintained in electronic data processing records rather than physical documents.	The CAD does not have electronic maps.
Development of tax map systems (or substantial progress toward development) shall be completed by Jan. 1, 1983.	The CAD has not developed a system of tax maps.
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.	The CAD has not established a tax map system as required by Comptroller Rule 9.3002.

Source: Comptroller Rule 9.3002, Haskell CAD.

The CAD cannot identify and list all parcels for property tax purposes if its mapping system is not fully functional. The basic function of being able to locate all county parcels geographically is critical to a successful reappraisal process. Displaying parcels to identify market areas, such as the eastern portion of the county where land values are rapidly increasing, also helps to ensure fair and equitable appraisals. Given the status of the CAD's maps, the onsite reviewer would have been unable to locate properties without the assistance of the chief appraiser. The chief appraiser is the CAD's only field appraiser and must rely on situs addresses or personal knowledge of the area to locate properties. This hinders fieldwork and places the CAD at risk of not completing scheduled reappraisals in a timely manner. Loss of the chief appraiser to an emergency or illness would cripple the CAD's ability to locate property.

Henderson CAD, for example, has a sophisticated computerized mapping system to locate properties in the county. The computerized maps show parcels with relation to streets, roads, rivers, streams and other topographical areas that can have an influence on property values. The system also identifies taxing entity boundary lines. Henderson CAD's maps are updated within 30 days of receiving new deed information.

RECOMMENDATION 3
Develop a timeline and devote necessary resources to develop maps that comply with Comptroller Rule 9.3002.

Options available to the CAD include hiring full or part-time mapping staff or outsourcing the mapping to a third party.

FINDING
Haskell CAD's reappraisal plan lacks specific data required by Property Tax Code, Section 25.18 and IAAO.

Section 25.18, Tax Code states:

The IAAO textbook, Property Appraisal and Assessment Administration, Chapter 13, Mass Appraisal, states that the required activities for all reappraisals must include the following steps in the order given:

• Performance Analysis – Determines whether or not the values are consistent with the market and if the values are equitable and that ratio studies are the primary tool for the analysis.
• Reappraisal Decision – Use statutes or administrative rules. This may include a cyclical schedule in which jurisdictions are physically reviewed and revalued. It is also noted that the reappraisal requires careful planning along with a major commitment of resources.
• Analysis of Available Resources – This step is performed before defining goals and objectives. This includes evaluating the staff, budget, existing systems and practices, data processing support and existing data and maps. The publication also stresses that an adequate budget is crucial in that it can overcome deficits in other areas.
• Planning and Organization – IAAO emphasizes that this is the most important aspect of reappraisal as it identifies the target completion date and performance objective, specific plan of action and timeline. The plan should also include definitions of critical activities with completion dates, assignment of responsibilities, and establishes data collection and field work standards.
• System Development – This produces the procedures, methods, manuals, and software for the mass appraisal system.
• Pilot Study – This study tests procedures in several portions of the jurisdiction. It should include a ratio study to verify if the system produces reliable and accurate values and point out needed modifications.
• Data Collection – After procedures and forms are made, tested and approved the data collection can start. IAAO stresses that quality control is essential.
• Production of Values – This begins with a market analysis, model development, model calibration and calculation of preliminary values. The ratio study then assesses the consistency and validity of the values between each property type and area. After the models provide acceptable results, they can be used to produce values.
• Preparation of Appraisal Roll.
• Final Performance Analysis.
• Data Maintenance.
• Value Updates.

Haskell CAD did not have a written reappraisal plan in 2006. In September 2006, the CAD Board of Directors approved a biennial reappraisal plan for the 2007 and 2008 tax years. The chief appraiser said the CAD is on a two-year reappraisal cycle, with the City of Haskell and the eastern half of the county reappraised in 2007. Other incorporated areas and the western half of the county will be reappraised in 2008. The 15-page reappraisal plan does not reference the two-year reappraisal cycle described by the chief appraiser, but instead states that all property in the CAD is reappraised every year.

The CAD's reappraisal plan is vague, providing limited and generic information on reappraisals. According to the chief appraiser, the CAD's reappraisal plan is based on a reappraisal plan model developed by another appraisal district. The model summarizes IAAO's required reappraisal activities, but does not provide any information specific to Haskell CAD. For example, the plan contains a section for a calendar of key events, but no information is included. The CAD Board of Directors adopted the model, without any substantive changes, as its biennial reappraisal plan in September 2006.

The Haskell CAD reappraisal plan describes, in general terms, the mass appraisal techniques used to appraise property for ad valorem tax purposes. A reappraisal plan that complies with Property Tax Code Section 25.18 describes in detail what an appraisal district plans to do in each year of the reappraisal cycle and contains at least the required statutory elements. The plan should explain specifically how and when the described mass appraisal techniques will be implemented. The IAAO provides vital elements for an effective work plan, such as inclusion of a timeline or calendar for performing reappraisal tasks. The work plan needs definitions of critical activities, with completion dates, assignment of responsibilities and established data collection and fieldwork standards. Given the generic nature of Haskell CAD's reappraisal plan, one cannot determine if all of the required elements of a reappraisal plan were followed in 2007.

Exhibit 4 shows a comparison of the CAD's 2007-08 reappraisal plan with the elements required by Property Tax Code Section 25.18(b).

Exhibit 4
Comparison of Property Tax Code 25.18(b) and Haskell CAD's Reappraisal Plan

Property Tax Code Section 25.18(b) Requirements	Activity in Plan? Yes/No	Activity Performed? Yes/No
The plan shall provide for the following reappraisal activities all real and personal property in the district at least once every three years:
(1) identifying properties to be appraised through physical inspection or by other reliable means of identification, including deeds or other legal documentation, aerial photographs, land-based photographs, surveys, maps, and property sketches;	Plan contains a generic explanation, but nothing specific to Haskell CAD	Lack of measurable data
(2) identifying and updating relevant characteristics of each property in the appraisal records;	Plan contains a generic explanation, but nothing specific to Haskell CAD	Lack of measurable data
3) defining market areas in the district;	Plan contains a generic explanation, but nothing specific to Haskell CAD	Lack of measurable data
4) identifying property characteristics that affect property value in each market area, including:	Plan contains a generic explanation, but nothing specific to Haskell CAD	Lack of measurable data
(A) the location and market area of property;	Plan contains a generic explanation, but nothing specific to Haskell CAD	Lack of measurable data
(B) physical attributes of property, such as size, age, and condition;	Plan contains a generic explanation, but nothing specific to Haskell CAD	Lack of measurable data
(C) legal and economic attributes;	Plan contains a generic explanation, but nothing specific to Haskell CAD	Lack of measurable data
(D) easements, covenants, leases, reservations, contracts, declarations, special assessments, ordinances, or legal restrictions;	Plan contains a generic explanation, but nothing specific to Haskell CAD	Lack of measurable data
(5) developing an appraisal model that reflects the relationship among the property characteristics affecting value in each market area and determines the contribution of individual property characteristics;	Plan contains a generic explanation, but nothing specific to Haskell CAD	Lack of measurable data
(6) applying the conclusions reflected in the model to the characteristics of the properties being appraised; and	Plan contains a generic explanation, but nothing specific to Haskell CAD	Lack of measurable data
(7) reviewing the appraisal results to determine value.	Plan contains a generic explanation, but nothing specific to Haskell CAD	Lack of measurable data

Source: Property Tax Code Section 25.18(b) and Haskell CAD Reappraisal Plan 2007-08.

Without a detailed reappraisal plan, Haskell CAD does not have a step-by-step explanation of how the CAD will accomplish its reappraisal activities. The CAD's plan does not describe the type of properties or how many are to be appraised in 2007 and 2008. It does not describe in detail how the reappraisal proceeds from one area to the next. For example, are properties in town appraised before moving to the rural areas to perform appraisals? If so, what is the deadline for completing in-town appraisals?

An adequately detailed reappraisal plan, if executed properly, provides a roadmap to help the CAD ensure that school districts receive valid values in the PVS and possibly preclude a school district from receiving less than the expected amount of funding from the state. Effective appraisal districts develop and properly execute a complete reappraisal plan, helping ensure that taxpayers are treated equitably in assigning property taxes. A reappraisal plan also serves as the communication tool that demonstrates to the board the methods used by appraisal staff. The reappraisal plan sets forth the manner in which the staff will conduct its appraisals.

Jefferson CAD, for example, has a detailed reappraisal plan that explains exactly how and when reappraisals take place and how sufficient resources will be allocated to follow the plan. The reappraisal plan ensures the execution of timely and accurate reappraisals on an annual basis and is reviewed and updated annually.

RECOMMENDATION 4
Develop and adopt a reappraisal plan that complies with the Property Tax Code and IAAO.

FINDING
Haskell CAD's appraisal manuals lack local procedures and directives for completing appraisals.

IAAO's textbook, Property Appraisal and Assessment Administration, Chapter 1, The Ad Valorem Tax System, describes the importance of written procedures or standards of practice and states they may incorporate or be contained in laws, regulations, policy memoranda, procedural manuals and guidelines, appraisal manuals and schedules. Repeated tasks, particularly those done by more than one person, should be described in guidelines or manuals. There should be a procedure for establishing standards of practice, including regularly updating manuals. Procedures are required for monitoring the quality of appraisals, editing data and reviewing appraisals.

The chief appraiser has been with the CAD for 10 years and is the CAD's only staff appraiser. Through fieldwork, the chief appraiser gathers specific information such as the property's condition, age, construction details and physical dimensions. The chief appraiser also gathers information about the land on which real property is located, including dimensions of the land, shape and location. The same information is gathered for vacant land, whether a vacant lot or a rural tract.

The CAD has written field procedures that include field appraiser conduct, instructions for measuring improvements and a glossary of appraisal terms. Instructions for transforming the field data into an appraisal, however, are lacking.

The chief appraiser records the accumulated property characteristics on appraisal cards and draws diagrams of all improvements. Using the CAD's appraisal manuals and his appraisal knowledge, the chief appraiser determines the property type and class, unit costs and depreciation. Data gathered in the field is entered into the CAD's automated appraisal system (valuation model) and separate values for land and improvements are calculated. The model, when directed, produces a market value for each property based on the property's characteristics.

Residential properties are appraised using market-based schedules developed from local sales and cost data obtained from area builders. The residential appraisal manual includes current building schedules, descriptions of typical classification characteristics and representative pictures for each residential class. The residential manual lacks detailed instruction on its use. To be an effective manual and training tool for new appraisers, procedures included in the manual should focus on measuring classification, identifying property attributes, applying depreciation and site valuation procedures.

The CAD uses market data to appraise land. Size, location and use are factors affecting land values, and the CAD values land by the acre, square foot or front foot based on the factors. The appraisal manual lacks instructions for determining which appraisal method to use and when.

According to the chief appraiser, commercial properties are primarily appraised using Marshall & Swift's Commercial Valuation Guide. Haskell County has very few commercial sales, which hinders the appraisal district when appraising commercial property and developing accurate local modifiers. The chief appraiser also reviews the mechanic's liens that are filed with the county clerk on new construction. The CAD lacks local procedures and directives for completing commercial appraisals.

Personal property values are largely based on taxpayer renditions. When a rendition is not received during the regular filing period, the chief appraiser sends a follow up letter and accesses a ten percent penalty if a rendition is not received. The chief appraiser reviews the renditions for reasonableness by comparing the rendered values to the personal property value schedule in the out-of-print Comptroller's Field Appraiser's Guide and comparing values of similar businesses. The guide is outdated and not sufficient for use in valuing personal property. The CAD does not have a manual to guide its staff in the review of renditions or in the reasonableness determination.

The appraisal district contracts with an outside appraisal vendor to appraise the CAD's industrial, utility and mineral accounts. Utilities are appraised using the unit value technique. The unit value technique requires the appraiser to determine the entire utility company's market value. 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 as miles of track, historical cost or number of meters. The unit valuation is widely accepted as the preferred income technique for appraising utility properties. Industrial properties are typically appraised using the cost approach and minerals are appraised using the income approach. The vendor provides a general explanation of the methods used to appraise these properties in the CAD's reappraisal plan.

Part of the ASR required the Comptroller's onsite reviewer to audit a sample of the CAD's appraisal records. Forty parcels were randomly selected from Haskell CISD's 2006 PVS. The purpose of the exercise was to determine if, by using the CAD's appraisal procedures and manuals, one could arrive at the same or similar appraised value as the CAD. Because the CAD lacks instructions on how to use its appraisal manuals, the reviewer, a professional appraiser, relied on generally recognized appraisal concepts to arrive at appraised values for the properties sampled.

With the assistance of the chief appraiser, the reviewer conducted an onsite inspection of each property. Information pertaining to property characteristics contained on the CAD's appraisal cards was examined for accuracy. Age, condition and size were reviewed for reasonableness. Using descriptions of property classifications found in the CAD's appraisal manuals, the reviewer classed each property based on type and quality. Residential property was classified as either frame or masonry with quality ratings from one to six-plus, with one being the lowest quality and six-plus being the highest quality. Using the CAD's calculated square footages for each building component, such as living area, porches and garages, the reviewer applied the corresponding costs-per-square foot from the appraisal manual and calculated a replacement cost new. The effective age of the improvement was estimated and the CAD's depreciation table was used to determine a percent good factor. The factor was applied to the replacement cost new to calculate the current value of the improvement. Land values were calculated by applying the appropriate unit value from the CAD's land schedule for the land code found on the appraisal card. For example, if the appraisal showed a land code of "FF50," the land was appraised at $50 per-front-foot, based on the measurements provided on the appraisal card. The improvement and land values were combined for total property value. Eighteen single-family residences were audited.

The same methods were used to appraise eight Category D, Rural Real properties and seven Category F1, Commercial Real properties. Seven Category L1, Commercial Personal properties were appraised using the personal property renditions filed by the business owners.

The results of the audited appraisal sample did not show any material differences between the reviewer's appraisals using the CAD's field manuals along with oral instructions and the CAD's values.

Exhibit 5 shows the weighted mean ratios between the reviewer and CAD appraisals for the four categories of property audited.

Exhibit 5
Sample Appraisal Results

Category	Number of Parcels	Audit Sample Value	CAD Sample Value	Ratio
A	18 parcels	$806,190	$802,740	99.57%
D	8 parcels	$1,723,340	$1,723,340	100.00%
F1	7 parcels	$897,340	$899,220	100.21%
L1	7 parcels	$1,053,420	$1,053,411	100.00%

Source: ASR Sample Appraisals & Haskell CAD.

Because the reviewer was an experienced appraiser, he was able to use the CAD's appraisal manuals without written instructions to complete the appraisals. It is unlikely that someone without extensive appraisal experience could use the CAD's appraisal manuals without written instructions.

Should the CAD experience a change in appraisal personnel, the lack of detailed appraisal procedures manuals may cause inconsistent appraisals and may cause property values to deviate from market value. This market value deviation may cause school districts in Haskell CAD to receive invalid findings in the state's PVS. If the level of appraisal (percentage of market value) varies between property categories, or from taxpayer to taxpayer, some taxpayers may bear more than their fair share of the local tax burden. In addition, instructions on how to use the CAD's appraisal manuals will help taxpayers better understand the appraisal process.

Property Tax Code Section 23.01 mandates that property be appraised by applying generally accepted appraisal methods and techniques if the appraisal district is using mass appraisal standards. This section also requires appraisal districts to comply with the USPAP and apply similar appraisal methods and techniques to the same or similar properties. Appraisal districts should account for the contributions of individual property characteristics to value. A comprehensive appraisal procedures manual will help ensure that these standards and requirements are attained.

Tom Green CAD, for example, has a comprehensive appraisal policies and procedures manual for appraising real, commercial and personal property. Tom Green CAD has developed a residential classification guide to promote uniformity and consistency among the appraisers in the way they classify residential properties. The guide has pictures of local houses and a description of property characteristics and attributes common to each class. The manual also contains a section on land appraisal.

Developed in 2005, the Tom Green County Appraisal District Appraisal Manual thoroughly explains how the CAD appraises residential property, commercial property, business personal property and land. The CAD's procedures for analyzing sales and market data are also contained in the manual.

RECOMMENDATION 5
Develop appraisal procedures manuals that provide instructions and local procedures for completing appraisals.

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