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Chapter 2
Findings of the Appraisal Standards Review

This chapter of the report addresses commendations, findings and recommendations from the appraisal standards review of the Hunt CAD in three sections:

2.1
Commendable Practice

As part of its review process, PTAD identifies best practices used by each CAD under review. These commendable practices improve efficiency or in some instances address past operational weaknesses. We commend Hunt CAD for its efforts and hope this commendation gives other appraisal districts ideas for improving their own operations.

FINDING
Hunt CAD balances the requirements of public access with internal data security.

The section on Record Custodian and Retention of the Comptroller's Appraisal District Director's Manual discusses public information:

The chief appraiser is the custodian of appraisal district records. The chief appraiser may delegate responsibility to staff, but remains accountable for the preservation and care of district records. The custodian's responsibilities are to do the following:

• ensure that records are available for public inspection and copying;
• protect and preserve records from deterioration, loss, theft, alteration and destruction;
• repair, renovate and rebind records–when necessary;
• provide public access to public appraisal district records without asking the person making the request for any information other than personal identification and a description of the records being requested; and
• provide a reasonably comfortable place for persons to use while inspecting the records.

IAAO's Standard on Public Relations, Section 5, Public Records states the following:

All records should be made available for public review unless access is specifically limited by law or unless confidential information is involved. Public access to assessment records is crucial to good public relations, and measures should be taken to ensure a climate of openness.

Hunt CAD has computerized its appraisal system to include assessment administration and computer assisted mass appraisal (CAMA). In 2006 Hunt CAD purchased new appraisal and mapping software systems. The CAD made a conversion to the new appraisal system. Information in these systems is protected as each CAD employee has a profile and password that determine the rights to systems access. Systems have complete audit trails of all activities. Hunt CAD provides public access through the Internet to its real property accounts through its software vendor's Internet site. Taxpayers have access to terminals in the office's public areas. The CAD's physical office building is well-maintained and public areas are comfortable. Appraisers have private offices that provide sufficient room for taxpayers to be seated. This provides privacy for taxpayers who prefer confidentiality when discussing their property's situation.

COMMENDATION
Computerized appraisal information is properly stored, maintained, backed up regularly, secured by user passwords, yet available to the public via the Internet and in public areas of the CAD office.

2.2
Key Findings and Recommendations

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

FINDING
When appraising real property, Hunt CAD's appraisal model does not specify and calibrate all three valuation approaches with statistical software to appraise district property at market value.

Property Tax Code Section 23.0101,Consideration of Alternate Appraisal Methods, states the following:

In determining the market value of property, the chief appraiser shall consider the cost, income, and market data comparison methods of appraisal and use the most appropriate method.

IAAO's Standard on Mass Appraisal, in summary, discusses that all three approaches, sales comparison, cost and income, play important roles in the mass appraisal of real property. In mass appraisal applications, the reliability of all three approaches is dependent upon the quality of the data used in the development of the applicable valuation equations or tables. The cost approach requires current and accurate estimates of land market values, cost data and accrued depreciation from all causes. The sales comparison approach requires adequate sales samples to provide accurate indications of current market values. The income approach requires reliable income and expense data, as well as objective evidence of the relationship between income to present value. Moreover, successful development and application of all three approaches is subject to the reliability of data on property characteristics determining value. Which technique works best in a given situation will vary with the type of property, availability of data, training and experience of appraisers and other factors.

In addition to Hunt CAD's primary use of the cost approach, it should consider the sales comparison and income approaches to value and use these approaches when appropriate. Hunt CAD rarely uses these approaches, and the Hunt CAD appraisal manual does not contain procedures or guidelines for using them. Including these procedures might enable appraisers to appraise property by these approaches.

The CAD's chief appraiser and appraisal supervisor are responsible for market analysis and appraisal cost tables. There are no written guidelines for any appraisal approaches. A CAD that uses the cost approach needs written procedures for the comparable sales method to properly appraise the land component of improved parcels. Since land is appraised separately from improvement cost new, and is not subject to depreciation, it is necessary to apply the sales comparison approach, and highest and best use analysis, to appraise land. Written guidelines for applying the income approach will not only provide consistent guidelines, but can also comprise a work breakdown structure of specific appraisal activities that can be measured, modeled and improved.

The CAD does not reconcile the cost approach against the other appraisal approaches, a practice that might highlight limitations between approaches or the potential need for updates to cost tables. For example, the cost approach is most persuasive when land values are well-supported and is more suitably used for appraising newer, similarly constructed improvements. The calculation of depreciation, which is a subjective process if not automated, is less precise in older, heterogeneous property. Within the CAMA system, calibrating cost table results against appraisals that use the sales comparison or income approaches will improve the appraisal model's accuracy for the contribution that improvement cost has in determining market value. Without written guidelines for the use of the sales comparison and income approaches to value, however, the appraisal model results specified with the cost approach cannot be reconciled, which limits efforts to improve the CAD's appraisals.

After review of the draft report, the chief appraiser stated the following:

Prior to the 2008 appraisal year, Hunt CAD's cost schedules did not include ranges based on size; for example, a class 1 house with 750 square feet would be priced at the same $18.89 per square foot as a class 1 house with 1,500 square feet. The cost schedules also did not have any automated depreciation schedules attached that would allow the system to automatically calculate depreciation based on the age/condition of the house. This meant that the appraisers had to manually adjust the depreciation amount account by account each year which did create inconsistencies in the appraisal records.

The chief appraiser also provided copies of screen prints for the 2006 PVS property sample indicating that the 2008 depreciation schedules are linked to the property for that sample. He also provided 2008 depreciation schedules and copies of updated property cards indicating the square foot for the property matches the schedule.

The review recognizes the CAD's efforts to improve processes overall.

Appraisal of certain classes of commercial property, hotels and motels for instance, relies on direct capitalization income appraisal methods. For example, income and expense information provided to CADs is usually less optimistic than information provided to lending institutions. Therefore, the capitalization rates used for appraisals that are developed for lenders cannot be used by CADs. Net incomes available to the CAD must be market calibrated by comparing known net income to known sale prices. This is analogous to the cost approach, which requires calibrating the sum of land and improvement value with valid sale price data. When CADs do not systematically calibrate an appraisal model by comparing it with other methods, not only do unintended results occur in ratio studies, but appraisal equity and uniformity vary from market value.

Most CAMA systems are designed for production with limited market analysis programs. Cost approach tables can be calibrated (trended) directly against the market by using sales and property characteristics in direct market model software.

IAAO's Property Appraisal and Assessment Administration, Chapter 6, Sales Comparison Approach, identifies several model specifications, including the hybrid model, as a method to develop adjustments for the cost approach.

The hybrid adjustment method uses both additive (dollar amounts) and multiplicative (percentages) adjustments and more accurately reflects the behavior of the market.

The hybrid adjustment method classifies attributes as quantitative or qualitative. Quantitative attributes are usually additive and can easily be expressed as dollar amounts; qualitative attributes are usually expressed as percentages and can be either additive or multiplicative.

According to the IAAO's Standard on Automated Valuation Models (AVMs), model specification and calibration entails the following steps:

• specification of a model;
• test the specification with calibration;
• adjustments to model specification;
• test new specification with calibration; and
• continue to repeat the process until statistically significant improvement is minimized.

Building and improvement attributes can be separately calibrated and applied to a model structure representing the cost approach, sales comparison approach and income approach, as applicable.

A best practice is to calibrate the models (cost, sales comparison and income approaches) directly against the market. Since most CAMA systems have limited market analysis capabilities, CADs can supplement their CAMA systems with generic statistical software packages. There are two statistical software packages that are specifically designed to assist appraisers, providing extensive graphics, selective reports and "what-if" scenarios used to test assumptions before making changes in the CAD's appraisal systems. Although these software applications are only appraisal tools and their accuracy is subject to the reliability of data, when properly used these programs can improve the accuracy, equity and uniformity of the CAD's appraisal performance as measured by internal and independent ratio studies, which in turn ensures the reliability and credibility of the CAD's mass appraisals.

Nueces CAD, for example, has well-written policies and procedures manuals for managing district operations. Manuals exist for personnel procedures, real estate appraisal, personal property appraisal, district records, exemptions and public information. The Nueces CAD Real Estate Procedures and Operations Manual addresses residential, commercial and land appraisal procedures. It contains the department's reappraisal plan and a USPAP section and clearly defines the three approaches to values cost, market and income.

RECOMMENDATION 1
Expand use of statistical software to specify and calibrate all three approaches to market value when appropriate according to Property Tax Code Section 23.0101 and generally accepted appraisal standards and practices.

FINDING
Hunt CAD does not document standardized, complete appraisal manuals for each category of property.

Property Tax Code Section 23.01(b) states the following:

The market value of property shall be determined by the application of generally accepted appraisal methods and techniques. If the appraisal district determines the appraised value of property using mass appraisal standards, the mass appraisal standards must comply with the Uniform Standard of Professional Appraisal Practices. The same or similar appraisal methods and techniques shall be used in appraising the same or similar kinds of property. However, each property shall be appraised based upon the individual characteristics that affect the property's market value.

Property Tax Code Section 23.011,Cost Method of Appraisal, states the requirements CADs must follow in using the cost approach to value:

The IAAOStandard on Mass Appraisal of Real Property states the following:

Mass appraisal requires complete and accurate data, effective valuation models and proper management of resources.

Mass appraisal is the process of valuing a group of properties as of a given date using common data, standardized methods and statistical testing. To determine a parcel's value, assessing officers must rely upon valuation equations, tables, and schedules developed through mathematical analysis of market data.

Values for individual parcels should not be based solely on the sale price of a property; rather valuation schedules and models should be consistently applied to correct, complete and up-to-date property data.

Hunt CAD uses material in its real property cost schedules that is derived from Marshall & Swift, a national cost estimator service. The cost approach is the principle approach used by Hunt CAD to appraise residential, commercial and business personal property.

Hunt CAD's appraisal documentation is a collection of cost tables, property descriptions, pictures and selected pages copied from a Marshall & Swift cost handbook.

A review of the CAD's appraisal manual and records of sample property showed the following inconsistencies, which would produce inaccurate Jan. 1 market values for real property:

• missing instructions for application of appraisal procedures;
• land tables for non-rural (suburban) areas are not in the manuals;
• cost tables in the residential manual do not match the much lower price-per-square-foot on the property records;
• residential depreciation tables list depreciation factors that need to be converted to percentage good factors;
• many property records cards do not use the age compared to percent good from the deprecition tables; and
• lack of documentation of the comparable sales approaches to value.

Based on the field review of records, the CAD is not uniformly following the cost tables in the CAD's cost manuals in Wolfe City and Cumby ISDs as shown in Exhibit 1.

Exhibit 1
Hunt CAD: Reviewers Property Audit Comments

Account	Comments
23088	CAD used lower price on all areas and higher percent good.
30252	CAD used lower price on all areas and higher percent good.
33663	CAD used lower unit price on main areas overriding improvement schedule.
38222	Class 12dl/ not included in the Commercial Cost Schedules provided.
38363	CAD used lower price on land and building.
38549	CAD used lower unit price for land overriding land schedule.
111970	Class 60sa Not Included in The Commercial Cost Schedules provided.
38574	No year built or effective year built date.
112077	CAD used lower price for parcel.
125900	CAD used lower price on land and building.
117971	CAD used lower price per acre.
32778	CAD used lower unit price for land.
44282	CAD used lower price on all areas.
45966	CAD used lower price on all areas and higher percent good.
46000	CAD used lower price on all areas and higher percent good.
45958	CAD used lower price on all areas.
74430	CAD used lower price on all areas and higher percent good.
74532	CAD used lower price on all areas and higher percent good.
74690	CAD used lower price on main area and carport.
74709	CAD used lower price on all areas.
74721	CAD used lower price on all areas and higher percent good.
110671	CAD used lower price on all areas and higher percent good.
126593	Land table not provided for a-s4543.
111223	No percent good schedule for mobil homes provided.
121969	Land table not provided for a-s5223.
112309	Old mobile home effective year built of 2007 inconsistent with condition.

Source: Comments from reviewer's notes to procedural audit of sample single-family residences in 2006 Field Studies Category Worksheet, 2006 Property Value Study.

When field appraisers do not accurately develop or use standardized land, improvement cost new and depreciation schedules, the CAD's mass appraisal processes hinge on unreliable data in determining the contribution made by certain property characteristics to a property's market value. Without written directives for use of manuals, appraisers can incorrectly apply cost tables or make inconsistent judgments about depreciated property values. This inaccuracy leads to property misclassification, which leads to misapplication of unit values (per square foot), which results in incorrect improved parcel values. By developing and using functional appraisal manuals, Hunt CAD can provide guidelines to its appraisers for consistent application of appraisal formulas. Hunt CAD can enable its appraisers to adequately develop, document and report a USPAP-compliant mass appraisal with the common set of procedures necessary to produce and communicate credible mass appraisals.

RECOMMENDATION 2
Include directives in the local appraisal manuals for all categories of real and personal property; document the consideration of alternate appraisal methods; and use the manuals as guidelines for developing reasonable, consistent and accurate mass appraisal models.

FINDING
The Hunt CAD sales file maintenance process lacks documented procedures for sourcing valid sale price data from property buyers, sellers and brokers.

IAAO's Property Appraisal and Assessment Administration, Chapter 5, Data Collection and Management, states the following:

The reliability of any valuation model or sales ratio studies depends upon the quantity and quality of its data. Sales data must be collected, edited and adjusted to obtain valid indicators of market value. Accurate sales data is needed for specifying and calibrating valuation models and for sales ratio studies.

It further recommends collecting the following sales data whenever available:

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

Three basic sources of sales data are deeds, contracts or agreements of sale and affidavits of property value. When this information is unavailable, incomplete or requires verification, sales information can be obtained from buyers and sellers by mail questionnaire, telephone inquiry or face-to-face interviews. As a final resource, real estate agents, multiple listing services, title companies, private appraisers, leasing agents and certified property managers are good informational sources.

IAAO'sStandard on Ratio Studies (2007) stresses ratio studies need to contain properly screened and adjusted arms-length sales data in order to evaluate appraisal performance and determine reappraisal and revaluation priorities; the procedures for screening and adjusting sales should be documented because of the following:

No single set of sales screening rules or recommendations can be universally applicable for all uses of sales data or under all conditions. Sales screening guidelines and procedures should be consistent with the provisions of value definition applicable to the jurisdiction. Appraisers must use their judgment, but should not be arbitrary. To help analysts make wise and uniform judgments, screening procedures should be in writing. Each sales analyst should be thoroughly familiar with these procedures as well as with underlying real estate principles. (Appendix A.4 Screening Sales and Tomberlin 2001).

Hunt CAD does not have written procedures for sales validation or for the performance and use of ratio studies. The chief appraiser describes the CAD's process as follows:

• gather sales transactions from MLS and deeds from the county clerk;
• mail sales questionnaires and make follow-up calls for non-responsive buyers;
• load sales into CAMA system (separate sales property characteristics file as of date of sale);
• the appraisal supervisor and clerk maintain and run ratio studies;
• use ratio study results to adjust cost tables and land schedules; and
• mass adjust neighborhood percentages.

It is important for Hunt CAD to have written sales gathering procedures; instructions for proper screening of sales for reports; and instructions on the methods for use of sales in ratio studies to update land and improvement cost schedules. Proper sales gathering and validation procedures are the only way to apply market information (sales) in a consistent manner. The sales validation process should have various built-in levels of quality control.

RECOMMENDATION 3
Develop written procedures for sales verification; procedures for comparing sold property to existing CAD property characteristics; and procedures for use of sales verification codes.

FINDING
Hunt CAD lacks documented procedural parameters for internal ratio studies.

Ratio studies are not solely for the development of neighborhood percentage adjustment tables. Ratio studies should also be used for these purposes:

• identify neighborhoods that need appraisal maintenance;
• identify outliers where price and CAD property records are not compatible;
• calibrate the contribution of land and building characteristics to market value;
• consider updates to existing valuation methods; and
• indicate when use of alternative valuation approaches is appropriate.

IAAO's Standard on Ratio Studies describes, in summary, the terms used in Exhibit 2:

IAAO recommended quality standards for local jurisdiction sales ratio studies are presented in Exhibit 2.

Exhibit 2
IAAO Standard on Ratio Studies - Quality Standards

Type of Property	Measure of Central Tendency	COD	PRD
Single-family residential newer, homogenous	0.90 - 1.10	10 or less	0.98-1.03
Single-family residential older, heterogeneous	0.90 - 1.10	15 or less	0.98-1.03
Rural residential	0.90 - 1.10	20 or less	0.98-1.03
Income producing large, urban jurisdictions	0.90 - 1.10	15 or less	0.98-1.03
Income producing smaller, rural jurisdictiowwns	0.90 - 1.10	20 or less	0.98-1.03
Vacant landw	0.90 - 1.10	20 or less	0.98-1.03
Other Real and Personal Property	0.90 - 1.10	Varies with local conditions	0.98-1.03

Note: The standards for the PRD are not absolute when samples are small or when wide variations in prices exist. In such cases, appropriate tests are more useful. Note: These types of property are provided for guidance only and may not represent jurisdictional requirements. Appraisal level for each type of property shown should be between 0.90 and 1.10, unless stricter local standards are required.
Source: IAAO Standard on Ratio Studies, Approved July 1999.

Hunt CAD provided three years of sales reports by ISD for the entire CAD. There are not sufficient reported sales in the Cumby ISD portion of the sales ratio study to comprise a representative sample.

Hunt CAD's appraisal supervisor runs ratio studies with summary quality statistics for ISDs and the county. The vendor's ratio report program has parameters at the beginning of each report to vary the selection process. The reports provided to the Comptroller are sorted by ISD, with ISD and CAD totals. The CAD used very few selection criteria (property classification and sale type codes), which may be due to a lack of written procedures for sales verification and ratio studies, and may have affected the application of ratio study statistics at the neighborhood level.

For example, the CAD's 2007 residential ratio study has a COD of 3,933.0183 and a PRD of 99.4490. The minimum ratio is 0.0832 and the maximum is 6,290.000. These extreme numbers indicate extreme outliers that will have an effect on the median and weighted mean. These outlier ratios should have been removed from the ratio study. One method for trimming outliers is to remove the lowest and highest 5 percent of the ratios. Exhibit 3 is the summary of the overall quality statistics by Wolfe City ISD and Hunt CAD totals from 2006 and 2007 ratio studies. The CAD collected sufficient residential sample sale property to provide statistically reliable ratio studies in Wolfe City ISD but not Cumby ISD.

Exhibit 3
Hunt CAD: 2006-07 Residential Ratio Studies
Overall Ratio Study Quality Statistics

Ratio Statistics	Wolfe City ISD 2006	Hunt CAD 2006	Wolfe City ISD 2007	Hunt CAD 2007
Minimum ratio	0.50	0.11	0.71	0.08
Maximum ratio	3.31	5.26	2.36	6,290.00
Median	0.99	1.00	1.03	1.00
Weighted mean	1.03	1.01	1.13	1.01
Standard deviation	0.35	0.53	0.58	2,475.73
Coefficient of dispersion	24.22	26.53	35.85	3,933.02
Price-related differential	1.11	1.15	1.14	99.45
Number of observations	31	1,196	30	1,254

Source: Hunt CAD 2006 and 2007 Sales Ratio Reports.

Measures of central tendency for residential sold property are mostly within the acceptable range from 0.95 to 1.05 and the IAAO's recommended guidelines except for the 2007 Wolfe City ISD weighted mean. There are some invalid sales ratios (outliers) in Hunt CAD's 2007 overall ratio study as represented by the unusually high standard deviation and COD. The three other CODs are higher than recommended levels in the IAAO standard. This indicates an unacceptably wide variance of the ratios around the central tendency (median), which implies either lack of quality control or the need for better market analysis. The PRDs are above the IAAO recommended level of 1.03. This is an indication, although not proof, of assessment regressivity, where low-value property is being appraised at higher levels of market values than high-value property, producing vertical inequity within the CAD's assessment values. Unacceptable PRDs can be caused by sampling error, measurement bias or a systematic error in the CAD's appraisal model.

The ratio study uniformity statistics indicate procedures for sales validation or ratio studies are not systematically applied. The CAD internal ratio studies' acceptable parameters are set too wide. The studies may include incorrect or invalid sale prices or prices that are not "snapshots" of the property characteristics listed on the CAD's CAMA system at the time of sale. The high CODs and PRDs suggest that the unit values used in land and improvement cost schedules are not properly calibrated to the local market in Hunt County.

Brown CAD, for example, uses an automated appraisal system that produces ratio studies on demand. The ratio studies used for property reappraisal and appraisal maintenance are adequate and conform to standards established by the IAAO. The CAD groups residential property by neighborhoods. Staff conducts a ratio study at the end of the appraisal season each year and conducts additional ratio studies following implementation of changes. The ratio studies help identify areas of increasing values and declining neighborhoods. The CAD uses ratio studies to identify land and improvement appraisal problems. Brown CAD conducts ratio studies by school district, subdivision, property class, sale date and sale type.

RECOMMENDATION 4
Develop written procedures for internal ratio studies; time trend sale prices; run the sales ratio program with more detailed parameters for various sub-markets; correctly apply results to appraisal valuation approaches; and use ratio studies after field seasons for quality control of values.

FINDING
Hunt CAD does not have written discovery procedures that are necessary to properly appraise property on an equal and uniform basis.

IAAO's Property Appraisal and Assessment Administration, Chapter 1, The Ad Valorem Tax System, states the following:

Standards of practice 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 and maintaining them (for example, updating manuals).

The IAAO Standard on Personal Property, Section 4 states:

The extent to which personal property can be assessed depends upon its discovery. Complete discovery requires adequately trained staff and supporting resources. Taxation agencies should be empowered to issue binding rules and regulations covering the discovery of personal property.

To discover potential new real property inventories, Hunt CAD uses building permits from cities, septic permits from the county and appraisers drive assigned areas at the beginning of the field season. Potential new personal property discovery includes newspaper ads, assumed name certificates, telephone book visual inspections and information reported by owners on renditions.

Lack of detailed data collection procedures manuals limits the CAD's ability to use the appraisal software. This limitation leads to inconsistencies in data collection and application of valuations formulas that may generate inaccurate appraisals. Without written data collection procedures, the field appraisers may not consistently collect new property or make correct modifications to existing property. This inconsistency can lead to property being listed incorrectly and possibly property missing from the assessment roll. Lack of detailed procedures manuals can lead to value inequities that can decrease the uniformity (COD and PRD) around the median assessment-to-price ratios.

The fluctuation of the weighted mean in Wolf City ISD (Exhibit 6) demonstrates the impact of extremely low and high ratios on a small sales sample. Lack of uniformity means higher CODs and possibly higher PRDs. High CODs indicate the lack of consistency, so some property is considerably over-assessed and other is considerably under-assessed. High PRDs indicate low-value property is assessed at higher levels of assessment than high-value property. Both indicate potential problems with the fairness and uniformity of the CAD's assessment roll that may stem from ineffective procedural guidelines for discovery.

Brown CAD, for example, has continuous data gathering procedures in place that conform to IAAO and USPAP standards and contribute to effective assessment of property. The CAD conducts annual property inspections for appraisal maintenance and uses a computer software program to retrieve records for property appraisal. Property data collection is one part of mass appraisal applications, and good data gathering can assist the CAD in its efforts to achieve acceptable local appraisal values.

RECOMMENDATION 5
Prepare and use detailed procedures manuals for all functions of property discovery and data collection for all classes of property.

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

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

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."

As the standard operational software for assessment jurisdictions is computerized, theIAAOStandard on Digital Cadastral Maps and Parcel Identifiers (2003) provides a general description of components for a geographic information system (GIS). The modern digital map should include base maps that have geocoordinates (geographic coordinates, latitude and longitude), which can be related to various third-party sources such as flood plain maps. The map should have all property characteristics from the appraisal system and footprints of building sketches that are geographically oriented to the lots (street front). Aerial maps should be overlaid as a separate GIS layer but oriented to the base map.

A digital cadastral mapping system should have the following components: a geodetic control network; a current, accurate, base map layer (ideally, photo-grammetrically derived) that is tied to the geodetic control; a cadastral layer delineating all real property parcels; aerial photographs and/or images; a unique parcel identifier assigned to each parcel; a series of parcel data files containing parcel identifier, ownership, and assessment data; and layers of interest to the assessor such as municipal boundaries, zoning, and flood plains.

This standard further states that quality control is a requirement for the creation and maintenance of the GIS:

In both map creation and maintenance, quality control is a vital process. Software should be designed with built-in testing for data integrity and validity. Tests should be run and queries performed to ensure that all relevant documents (deeds, plats, ownership change requests) have been properly processed, with correct ownership and map changes made. Near-perfect correlation must be maintained between parcels in tabular databases and parcels in digital map layers. Cadastral map layers should be tested for spatial accuracy using published standards (FGDC 1998b), and the results should appear in metadata. A procedure should be established to solicit user requests for map changes.

In the 2003 ASR, Hunt CAD was commended for its completed GIS:

Hunt CAD's mapping system graphically includes the entire county with maps tied to individual appraisals by property identification number. The system also has several additional identification references and lot measurements, with floodplain maps overlain on the property mapping system.

District staff including the chief appraiser and appraisal coordinator worked with a consultant, CADversion, Inc. to enhance the district's mapping capabilities. As part of an overall computer appraisal system update, the district is moving from AutoCAD to ESRI mapping systems but may maintain both systems. For district purposes AutoCAD is better for drawing and ESRI software is better for analysis. Individual property and small maps can be printed by any staff member using AutoLite. Large individual and sets of maps are printed at least once per year and can be printed on request by the mapping department.

At the 2003 ASR meeting that occurred in 2005, the consultant was assured by the GIS contractor that the GIS was fully operational. During the 2006 ASR on-site visit, the new chief appraiser indicated that the GIS was not complete. During field review of the audit samples, some property required the original deed plots to determine the property location and size. In the middle of Exhibit 4 is an example of the problem, Turkey Creek Estates is missing an account number and land size.

When Hunt CAD switched mapping vendors, it found gaps in the cadastral maps where land area was not accounted for in the old system. The CAD corrected about 50 percent of the errors that were discovered. The electronic conversion to the new GIS system is complete. This new GIS software is fully integrated with Hunt CAD's CAMA system.

The new mapping vendor provides Hunt CAD's base GIS software. A new contractor has been hired to complete the initial map load and data maintenance. By December 2008, the GIS should be complete and integrated with the new appraisal software system.

During the ASR field inspection of a sample of the PVS property, the location of three properties required reference to copies of the original deed plats. This means that gaps in the GIS database make it difficult for field appraisers to locate property during field inspections. Other GIS generated maps did not have property addresses on the maps or measurements of the boundary lines. This deficit created some confusion in locating the review sample property in the field. Appraisers have to estimate the location of property to be inspected. If the size and frontage is not on the maps, the appraisers must estimate various size lots from the nearest corner. The property addresses may or may not be on property record cards or on buildings, which causes more confusion and estimation. Incorrect identification of property leads to inaccurate appraisals and potentially inaccurate market value-to-price ratios. Maps should have as much useful information as possible to help field appraisers work more efficiently.

After review of the draft report, the chief appraiser provided copies of contracts with an outside vendor to amend, clean and complete the existing AutoCAD base map; convert it into GIS format to link with the CAD's appraisal software; and manage the CAD's GIS mapping department and property ownership accounts. While a timeline for implementation was not provided, one of the contracts lists the scope of work and indicates that the outside vendor will complete a quadrant every 90 days.

If its mapping system is not fully functional, the CAD cannot identify and list all parcels for property tax purposes. The basic function of being able to locate all county parcels geographically is critical to the reappraisal process. Given the status of the CAD's maps, the reviewer would have had difficulty locating property without the assistance of CAD appraisers. In some cases, only the local experience of the field appraiser permitted property identification. This hinders field work and places the CAD at risk of not completing scheduled reappraisals in a timely manner. Displaying parcels to identify market areas also helps ensure fair and equitable appraisals once they are defined and delineated.

Brown CAD, for example, has a fully functional computerized mapping system. The mapping and appraisal systems are integrated. The CAD maintains all mapping data layers to industry professional standards. The mapping coordinator regularly updates maps to reflect changes in ownership and boundaries. All parcels have a unique identification number.

RECOMMENDATION 6
Complete the implementation of the fully-integrated GIS within one year of this report's publication.

2.3
Other Recommendation

During the course of the review process, PTAD identified a certain management and operational issue that may not be directly related to the appraisal process, but could indirectly affect the CAD's ability to conduct appraisals accurately and consistently. Hunt CAD is not obligated to implement this recommendation, but it is provided here for consideration as an additional way to enhance operational effectiveness and efficiency. Appraisal districts, as Texas governmental entities, are required to comply with all applicable laws.

FINDING
Hunt CAD contracts with an appraisal firm to value real and personal property, but does not monitor the contractor's work or require supporting appraisal information to be delivered to the CAD.

Property Tax Code Section 6.01(b) defines the responsibility of an appraisal district:

(b) The district is responsible for appraising property in the district for ad valorem tax purposes of each taxing unit that imposes ad valorem taxes on property in a district.

The chief appraiser is responsible for the CAD's appraisals. Chief appraisers need sufficient knowledge for development of appraisal formulas and appraisal calculations of all taxable property within the CAD. Property Tax Code Section 25.01 defines appraisal property records. Subsection (c) states the following:

(c) A contract for appraisal services for an appraisal district is invalid if it does not provide that copies of the appraisal, together with supporting data, must be made available to the appraisal district and such appraisal and supporting data shall be public record. "Support data" shall not be construed to include personal notes, correspondence, working papers, thought processes, or any other matters of a privileged or proprietary nature.

Property Tax Code Section 5.16 establishes the (Comptroller's) authority to examine a CAD contractor's supporting appraisal information in conjunction with an Appraisal Standards Review:

IAAO'sStandard on Contracting for Assessment Services, Section 4.2, requires contracts to have specific provisions.

The contract establishes the legal obligation of all parties with respect to the project. It should incorporate the salient features of the RFP and of the successful proposal:

• Detailed description of the work to be performed
• The time frame, delivery date, and other requirements of the project
• The amount and terms of the contract delineating all expenses (travel and other expenses), including all billable expenses
• Authorized signatures of the assessment agency and other parties
• Performance standards
• Testing standards and procedures
• Performance bonds and other insurance coverage, including indemnification and hold harmless clauses
• Required documentation
• Implementation, installation, and delivery dates
• Responsibility for maintenance and upgrades
• Payment provisions
• Termination rights and compensation or penalty payments to the agency in the event of failure to perform, unavailability of funds, liquidation, or other factors
• Arbitration of contractual and other disputes
• Confidentiality agreements
• Other relevant considerations

In this IAAO Standard, Section 5.1 generally requires contracts have monitoring provisions:

Agency personnel must work closely with the contractor throughout the project to ensure full understanding and confidence in the system. They must be able to operate, maintain, and support the system once the contract is completed. Similarly, the assessment agency must possess, train, or acquire an internal staff that can use the contractor's products and services effectively.

The Hunt CAD chief appraiser accepts the appraisal values for gas, oil, industrial and utility property from its appraisal company without additional supporting information or documentation. The CAD's contract does not require delivery of detailed appraisal records, appraisal manuals, appraisal tables of income and expense used to value property or the market analysis of the appraisal company that is used in the valuation process. Without contractually requiring contractors to provide the supporting information for contracted appraisal services, Hunt CAD cannot demonstrate compliance with Property Tax Code sections 25.01(c) and 5.16(a)(2). By including a clause in its contracts that requires contractors to provide the required appraisal information, Hunt CAD will not only meet the prerequisites for establishing valid contracts, but also demonstrate compliance with the Property Tax Code. The failure of CAD governance to monitor contracts demonstrates lack of accountability for public resources, which is fundamental to serving the public interest.

Hansford CAD's process, for example, for managing and monitoring contracted services provides continual oversight in compliance with IAAO standards. The chief appraiser is responsible for supervising all other contracts except the chief appraiser employment contract, which is managed by the board. All contracts reviewed exceeded the IAAO standard by explaining what the services each vendor/individual is expected to perform, what the district gets, and when the delivery dates of services can be expected.

RECOMMENDATION 7
Adopt appraisal contract administration policies that include contract monitoring procedures and required appraisal support documentation for complying with Property Tax Code sections 25.01(c) and 5.16(a)(2).

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