In July 2004, the Perrin-Whitt Consolidated Independent School District (Perrin-Whitt CISD) was identified as one of 54 school districts in the state meeting the criteria that initiate an Appraisal Standards Review (ASR) of the county appraisal district that served them. In March 2005, the Comptroller's Property Tax Division (PTD) began an ASR of the Jack County Appraisal District (Jack CAD).
Appraisal Standards Reviews
The 78th Legislature, Regular Session, directed the Comptroller's office to conduct appraisal standards reviews of county appraisal districts if the Comptroller finds in its annual Property Value Study (PVS) that the appraisal district has one or more "eligible" school districts. Eligible school districts are those that meet all of the following conditions:
- the district's values are invalid in the most recent property value study;
- the district's values were valid in the two studies preceding the most recent study; and
- the district's local value is above 90 percent of the lower threshold of the margin of error.
In Texas, public education is paid for by a combination of state and local funds. Local funding comes from local property taxes. The chief appraiser of each county appraisal district (CAD) determines local property values and school district boards set tax rates that determine the amount of local tax revenue. Appraisal districts under the law, are required to appraise property at market value. Market value, in simple terms, is the price for which a property would sell under normal conditions. State funding is based on the total taxable property value within each school district as determined by the PVS.
The PVS independently estimates the taxable property value in each school district to ensure that state values reflect market value, which in turn ensures that school districts have approximately the same number of dollars to spend per student, regardless of the school district's property wealth or lack of property wealth. School districts with less taxable property value per student receive more state dollars for each pupil than districts with more value per student. The state's fair distribution of school funding depends largely on the Comptroller's taxable value findings.
By conducting appraisal standards reviews, the Comptroller's office helps school districts to understand the reason for the invalid finding so they can effectively work with the appraisal district to correct the problems and achieve market values in future tax years. The purpose of an ASR is to identify problems and recommend changes in procedures or methods to improve appraisal accuracy.
An ASR examines and evaluates a county appraisal district's (CAD) appraisal practices including appraisal planning, appraisal procedures and methodology, and application and adherence to appraisal standards. The Tax Code and Comptroller Rules are the major criteria used to measure an appraisal district's performance. The evaluation of the appraisal district's appraisal methods are based on a comparison of local methods and procedures to those generally accepted by the mass appraisal industry in Texas and those practices mandated by state law or Comptroller Rules. The Tax Code dictates certain appraisal procedures or standards such as the Uniform Standard of Professional Appraisal Practice (USPAP), specifically Standard 6: Mass Appraisal and Standard 7: Personal Property. Also the International Association of Assessing Officers (IAAO) Standards on Assessment are used as guidelines on the operation of an assessment office.
The two principal focuses of an ASR are to determine why a school district was deemed eligible and to make recommendations to improve appraisal practices so the school district's taxable values can be determined valid in future studies. The review evaluates five broad functional areas of CAD operations: information processing systems, district staffing, property mapping and discovery, appraisals and appraisal standards.
The review methodology includes a self-assessment completed by the CAD, a survey of appraisal district board of directors, staff interviews, reviews of written policies, procedures, plans, financial and management audits, and assessments of manual and automated records systems.
As the result of the review process, the Comptroller is issuing this report of its findings that includes recommendations for change. The appraisal district is required by law to comply with the recommendations within one year of the release of this report. If the Comptroller determines that the appraisal district board of directors failed to take remedial action within one year after the issuance of the review, the Comptroller shall notify the district judges serving in the county, who shall appoint a five-member board of conservators to implement the recommendations. The board of conservators shall exercise supervision and control over the operations of the appraisal district until the Comptroller determines pursuant to the annual property value study, Section 403.302, Government Code, that in the same year the taxable value of each school district for which the appraisal district appraises property is the local value for the school district. The appraisal district shall bear the costs related to the supervision and control of the district by the board of conservators.
Jack CAD has a stable staff that prides itself on customer service, flexibility and adaptability. The appraisal district staff is familiar with the county, its taxpayers and the ad valorem tax issues in the district. The average experience level of appraisal district staff is slightly more than nine years. Some areas of operation, however, can be improved and, thereby, strengthen the appraisal district's appraisal performance. Key issues facing the appraisal district include:
- identifying different land markets in the county;
- documenting and updating policies and procedures; and
- planning for reappraisals.
Key Findings and Recommendations
Identify Different Land Markets in the County
Research land sales to identify market influences and stratify all similar properties according to their common characteristics. Jack CAD's market research and analysis does not allow effective delineation of the local market for land. The district should use sales to identify all of the influences on market value and then group properties with similar characteristics, regardless of their location in the appraisal district. From research of sales, the appraisal district can define the boundaries of each market and perform ratio studies of the properties in the market to determine whether location modifiers are necessary and, if so, how large of a modifier is necessary
Develop an implementation plan and timeline to complete the integration of the district's appraisal and geographic information systems. Jack CAD's process for verifying property boundary data against deeds is about 70 percent complete. The process requires the CAD to update its property boundary data using actual deed filings. When this process is complete, the appraisal district can integrate its property appraisal records with its maps by overlaying property records on the maps. This will enable the CAD to compare properties to identify similar characteristics more effectively. This will allow the appraisal district to accurately identify markets, particularly land markets, by grouping properties with similar characteristics and similar market influences regardless of their geographic location.
Document and Update Policies and Procedures Manuals
Develop and adopt a comprehensive policies and procedures manual for appraisal district operations. Jack CAD does not have well-documented policies and procedures to guide the day-to-day operations of the district in areas such as payroll processing, accounting and purchasing. Policies direct individual employees or a group of employees in what they must do by identifying their duties and functions. Procedures enumerate the tasks required in a duty or function and detail how the duty can be accomplished. A policies and procedures manual will help the appraisal district maintain consistency in its operations in the event of turnover among key administrative staff
Expand the district's personnel manual to address employment and federal laws. The district's personnel manual does not address issues of ethics, conflicts of interest, security, the Family Medical Leave Act and the Americans with Disabilities Act. Personnel policy and procedures manuals help organizations define major employment issues. Good policy and procedure manuals protect both management and employees from arbitrary practices and help management resolve conflicts in a consistent manner.
Plan for Reappraisals
Develop a detailed reappraisal plan. The chief appraiser said the appraisal district annually reappraises its property. Annually, the appraisal district inspects properties and reviews market information to identify where appraised values no longer reflect the market value and then adjust those property values to bring them in line with their market value. This process is sometimes referred to as appraisal maintenance and is an accepted practice. The district, however, has not established a detailed reappraisal plan that it can use as a roadmap for performing the work. A detailed reappraisal plan can also be a communication tool that shows the appraisal district board of directors how the appraisal district staff plans to accomplish its appraisals and allows the board to direct the appraisal activities by amending the plan as presented by the chief appraiser. The appraisal district should develop a comprehensive reappraisal plan.
The reviewer identified commendable practices in Jack CAD that other county appraisal districts may do well to review and implement where appropriate
The appraisal district has established an appraisal performance threshold policy to identify when to revise base appraisal schedules. Jack CAD has established an appraisal performance threshold policy for determining when to reappraise. It is the appraisal district's policy to reappraise categories of properties whose level of appraisal falls below .95 as indicated in local ratio studies. Jack CAD's computerized appraisal system allows the appraisal district to evaluate its appraisal performance through ratio studies within and among property classifications. The chief appraiser said that the appraisal district runs ratio studies within property classes, by school district and countywide at least bimonthly. The chief appraiser said the district uses the ratio study results for reappraisal decisions and annual value maintenance. When the ratio for a property type falls below .95, the appraisal district develops new appraisal schedules for that type of property.