Findings of the Appraisal Standards Review
This chapter of the report addresses the findings, commendations and recommendations from the appraisal standards review of the Johnson County Central Appraisal District in five sections:
The quality of the property tax system depends on the appraisal district's Board of Directors. Individuals serving on the Board of Directors bring to the board knowledge, judgment and expertise in establishing policies and procedures for the district's organization and operation.
The Central Appraisal District of Johnson County was formed in 1981 and became active in 1982. The district Board of Directors consists of six members. Members of the board are listed in Exhibit 4.
Board of Directors Members
Board Member Represents Starting Date Byron Black, Chairman City of Burleson 01/20/94 Sid Pruitt, Vice Chairman Alvarado ISD and City of Alvarado 01/18/96 Troy Thompson, Secretary Johnson County 02/24/97 Mike Brand Cleburne ISD 01/17/02 R. D. Scott Burleson ISD 10/17/02 Scott Porter Johnson County Tax Assessor/Collector 10/17/02 Source: Johnson CCAD, 2005.
Scott Porter is the elected Johnson County Tax Assessor-Collector and a non-voting member of the board. Troy Thompson is the Precinct 4 County Commissioner in Johnson County, an elected official. While the Exhibit 3 survey data shows four elected officials that are also board members in 2003, some are no longer in office.
The board of directors hires a chief appraiser to act as the chief operating officer of the appraisal district and has the following primary responsibilities:
- establish the appraisal district's appraisal office,
- adopt the appraisal district's annual operating budget,
- approve appraisal contracts,
- hire a taxpayer liaison officer (districts in counties having a population of over 125,000),
- appoint appraisal review board members, and
- Make general policy on the appraisal district's operation.
Members of the board received a written survey about board activities to complete. The survey was broken down into board policies and procedures, chief appraiser and staff, property appraisals, appraisal review boards, and budgeting and financial management. In interviews with the board chairman, Byron Black, and board member, R. D. Scott, both directors expressed confidence in the current administration and satisfaction with the progress made in appraising property equally and uniformly and at market value. Both board members interviewed emphasized the importance of achieving local values for the school districts as well as all of the taxing entities served by Johnson CCAD. Board chairman Black has previously served as mayor of the City of Burleson as well as a trustee for the Burleson ISD.
In January 2005 the Johnson CCAD board officially appointed a Taxpayer Liaison Officer who serves at the discretion of the board, as required by Tax Code Section 6.052 in counties with populations of more than 125,000.
The board evaluates the chief appraiser annually but only at an oral conference. The chief appraiser is the only district employee hired with a contract, and the only district employee that does not receive an annual written evaluation.
The current chief appraiser was hired in 2001 after the resignation of the only other chief appraiser since the district's 1981 inception.
Currently, the oral review process provides opportunity for the chief appraiser to respond and provide the board with established goals and objectives and the board members with an opportunity to identify performance issues that need to be addressed. The district does have a comprehensive, two-page job description for the chief appraiser, which includes a general position summary, an itemized list of 15 principle duties and responsibilities, and a description of the required knowledge, skills and abilities for the chief appraiser.
Without a written evaluation based on measurable performance standards, neither the chief appraiser, board, nor public has documented progress or lack of progress towards desired district goals. Written evaluations based on performance standards also provide a concrete basis for employee performance rewards, demotions or releases.
Perform a written evaluation of the chief appraiser annually.
The district's budget provides an incomplete breakdown of benefits for each staff position.
The budget currently contains the information for employee benefits but only in total dollar amounts rather than in a breakdown by staff position as required in Tax Code Section 6.06(a). The code does not require names of an individual employee in a particular position so names can be omitted in the proposed budget presentation. This provision of the tax code is designed to give the public and participating taxing units information about total compensation, including benefits, for each proposed staff position included in the proposed budget. It should also be noted that the proposed budget should itemize each proposed capital expenditure.
In documents provided by Johnson CCAD, the proposed 2005 budget was timely provided to the taxing jurisdictions before June 15, 2004. Also, documents provided include a copy of the notice for a public hearing on the proposed 2005 budget appearing in the Cleburne Times Review. The public hearing was scheduled for July 15, 2004.
A summary of the 2004 and 2005 budgets is provided in Exhibit 5.
Johnson CCAD Budgets for Fiscal Years 2004 and 2005
2004 2005 Category Budget Percent of Total Budget Percent of Total Employee Wages and Benefits* $1,373,727 71.1 $1,457,452 72.9 Professional Services 92,000 4.8 80,000 4.0 Office Supplies 10,000 0.5 10,000 0.5 Postage 28,750 1.4 32,900 1.6 Printing 6,500 0.3 4,000 0.2 Furniture & Fixtures 5,000 0.3 5,000 0.2 Office Equipment 3,000 0.2 3,000 0.1 Mapping Supplies 3,500 0.2 4,500 0.2 Deed Records 3,600 0.2 3,600 0.2 Computer Supplies & Equipment 15,000 0.8 15,000 0.7 Data Processing 82,250 4.3 61,000 3.0 Freight, 600 0.1 500 0.1 Telephone, Utilities 27,200 1.4 26,200 1.3 Maintenance & Repairs-Equipment 2,000 0.1 7,400 0.4 Fees - Parking 3,600 0.2 4,080 0.2 Maintenance & Rep-Property 12,175 0.6 13,000 0.6 Janitorial Serv/Supplies 9,950 0.5 9,950 0.5 Auto Allowance 77,520 4.0 85,320 4.3 Travel-Employees 6,000 0.3 8,000 0.4 Schools & Education 18,000 0.9 16,000 0.8 Legal Services 28,000 1.4 28,000 1.4 Auditing/Payroll Services 5,280 0.3 4,750 0.2 Insurance & Bonds 10,615 0.5 7,000 0.3 Dues & Memberships 5,500 0.3 5,000 0.2 Books & Publications 2,000 0.1 2,000 0.1 Subscriptions 700 0.1 500 0.1 Legal Notices 1,000 0.1 1,000 0.1 Maint Agreements 5,000 0.3 8,200 0.4 Misc Expenses 2,500 0.1 2,500 0.1 ARB 30,000 1.5 32,000 1.6 Aerial Photographs 12,500 0.7 12,500 0.6 Lease-Copier 5,700 0.3 5,700 0.3 Lease-Post Mach/Meter 4,300 0.2 4,300 0.2 Fixed Assets 13,125 0.7 13,125 0.7 Subtotal, Operations Expenses 1,906,592 1.3 1,973,477 1.3 9-1-1- Program Expenses 25,352 n/a 25,552 n/a Total Expenses $1,931,944 100.0 $1,999,029 100.0 Source: Johnson CCAD, fiscal years 2004 and 2005 budgets.
*Benefits are combined with employee wages for simplicity and were not broken out by budgeted position in the adopted budget.
Note: Percentage totals may not add to 100 percent due to rounding.
With more than 70 percent of budgeted funds dedicated to wages and benefits, both taxing units and the public need the detail on positions and benefits required by state law to be assured the number of staff in the district is sufficient to perform the work and that each staff member is fairly compensated. For example, the recently reviewed Jefferson CAD has model budget document that contains all of the necessary details required by Section 6.06 of the Tax Code.
Expand the budget format to comply with the Tax Code.
Numerous service and/or vendor contracts are a standard part of Johnson CCAD operations but the district does not have a formal; written contract monitoring process. Without formal contract monitoring, the district has not confirmed that it received the quality or quantity of services specified for delivery, as rendered by the contractor. Exhibit 6 presents a summary of contract items.
Johnson CCAD Contract Summary
Contract Type With Employment Chief appraiser Management Information Services Appraisal Records Services Appraisal Services Capitol Appraisal Group, Inc. Legal Services Perdue, Brandon, Fielder, Collins and Mott, L.L.P. Postage Meter/Mail Scan Equipment Pitney Bowes Janitorial Services Martindale Maids Hardware, Software, Software Maintenance and Production Services Contract Appraisal Records Services, Inc. Interlocal Government Contracts for Tax Collections* Joshua ISD and the City of Burleson External Audit Kirk and Richardson, P.C. Source: Johnson CCAD records, 2005.
*Agreement ends August 31, 2005, with Tax Assessor-Collector taking over collections on September 1.
Contract monitoring is currently accomplished informally between district staff and the chief appraiser.
While onsite, the reviewer learned the chief appraiser was in the process of evaluating services provided by competitive management information services (MIS) vendors. The chief appraiser also prepares and submits a written contract status report to the board at their monthly meetings.
Some of Johnson CCAD's contract monitoring challenges were evident in the Agreement for Appraisal Services (Agreement) for oil, gas pipeline, public utility, industrial and business personal property appraisals with CAG. The Agreement does not fully specify dates, deliverables or performance conditions required to be met. The calendar year term contract provides for the district to pay CAG for their services in four quarterly payments beginning January 15, 2003 and continuing on April 15, July 15 and October 15 of each year. Deliverables are not tied to payments.
Other than the May 31 deadline for CAG to provide all values resulting from the scope of work to the CAD, in time for issuing notices of appraised value to taxpayers, none of the other contract activities or deliverables has specific deadlines for performance or delivery.
Since the contract does not mention any specific breakout or basis for the said fee, no clear basis exists for adjusting the contract fee. Government entities generally do not have "evergreen" clauses - those that provide for automatic renewal and usually have provisions for the following items that are not included in this contract:
- contract dispute resolution process,
- key project staff identification, substitution, notification and approval provisions, and
- credentials required for vendor staff performing work.
Without clearly defined contract services and deliverables tied to vendor deadlines that correspond with appraisal district target function dates, the district is not alerting the vendor to critical deadlines the district faces or ensuring that critical deliverables are received timely.
IAAO's Standard on Contracting for Assessment Services, Section 5, requires monitoring contract performance.
A good contract monitoring process has procedures that identify the contract monitor and the duties that the contract monitor is to perform for each contract.
Adopt a formal contract monitoring process.
The Agricultural Appraisal Advisory Board met once in 2004. Tax Code Section 6.12 (d) requires that this board meet at the call of the chief appraiser at least three times a year.
Tax Code Section 6.12 (g) states that the board shall advise the chief appraiser on the valuation and use of land that may be designated for agricultural use or that may be open space agricultural or timber land within the district. The advisory board's purpose is to advise the chief appraiser on the appraisal and use of agricultural land; the district needs advice because its productivity values for a majority of land classifications have been held constant, not reflecting the market.
By calling only one of three required meetings, the chief appraiser has not been advised on agricultural land valuation as prescribed and intended by the Tax Code. Conducting the required annual meetings aids the district in improving its appraisal and classification of agricultural land.
Call at least three meetings of the Agricultural Appraisal Advisory Board annually.
In organizing and administering an appraisal district, the chief appraiser is responsible for hiring, firing, and training personnel, for ensuring compliance with a wide range of legal requirements and for the maintenance of policies and procedures for effective appraisal district office operations. The district is also required to comply with Comptroller rules concerning application forms and appraisal records. The most fundamental and important function is to annually appraise property in the district for ad valorem tax purposes for each taxing unit that imposes ad valorem taxes on property in the district, Texas Property Tax Code, Section 6.01 (b).
The chief appraiser is required by law to prepare and certify an appraisal roll for each taxing unit participating in the district. Certification of the appraisal rolls for 2003 and 2004 tax years by the district were completed according to the law. The 2003 certifications are dated July 28, 2003. Certifications for 2004 are dated July 26, 2004.
There are written performance reviews for staff members other than the chief appraiser. Copies of performance reviews for staff members were provided to the review team. At the time Mr. Hudspeth was hired in 2001 several of the ISD's had failed to receive local value in the Comptroller's property value study (PVS). In 2003, Cleburne and Venus ISDs failed to receive local value, initiating this Appraisal Standards Review (ASR). In 2004, all ISD's appraised by Johnson CCAD received local value.
Johnson County Appraisal District has well written policies and procedures manuals for managing district operations. The policies and procedures manuals are made up of two volumes, identified as Book One of Two and Book Two of Two, Policies and Procedures. A copy of the Table of Contents from each volume has been provided and included as a part of the ASR. Volume One-and Two policy sections are listed in Exhibit 7.
Johnson CCAD Policies and Procedures Summary
Policies and Procedures - Two Volume Set Volume One Policy Listings Volume Two Policy Listings Appraisal district Records systems Budget Exemptions Re-appraisal Mapping system Appraisal Review Board Appraisal methods Certification of appraisal rolls Personal property Appraisal district office Agricultural use appraisal Personnel Exemption and sales Chief appraiser Data processing system Source: Johnson CCAD, March 2005.
There are additional written materials that further define Johnson CCAD policies and procedures. An example is the Employee Handbook, a copy of which is provided each district employee. Other materials include a reappraisal plan and a summary outline of Uniform Standards of Professional Appraisal Practice. The reappraisal document references Section 25.18 of the Texas Property Tax Code as the guiding cause for reappraisals. Standards for property inspections are outlined for both real property and BPP. Sources cited for use in the reappraisal are the Comptroller's Office, Marshall and Swift Valuation Service and Texas Vehicle Information and Computer Services. The plan data also includes a memorandum signed by the chief appraiser identifying staff assignments for the reappraisal activities.
Successful appraisal districts have documented policies and procedures available for the public as well as to satisfy the requirements of Comptroller's Rules and provide for efficient administration of appraisal district responsibilities. The manuals developed by Johnson CCAD help taxpayers and staff understand the steps the district follows to accomplish its objectives.
Johnson CCAD provides a systematic approach to property appraisal with its well written district policy and procedures manuals and other written guides.
Appraisal districts use information technology to provide detailed records that are easily accessible to staff and the public. Management Information Systems allow the appraisal district staff to effectively manage large amounts of data on individual properties and employ appraisal processes that ensure equal and uniform appraisal processes and comply with Section 23.01 (b), Texas Property Tax Code. This section of the code requires "the market value of property shall be determined by the application of generally accepted appraisal methods and techniques." The section further states that mass appraisal standards must comply with USPAP and the methodology requires the same or similar appraisal methods and techniques to be used in appraising the same or similar kinds of property. Mass appraisal via information processing systems provide the development of appraisal modeling that results in uniform consistency not otherwise achievable in addition to management of massive quantities of information necessary to achieve acceptable results. Another primary use of management information systems is in mapping. The mapping process facilitates location information for property and is also an essential to reliable property appraisal. Such a system is referred to as Graphic Information Systems or GIS.
Johnson CCAD minimizes costs while maintaining an excellent multipurpose graphic system integrated with mapping technology. The district's management information system vendor is Appraisal Records Services, Inc. of Plano, Texas. Environmental Systems Research Institute (ESRI) provides the partially integrated GIS system. Johnson CCAD is actively involved in multipurpose GIS, working with local governments, the county engineer, the 9-1-1 coordinator and the sheriff's department as local participants to eliminate duplication and minimize costs. In March 2005 the chief appraiser was investigating competitive management information system vendors in the interest of ensuring the CAD has the most suitable information technology available to meet district needs.
Parcel conversion is tracked monthly and compared with monthly achievement goals. The detailed planning establishes a completion goal as well as month-by-month feedback for the staff, chief appraiser and directors.
Johnson CCAD maintains an excellent multipurpose graphic information system integrated with mapping technology while minimizing costs.
Johnson CCAD maintains a secure computer system environment and disaster recovery plan. The district's appraisal software has a security system that allows needed access for users of all levels while protecting sensitive data and user privacy.
Security is maintained by limiting general access to appraisal records and other confidential data fields. The public has "view only" access that does not enable restricted information records to be viewed; security codes are assigned as necessary to facilitate record changes. Not only do the security procedures limit the ability of anyone unauthorized to make changes but it also provides a historical record of changes that have occurred to trace their origin.
The district also has daily data backup and offsite storage to ensure all records are available in the event of a catastrophe or partial system loss.
Johnson CCAD ensures its appraisal and data computer systems are secure while protecting user privacy.
Personnel and human resources management are a critical function of appraisal districts. Successful management of personnel includes efficient recruiting, hiring, classification and compensation benefit administration, training and development and performance evaluation. Compliance with equal opportunity statutes and other applicable federal and state laws and the establishment of fair and workable policies, procedures and training are important for the recruitment and retention of competent staff.
Exhibit 8 provides a list of staff and assignments for the Johnson County Central Appraisal District.
Johnson County Appraisal District Staff, Positions, Certifications and Years Of Service
Position BTPE Course/Certification Year Completed/Obtained Years of Service Chief Appraiser, Executive Director* RPA 1982 24 RTA 1982 Supervisor Appraisal Operations RPA 1984 21 Senior Appraiser IV RTA 1985 17 RPA 1988 Senior Appraiser IV RPA 1980 25 Senior Appraiser IV** RPA 1987 19 Appraiser IV RPA 1989 16 Appraiser IV RPA 1999 6 Appraiser IV RPA 2000 5 Appraiser III Class III 2003 5 Appraiser III Class III 2004 10 RTA 2001 Appraiser II Class II 2003 9 Appraiser II Class II 2003 2 Appraiser Trainee 6 Administrative Assistant Course I 5 Data Coordinator Course I 24 Data Entry Systems Operator 5 ARB Coordinator Course I 11 Coll/Customer Service Supervisor RTA 2001 16 Deputy Tax Collector TAAO Collections Refresher 14 Tax Collections Clerk 2 Exemptions Clerk RTA 1989 16 Appraisal Clerk RTA 1984 19 Appraisal Clerk Course I 7 Appraisal Clerk Course I 4 Appraisal Clerk** 3 Appraisal Clerk Course I 3 Appraisal Clerk 3 Appraisal Clerk TAAD Deeds and Records 3 Receptionist/File Clerk** + Receptionist/Appraisal Clerk + Sales Research Clerk Course I 3 Mapping Supervisor Course I 5 ESRI - ArcGIS I & II, GEO Databases Mapping Clerk II ESRI - ArcGIS I & II, GEO Databases 4 Customer Service Clerk 3 Deeds and Records Clerk + Deeds and Records Clerk TAAD Deeds and Records 1 Deeds and Records Clerk TAAD Deeds and Records 1 Deeds and Records Clerk 1 9-1-1 Address Coordinator 19 Source: Johnson CCAD, 2005.
*The current chief appraiser also holds CTA and CSTA certifications.
+Employed less than one year.
Johnson CCAD staff comprises 39 employees including the chief appraiser. Three of the employees are described as part-time clerical staff and three employees are allocated to collections. The chief appraiser said that he hopes to be able to absorb the collections employees into the appraisal operations beginning September 1, 2005 when the district ceases to collect taxes and collection responsibilities transfers to the County Assessor/Collector. The 9-1-1 responsibilities will remain a part of the CAD operations.
Johnson CCAD has an Employee Handbook that is well written and comprehensive. The handbook is composed of 41 pages. The major divisions of the manual are as follows:
- Employee Welcome;
- Employment Policies;
- Employment Conduct;
- Hours and Compensation Policies;
- Operations Policies;
- Leave of Absence Policies;
- Employee benefits, and
- Acknowledgement for Receipt of the Handbook.
Examples of annual employee performance reviews are included in the reference. The review is titled Job Performance and Individual Work Plan. The performance evaluation appears to be well thought out and provides for employee comments as well as employer ratings utilizing a grid system. Judging from the comments of one of the staff appraiser reviews, there is an exemplary attitude toward teamwork in achieving CAD objectives. Employee performance reviews are standardized by written, annual reviews that are effective and functional.
Johnson CCAD has a comprehensive and well-written employee handbook.
Professional appraisal practice generally requires three approaches to value. The three approaches are briefly described as cost, income and market. Chief appraisers must consider all three approaches and use the method or methods that result in credible appraisal conclusions of a final value reconciliation for each property appraised. The system of appraisal employed by central appraisal districts throughout Texas is referred to as "mass appraisal."
The mass appraisal process is an appraisal system whereby large numbers of properties can be appraised for a relatively low unit cost, using modeling systems for properties along with statistical applications that provide for evaluating appraisal results or conclusions. Standard 6 of Uniform Standards of Professional Appraisal Practice (USPAP) establish the requirements for professionally completed mass appraisal, development and reporting. There are eight parts incorporated into Standard 6. Standard 7 of USPAP contains the provisions for personal property appraisal development. It is incumbent on central appraisal districts to incorporate the provisions of USPAP, Standard 6 and Standard 7 into their appraisal procedures.
Also included as a part of professional mass appraisal practice are the steps that are described and outlined by the International Association of Assessing Officers (IAAO) for a mass appraisal system and environment that achieves the end result of equal and uniform appraisals as required for by the Texas Property Tax Code.
Johnson CCAD has an effective system of property discovery and recording for both real property and business personal property. Both real and personal property systems incorporate an automated information system.
The district gathers information through construction permits received from member cities, septic permits from the County and temporary electric service permits in rural areas and records them in the appraisal records. This allows CAD field appraisers to discover and inspect new property from a select list of properties requiring inspections created by recording permit information to the appraisal records. Business personal property information is received from DBA recordings with the County Clerk in addition to newspaper and other advertisements.
Using this process resulted in almost doubling the number of renditions received from 2003 to 2004, from 33 percent to 64 percent, respectively. Final numbers for 2005 renditions are not yet available but results to date are ahead of 2004.
Periodic inspections are also a common method of property discovery and the inspections result in recording data characteristics that generate value changes specific to the revised property records. Inspections are a routine occurrence in rural settings where permits are not required and manufactured housing appraisal items are also incorporated into the district's information processing system.
Johnson CCAD has an effective and successful process for discovering and recording real and business personal property.
Johnson CCAD identified problematic issues and made staffing and procedural changes that resulted in having no eligible school districts (local value for all member ISDs) in the 2004 PVS. Following the 2003 reappraisal in which Cleburne and Venus ISDs failed to receive local value and met the three qualifying criteria to receive an appraisal standards review, procedural changes were implemented in the manner in which sales were gathered, recorded and reported in periodic ratio studies.
Specifically, the district assigned one employee the responsibility of gathering and recording sales and distributing that information to the appraisal staff. By having one person responsible, the gathering of sales, recording and distributing that information gained proficiency and facilitated management. A significant part of the sales gathering procedure involves deed information received from the map and deed department, mailing sales information letters to respondents and recording the information in the appraisal records for analysis. The information system is a critical part of this process and is the system by which the periodic sales ratio studies are generated.
Other sales information linked to the information system is gathered from MLS, real estate professionals, title companies and fee appraisers. Information from all of these sources are routinely gathered, recorded in the appraisal records and reviewed using ratio studies and physical inspections of the properties. The review team received a copy of the sales letter and the log quantifying the results and listings of the sales information received. The recorded sales data and ratios are a key addition to the information processing and records system for mass appraisal.
Johnson CCAD identified and implemented ways to improve appraisal accuracy through staffing and procedural changes.
Johnson CCAD does not perform or have procedures to ensure adequate market research and data documentation are being gathered for all property types.
Johnson CCAD uses Marshall & Swift cost services for the development of appraisal models that are incorporated into a database of property classifications evolving from the Marshall & Swift cost information. The concept provides for estimating the replacement cost new of a model, for which an estimate of accrued depreciation is then calculated and subtracted, to determine a final estimated value of depreciated improvements. That improvement value estimate is then added to the land or site value to arrive at a total property value. The table driven cost models provide for plus or minus adjustments for property specific characteristics of both site and improvement models. The model calculations permit adjustments for local market influences and factors for both land and improvement schedules. Valuation ratios are then utilized in the testing process to compare the cost calculations with market sales of similar properties. A similar process is also used in the appraisal of commercial property.
The reviewer learned through appraisal staff interviews that the district has had limited success with accumulating reliable income and expense information from property owners to be used in an income approach to appraise commercial properties. Income calculations are sometimes used when the income and expense information is available and can be confirmed during the data gathering process.
Deferring to income approaches to value is not an acceptable practice if it violates uniform appraisal methods for like properties. Some income and expense information is available at times for income property appraisals with information from trade journals and publications that are occasionally used. The district subscribes to this type of information to aid in reliable appraisals of income property.
In addition, according to district staff, the original town of Cleburne has a significant number of property improvements constructed prior to 1950 that do not lend themselves to mass appraisal techniques because of the unique character, age and physical condition of improvements more than 50 years old and there also existed an environment of intimidation about "sales chasing." Johnson CCAD did not test positive for sales chasing or fail ratio concentration tests in the 2003, 2004 or 2005 PVS.
Properties in this age range frequently have had extensive remodeling by investment purchasers for the purpose of resale. In such instances, these properties sell for amounts higher than typical for a neighborhood having improvements nearing the end of their useful economic life.
Tax Code Section 23.01(b) requires that, "....each property shall be appraised based upon the individual characteristics that affect the property's market value."
Reviewer discussions with the chief appraiser and staff appraisers about the 2003 failure to appraise residential property within the prescribed limits of market value required by the PVS for school district funding for Cleburne and Venus ISD revealed that the chief appraiser has focused increased detailed attention to researching and documenting data based on the periodic ratio studies for all of the Johnson CCAD school districts.
By strengthening its focus on continued market research and data documentation for all property types, the district can prevent appraisal inaccuracy and ensure achieving market value assessments for all its school districts.
Research and document sales data for all property types based on periodic ratio studies.
Johnson CCAD is not following the required Section 1-d-1 appraisal methods for computing productivity value for all of its land classifications. Land that qualifies for Section 1-d-1, or agricultural use is appraised based on its productivity value rather than on its market value. Usually, the land's productivity value is substantially lower than its market value. The chief appraiser said that the Johnson CCAD has been working on productivity values since the beginning of 2005.
The Texas Constitution permits productivity appraisal with two sections in Article VIII - Sections 1-d and 1-d-1. Tax Code Chapter 23, Subchapters C, D and E are the laws that implement the constitutional provisions. The Manual for the Appraisal of Agricultural Land is a Comptroller administrative rule that sets out appraisal procedures and eligibility requirements for 1-d and 1-d-1 appraisal.
Five steps are required to put an effective productivity appraisal system into action:
- develop a land classification system;
- estimate the net to land per acre for each land class or sub-class;
- divide each class' net to land by the year's capitalization rate to create a current year productivity appraisal schedule;
- classify all qualified agricultural land according to the land classification system;
- Use the productivity appraisal schedule to compute productivity value for individual land parcels.
As shown in Exhibits 9 through 11, Johnson CCAD is skipping steps 2 and 3 for several land classes and school districts and instead choosing to hold the productivity value constant.
Johnson CCAD School Districts and State Productivity Values, Cap Rates and
Computed Net to Land Values Barren/Wasteland Land Classification
1992 - 2003
Land Classification: Barren/Wasteland Tax Year State Productivity Value ($/acre) Cleburne, Joshua, Rio Vista and Godley ISD Self Reports Productivity Values ($/acre) Cap Rate (defined by law) Cleburne, Joshua, Rio Vista and Godley ISD Net to Land Values (PTD computed, $) 2003 23.52 50.00 10.00% 5.000 2002 21.65 50.00 10.00% 5.000 2001 24.15 50.00 10.85% 5.425 2000 23.42 50.00 10.90% 5.450 1999 22.96 50.00 10.00% 5.000 1998 23.03 50.00* 10.60% 5.300** 1997 n/a 50.00 10.35% 5.175 1996 n/a 50.00 10.75% 5.375 1995 n/a 50.00 10.75% 5.375 1994 n/a 50.00 10.00% 5.000 1993 n/a 50.00 11.00% 5.500 1992 n/a 50.00 12.00% 6.000 Source: Johnson CCAD Self Reports and Comptroller's PVS State Totals.
*1998 value for Godley ISD: 49.98; Rio Vista: 50.19.
**1998 value for Godley ISD: 5.298; Rio Vista: 5.320.
Holding the productivity value constant ignores two of the required methods for this process. One required method calls for estimating the current year's net to land per acre and then dividing by the current year's capitalization rate to arrive at the current year's productivity value per acre for each land class.
The other method requires net to land to be based on the annual income estimate for the five year period preceding the year before the year of the appraisal. For example, an appraisal in 2003 is based on income from 2001, 2000, 1999, 1998 and 1997. The annual income is defined as the net income the land would have generated under an average owner of ordinary prudence during each year. In computing net to land, the appraiser averages the annual net income for the appropriate five years.
It is highly unlikely that the prescribed five year annual net income averages (net to land) and capitalization rates for barren/wasteland would combine to produce the exact same productivity value for every year, 1992 to 2003. The state's productivity values for wasteland/barren varied between 1998 and 2003, sometimes by more than a dollar per acre.
Exhibit 10 presents a summary of productivity values for Johnson CCAD school districts with native pastureland. Alvarado, Venus and Joshua ISDs have the exact same productivity values, respectively, for at least the past 10 years while state values have varied by about $0.50 each year since 1998. Grandview and Burleson ISDs showed a value change for 2003 but had constant values in previous years. While the other school districts have some variation between some years, it appears that the required methods are not being applied consistently.
Johnson CCAD School Districts and State Productivity Values
Native Pastureland Land Classification
1992 - 2003
Land Classification: Native Pastureland ISD Self Reports and State Productivity Values ($/acre) Tax Year State Alvarado ISD Venus ISD Joshua ISD Grand-view ISD Burleson ISD Cleburne ISD Rio Vista ISD Godley ISD 2003 40.79 113.70 90.00 78.00 83.66 93.68 86.88 88.85 86.30 2002 40.20 113.70 90.00 78.00 84.97 89.81 87.17 88.85 87.80 2001 38.14 113.70 90.00 78.00 84.97 89.81 87.12 80.06 79.73 2000 37.88 113.70 90.00 78.00 84.97 89.81 88.66 88.85 85.07 1999 38.69 113.70 90.00 78.00 84.97 89.81 87.09 88.21 87.83 1998 38.12 113.70 90.00 78.00 84.97 89.81 87.09 87.94 86.93 1997 n/a 113.70 90.00 78.00 84.97 90.00 87.09 87.94 87.83 1996 n/a 113.70 90.00 78.00 84.97 90.00 87.09 87.74 87.43 1995 n/a 113.70 90.00 78.00 84.97 90.00 87.09 90.38 87.43 1994 n/a 113.70 90.00 78.00 84.97 90.00 87.09 90.38 87.43 1993 n/a 113.70 90.00 127.70 84.97 90.00 87.09 89.91 87.43 1992 n/a 113.70 90.00 129.42 84.97 90.00 87.09 89.91 87.41 Source: Johnson CCAD ISD Self Reports and Comptroller PVS State Totals.
All nine Johnson CCAD school districts have land classified as dry cropland. The productivity values follow a similar pattern to the native pastureland classification, with Keene ISD showing the exact same productivity value, 164.23, for every year from 1992 to 2003. State productivity values vary by one to five dollars between 1998-2003 with a low of $137.59 and a high of $149.21. Improved pastureland is also found in all nine Johnson CCAD ISDs. Productivity values vary more than in the other land classifications, but Cleburne ISD, for example, has a productivity value of $141.36 for 2002 and 2003, and one only four cents less for 2001. However, Rio Vista ISD has recent productivity values that vary between years and appear to be independently recalculated each year, as follows: 2003 - $160.62; 2002 - $169.98; 2001 - $173.90; 2000 - $187.87. State productivity values for improved pastureland have varied by about a $1 each year for the past three years, and by about $4 a year for the four years preceding 2002 but overall have increased each year since 2000.
Four Johnson CCAD school districts have land classified as orchards. Exhibit 11 presents a summary with the school district and state productivity values for orchards.
Johnson CCAD School Districts and State Productivity Values
Orchards Land Classification
1992 - 2003
Land Classification: Orchards ISD Self Reports and State Productivity Values ($/acre) Tax Year State Cleburne ISD Grandview ISD Joshua ISD Keene ISD 2003 404.90 300.00 299.60 300.00 300.00 2002 401.13 300.00 299.60 300.00 300.00 2001 396.81 300.11 299.60 300.00 300.00 2000 399.87 300.00 299.60 300.00 300.00 1999 396.15 300.00 299.60 300.00 300.00 1998 365.61 300.00 299.60 300.00 300.00 1997 n/a 300.00 299.60 300.00 300.00 1996 n/a 300.00 299.60 300.00 300.00 1995 n/a 300.00 299.60 300.00 300.00 1994 n/a 300.00 299.60 300.00 300.00 1993 n/a 300.00 299.60 0.00 300.00 1992 n/a 300.00 299.60 0.00 300.00 Source: Johnson CCAD ISD Self Reports and Comptroller PVS State Totals.
Again, it is highly unlikely that the prescribed five year annual net income averages (net to land) and capitalization rates for orchards would combine to produce the exact same productivity value for each year, 1992 to 2003. The state's productivity values for wasteland/barren varied between 1998 and 2003, sometimes by more than $30 per acre but more recently by about $3 per acre between years.
While the district improved its overall appraisal accuracy from 2003 to 2004 PVS, the district is not producing accurate productivity values for all of its land classifications. Continuing this practice of skipping required valuation steps compromises assessed values for Johnson CCAD school districts and taxpayers. Possible consequences of continuing this practice include future eligibility for school districts with high concentrations of special agricultural use property and loss of state funding.
Successful appraisal districts achieve and maintain appraisal accuracy by using required methods to compute appraised values, which benefit school districts and taxpayers.
Compute productivity values annually using methods required by law for all land classifications.