Findings of the Appraisal Standards Review
This chapter of the report addresses the findings, commendations and recommendations from the appraisal standards review of the Kaufman County 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 appraisal district was formed in 1981 and became active in 1982. The district Board of Directors consists of eight members. Members of the board are listed in Exhibit 4.
Board of Directors Members
R.A. (Skip) Weatherford, Chair City of Forney, Forney ISD 1984-1998, 2002-present Frances Anderson City of Terrell 1996 Johnny Countryman Kaufman County 2005 Mike Hunt Terrell ISD 2000 Vidal Jones City of Kemp, Kemp ISD, City of Mabank 2002 Ray Raymond City of Kaufman, Kaufman ISD 2003 Chris Walters Scurry-Rosser ISD, City of Crandall, Crandall ISD 2002 Dick Murphy, non-voting Kaufman Tax A/C 2005 Source: Kaufman CAD, June 2005.
Johnny Countryman is a county commissioner and Dick Murphy is the county tax assessor-collector and both are elected officials. Frances Anderson is the City of Terrell mayor.
The Board of Directors has the following primary responsibilities:
- Establish the appraisal district's appraisal office;
- Adopt the appraisal district's annual operating budget;
- Contract for necessary services;
- Hire a chief appraiser;
- 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.
The Board of Directors hires a chief appraiser as the chief operating officer of the district.
Board of Directors received a written survey about board activities. Four of the eight board members responded. The survey was broken down into board policies and procedures, chief appraiser and staff, property appraisals, appraisal review boards, and budgeting and financial management. Three board members provided overwhelmingly positive replies to each question. The fourth member, new to the board, declined to answer any questions citing lack of experience.
The current chief appraiser was hired in January 2005 replacing the former chief appraiser who retired after 24 years with the district. The board had 14 applicants for the position and interviewed seven.
The board has developed a well-defined job description for the chief appraiser and constructed an objective evaluation tool for measuring the chief appraiser's job performance.
The chief appraiser's job description contains the statutory responsibilities set forth in Section 6.05 of the Property Tax Code, as well as specific goals and expectations required from the board. The job description clearly defines the role of the chief appraiser and lays the groundwork for an objective evaluation.
The chief appraiser receives an annual performance evaluation. The board uses a separate evaluation instrument for the chef appraiser than is used for other district staff. The evaluation employs a numeric rating system of 1 to 10, with 1 being inadequate competency, 5 being average competency, and 10 indicating an excellent competency rating. The instrument allows for input from all board members. The board chairman tallies the individual ratings to determine a numerical average and presents the chief appraiser with the composite board scores. Having an objective evaluation system in place ensures that the board and the chief appraiser are in agreement as to what is expected of the chief appraiser, and eliminates performance evaluations that may be subjective and based on emotion rather than actual performance.
The board chairman stated that he is satisfied with the current chief appraiser's performance to date.
The board has developed a well-defined job description for the chief appraiser and constructed an objective evaluation tool for measuring the chief appraiser's job performance.
The district's budget lacks the detail necessary to comply with Section 6.06 of the Tax Code.
Section 6.06 requires a listing of each proposed position including the salary and benefits for the position, each proposed capital expenditure and an estimate of the amount of the budget allocated to each taxing unit. Taxing units are also required to maintain a copy of the budget for public inspection at their principal administrative office.
Copies of the budgets for 2003, 2004 and 2005 were reviewed. Each budget contains detailed listings of proposed capital expenditures, as well as the required budget allocations to each taxing unit. Each budget also contains a listing of each proposed staff position showing its proposed salary. The benefits allocated to each position, however, are shown as category totals rather than itemized for each proposed position. According to the budgets, benefits for full-time staff include health insurance, retirement, and a $400 monthly travel allowance for appraisers.
The 2005 budget was not amended to support the $29,600 appraisal contract with Capitol Appraisal Group (CAG), which was approved by the board in December 2004. According to board minutes, the board intends to pay for the appraisal services with excess funds from the 2004 fiscal year. The 2004 fiscal year audit was completed in March 2005 and indicates sufficient excess funds to cover the expenditure. In January 2005, the district exercised its option to have CAG appraise the county's minerals in 2005 for an additional $2,900.
A summary of the 2003, 2004 and 2005 budgets is in Exhibit 5.
Kaufman CAD Budgets for Fiscal Years 2003, 2004 and 2005
2003 2004 2005 Category Budget Percent of Total Budget Percent of Total Budget Percent of Total Reserves $8,000 0.68% $8,000 0.63% $8,000 0.61% Salaries 630,476 53.72% 662,537 52.36% 702,975 53.70% FICA 48,231 4.11% 50,684 4.01% 53,777 4.11% TEC 3,500 0.30% 9,276 0.73% 4,500 0.34% Health Insurance 117,840 10.04% 141,408 11.18% 142,430 10.88% TCDRS 57,941 4.94% 61,218 4.84% 64,954 4.96% Travel 45,200 3.85% 45,200 3.57% 45,200 3.45% Office Expenses 44,310 3.78% 44,310 3.50% 46,110 3.52% Supplies 31,732 2.70% 32,550 2.57% 32,550 2.49% Office Maintenance/Equipment 18,651 1.59% 12,300 0.97% 12,750 0.97% Subscriptions/Dues 7,655 0.65% 8,720 0.69% 9,836 0.75% Postage 33,400 2.85% 33,000 2.61% 32,600 2.49% BOD Expenses 4,000 0.34% 5,900 0.47% 3,000 0.23% ARB Expenses 15,325 1.31% 23,000 1.82% 17,950 1.37% School/Education 24,776 2.11% 26,650 2.11% 25,000 1.91% Computer 69,200 5.90% 67,000 5.30% 78,460 5.99% Contracts 13,500 1.15% 33,500 2.65% 29,000 2.22% Total $1,173,737 100.00% $1,265,253 100.00% $1,309,093 100.00% Source: Kaufman CAD, fiscal years 2003, 2004 and 2005 budgets.
Boards of Directors are required by law to hold a public hearing on the budget. The hearing for the 2003 budget was held on June 27, 2002. The hearing for the 2004 budget was held on June 24, 2003 and the hearing on the 2005 budget was held on June 17, 2004.
Taxing entities and the public need to understand how district employees are compensated. With more than two-thirds of the budget going to wages and benefits, both taxing units and the public need the detail required by state law to be assured that the number of staff in the district is sufficient to perform the work and that the staff is correctly compensated.
Expand the detail of the budget to include the benefits proposed for each position as required by Section 6.06 of the Tax Code.
Three members of the 2005 Appraisal Review Board (ARB) have not received state-mandated training.
In May 2005, the board of directors had to appoint three new members to the ARB to replace three members who vacated their positions earlier in the year. The appraisal review board is composed of seven members. According to the district's office manager, one of the members replaced was not aware of how much time he would have to devote to hearings and two others were substitute teachers employed by a school district. Employees of taxing entities are not eligible to serve on the ARB.
The three ARB members appointed in May 2005 have not completed the training course established by Section 5.041 of the Property Tax Code. The code states that a member of the ARB cannot participate in a board hearing if the person has not attended the required training and received a certificate of completion. Subsection (e) of the code does provide, however, that if an ARB member is appointed after a course offering, the member may continue to serve on the ARB if the course is completed the following year.
The chief appraiser stated that the district will conduct a training session for the new ARB members prior to any formal hearings and that the new members will attend the state-required training next year. Formal hearings are scheduled to begin in June 2005.
Ensure that new members of the Appraisal Review Board complete the state-mandated training prior to the 2006 board hearings.
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 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 the 2002, 2003, and 2004 tax years by the district were completed according to the law.
Over the years, Kaufman CAD has developed several procedural manuals, in addition to a district policy manual, which includes board policy, administration policy, and personnel policy. The chief appraiser stated he is in the process of reviewing all of the district's policies and procedures for content and applicability. A timeline has not been established to complete this review. Evidence indicates that some of the manuals currently in use need revisions. It is important that the district's policy and procedures manual reflect current policies and procedures to ensure consistency among staff performance and serve as a training tool for new employees.
The Kaufman County Appraisal District Policy Manual and Mission and Vision Statements is divided into three sections. The first section is devoted to the board of directors and explains how the board was created, how members and officers are elected, duties of members and officers, when meetings are to be held and what business can be transacted at the meetings. This section also contains a policy statement on periodic reappraisals once every three years. Section two of the policy manual describes the appraisal district's administration and organization. It contains job descriptions of the chief appraiser and other district staff. Some of the positions described are outdated based on the district's existing workforce. Section three serves as the district's personnel policy informing district employees of their rights and responsibilities. This section presents the district's position on ethics, the Family and Medical Leave Act, at will employment, and a drug free workplace.
A Mass Appraisal of Real Property in Kaufman County, Texas serves as the district's mass appraisal report and complies with Standard 6 of the Uniform Standards of Professional Appraisal Practices (USPAP). The summary report serves to aid the taxpaying public in better understanding the methods and techniques used by the district in the valuation of property.
The Open Space/Agricultural Application Procedures Manual describes how applications for open space agricultural use are processed. The manual also contains the district's guidelines for qualifying for agricultural use and wildlife management. Some of the forms shown in the manual are no longer in use, having been replaced by newer forms.
The Personal Property Procedures Manual describes field procedures and methods of discovery used by the district's appraisers. The manual contains a section on renditions. It has not been updated to reflect the changes made by SB 340, 78th Texas Legislature, 2003. These can be found in Section 22 of the Property Tax Code. The district complies with the code, but the manual needs revision.
In 2005, according to the director of personal property, the district will assess a 10 percent penalty for business owners who failed to file a 2005 business personal property rendition, in accordance with Section 22.28 of the Property Tax Code. The Kaufman County Tax Assessor-Collector will actually collect the fines. Currently, written procedures do not exist explaining how the appraisal district plans to provide this information to the tax assessor-collector or what percentage of the monies collected the appraisal district plans to retain.
The Kaufman County Appraisal District Appraisal Procedures Manual was last updated in September 2000. The manual describes the daily procedures appraisers will use when in the field, how field cards are processed when returned to the office, how to review sales data, and appeals procedures. A residential classification guide with photos and descriptions is used in conjunction with the appraisal manual.
The Mapping Department Procedures Manual is well written and explains what documents are required before the district's mapping system can be updated. It explains how ownership on maps are changed, how new parcels are created, deleted or modified, and how to digitize scanned maps and pull them into the geographic information system (GIS). The manual, however, still refers to the district's old mass appraisal system, ARS, rather than to the Property Appraisal and Collection Software (PACS) system, which the district acquired in 2004.
The Homestead Exemption Procedures Manual describes the statutory requirements and documents necessary to process general residential homestead exemptions, over 65 exemptions and surviving spouse, disability exemptions, and disabled veteran or survivor exemptions. The manual explains how to enter the data into the district's old mass appraisal system rather than PACS. All forms and applications used by Kaufman CAD comply with Comptroller rules.
The district has a manual entitled Appraisal Coordinator Procedures that discusses the appraisal notice process, procedures for tracking protests and scheduling hearings with the appraisal review board, and how to make value changes ordered by the ARB. Again, all data entry instructions and print screens refer to the ARS system. Some of the personnel identified in the manual are no longer employed with the district or have been reassigned other responsibilities.
Section 23.12 of the Property Tax Code requires all appraisal districts to have documented policies and procedures.
A procedures manual helps taxpayers and staff understand the steps the appraisal district follows to accomplish the tasks of the appraisal district.
Develop and implement a timeline for reviewing and updating all district policy and procedures manuals.
Appraisal districts use information technology to provide detailed records that are easily accessible to staff and the public. Information technology systems allow staff to effectively manage large amounts of data on individual properties and make the appraisal process more efficient.
Kaufman CAD has integrated its computer system for appraisals with its geographic information system. Having an integrated appraisal/GIS system available for use in these areas helps the district capture and verify more sales information, which the district uses to improve its valuation of properties. The integrated system allows the district to respond quickly to information requests by the public. The system allows both the appraiser and appraisal review board members access to more comprehensive information on a real time basis. It contributes to a timely and more efficient re-appraisal.
The district is in its second year of using a new mass appraisal evaluation system. Kaufman CAD uses a highly sophisticated information system for appraising property in the district. The Property Appraisal and Collection Software was developed by True Automation, Inc. from Plano, Texas. True Automation also hosts the district's Web site, <www.kaufman-cad.org>.
PACS allows the appraiser to access all the data needed in order to analyze sales and make comparisons to other, similar property. It allows the appraiser to make an accurate appraisal of each property by having all of the required data available when he or she calls up the property appraisal. This system allows the district to meet the requirements of Section 23.01 of the Tax Code, which requires that all appraisals must consider the individual characteristics of the subject property. PACS also allows the district to run ratio studies on sold properties in order to update the appraisal schedules, and it assists the district in the record keeping for ownership, exemptions and values. The district uses the PACS imaging module to display photos of properties taken in the field with digital cameras. This feature is very helpful during the appeals process. It allows the taxpayer and the Appraisal Review Board to view the data at a hearing. Imaging also assists the district in the reappraisal process by showing improvements that existed at the last inspection of the property. The PACS system can assess appraisal trends over time because it currently retains eight years of data.
The GIS system uses Geographic Software System software. A GIS technician enters metes and bounds of property taken from recorded deeds and plats. Each parcel is given a unique identifying number. Parcels can be displayed electronically as a single parcel or as part of a larger group of parcels, such as a subdivision or neighborhood. The GIS system shows parcels with relation to streets, roads, rivers, streams, and other topographical areas that can have an influence on property values. The system identifies taxing entity boundary lines and other data such as voter precincts. The district's aerial maps have been integrated into the GIS system, allowing all of the same data to be displayed on aerial maps.
The district has integrated its appraisal software and geographic information systems, which provide staff and taxpayers better access to data.
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 employment 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.
The Kaufman CAD staff, at the time of this review, is organized as outlined in Exhibit 6.
Kaufman County Appraisal District Staff, Positions,
Certifications, Years with Kaufman CAD and Salaries
Salary Chief Appraiser RPA 6 months $71,821 Deputy Chief Appraiser RPA 10 $54,668 Director of Personal Property/Commercial Real Estate* Class III (A) 7 $39,936 Senior Appraiser RPA 5 $42,438 Appraiser RPA 5 $35,632 Appraiser RPA 6 $33,935 Appraiser Class III (A) 3 $30,202 Appraiser Class II (A) 1 $26,880 Appraiser Class I (A) 4 months $25,119 Personal Property Assistant Class I (A) 3 $28,224 Systems Manager Class III (AC) 6 $40,140 Data Entry Supervisor 24 $35,692 Homestead Exemption Specialist 20 $28,272 Customer Service 2 $25,161 Mapping Supervisor 20 $40,104 Mapper 1 month $25,873 Office Manager 24 $40,104 Receptionist 17 $25,161 Customer Service (part-time) 2 $6.75/hour Customer Service (part-time) 3 $6.75/hour Source: Kaufman CAD, fiscal year 2005 budget.
*Moved from mapping to appraisal in 2000.
Appraisal district staff members who appraise property are required to be Registered Professional Appraisers (RPA) or to be working towards certification as an RPA. Employees must be certified within five years of their hire date. Interim certifications include Class I, Class II, and Class III. In addition, RPAs must re-certify five years from the date of first certification and every five years while registered. Currently, the district has 18 full-time and 2 part-time staff. Of the full-time staff, eight are appraisers, including four RPAs. The chief appraiser holds an RPA designation, but does not perform appraisals.
According to the 2003-2004 Appraisal District Operations survey, the district reported it had 58,401 parcels. Of these, 53,640 are real parcels, 211 are minerals, and 4,550 are personal property accounts. The district did not employ a contract appraiser during the years 2001 through 2004. According to the chief appraiser, the board of directors felt that because of the few number of mineral, utility and industrial accounts, and the cost of hiring an outside appraisal firm, the district's appraisal staff, including the former chief appraiser, was qualified to perform the appraisals. In 2000, the district paid Thos. Y. Pickett & Co., Inc. $25,000 for appraisal services.
The construction of the Florida Power and Light power plant in 2003 in the Forney Independent School District prompted the board of directors to revisit the issue of contract appraisers. In 2004, the district issued a Request for Proposal (RFP) and awarded Capitol Appraisal Group a contract for the 2005 tax year. Thos. Y. Pickett & Co., Inc. and Pritchard & Abbott, Inc. also submitted proposals.
The district provides appraisal services for 22 taxing units, including Kaufman County, Crandall Independent School District, Forney Independent School District, Kaufman Independent School District, Kemp Independent School District, Terrell Independent School District, Scurry-Rosser Independent School District, City of Crandall, City of Forney, City of Kaufman, City of Kemp, City of Mabank, City of Terrell, Town of Oak Ridge, Kaufman County Freshwater District, Trinity Valley Community College District, Kaufman Emergency Services District #1, Mabank Emergency Services District #2, Terrell Emergency Services District #3, Kemp Emergency Services District #4, Surry-Rosser Emergency Services District #5, and Forney Emergency Services District #6.
In 1998, Kaufman CAD contracted with DMG-MAXIMUS, INC. (DMG) of Dallas, Texas to develop a compensation and classification system. According to the chief appraiser, the former chief appraiser and the board of directors wanted to determine if the district's salaries were in line with relevant job markets, namely similarly sized appraisal districts and other governmental entities. The district wanted to maintain competitive salaries and retain qualified personnel.
Each employee's job responsibilities were reviewed and compared to others within the job markets identified by DMG. Salary ranges for each position were determined based on the lowest and highest salaries surveyed. Job functions were matched to a pay grade, based on the job's "best fit" to others in the job market.
As a result, the board of directors adopted a compensation and classification system consisting of 24 pay grades, each pay grade having 10 steps with 3 percent increments between steps. The initial cost to implement the plan and equalize salaries the first year was $48,721.
The district updated the pay structure in 2005 to adjust for inflation and living costs. An additional step was also added to each pay grade.
The district has implemented a plan to maintain competitive salaries for its employees.
The Kaufman CAD has a well-written and comprehensive personnel policy that explains the district's position as an at-will employer and covers federal employment guidelines dealing with the Federal Medical Leave Act. The Kaufman County Appraisal District Policy Manual and Mission and Vision Statements table of contents is divided into three parts: board of directors; administration; and personnel.
The 30-page section on personnel contains 20 separate sections addressing management issues, new employee orientation, conduct and ethics, health and safety standards, pay periods and leave, holidays, civic duties, insurance and professional dress, among other topics.
The handbook also describes guidelines for employee behavior in dealing with customers and guidance on the use of district equipment.
The policy is reviewed and regularly updated. According to the chief appraiser, the last update was in January 2005.
The district has adopted a personnel policy that informs employees of their rights and responsibilities.
Job descriptions for staff are not up-to-date and the district's employee performance evaluation system does not match the work being performed by staff. The current chief appraiser is reviewing staff assignments and job responsibilities. As a result, some of the staff's functions have changed and others are subject to change. The chief appraiser states it is his goal to update all job descriptions and implement annual performance evaluations based on the new job descriptions. A timeline has not been established to accomplish this goal. The district's policy manual does contain job descriptions for staff, but some of the job descriptions are outdated while others are vague.
The former chief appraiser conducted annual performance evaluations using a form that employed a rating system ranging from unsatisfactory to excellent. According to the district's office manager, the chief appraiser would meet individually with staff to discuss the evaluation. The form itself does not provide sufficient feedback from staff.
Property Appraisal and Assessment Administration in Chapter 16, "Administration," states, "Although employees may improve their skills by their own efforts and the help of peers, managers have organizational responsibility for employee development. They use training, education, counseling, and performance reviews to identify talents and help employees grow."
The employee's performance of assigned duties and other job-related criteria provides the basis for an annual (at a minimum) employee evaluation. Employees need to be informed of the criteria on which they will be evaluated. A detailed job description is essential. Evaluation and performance appraisal ratings are based on the evaluation instrument and cumulative performance data gathered by supervisors throughout the year.
Each employee needs to have at least one evaluative conference annually to discuss the written evaluation and may have as many conferences about performance of duties as the supervisor deems necessary. Evaluation records and forms, reports, correspondence and memoranda may be placed in each employee's personnel records to document performance. All records that support appraisal ratings need to be maintained for at least two years. Official appraisal records are then maintained throughout a person's employment with the district and for two years after an employee ceases to be employed with the district. (Kaufman CAD's policy manual states that personnel records will be kept for seven years following termination.) All employees need to receive a copy of their annual written evaluation. A proper personnel evaluation process is essential to employee development and high morale.
Develop a plan and timeline for reviewing job descriptions and adopt an annual personnel performance evaluation system to use in evaluating all district staff.
In the appraisal business, there are generally three approaches to value - cost, income, and market - that a chief appraiser must consider in determining the market value of property. The chief appraiser must consider all three and use the method most appropriate in appraising a particular property.
Mass appraisal requires the development of a property classification system as the basis for the development of value schedules, which accurately reflect the market. Kaufman CAD categorizes property according to the Comptroller's classification guide (refer to Exhibit 2). Within each category, the district has developed classifications for improvements based on type and quality of construction.
The Kaufman CAD uses cost-based schedules to appraise real property improvements. The cost-based schedules the appraisal district uses are purchased as a subscription service from Marshall & Swift/Boeckh (MS/B).
MS/B provides residential and commercial building cost data necessary for real estate cost valuations and is widely considered by the appraisal profession as the authority in cost appraisal. Their cost data allow appraisers to develop replacement costs for hundreds of property types, construction types and property uses. It can develop depreciated values of properties as well as developing values for other contributing property features and improvements such as swimming pools, fences and storage buildings.
Kaufman CAD subscribes to two products that MS/B offers. Specifically, it subscribes to the Residential Cost Handbook, for the cost appraisal of residential and multi-family properties, and the Marshall Valuation Service manual for the valuation of commercial properties. When appraising residential property, Kaufman CAD appraisers use a market-derived adjustment factor called a "local modifier" to adjust the MS/B cost values to an appraised value that is reflective of their local market conditions. The local modifier is developed by appraising confirmed residential sales using the MS/B residential cost data in the handbook. Any disagreement between the sales price and the appraised value results in an adjustment factor. By applying this method to sales in a neighborhood or concentration of residential properties, the CAD can determine an appropriate overall local modifier from the pattern of adjustment factors that are developed. The agreed upon local modifier can then be applied to all cost appraisals of similar properties in that area. The cost appraisals are then considered to be "market adjusted."
When appraising commercial property, Kaufman CAD applies an "economic adjustment" factor to its cost appraisals. The economic factors are discriminately applied to areas or properties that they deem need an adjustment. The CAD's use of economic factors is subjective and is based on the appraiser's experience and knowledge of the local commercial market conditions.
In 2005, the Kaufman County Appraisal District prepared a written re-appraisal plan that calls for all real property to be inspected once every three years. In previous years, according to the deputy chief appraiser, because Kaufman County does not issue building permits, appraisers attempted to inspect all improved properties every year. The district did not have a written plan prior to 2005. Attempting to inspect every property every year in a district the size of Kaufman County leaves little time for research.
The 2005 plan divides the county into three zones along school district boundary lines. The plan identifies which schools are located within each zone and the number of parcels estimated to be in each zone. The plan discusses how staff will be used to implement the plan and instructs them on specific items that need to be addressed while in the field. The importance of documentation and efficiency in the reappraisal process is stressed.
According to the deputy chief appraiser, in 2004 the district's reappraisal effort concentrated on improving land values - both residential and rural. Findings of the 2003 Comptroller's Property Value Study indicated that rural land in some areas was being appraised below market value - contributing to the invalid findings of four school districts. Using sales information from 2003 and 2004, the district increased the value of rural land and residential lots both improved and vacant. As a result of the district's 2004 land re-appraisals, all Kaufman County school districts received valid preliminary findings in the 2004 property value study. The 2004 study showed improved ratios in rural land (Category D), and by increasing residential land values, the ratios of single family residences (Category A) also improved. The Comptroller's field appraiser agreed that land values increased significantly in 2004.
In 2004, the district assigned the appraisal of all commercial real estate to the district's director of personal property. Prior to 2004, commercial property was worked by the appraiser assigned to the school district in which the property was located. The director of personal property/commercial real estate stated that he began updating the district's commercial cost schedules in 2004 and will continue to update the schedules in 2005. The 2003 PVS indicated that commercial real estate (Category F) was being under-appraised in those school districts where commercial property was tested. The 2004 study showed improved commercial appraisal ratios in those same school districts. Historically, confirmed commercial sales information has been limited in Kaufman County. According to the commercial real estate appraiser, the district uses information from builders and fee appraisers to help modify the Marshall & Swift building cost tables.
Section 25.18, Property Tax Code, requires appraisal districts to implement a plan for reappraisal. The plan for reappraisal shall provide for reappraisal of all real property in the district at least once every three years. A reappraisal plan is a roadmap for performing the work. It is also a communication tool that shows the appraisal district board of directors how the appraisal district staff plans to accomplish its appraisals, and if the board chooses to require the chief appraiser to submit the plan for approval, the board can direct the appraisal activities by amending the plan.
According to USPAP Standard 6, a functional reappraisal plan includes the following activities:
- identifying properties to be appraised;
- identifying and updating in the appraisal records the relevant characteristics of each property to be appraised;
- defining market areas;
- identifying property characteristics that affect property value in each market area;
- developing an appraisal model that reflects the relationship among the property characteristics affecting value in each market area;
- calibrating the model to determine the contribution of the individual property characteristics affecting value;
- applying the conclusions reflected in the model to the characteristics of the properties being appraised; and
- reviewing the appraisal results.
The USPAP, Standards Rule 6-2(g), requires appraisers to "identify the characteristics of the properties that are relevant to the purpose and intended use of the mass appraisal, including:
(i) the group with which a property is identified according to similar market influence;
(ii) the appropriate market area and time frame relative to the property being valued; and
(iii) their location and physical, legal, and economic characteristics."
To comply with this standard, appraisal districts typically record property characteristics that include, but are not limited to: the Comptroller's property category code, the location and market area of property; the physical attributes of the property such as the size, age, condition, and construction type; the number of various kinds of rooms such as bedrooms, bathrooms, etc.; the presence of amenities such as central air conditioning; any legal and economic attributes or restraints; and the presence of easements, covenants, leases, special appraisals, ordinances or other legal restrictions. See the Comptroller's Electronic Data Submission Record Layout and Instructions, Account Category Detail Record Layout for a basic list of property characteristics.
A reappraisal plan also provides for a physical inspection of the properties being appraised. Alternatively, the plan can include reliance on reliable sources of property information instead of physical inspections. Such sources include, but are not limited to, deeds or other legal documentation, aerial photographs, land-based photographs, surveys, maps and property sketches. A complete plan would indicate instances or types of properties that will be appraised using sources of information other than physical inspection.
The district implemented a three-year reappraisal plan in 2005 and took steps in 2004 to improve land and commercial values.
As previously mentioned, the appraisal district uses an automated computer appraisal system (valuation model). Through fieldwork, the appraisers gather specific information about properties such as condition of the property, age of the property, construction details, and physical dimensions. In addition, the appraisers gather information about the land on which real property is located. They gather specific information about the dimensions of the land, its shape and location. The appraisers gather the same information for vacant land, whether a vacant lot or a rural tract.
Most appraisals are accomplished by entering the accumulated property characteristics into the computerized valuation model. The model, when directed, produces a market value for each property based on the property's characteristics that the appraiser then reviews for reasonableness and accuracy.
As part of its computerized model, Kaufman CAD uses cost-based schedules to appraise residential and commercial improvements. The schedules uses are based on the Marshall & Swift Valuation Service guide.
The district's procedures for analyzing sales and market data are contained in the Kaufman County Appraisal District Manual. Confirmed sales within the same category of property are appraised using existing cost tables. The resulting appraisals are compared to the sales and factors (or modifiers) are calculated to either increase or decrease the appraisals to bring them more in line with the sales. When all of the sales have been reviewed and all of the factors calculated, a mean or average factor is determined. That factor becomes the local market-based modifier that is applied to the building cost table for that particular category of property.
Kaufman CAD subscribes to a multiple listing service (MLS) for real estate professionals. The district also researches deed recordings to identify property transactions. The district sends sales confirmation letters to buyers as recorded in the deed to confirm and verify the transaction and the amount of the transaction. Appraisal district staff also researches new homestead applications, new 9-1-1 addresses, and receives building permits from the cities of Terrell and Kaufman to gather information about new construction or construction on existing property. The district's confirmation and verification procedure is one that most appraisal districts use.
The district has developed a residential classification guide in an attempt to promote uniformity and consistency among the appraisers in the way they classify residential properties. The guide has pictures of local houses and a description of property characteristics and attributes common to each class. For commercial appraisals, the district uses Marshall & Swift's Commercial Valuation Guide, which also contains pictures and property descriptions.
According to the director of personal property, the district attempts to inspect all business personal property annually. Personal property values, however, are largely based on taxpayer renditions. The personal property appraiser reviews the renditions for reasonableness by comparing the rendered values to the personal property value schedule in the Comptroller's field appraiser's guide, Marshall & Swift, and also comparing values of similar businesses. Property not rendered is appraised using the square foot method by applying quality and density costs from tables found in the guides mentioned above. According to the personal property appraiser, personal property is discovered by reading the newspaper, phone book, requesting information from the sales tax division of the Comptroller's office, boat registrations from Texas parks and Wildlife, automobile registration lists from the publication Just Texas, word of mouth, and by driving around the district. Rendition forms are mailed to all business owners every year.
Section 23.01, Property Tax Code, mandates that property be appraised by applying generally accepted appraisal methods and techniques. This section also requires appraisal districts to comply with the USPAP and requires similar appraisal methods and techniques be applied to the same or similar properties, while taking care to account for the contributions of individual property characteristics on value. A comprehensive appraisal procedures manual would help ensure that these standards and requirements are attained.
The chief appraiser states he is reviewing the district's appraisal manuals and classification guides with the intent of making some changes for 2006.
The district has developed appraisal manuals for local procedures and practices that comply with USPAP.
In 2003, the district did not use ratio studies to effectively determine where it was under-appraising property. The Kaufman CAD's computerized appraisal system allows the appraisal district to analyze its appraisals through ratio studies within and among property classifications. According to IAAO's Property Appraisal and Assessment Administration, a ratio study is a study of the relationship between appraised or assessed values and market values. Indicators of market values may be either sales or independent "expert" appraisals. Of common interest in ratio studies are the level and uniformity of the appraisals or assessments. The reviewer examined several ratio studies, but focused on the studies in Crandall ISD, Kaufman ISD, Kemp ISD, and Terrell ISD.
According to the deputy chief appraiser, the appraisal district has conducted ratio studies every year. The ratio studies are run within property categories, by school district and county at least quarterly to determine appraisal performance. The deputy chief appraiser stated that prior to 2004, the district was generally reviewing the results of their ratio studies on a broad scale. For example, the district would look at its sales ratios to see how well it was appraising single family residences overall within a school district or neighborhood. The district wasn't spending a lot of time analyzing property characteristics within a category of sold properties. Property characteristics such as class, age, condition, size and value need to be considered in any ratio study to ensure appraisal uniformity and eliminate unequal levels of appraisal.
In the 2003 Comptroller's Property Value Study, the final results indicated that Kaufman CAD, in general, was doing a good job of appraising single family residences with appraised values greater than $100,000, but was under appraising lesser valued homes. This lack of appraisal uniformity contributed to the invalid findings of four school districts - Crandall, Kemp, Kaufman, and Terrell.
In 2004, the appraisal district purchased new appraisal software. The new automated appraisal system will produce ratio studies statistics on demand. The appraisal district staff need only input the property sales information and identify the market area to be studied.
Kaufman CAD should use ratio studies to plan appraisal maintenance programs. The ratio study results indicate those market areas in the appraisal district whose values no longer reflect the market. If the ratio study in a market area shows the appraised values do not reflect the market, the appraisal district appraises the available sales to determine the market adjustment factor. The market adjustment factor is the percentage the appraisal district uses to adjust the appraisal schedules to reflect the market value.
Frequent ratio studies and the appraisal maintenance that follows it enable an appraisal district to keep its values at or near the market. Ratio studies are also used to determine actual appraisal performance of the district.
Conduct more in depth analyses of ratio studies to eliminate unequal levels of appraisal within categories of property and to ensure all categories of property are being appraised at current market value.
Kaufman CAD's productivity values are not consistent with the Comptroller' estimates. With productivity ratios for qualified acres in excess of 170 percent in some cases, the district's method of determining productivity values for land designated for agricultural use creates an unequal level of appraisal.
Sections 23.41 and 23.51 state that land designated for agricultural use should be valued based on the land's capacity to produce agricultural products. The land's productivity value is found by capitalizing the average net income the land would have yielded under prudent management during the five years preceding the current year.
Section 23.51(4) states that the chief appraiser shall calculate the average net income by considering the income that would have been due a land owner under cash lease, share lease, or whatever lease is typical for the area. Expenses directly attributable to the land's agricultural use are to be deducted and the resulting net income is to be capitalized using a rate established annually by the Farm Credit Bank of Texas (rate plus 2 and one half percent) or 10 percent whichever is greater (Section 23.53 Property Tax Code).
According to the deputy chief appraiser, the district mails agricultural surveys to its agricultural advisory committee members and some land owners. He stated that the response is very low. The district performs the calculations required by the Code annually using its limited data. The resulting values are significantly higher than the state's estimates. For example, in 2003, the appraisal district appraised native pasture at $80 per acre, while the Comptroller's office estimated the productivity value of native pasture to be $48. The preliminary results of the 2004 PVS show productivity values continue to be high.
Determine methods to obtain better income and expense information on land qualifying for productivity use.