In July 2004, the Kaufman Independent School District (Kaufman ISD), Crandall Independent School District (Crandall ISD), Kemp Independent School District (Kemp ISD) and Terrell Independent School District (Terrell ISD), all located in Kaufman County, Texas, were identified as four 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 June 2005, the Comptroller's Property Tax Division (PTD) began an Appraisal Standards Review of the Kaufman County Appraisal District (Kaufman 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 districts set tax rates that determine the amount of local tax revenue. Appraisal districts, under most circumstances, are required by law to appraise property at or near 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. ASRs 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 the 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. The Tax Code dictates certain appraisal procedures or standards such as the USPAP, specifically Standard 6: Mass Appraisal and Standard 7: Personal Property. Also the IAAO Standards on Assessment are used as guidelines on the operation of an assessment office.
The two principal focuses of the review are to determine why a school district served by the CAD was deemed eligible and to make recommendations to improve appraisal practices so the school district's 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, 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 and commendations for exemplary district appraisal practices. 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.
While the review team found several commendable practices implemented by dedicated and hardworking district employees, Kaufman CAD is facing a number of challenges in achieving and maintaining consistent valid findings, including:
- improving appraisal methods and practices;
- updating procedures and job descriptions.
Key Findings and Recommendations
Improve Appraisal Methods And Practices
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. The 2003 Comptroller's Property Value Study identified some areas that the district needs to research to ensure appraisal uniformity. Ratio studies performed by the district, when thoroughly researched, are an excellent tool in identifying properties that are not being appraised at market value
Determine methods to obtain better income and expense information on land qualifying for productivity use. According to the 2003 Comptroller's Property Value Study, the district's productivity values are significantly higher than the state's estimate. By gathering better income and expense data on land qualifying for productivity use, the district will be able to calculate better values.
Update Procedures And Job Descriptions
Develop and implement a timeline for reviewing and updating all district policy and procedures manuals. The CAD had developed several policy and procedure manuals over the years. Many of the manuals need to be updated to reflect current policy and procedures. The chief appraiser has stated it is his goal to review and update the manuals as needed
Develop a plan and timeline for reviewing job descriptions and adopt an annual personnel performance evaluation system to use in evaluating all district staff. As with the manuals, many of the district's job descriptions need to be reviewed and revised. When completed, an annual performance evaluation using criteria found in the job descriptions that objectively measures job performance needs to be conducted.
The review team identified some commendable practices in Kaufman CAD that other county appraisal districts may do well to review and implement where appropriate
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 district has integrated its appraisal software and geographic information systems providing staff and taxpayers better access to data. Having this data available for the district's use helps the district capture, verify, and better analyze more sales information within these areas. Better analysis of market data helps the district to improve its valuation of properties. The integrated systems also contribute to a timely and efficient re-appraisal
The district has implemented a plan to maintain competitive salaries for its employees. Retaining qualified staff is a concern of all employers, particularly in highly specialized areas such as property appraisal. The district has sought to keep its salaries competitive
The district implemented a 3-year re-appraisal plan in 2005 and took steps in 2004 to improve land and commercial values. The district has a written re-appraisal plan. 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 utilized to implement the plan and instructs them on specific items that need to be addressed while in the field. Responding to the findings of the 2003 PVS, the district improved land and commercial values in 2004.