In July 2004, the Boerne Independent School District (Boerne ISD), located in Kendall County, Texas, was identified as one of 54 school districts in the state meeting the criteria that initiate an Appraisal Standards Review (ASR) of the county appraisal district that served them. In April 2005, the Comptroller's Property Tax Division (PTD) began an Appraisal Standards Review of the Kendall County Appraisal District (Kendall 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 CAD's 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 Uniform Standards of Professional Appraisal Practice (USPAP), specifically Standard 6: Mass Appraisal and Standard 7: Personal Property. Also the International Association of Assessing Officers (IAAO) Standards on Assessment are used as guidelines on the operation of an assessment office.
The two principal focuses of 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, including 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 under 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, Kendall CAD is facing a number of challenges in achieving and maintaining consistent valid findings, including:
- documenting procedures and appraisal methods;
- processing sales, conducting ratio studies and evaluating schedules; and
- reappraising regularly.
Key Findings and Recommendations
Document Procedures and Appraisal Methods
Revise the professional appraisal services contract to include deliverable dates and contract monitoring procedures. The district contracts with Pritchard & Abbott, Inc. for the appraisal of utilities, business personal property and industrial accounts, but does not have a provision for the dates when appraisal services will be delivered. The contract describes the services that the appraisal contractor will deliver, but it does not give any dates as to when those services will be delivered to the district or include any means for monitoring contract performance. In order to get the appraisal roll ready each year, the appraisal district should have a deadline for all of the appraisal data to be completed
Develop a written policy and procedures manual for district operations. The district does not have a comprehensive policy and procedures manual for appraisal district staff to follow. Written policy and procedures are essential for effectively managing day-to-day operations. Procedure manuals outline step-by-step the methods and activities of all the key functions of the district. A policy and procedures manual is necessary for training new employees and as a reference guide for current employees. The manual can also help the public understand how the district functions and accomplishes its tasks
Develop written appraisal procedures manuals for the appraisal staff. The Kendall CAD has not developed an appraisal procedures manual that the appraisal staff can reference in completing their appraisals. Appraisers have access to the Marshall & Swift Valuation guide, but this manual does not contain local directives for use in Kendall County. Procedure manuals are vital in training staff, but also useful as evidence during appraisal review board hearings and for demonstrating that the district is complying with its own policies. Section 23.01, Tax Code, mandates that property is to be appraised by applying generally accepted appraisal methods and techniques and that appraisal districts comply with the Uniform Standards of Professional Appraisal Practice (USPAP). CADs must use similar appraisal methods and techniques and apply these to the same or similar properties, while taking care to account for the contributions of individual property characteristics on value.
Process Sales, Conduct Ratio Studies and Evaluate Schedules
Conduct a staff needs analysis and establish staffing allocation guidelines that will ensure the number and type of staffing is appropriate and annually adjusted to meet the CAD's needs. The population center of San Antonio has moved westward and Kendall County is experiencing tremendous growth. Such growth puts an additional strain on a district's efforts to maintain current records and market valuations. The district processes sales, conducts ratio studies and evaluates schedules, but these tasks are not given the time and attention now required to assess a growing and changing market environment. With the growth that the county has experienced and continues to experience, the district needs to allocate staff to functions that most benefit district needs. By performing a staffing analysis and determining staffing needs, the correct number and type of staff can be employed to meet the district's needs.
Physically inspect all business personal property accounts each year and develop an independent verification and valuation of the business personal property. The district relies mainly on rendition forms in valuing business personal property. Rendition forms are mailed or delivered to business owners each year. Rendition forms are reviewed for reasonableness and compared to renditions from similar types of businesses. The district also trends and depreciates asset listings when sufficient information exits. Section 23.01, of the Tax Code, requires all property to be appraised at market value, taking into consideration the individual characteristics of each property. Annual inspections are necessary to identify changes in the character of the accounts, as well as changes in ownership and location of property. Independent verification, inspection and valuation of inventories, fixtures and equipment ensure that accounts reflect market value.
The review team identified some commendable practices in Kendall CAD that other CADs may do well to review and implement where appropriate
The chief appraiser has developed a public relations program that educates the public on district operations and taxpayer rights and responsibilities. The chief appraiser has made it a priority to educate the public on district operations as well as publicize information on taxpayer rights and responsibilities. Public relations programs include distributing copies of the Comptroller's publication Taxpayers' Rights, Remedies and Responsibilities to title companies, realtors, homeowner associations, and civic groups. The district also regularly submits articles for newspaper publication. The chief appraiser frequently speaks to area groups and conducts workshops for property owners on wildlife management. The chief appraiser is active in the chamber of commerce and participates in the Business After Hours network. In addition, the chief appraiser makes it a priority to visit with the taxing entities on a regular basis. The district has also developed a personnel policy manual that requires professional conduct and service from its employees
The district developed an information processing system that assists in the valuation of property in the district. Kendall County Appraisal District has integrated its automated appraisal system with its computerized mapping system. The resulting Geographic Information System (GIS) capabilities enable the district to download information off the mainframe computer and link that information to parcel data on the map. The appraiser now has access to all the data needed in order to analyze sales and make comparisons to other, similar property. It allows the appraiser to make an appraisal of each property by having all of the required data available when the appraiser calls up the property for 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. This system has all of the required elements of a complete information system
The district has adopted a personnel manual that informs employees of their rights and responsibilities. The Kendall CAD has a well-written and comprehensive personnel policy manual that explains the district's policy as an at-will employer. The manual also describes guidelines for employee behavior in dealing with customers and guidance on the use of district equipment including telephones and Internet access.