Chapter 1
Findings of the Property Value Study and Summary
Overview of Property Value Study
The annual PVS estimates the total taxable property value in each school district in Knox CAD. With a few notable exceptions, the law requires all CADs and PTAD to appraise property at market value. Market value, in essence, is the price a willing buyer would pay a willing seller for the property under normal conditions. Agricultural land and timberland, however, are appraised according to the productivity value of the land's category.
The CAD determines the local appraisal roll value and certifies it to each school district: these values become the school districts' tax roll values. Each school district must submit an annual self-report of its property values to PTAD, which audits the reports for accuracy.
PTAD's estimate of the total taxable value in a school district, called the state value, is made by estimating market value or by accepting the local appraised value in each property category and then adding these category values for an overall school district value. PTAD then deducts the school district's self-reported, state-mandated homestead exemptions, disabled veterans exemptions, value limitations, reinvestment zones, freeport exemptions, the loss between market value and productivity value of qualified agricultural lands, the school tax ceiling for homeowners aged 65 and older or with a disability and other state-mandated exemptions. The result is the school district's total taxable value.
PTAD issues a preliminary and a final PVS each year. School districts and CADs may protest the findings of the preliminary PVS through an administrative hearings process. This process requires the protester to file a written protest with supporting documentation within 40 days of the issuance of the preliminary PVS. PTAD may amend the findings of the preliminary PVS based on the submission of a written protest, a conference between PTAD and CAD representatives or a formal hearing. A hearings examiner appointed by the Comptroller's general counsel holds the formal hearing; this person is not a PTAD employee. A school district that disagrees with the hearing examiner's final decision may appeal it to Travis County District Court.
When conducting the PVS, PTAD assigns property to various categories, such as residential, commercial and rural property, so like property can be studied together.
In general, a ratio indicates the percentage of market value, as determined by PTAD, at which a CAD appraises a property or group of properties. A ratio of 1.0 indicates appraisal at market value-the legal standard. Generally, appraisals with ratios close to the standard-for instance between 0.95 and 1.05-are considered reasonably accurate for a property group.
Eligible School District
In the 2007 PVS, Benjamin ISD fell outside the study's statistical margin of error and became an eligible school district, leading to this ASR. The statistical margin of error, or confidence interval, is a range of school district values the Comptroller accepts.
PTAD tested four property categories in Benjamin ISD:
- Category A, Single-Family Residential;
- Category D, Rural Real;
- Category G, Oil, Gas and Mineral Leases; and
- Category J, Utilities.
Category A made up 10 percent of Benjamin ISD's test value and 9 percent of its total value. A review of the Category A sample ratios in the 2007 PVS indicates the CAD appraised from as low as 49 percent to a high of 177 percent of market value, with a weighted mean ratio of 0.99.
Category D made up 78 percent of the ISD's test value and 68 percent of the ISD total value. Category D properties include two subcategories: Subcategory D1: Qualified Acres, which is primarily farm and ranch land that qualifies for the special productivity appraisal; and Subcategory D3: Non-Qualified Acres and Farm and Ranch Improvements, which are primarily rural homes and land that do not qualify as farm, ranch or timberlands. The differences in value between D1 and D3 are wide since D1 land is appraised using a special statutory method to determine the land's productivity value, and D3 is based on what the land would sell for in an open-market transaction.
Subcategory D1 made up 72 percent of the ISD's test value and 62 percent of the ISD's total value. The category ratio of the qualified rural values tested was 0.92. Subcategory D3 made up 6 percent of the ISD's test value and 6 percent of the ISD's total value. The CAD appraised Subcategory D3 from as low as 79 percent to a high of 166 percent of market value, with a weighted mean ratio of 1.06.
Category G made up 6 percent of the ISD's test value and 5 percent of the ISD total value. A review of the Category G sample ratios in the 2007 PVS indicates that the CAD appraised from as low as 88 percent to a high of 139 percent of market value, with a weighted mean ratio of 0.99.
Category J made up 6 percent of the ISD's test value and 12 percent of the ISD's total Value. A review of the Category J sample ratios in the 2007 PVS indicates that the CAD appraised from as low as 96 percent to a high of 102 percent of market value, with a weighted mean ratio of 0.97.
While these figures show the range of property ratios in Knox CAD, a clearer measure of appraisal performance includes how many of these ratios were within 10 to 25 percent of the median ratio. The median ratio is the ratio in the middle of all the other ratios when sorted by size.
These figures, in conjunction with the coefficients of dispersion (CODs) outlined below, measure the consistency of a CAD's property appraisals at the same percentage of market value, without regard to value. A low COD combined with high percentages indicate equitable appraisals, while a high COD paired with low percentages indicate inequitable appraisals.
The median ratio for Category A in Benjamin ISD was 101 percent, with 51 percent of the ratios within 10 percent of the median and 85 percent within 25 percent of the median ratio.
The median ratio for Subcategory D3 was 100 percent, with 70 percent of the ratios within 10 percent of the median and 85 percent within 25 percent of the median ratio.
The Category G was 97 percent, with 67 percent of the ratios within 10 percent of the median and 89 percent within 25 percent of the median ratio.
The median ratio for Category J was 97 percent, with 100 percent of the ratios within 10 percent of the median ratio.
Knox CAD Summary
The KNOX CAD overall median Ratio was 1.0. Category ratios included the following:
- Category A sample ratios ranged from 0.49 to 1.77 with the median ratio of 1.03;
- Subcategory D3 sample ratios ranged from 0.56 to 1.66 with the median ratio of 1.0;
- Category G sample ratios ranged from 0.82 to 1.39 with the median ratio of 1.01;
- Category J sample ratios ranged from 0.96 to 1.02 with the median ratio at 0.97;
- Category L1: Personal Property: Commercial sample ratios ranged from 0.74 to 1.13 with a median ratio of 1.0.
Coefficient of Dispersion
The COD, the primary measure of appraisal uniformity, measures the average percentage by which individual ratios vary from the median ratio. According to IAAO's Property Appraisal and Assessment Administration, a low COD indicates that appraisals within a category of property are uniform, while a high COD indicates property is being appraised at inconsistent percentages of market value. A COD that is very low, however, may indicate "sales chasing," a form of unequal appraisal.
According to IAAO's Standard on Ratio Studies, CODs for single-family residential should generally be 15 or less, and 10 or less for new and fairly homogeneous areas. For vacant lots, and for income-producing property, the COD should be 20 or less. For other real and personal property, CODs should reflect the nature of the property, market conditions and the availability of reliable market indicators.
The 2007 CODs for Knox CAD based on the PVS calculation were as follows:
- Category A was 15.98;
- Category D was 12.03;
- Category G was 8.70;
- Category J was 2.14 and
- Category L1 was 5.76.
The 2007 COD for Benjamin ISD (rounded to the nearest whole number) were as follows:
- Category A. 14;
- Category D. 12;
- Category G, 10;
- Category J, 2.
These numbers indicate relative uniformity of appraisal in the CAD and ISD.