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Chapter 2:
Findings of the Appraisal Standards Review

This chapter of the report addresses commendations, findings and recommendations from the appraisal standards review of the Lamar CAD in three sections:

2.1
Commendable Practices

As part of its review process, PTD identifies best practices used by each CAD under review. These commendable practices improve efficiency or in some instances address past operational weaknesses. We commend Lamar CAD for its efforts and hope this commendation gives other appraisal districts an idea for improving their own operations.

FINDING
Lamar CAD improved its access to market sales by joining a multiple listing service.

IAAO's Property Appraisal and Assessment Administration, Chapter 1, The Ad Valorem Tax System, states complete and accurate sales information is necessary for appraising property.

In 2006, the CAD's primary source of sales information came from sales letters mailed to buyers and sellers of property in the county. According to the chief appraiser, about 200 letters are generated each month, with less than a 25 percent response rate. Sales are necessary for analyzing market trends and performing ratio studies.

Realizing the need to increase its sales base and improve market analysis, the CAD joined a local multiple listing service (MLS) in August 2007. Area realtors submit sales listings and closings for all types of properties to the MLS. Membership allows access to sale prices and other pertinent data.

Without sufficient sales information, appraisal districts cannot do the research needed to maintain appraisal schedules and produce market value appraisals. The 2006 PVS produced invalid findings in four of the CAD's five school districts. If not corrected, the schools are at risk of losing state funds.

Lamar CAD demonstrated a desire and willingness to improve how it appraises property by joining a MLS.

COMMENDATION
Lamar CAD joined a multiple listing service to improve market research.

2.2
Key Findings and Recommendations

As part of the review process, PTD makes recommendations to address challenges identified during its review of a CAD. Below are recommendations addressing key challenges associated with Lamar CAD's appraisal activities.

FINDING
Lamar CAD's appraisal manuals lack local procedures and directives for completing appraisals.

IAAO's textbook, Property Appraisal and Assessment Administration, Chapter 1, The Ad Valorem Tax System, describes the importance of written procedures or standards of practice and states they may incorporate or be contained in laws, regulations, policy memoranda, procedural manuals and guidelines, appraisal manuals and schedules. Repeated tasks, particularly those done by more than one person, should be described in guidelines or manuals. There should be a procedure for establishing standards of practice,
including regularly updating manuals. Procedures are required for monitoring the quality of appraisals, editing data and reviewing appraisals.

Through fieldwork, the chief appraiser and four staff appraisers gather specific information, such as the property's condition, age, construction details and physical dimensions. The appraisers also gather information about the land on which real property is located, including dimensions of the land, shape and location. The same information is gathered for vacant land, whether a vacant lot or a rural tract. Instructions for transforming the field data into an appraisal, however, are lacking.

The appraisers record the accumulated property characteristics on appraisal cards and draw diagrams of all improvements. Using the CAD's appraisal manuals and their appraisal knowledge, the appraisers determine the property type and class, unit costs and depreciation. Data gathered in the field is entered into the CAD's automated appraisal system (valuation model). Separate values for land and improvements are calculated. The model, when directed, produces a market value for each property based on the property's characteristics.

Residential properties are appraised using market-based schedules developed from local sales and cost data obtained from area builders. The residential appraisal manual, which was last updated in 2007, includes current building schedules, descriptions of typical classification characteristics and representative pictures for each residential class. The residential manual lacks detailed instructions on its use. To be an effective manual and training tool for new appraisers, procedures included in the manual should focus on measuring classification, identifying property attributes, applying depreciation and site valuation procedures.

The CAD uses market data to appraise land. Size, location and use are factors affecting land values, and the CAD values land by the acre, square foot or front foot based on these factors. The appraisal manual lacks instructions for determining which appraisal method to use and when to use each method.

According to the chief appraiser, prior to 2007, land schedules were maintained by applying market adjustment factors to land costs developed years earlier. The CAD is developing new land schedules and the chief appraiser said adjustment factors are being removed when they cannot be justified.

The CAD uses the Marshall & Swift Commercial Valuation Guide for appraising commercial property. The CAD lacks local procedures and directives for using the manual, determining local modifiers for Lamar County and completing appraisals.

Personal property values are largely based on taxpayer renditions. When a rendition is not received during the regular filing period, the chief appraiser sends a follow-up letter and assesses a ten percent penalty on the tax bill. The personal property appraiser reviews the renditions for reasonableness by comparing the rendered values to the personal property value schedule in the out-of-print Comptroller's Field Appraiser's Guide and comparing values of similar businesses. The guide is outdated and not sufficient for use in valuing personal property. The CAD does not have a manual to guide appraisers in the review of renditions or in the reasonableness determination.

The appraisal district contracts with an outside appraisal vendor to appraise the CAD's industrial, utility and mineral accounts. Utilities are appraised using the unit value technique. The unit value technique requires the appraiser to determine the entire utility company's market value. The utility company's value is then apportioned to each taxing unit based on an agreed measure of the company's presence in the taxing unit, such as miles of track, historical cost or number of meters. The unit valuation is widely accepted as the preferred income technique for appraising utility properties. Industrial properties are typically appraised using the cost approach and minerals are appraised using the income approach. The vendor provides a general explanation of the methods used to appraise these properties in the CAD's reappraisal plan.

Part of the ASR required the Comptroller's onsite reviewer to audit a sample of the CAD's appraisal records. The onsite reviewer examined 97 randomly selected properties within the four eligible school districts from the CAD's 2006 PVS. Fifty-seven Category A, Single-Family Residential, 25 Category D, Rural Real, five Category F1, Commercial Real and 10 Category L1, Commercial Personal properties, were audited. The reviewer conducted onsite visits to the properties and appraised them using the CAD's appraisal manuals and oral instructions from the chief appraiser. The purpose of this review was to determine if, by using the CAD's appraisal procedures and manuals, one could arrive at the same or similar appraised value as the CAD. Because the CAD lacks instructions on how to use its appraisal manuals, the reviewer, a professional appraiser, relied on generally recognized appraisal concepts to arrive at appraised values for the properties sampled.

With the assistance of the chief appraiser, the reviewer conducted an onsite inspection of each property. Information pertaining to property characteristics contained on the CAD's appraisal cards was examined for accuracy. Age, condition and size were reviewed for reasonableness. Using descriptions of property classifications found in the CAD's appraisal manuals, the reviewer classed each property based on type and quality. Residential property was classified as either frame or masonry with quality ratings from one to seven, one being lowest quality and seven being the highest quality. Using the CAD's calculated square footages for each building component, such as living area, porches and garages, the reviewer applied the corresponding costs-per-square foot from the appraisal manual and calculated a replacement cost new. For example, a wood frame class F4 house in North Lamar ISD with 2,100 square feet of living area has a base cost-per-square foot of $30.11. The effective age of the improvement was estimated and the CAD's depreciation table was used to determine a percent good factor. The factor was applied to the replacement cost new to calculate the current value of the improvement. Land values were calculated by applying the appropriate unit value from the CAD's land schedule for the land code found on the appraisal card. For example, if the appraisal card showed a land code of RS, the land was appraised at $1,800 per acre, the unit cost per acre for land table RS. The improvement and land values were combined to come up with a total property value.

The same methods were used to appraise 25 Category D, Rural Real; five Category F1, Commercial Real; and 10 Category L1, Commercial Personal properties.

The results of the reviewed appraisal sample did not show any significant differences between the reviewer's appraisals using the CAD's existing manuals in conjunction with the reviewer's appraisal knowledge and the CAD's values.

Exhibit 1 shows the weighted mean ratios between the reviewer and CAD appraisals for the three categories of property audited.

Exhibit 1
Sample Appraisal Results

School District	Category	Number of Parcels	Audit Sample Value	CAD Sample Value	Ratio
Chisum ISD	A	8	$425,300	$429,780	101.05%
Roxton ISD	A	12	$562,030	$557,870	99.26%
North Lamar ISD	A	30	$3,047,750	$3,072,120	100.80%
Prairiland ISD	A	7	$520,810	$546,910	105.01%
Chisum ISD	D	5	$281,090	$280,040	99.63%
Roxton ISD	D	5	$84,550	$84,550	100.00%
North Lamar ISD	D	7	$334,920	$339,940	101.50%
Prairiland ISD	D	8	$644,030	$643,110	99.86%
North Lamar ISD	F1	5	$444,560	$444,560	100.00%
Chisum ISD	L1	5	$1,559,430	$1,559,430	100.00%
North Lamar ISD	L1	5	$3,215,540	$3,215,540	100.00%

Source: ASR Sample Appraisals and Lamar CAD.

Because the reviewer is an experienced appraiser, he was able to use the CAD's appraisal manuals, without written instructions, to complete the appraisals. It is unlikely that someone without extensive appraisal experience could use the CAD's appraisal manuals without written instructions.

Should the CAD experience a change in appraisal personnel, the lack of detailed appraisal procedures manuals may cause inconsistent appraisals and may cause property values to deviate from market value. This market value deviation may cause school districts in Lamar CAD to receive an invalid finding in the state's PVS. If the level of appraisal (percentage of market value) varies between property categories, or from taxpayer to taxpayer, some taxpayers may bear more than their fair share of the local tax burden. In addition, instructions on how to use the CAD's appraisal manuals will help taxpayers better understand the appraisal process.

After reviewing the draft of the ASR, the chief appraiser said Lamar CAD's appraisal manual was not designed for use by inexperienced appraisers. The CAD's appraisers typically work in pairs, and any new appraiser is paired with an experienced appraiser. She also said they are working on creating written procedures for the manual and have already created map grids to help appraisers determine which map to take into the field.

Property Tax Code Section 23.01 mandates that property be appraised by applying generally accepted appraisal methods and techniques if the appraisal district is using mass appraisal standards. This section also requires appraisal districts to comply with the USPAP and apply similar appraisal methods and techniques to the same or similar properties. Appraisal districts should account for the contributions of individual property characteristics to value. A comprehensive appraisal procedures manual will help ensure that these standards and requirements are attained.

Tom Green CAD, for example, has a comprehensive appraisal policies and procedures manual for appraising real, commercial and personal property. Tom Green CAD has developed a residential classification guide 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. The manual also contains a section on land appraisal.

Developed in 2005, the Tom Green County Appraisal District Appraisal Manual thoroughly explains how the CAD appraises residential and commercial property, business personal property and land. The CAD's procedures for analyzing sales and market data are also contained in the Tom Green County Appraisal District Appraisal Manual.

RECOMMENDATION 1
Develop appraisal procedures manuals that provide instructions and local procedures for completing appraisals.

FINDING
Lamar CAD does not have a complete set of maps identifying all parcels in the county as required by Comptroller Rule 9.3002.

Section 9.3002 of the Texas Comptroller's Property Tax Rules addresses mapping as follows:

Chapter 1 of the IAAO publication, Property Appraisal and Assessment Administration, The Ad Valorem Tax System, points out that an accurate set of maps showing every parcel of real property is the most important tool in identifying and locating taxable property. Chapter 7, Land Valuation, notes that a complete set of maps showing parcel boundary lines is required for land appraisals and Chapter 17, Mapping System Management, states, "a good mapping system is essential for the location, identification and inventory of all parcels within a jurisdiction."

In June 2005, the CAD contracted with an appraisal software vendor for the digitized mapping of Lamar County. The CAD's paper maps were outdated and did not show individual parcels. Using deeds and paper maps provided by the CAD, the vendor is creating a base map of the county, containing five data layers: parcels, subdivision boundaries, abstract/survey boundaries, roads and taxing entity boundaries. The CAD's aerial photography has also been incorporated into the mapping system as an additional data layer. The mapping and appraisal systems will be integrated.

According to the chief appraiser, four of the five base map data layers are complete, but the most critical layer, parcels, is only about 65 percent complete. The chief appraiser attributes the incomplete mapping of all county parcels to inadequate legal descriptions of many rural parcels. Older deeds may contain poor legal descriptions and trying to verify property boundaries is time consuming. The vendor returns all deeds without verifiable legal descriptions to the CAD for research. Presently, the CAD has two staff members researching deeds. In addition to completing the base map's parcel coverage, the vendor is responsible for maintaining current mapping changes. The CAD mails the vendor deeds with parcel splits and combinations monthly. Although she has not developed a written timeline or plan, the chief appraiser wants to have all parcels in the county mapped by the end of 2008.

After reviewing the ASR draft, the chief appraiser commented that numerous visits to neighboring CADs had been made to see if their mapping systems might have a shorter implementation period. Lamar CAD determined that the vendor they are currently working with will have the shortest implementation period. The chief appraiser said after reviewing their initial plan with the mapping vendor, the progress was not adequate and a new implementation plan was worked out with the vendor in December 2007. The chief appraiser said the implementation progress will be monitored on a bi-annual basis and the plan will be updated accordingly. Lamar CAD has requested part-time help in the 2009 budget, but the board has not adopted a 2009 budget yet.

The CAD cannot identify and list all parcels for property tax purposes if its mapping system is not fully functional. The basic function of being able to locate all county parcels geographically is critical to a successful reappraisal process. In areas where parcels are not mapped, the CAD's appraisers must rely on situs addresses or personal knowledge of the area to locate properties. This hinders field work and places the CAD at risk of not completing scheduled reappraisals in a timely manner. Displaying parcels to identify market areas will also help to insure fair and equitable appraisals.

Brown CAD, for example, has a fully functional, computerized mapping system. The mapping and appraisal systems are integrated. The CAD maintains all mapping data layers to industry professional standards. The mapping coordinator regularly updates maps to reflect changes in ownership and boundaries. All parcels have a unique identification number.

RECOMMENDATION 2
Develop a timeline and devote necessary resources to complete the mapping of all parcels in the county and ensure that all maps comply with Comptroller Rule 9.3002.

Options available to the CAD include hiring full or part-time mapping staff or budgeting funds to compensate existing staff for overtime hours.

FINDING
Lamar CAD's market analysis and ratio studies have been insufficient to address valuation issues in a changing market as required by Property Tax Code Section 23.01.

Property Tax Code Section 23.01 states:

Results of the 2006 PVS indicate the CAD is not appraising much of the county's rural land at market value. Exhibit 2 lists 2006 PVS results for Subcategory D3, Rural Real, which consists of D2, Non-qualified Rural Land, and E, Farm and Ranch Improvements, for each school district in the CAD.

Exhibit 2
Subcategory D3:
Rural Real 2006 PVS Results

School District	Category	2006 PVS Ratio
Chisum ISD	D3	0.8767
Roxton ISD	D3	0.8252
North Lamar ISD	D3	0.7629
Prairiland ISD	D3	0.9600

Source: Texas Comptroller of Public Accounts, 2006 Property Value Study.

Exhibit 2 shows the CAD is not appraising rural land improvements and non-qualified agricultural land at market value in three of its five school districts. The market value of rural land was not tested in Paris ISD in 2006, while the 2006 PVS shows rural land in Prairiland ISD being appraised at 96 percent of market value, an acceptable range for study purposes. Individual rural land ratios within Prairiland ISD, however, indicate appraisal inconsistency with ratios ranging from a low of 0.3763 to a high of 3.7350.

The COD demonstrates how tightly or loosely individual sample ratios are clustered around the sample's median ratio. A lower COD indicates better appraisal uniformity and consistency. The IAAO recommended COD for rural land appraisals is 20 or less. In the 2006 PVS, the COD for Category D, Rural Non-qualified land, in Lamar CAD was 31.93.

The CAD did not appeal the preliminary 2006 PVS Category D findings. The chief appraiser, hired in January 2006, said land schedules had not been updated in several years, and the CAD agreed with the 2006 PVS results.

Exhibit 3 lists PVS results for Subcategory D3 from 2004-06 for all Lamar CAD school districts.

Exhibit 3
Subcategory D3:
Rural Real 2004-06 PVS

School District	Category	2004 PVS Ratio	2005 PVS Ratio	2006 PVS Ratio
Chisum ISD	D3	0.9539	0.9457	0.8767
Roxton ISD	D3	0.9676	0.8917	0.8252
North Lamar ISD	D3	0.9528	0.9407	0.7629
Prairiland ISD	D3	0.9961	0.9790	0.9600

Source: Texas Comptroller of Public Accounts, 2004, 2005, 2006 Property Value Studies.

Exhibit 3 shows a steady decline in appraisal performance for all school districts tested, indicating Lamar CAD has not kept in step with market trends and is lacking or ineffective in appraisal maintenance.

Research conducted by the Real Estate Center at Texas A&M University in 2007 indicated rural land values in Lamar and surrounding counties increased 14 percent from 2005 to 2006 and more than 48 percent from 2004 to 2006.

The Texas Chapter of the American Society of Farm Managers and Rural Appraisers, in its report, Trends in Texas Rural land Values for the Year 2006, noted that rural land prices in Lamar County and other northeast Texas counties increased in 2006 because of the demand for cropland to produce ethanol products.

The IAAO Property Appraisal and Assessment Administration, Chapter 7, Land Valuation, states the basic components of an effective land appraisal system are maps, data on land characteristics, sales, appraisal procedures and staff. The CAD did not have a written reappraisal plan (or procedures) for 2006 or access to the local MLS for sales, and not all rural land parcels were mapped. The CAD relied on sales letters mailed to buyers and sellers from deeds filed with the county clerk for sales information. The chief appraiser estimated about a 20 - 25 percent response rate. In addition, while the CAD performed ratio studies in 2005 and 2006, appraisal maintenance was ineffective, based on the 2006 PVS results.

The 2006 PVS also identified other areas where property was appraised below market value. Category A, Single-Family Residences, in Prairiland ISD recorded a weighted mean ratio of 0.8940 and Category J, Utilities, appraisals were below market value in all ISDs tested. Proper market analysis and appraisal maintenance are essential to all property appraisals.

Exhibit 4 shows 2006 PVS ratios for Category J, Utilities.

Exhibit 4
Category J: Utilities, Lamar CAD 2006 PVS

School District	Category	2006 PVS Ratio
Chisum ISD	J	0.8841
Roxton ISD	J	0.9311
Prairiland ISD	J	0.8878

Source: Texas Comptroller of Public Accounts, 2006 Property Value Study.

Exhibit 4 indicates Category J was not appraised at market value in 2006. The 2006 PVS results for Category J were appealed. Changes made to the 2006 PVS as a result of the appeal were not enough to bring the Category J ratios into an acceptable appraisal range. In the preliminary 2007 PVS, however, the CAD was able to get all Category J properties into an acceptable appraisal range.

By improving ratio study methods, the CAD will ensure necessary adjustments are made to produce values at or near the market. Effective appraisal districts conduct frequent ratio studies with associated appraisal maintenance, thus ensuring necessary adjustments are made. Failing to effectively use ratio studies to perform appraisal maintenance can result in unequal appraisal of properties, which can result in an increased number of protests.

Nueces CAD, for example, has a computerized appraisal system and conducts ratio studies within property classes by school district and county to determine appraisal performance. The CAD bases reappraisal and value maintenance decisions for some properties or locations on the ratio study results. In addition, Grayson CAD, for example, was able to improve its land appraisals by physically inspecting all land and aggressively pursuing sales information.

RECOMMENDATION 3
Prepare and analyze ratio studies frequently, using current market data to achieve market appraisals.

FINDING
Lamar CAD's reappraisal plan lacks specific data required by Property Tax Code Section 25.18 and recommended by USPAP and IAAO.

Section 25.18 (a) and (b), Property Tax Code state:

The IAAO textbook, Property Appraisal and Assessment Administration, Chapter 13, Mass Appraisal, states that the required activities for all reappraisals must include the following steps in the order given:

• Performance Analysis – Determines whether or not the values are consistent with the market and if the values are equitable and that ratio studies are the primary tool for the analysis.
• Reappraisal Decision – Use statutes or administrative rules. This may include a cyclical schedule in which jurisdictions are physically reviewed and revalued. It is also noted that the reappraisal requires careful planning along with a major commitment of resources.
• Analysis of Available Resources – This step is performed before defining goals and objectives. This includes evaluating the staff, budget, existing systems and practices, data processing support and existing data and maps. The publication also stresses that an adequate budget is crucial in that it can overcome deficits in other areas.
• Planning and Organization – IAAO emphasizes that this is the most important aspect of reappraisal as it identifies the target completion date and performance objective, specific plan of action and timeline. The plan should also include definitions of critical activities with completion dates, assignment of responsibilities, and establishes data collection and field work standards.
• System Development – This produces the procedures, methods, manuals, and software for the mass appraisal system.
• Pilot Study – This study tests procedures in several portions of the jurisdiction. It should include a ratio study to verify if the system produces reliable and accurate values and point out needed modifications.
• Data Collection – After procedures and forms are made, tested and approved, the data collection can start. IAAO stresses that quality control is essential.
• Production of Values – This begins with a market analysis, model development, model calibration and calculation of preliminary values. The ratio study then assesses the consistency and validity of the values between each property type and area. After the models provide acceptable results, they can be used to produce values.
• Preparation of Appraisal Roll.
• Final Performance Analysis.
• Data Maintenance.
• Value Updates.

Lamar CAD did not have a written reappraisal plan in 2006. On Aug. 9, 2006, the CAD board of directors approved a biennial reappraisal plan for the 2007 and 2008 tax years.

The CAD's reappraisal plan describes, in general terms, how appraisal staff appraise residential, land, commercial, industrial, mineral, utility and business personal properties using the three approaches to value – market, cost and income. The plan states the CAD operates under a three-year reappraisal cycle with approximately one-third of the county reappraised each year. In addition, new construction is appraised, and a market analysis of all property is performed every year using ratio studies. According to the plan, 2007 is a reappraisal year for all property in North Lamar ISD and 2008 is a reappraisal year for Paris ISD. Market areas are defined by school district. Preliminary field work and data gathering begins in June and all reappraisals must be completed by March 31.

The Lamar CAD reappraisal plan follows the format of a mass appraisal report. USPAP Standard 6 requires appraisal districts to prepare annual mass appraisal reports to provide the public a better understanding of what an appraisal district does and how it performs appraisals. A mass appraisal report describes, in general terms, the mass appraisal techniques used by a CAD to appraise property for ad valorem tax purposes. A reappraisal plan, on the other hand, as required by Property Tax Code Section 25.18, should describe in detail what an appraisal district plans to do in each year of the reappraisal cycle and contain at least the required statutory elements. The reappraisal plan should explain specifically how and when the mass appraisal techniques described in the mass appraisal report would be implemented.

Exhibit 5 shows the CAD's 2007-08 reappraisal plan compared to Property Tax Code Section 25.18, and which activities were followed in 2007.

Exhibit 5
Comparison Between Property Tax Code 25.18(b)
and Lamar CAD's 2007-08 Reappraisal Plan

Property Tax Code Section 25.18(b) Requirements	Activity in Plan? Yes/No	Activity Performed? Yes/No
The plan shall provide for the following reappraisal activities all real and personal property in the district at least once every three years:
(1) identifying properties to be appraised through physical inspection or by other reliable means of identification, including deeds or other legal documentation, aerial photographs, land-based photographs, surveys, maps, and property sketches;	Yes	Yes, via appraisal procedures
(2) identifying and updating relevant characteristics of each property in the appraisal records;	No	Yes, via appraisal procedures
3) defining market areas in the district;	Yes	Yes
4) identifying property characteristics that affect property value in each market area, including:
(A) the location and market area of property;	No	Yes, via appraisal procedures
(B) physical attributes of property, such as size, age, and condition;	No	Yes, via appraisal procedures
(C) legal and economic attributes;	No	Yes, via appraisal procedures
(D) easements, covenants, leases, reservations, contracts, declarations, special assessments, ordinances, or legal restrictions;	No	Yes, via appraisal procedures
(5) developing an appraisal model that reflects the relationship among the property characteristics affecting value in each market area and determines the contribution of individual property characteristics;	Yes	Yes
(6) applying the conclusions reflected in the model to the characteristics of the properties being appraised; and	Yes	Yes
(7) reviewing the appraisal results to determine value.	Yes	Yes

Source: Property Tax Code Section 25.18(b) and Lamar CAD Reappraisal Plan 2007-08.

Without a detailed reappraisal plan, Lamar CAD does not have a step-by-step explanation of how the CAD will accomplish its reappraisal activities. An adequately detailed reappraisal plan, if executed properly, provides a roadmap to help the CAD ensure that school districts receive valid values in the PVS and possibly preclude a school district from receiving less than the expected amount of funding from the state. Effective appraisal districts develop and properly execute a complete reappraisal plan, helping ensure that taxpayers are treated equitably in assigning property taxes. A reappraisal plan also serves as the communication tool that demonstrates to the board the methods used by appraisal staff. The reappraisal plan sets forth the manner in which the staff will conduct its appraisals.

Jefferson CAD, for example, has a detailed reappraisal plan that explains exactly how and when reappraisals take place and how sufficient resources will be allocated to follow the plan. The reappraisal plan ensures the execution of timely and accurate reappraisals on an annual basis and is reviewed each year and updated when changes are needed.

RECOMMENDATION 4
Expand the reappraisal plan to include locally developed appraisal procedures.

FINDING
Lamar CAD does not request and review documentation to support technical property appraisals.

Property Tax Code Section 23.01(b) requires uniform and equitable appraisals and states:

The market value of property shall be determined by the application of generally accepted appraisal methods and techniques. If the appraisal district determines the appraised value of a property using mass appraisal standards, the mass appraisal standards must comply with the Uniform Standards of Professional Appraisal Practice. The same or similar appraisal methods and techniques shall be used in appraising the same or similar kinds of property. However, each property shall be appraised based upon the individual characteristics that affect the property's market value.

Section 5.102(b) of the Property Tax Code states with respect to ASRs:

In conducting the review, the comptroller is entitled to access to all records and reports of the appraisal district and to the assistance of the appraisal district's officers and employees.

In March 2006, the CAD contracted for the appraisal of its technical properties. For purposes of the PVS, technical properties are defined as Category F2, Industrial Real; Category G, Oil, Gas and Minerals; Category J, Utilities and Category L2, Industrial Personal. Category J was the only technical property category tested in the CAD's 2006 PVS and comprises 8.27 percent of the CAD's total appraised value.

The chief appraiser said copies of appraisals performed by the contractor are not available at the CAD. The appraisals and supporting data are kept at the contractor's office and are available upon request. Section 2(c) of the appraisal contract states that copies of all appraisals and supporting data will be made available to the CAD and become public record. The contractor submits a list of the properties appraised including legal descriptions and appraised values for the CAD to enter into the appraisal system each year. General explanations of how these categories of property are appraised can be found in the CAD's reappraisal plan.

Exhibit 6 shows 2006 PVS values and ratios for Category J: Utilities.

Exhibit 6
Category J: Utilities Lamar CAD 2006 PVS

School District	Category	CAD Value	PVS Value	Ratio
Chisum ISD	J	$26,548,994	$30,028,576	0.8841
Roxton ISD	J	$3,471,542	$3,728,484	0.9311
Prairiland ISD	J	$11,870,367	$13,370,628	0.8878

Source: Texas Comptroller of Public Accounts, 2006 Property Value Study.

Exhibit 6 indicates industrial properties were not appraised at market value in 2006. The 2006 PVS results for Category J were appealed. Changes made to the 2006 PVS as a result of the appeal were not enough to bring the Category J ratios into an acceptable appraisal range.

Lamar CAD is responsible for the appraisal of all taxable property in the county, including appraisals done by contractors. When appraisal manuals, procedures and supporting data are not readily accessible, CAD staff and the general public are at a disadvantage. The chief appraiser should request the appraisals and supporting data from the vendor and review them to determine if they comply with the law and generally accepted appraisal techniques. Appraisals must represent market value and CAD staff must be able to explain and defend the values.

Appraisal manuals and procedures must be presented in such a way that both the appraiser and taxpayer understand how an appraised value was derived. If contractor appraisal data is not available at the CAD, the chief appraiser is not able to determine if industry standards and the Property Tax Code were followed. Failure to follow standards and produce appraisals that represent market value can affect school funding. In addition, customer service suffers when appraisal information is not available at the local level.

IAAO's Standard on Administration of Monitoring and Compliance Responsibilities states agencies responsible for appraising properties, such as public utilities, should clearly show how the properties are appraised and how the value is allocated.

RECOMMENDATION 5
Request and review copies of technical property appraisals and supporting data to ensure all properties are being appraised at market value.

2.3 Other Recommendations

During the course of the review process, PTD identified a management and operational issue that may not be directly related to the appraisal process, but could indirectly affect the CAD's ability to conduct appraisals accurately and consistently. Lamar CAD is not obligated to implement this recommendation, but it is provided here for consideration as an additional way to enhance operational effectiveness and efficiency. Appraisal districts, as Texas governmental entities, are required to comply with all applicable laws.

FINDING
Lamar CAD lacks written procedures for monitoring contracts.

IAAO's Standard on Contracting for Assessment Services, Section 5, Monitoring Contract Performance, states contracts must be continually monitored to ensure that all completed items meet required standards.

Two projects critical to the successful reappraisal of Lamar CAD are performed by contractors. The CAD outsources its mapping and technical appraisal functions. Both functions have been identified as contributing to invalid findings for four of the CAD's five school districts in the 2006 PVS.

The CAD's computerized maps only identify about 65 percent of all real property parcels, not all parcels as required by the Property Tax Code. Category J was appraised below market value in all school districts tested, violating the Property Tax Code requirement that all appraisals must be at market value.

Appraisal districts are responsible for the work of all contractors and the same laws and standards applicable to appraisal districts also apply to contractors. If Lamar CAD allows contractors to perform below legal and industry standards it creates an environment that lacks equity and uniformity and places school funding at risk. It also demonstrates a fiscal weakness if contractors are paid for inferior or sub-standard work.

Hansford CAD, for example, successfully prepares, manages and monitors its contracts while meeting IAAO contracting standards. Hanford CAD's deputy chief appraiser supervises the appraisal services contract to ensure that all requirements are being met and the chief appraiser supervises other contracts.

RECOMMENDATION 6
Develop written guidelines for monitoring professional service contracts.

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