Findings of the Appraisal Standards Review
This chapter of the report addresses the findings, commendations and recommendations from the appraisal standards review of the Lee 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 six members. Members of the board are listed in Exhibit 3.
Board of Directors Members
Board Member Represents Starting Date Robert Lee Giddings ISD 12/22/04 Billy Buetow Lee County 01/01/02 Virginia Jackson, Secretary (non-voting member) Lee County Tax Assessor/Collector 01/01/00 Fred Jones City of Giddings 01/01/04 Kenny Mostyn City of Lexington/ Lexington ISD 01/01/04 Douglas Spacek, Acting Chairman Dimebox ISD 01/01/00 Source: Lee CAD, November 2004.
The Board of Directors hires a chief appraiser as the chief operating officer of the district.
Financial audits have been prepared in accordance with Section 6.063 of the Property Tax Code, and the district has addressed the audit findings.
James E. Medack, a certified public accountant from Giddings, Texas, conducted independent audits of the 2002 and 2003 fiscal years. His audit of the 2002 fiscal year resulted in two findings, each concerning signatures on invoices. Mr. Medack suggested that the provider of janitorial services sign the invoice submitted for payment of service and that Appraisal Review Board members sign invoices submitted for mileage reimbursement and per diem. The district now requires these invoices to be signed. His audit of the 2003 fiscal year did not include any findings.
The district addressed findings in its 2002 financial audit in a timely manner.
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 and 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 its principal administrative office.
PTD staff reviewed copies of the budgets for 2004 and 2005. Each budget listed categories of capital expenditures such as office furniture and equipment and computer equipment and software, but neither listed each proposed purchase. The 2005 budget lacked a listing of the benefits for each position, which was included in the 2004 budget. A summary of the budgets is in Exhibit 4.
Lee CAD Budgets for Fiscal Years 2004 and 2005
Category 2005 2004 Budget Percent of Total Budget Percent of Total Employee wages and benefits $317,094 60.49% $306,316 60.61% Employee travel 18,850 1.19% 5,000 0.99% Membership and dues 1,550 0.30% 1,500 0.30% Conferences and training 3,250 0.62% 3,000 0.59% Communications and utilities 25,150 4.80% 24,250 4.80% Supplies 7,500 1.43% 7,500 1.48% Services 108,450 20.69% 102,950 20.37% Maintenance and services 34,300 6.54% 34,500 6.83% Insurances 3,600 0.69% 3,250 0.64% Leases and rentals 600 0.11% 600 0.12% Fixed asset purchases 9,000 1.72% 9,000 1.78% Boards and related costs 7,500 1.43% 7,500 1.48% Total $536,844 $505,366 Source: Lee CAD, fiscal years 2004 and 2005 budgets and 2005 amended budget.
The budget summarized above does not give sufficient detail for a member of a taxing unit or a member of the public to understand how the money is spent. Specifically, they are unable to determine what types of capital purchases are proposed. With more than 60 percent of the budget going to wages and benefits, both taxing units and the public need the detail required by state law to be assured 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 presented to the Board of Directors for adoption to include the benefits for each position and a list of each proposed capital expenditure with sufficient detail to allow comprehensive decision making by the CAD board and taxing units.
The board does not have a written process for hiring chief appraisers, nor is there evidence of any informal review process for assessing chief appraiser performance in 2003 and 2004. In the past four years the district has had six chief or acting chief appraisers. The chief appraiser resigned in September 2001. The deputy chief appraiser managed district operations between September 2001 and March 2002 when a new chief appraiser was hired. That chief appraiser left the district in September 2002. The deputy chief appraiser managed the district from September 2002 till a new chief appraiser was hired in February of 2003. That chief appraiser left in October 2004 and the current chief appraiser began work in November 2004.
The board does not have written policies or procedures for hiring a chief appraiser, although near the end of this review the district did develop a form for evaluating. According to board minutes of a February 25, 2005 meeting, the board adopted the Lee CAD Employee Evaluation and Performance Program. Subsequent to that meeting the current chief appraiser provided a copy of a form titled Lee County Appraisal District Evaluation – Chief Appraiser and another form designed to evaluate employee performance.
The chief appraiser evaluation form is designed for each board member to evaluate the chief appraiser. Each board member scores the chief appraiser on a scale of 1 to 10, with a score of 1 being an inadequate level of competency and 10 being an excellent level of competency. The board chairman tally’s the results and determines a composite board numerical average for each item. The chief appraiser receives a written copy of the composite evaluation and the instructions on the form require the board to discuss the results in executive session.
The five page form evaluates the chief appraiser on twelve areas: goals and objectives; organization; problem solving; leadership; relationship with board; personnel; duties/responsibilities; business and finance of appraisal district; communication; relationship with community; development, and; personal attributes. In addition, the form has a place for the board to identify the chief appraiser’s three strongest areas of performance during the past year and an area to identify the three areas that the chief appraiser needs to improve on during the coming year. Each section includes an area for written comments and the report has an area for summary comments as well. The evaluation is supposed to be “performed no less than twice per year.”
The district was unable to provide a job description for the chief appraiser or any written evaluations of the chief appraiser. Chief appraisers are responsible for ensuring that competent staff are hired, procedures are documented, appraisals are performed, employees are evaluated and all other functions performed by an appraisal district. Having a qualified chief appraiser is important to effective district operations.
The prior chief appraiser was employed for about a year and a half and her predecessor was employed for six months. The last two chief appraisers were terminated after a contentious relationship with their Board of Directors. Amelia Stayton, the chief appraiser hired in February 2003, was fired in a board executive session in October 2004 and in a public session of the board in November 2004. No explanation of the reason for termination was made in either meeting.
The board has been sharply divided on the former chief appraiser’s performance, and this controversy has affected the board members’ own roles. Board members by law are to focus on setting policy and approving the budget, but a distinct lack of trust in the chief appraiser on the part of several board members has prompted them to expand their roles into operational areas. One board member resigned in protest after the former chief appraiser was terminated.
Without a clearly defined job description, the board is unable to attract and hire the kind of chief appraiser the board would like to run the district. No documentation on the chief appraiser’s performance was provided to the review team.
While a new interim chief appraiser has been appointed, no job description is available to assist the chief appraiser in performing her new duties. Without an objective system in place to ensure that the board and the chief appraiser are in agreement as to what is expected of the chief appraiser, performance evaluations may be subjective and based on emotion rather than actual performance.
At the time of the report’s publication, the district did not have a copy of the chief appraiser’s evaluation having been completed using the new form.
Develop a job description for the chief appraiser position to be used in hiring, tie the job description to its evaluation form and begin evaluating the chief appraiser according to its new procedures.
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 roll for the 2003 tax year by the district was completed according to the law.
Lee CAD has no written comprehensive policy and procedures manual for district operations. The district does have oral policies for managing district operations. The district also has a one-page procedure entitled Personal Property Procedures and Methods. The district also has a short procedure for address changes and a Rules of Procedure document for the appraisal review board. The district also uses Property Appraisal and Collections Software (PACS) to assist district appraisers in appraising property.
The district has had six different chief or acting chief appraisers since September 2001, with the most recent chief appraiser being terminated by the Board of Directors in October 2004. Exhibit 5 outlines the length of service of the last four chief appraisers.
Lee CAD Chief Appraiser Length of Service
Chief Appraiser Length of service Roy Holcomb 16 years David Ballard 6 months Amelia Stayton 1.5 years Sheri Winn 6 months Source: Lee CAD and Lexington Leader.
Each chief appraiser has directed staff to perform appraisals, although each has focused on different issues in the district. For example, the first chief appraiser, Holcomb, emphasized software acquisition and its use in appraisal. The third chief appraiser, Stayton, emphasized leaving the vehicle when taking pictures of property and physically inspecting the property. None of the chief appraisers documented the processes employees need to follow in performing their duties. During this time of chief appraiser turnover, no one had the ultimate responsibility for ensuring that appraisals were done consistently.
Section 23.12 of the Property Tax Code requires all appraisal districts to have documented policies and procedures.
A policy and procedures manual needs to be in place for the staff to follow. A procedures manual helps taxpayers and staff understand the steps the appraisal district follows to accomplish the tasks of the appraisal district.
The manual shows the procedures used to complete each of the required tasks of the appraisal district. A policy and procedures manual will assist the district in meeting all of the requirements of the USPAP standards as well as meeting the legal requirements of the Tax Code and the Constitution. The district may want to check with other appraisal districts such as Jefferson County Appraisal District to find a model for their manual. Jefferson County Appraisal District’s manual covers each step in the appraisal process and also includes a USPAP document. It is especially important for the appraisal process to include cost, market and income approaches to value as well as the process the district uses to appraise land and personal property.
Develop a written policy and procedures manual for district operations.
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.
Lee County Appraisal District integrated its computer system for appraisals with its geographic information system (GIS), which the district uses to map and locate property within the district, during the course of this review. District staff completed initial training on the new system in October 2004. The former chief appraiser stated that once the system is fully integrated, district staff still had about six months’ of deed transfer data to enter into the system. The current chief appraiser said that they are reviewing the base maps for errors and sending changes to the vendor for updates. The chief appraiser said that they are checking and verifying property splits that were recently sent to the vendor and anticipate completely this process in the next two months.
The current chief appraiser signed a maintenance agreement with the GIS’s developer in February 2005 for it to maintain and update the system and “provide the appraisal district a completed parcel base map of the properties in Lee County.”
The GIS system maps assist in valuation of property by having the ability to print maps on either a countywide or entity basis, which graphically illustrates clusters of sales, sporadic sales or lack of sales in a given area. The 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. The system can also assess appraisal trends over time because it retains multiple years of data.
The system 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. The system also allows the district to run ratio studies on sold properties in order to update the appraisal schedules, and it will assist the district in the record keeping for ownership, exemptions and values. The system has the capability to measure an improvement from an aerial photograph when the appraiser has no access to the property on the ground. It also shows a picture of properties from different views assisting the Appraisal Review Board during the appeal process. For example, an appraiser takes pictures of each view of the house and then enters the pictures, along with the measurements of the structure, into the system. This allows the appraiser or a taxpayer to view the data at an Appraisal Review Board hearing. This process also assists the district in the reappraisal process by showing improvements that existed at the last inspection of the property. This system has all of the required elements of a complete information system.
Begin using the integrated appraisal and GIS system to improve appraiser productivity and improve appraisal in Lee County.
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 Lee CAD staff is organized as outlined in Exhibit 6.
Lee County Appraisal District Staff, Positions,
Certifications, Years with Lee CAD and Salaries
Position BTPE Certification Years with Lee CAD Salary Chief Appraiser RPA 6 months $60,000 Deputy Chief Appraiser RPA 19 $36,050 Appraiser Class IIIA 3.5 $19,750 Senior Appraiser RPA 13 $33,475 Appraiser (vacant) - - $29,000 Title Clerk - 4 $19,450 Appraiser Assistant - 2 $20,260 Receptionist - Less than 1 year $17,715 Exemption Administrator - 12 $24,410 Source: Lee CAD, fiscal year 2004 and 2005 budgets.
Appraisal district staff who appraise property are required to be Registered Professional Appraisers (RPA) or to be working towards certification as an RPA. Staff must be certified within five years of their hire date. Interim certifications include 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.
According to the 2003-2004 Appraisal District Operations survey, the district reported in early January 2003 it had 42,809 parcels, which was information reported to the agency in early 2004. The average of real parcels to appraiser is 3,913 and the average of all parcels per appraiser is 10,702. The current chief appraiser does perform appraisals.
The district provides appraisal services for eight taxing units, including Lee County, Giddings Independent School District, Lexington Independent School District, Dime Box Independent School District, City of Giddings, City of Lexington, Lee County Fresh Water Supply District #1 and Cummins Creek Water Control and Improvement District #1.
The Lee CAD has a well-written and comprehensive personnel policy and personnel handbook that explains the district’s policy as an at-will employer and covers federal employment guidelines dealing with the Federal Medical Leave Act. The handbook also describes guidelines for employee behavior in dealing with customers and guidance on the use of district equipment including telephones and Internet access.
The district has adopted a personnel handbook that informs employees of the rights and responsibilities.
The Lee CAD adopted the Lee CAD Personnel Evaluation and Performance Program in a Board meeting on February 25, 2005. It developed an eight-page form for employee evaluation, but has not conducted a round of written employee evaluations.
The district has job descriptions for the deputy chief appraiser, administrative assistant, senior appraiser, data entry/appraiser, the exemption administrator, receptionist, and the records/deeds technician. The district did not have written procedures for evaluating employee performance in 2003 and 2004. The district did not have written copies of employee performance evaluations on file during the onsite review work and has not provided any copies of written evaluation since that time.
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 are informed of the criteria on which they will be evaluated. 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. 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.
The district’s personnel evaluation form states the purpose of the performance management program is to:
- Provide an opportunity for dialogue between employees and supervisors, leading to a shared understanding of performance expectations and individual development needs; and
- Monitor performance by providing timely feedback.
The form requires an evaluation be performed at least twice a year. The form rates more than a dozen performance factors from unacceptable to outstanding, including the relevance of the performance factor for each employee. The form also provides for written comments from management and staff.
Develop procedures and use the recently developed personnel evaluation form to evaluate district staff.
In appraisal profession circles 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.
The appraisal district’s contract appraiser also appraises Lee CAD’s minerals and utilities. Minerals are appraised using the income approach, which involves estimating the income likely to be generated by selling the minerals. Utilities are appraised using the unit value technique. The unit value technique requires the appraiser to determine the market value of the entire utility and apportion the value to each taxing unit within the appraisal district.
The Lee 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.
Lee CAD subscribes to two products that MS/B offers. Specifically, they subscribe 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, Lee 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 property, 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, Lee CAD applies an “economic adjustment” factor to their 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.
The Lee 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 review team examined several ratio studies but focused on the studies in Lexington ISD. The Comptroller’s 2003 ratio study results for Lee CAD indicated strong appraisal uniformity and equality.
The chief appraiser said that she runs ratio studies within property classes, by school district and county at least quarterly to determine appraisal performance. The chief appraiser said the district makes reappraisal and value maintenance decisions for certain types of properties or locations based on the ratio study results.
The appraisal district’s 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.
Appraisal districts 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.
Lee CAD has a comprehensive ratio study system that allows proper reappraisal and maintenance planning.
Lee County Appraisal District lacks a detailed reappraisal plan to ensure the execution of timely and accurate reappraisals.
Currently, Lee CAD’s reappraisal plan is a one-page policy statement. The reappraisal plan states that all properties are reappraised annually based on sales in the market areas (neighborhoods), with inspections done annually on properties that have physical changes. Inspections are also done on all properties on a rotation of the neighborhoods.
The reappraisal plan does not give any detail as to the steps to be performed, staffing levels, workflow or the costs associated with plans and goals. The plan does not list specific procedures for determining how the sales are to be used in reappraising property in each market area, or how the district’s internal ratio study is used to determine the need for reappraisal in each market area. The plan does not discuss how market areas might be grouped to provide sufficient sales for appraisal model analysis and development.
The reappraisal plan does not link the appraisal district’s budget, training, contracting, market analysis, field inspections and data processing in one document. The appraisal district’s policy includes statements about some of these elements but the appraisal district Board of Directors has not adopted a plan that includes documentation of how the appraisal district staff will implement the reappraisal plan. In addition, the Board of Directors has not adopted or reviewed the work plan the staff would follow to accomplish the reappraisal policy.
Lack of a detailed reappraisal plan could cause the execution of the plan to go awry, and result in property values that deviate from market value. This market value deviation could cause any of Lee County’s school districts to receive an invalid finding in the state’s property value study.
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.
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 above steps are essential elements in completing any effective reappraisal. They must be followed to ensure a thorough and accurate reappraisal that reflects the market value of property.
The primary function of every appraisal district is to appraise all taxable property equally and uniformly at market value. The chief appraiser and appraisal district staff are responsible for the day-to-day operations of the appraisal district, but the Board of Directors must adequately plan to accomplish these objectives and establish policies that serve as clear directives to the chief appraiser and staff. As representatives of the member taxing units, the Board of Directors is responsible for ensuring that they employ a knowledgeable, capable chief appraiser who has the necessary tools, such as equipment and staffing, to produce an appraisal roll that reflects market value for all taxable properties. Policies, as adopted by the Board of Directors, are another tool to assist the chief appraiser and the appraisal district in accomplishing its primary mission.
A thorough reappraisal plan discusses in detail how and when the district plans to perform each of the activities mentioned above. A detailed reappraisal plan, if executed properly, would help ensure that values in each school district are valid in the PVS, thereby avoiding the possibility of a school district receiving less than the expected amount of funding from the state. A detailed and properly executed plan would also ensure that taxpayers are treated uniformly in the payment of property taxes.
According to the Texas Constitution, each property is required to be assessed at market value each year.
Develop and establish a reappraisal plan.
The appraisal district lacks written appraisal procedures manuals for the appraisal staff.
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 taxable value for each property based on the property’s characteristics that the appraiser then reviews for reasonableness and accuracy.
As part of their computerized model, Lee CAD uses cost-based schedules to appraise improvements. The cost-based schedules the appraisal district uses are based on the Marshall & Swift Valuation Service guide.
Although Lee CAD’s valuation model generally appears to follow the Marshall & Swift procedure, they have not developed a manual that would provide guidance in using their cost-based model. Rather than employing a procedures manual for appraisers to reference, the appraisal district relies on chief appraiser-led training in the field. The prior chief appraiser rode with all of the appraisers periodically in an attempt to promote consistency among the appraisers in the way they classify property and gather property data.
Lee CAD contracts the appraisal of mineral properties to Thomas Y. Pickett & Co., Inc. (TYP). TYP uses the income approach on mineral properties. The Lee CAD staff appraisers do not use the income approach for any properties. TYP appraises mineral properties using the discounted cash flow (income) technique. Using this technique, TYP projects the net income for each year of the property’s remaining economic life. They then discount each of those net incomes to the present value. Stated another way, appraisers use this technique to convert future income to its present value. This technique is a common and accepted income appraisal standard for income producing property.
TYP also appraises Lee CAD’s utility property. Utilities are appraised using the unit value technique. The unit value technique is a technique that requires the appraiser to determine the market value of the entire utility company. The utility company 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, but again, no manual is available for use in explaining or defending the appraisals to the public.
Personal property inspections are done at least once every three years. Personal property values, however, are largely based on taxpayer renditions. The chief appraiser and personal property appraiser review the renditions for reasonableness by comparing the rendered values to the personal property value schedule in the Comptroller’s field appraiser’s guide. Lee CAD does not have a manual to guide their appraisers in the review of renditions, or in the reasonableness determination.
The Marshall & Swift Valuation Service guidebook is certainly a helpful tool but it is not specifically designed for use in Lee County. In addition, the valuation guidebook does not contain local procedures and directives for completing appraisals. The district refers to the USPAP mass appraisal standard as its appraisal standard but appraisers do not have a procedures manual that incorporates the standard with local practices.
Lee CAD’s reliance on the chief appraiser is a risky and uncertain method for training appraisal staff, lacks consistency, and doesn’t ensure the proper application of Marshall & Swift schedules or the reasonableness of property values. Relying on the chief appraiser to ensure that staff follows proper procedures is a poor practice, as personnel can change. Tomorrow’s chief appraiser may be different than today’s chief appraiser, and without any procedures manual in place, a new chief appraiser will not know what procedures are in effect and may have different opinions about how the procedures need to be executed. This creates a high probability of inefficiency and inconsistency in appraisal performance.
Lack of detailed appraisal procedures manuals could cause inconsistent appraisals and result in property values that deviate from market value. This market value deviation could cause any of Lee County’s school districts to receive an invalid finding in the state’s property value study. As mentioned previously, Lexington ISD did receive an invalid finding in the Comptroller’s 2003 Property Value Study, and an invalid finding, if uncorrected, could eventually cause the school district to receive less funding from the state than expected. Further, if the level of appraisal (percentage of market value) varies from school district to school district, or from taxpayer to taxpayer, some taxpayers could be bearing more than their fair share of the local tax burden.
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.
Prepare and issue to each appraiser detailed appraisal procedures manuals that provide local procedures and practices for each type of property the staff appraises and tie these local procedures to the existing Marshall & Swift procedures.
To increase efficiency and aid appraisal equality, each appraisal staff member needs an appraisal procedures manual. The procedures manual includes local procedures and practices for each type of property the staff appraises. The procedures manual also needs to include property classification pictures and descriptions, directions for gathering and processing property characteristics and for reviewing and evaluating appraised values.
Detailed appraisal procedures manuals would help ensure that values in each school district are valid in the PVS, thereby avoiding the possibility of a school district receiving less than the expected amount of funding from the state. Detailed appraisal procedures manuals would also help ensure that taxpayers are treated uniformly in the payment of property taxes.
Lee County does not have a multiple listing service (MLS) for real estate professionals. To obtain market data from sales, the appraisal district researches deed recordings to identify property transactions. The district sends sales confirmation letters to buyers and sellers as recorded in the deed to confirm and verify the transaction and the amount of the transaction. Appraisal district staff also research building and sewer permits to gather information about new construction or construction on existing property. The chief appraiser said the district relies on realtors and real estate appraisers for sales information.
The district’s confirmation and verification procedure is one that appraisal districts use, especially those appraisal districts that do not have access to a multiple listing service. However, the appraisal district’s procedure for gathering and analyzing sales and market data is not written or contained in a procedures manual.
Written procedures ensure the market analyses are done consistently, regardless of changes in personnel. Knowing what analysis needs to be done, when to perform the analysis, and how to actually perform it is key to maintaining continuity and a high level of appraisal performance.
Establish written procedures for gathering and analyzing sales.
The chief appraiser needs to include the sales analysis procedures in the appraisal procedures manual. Compiling these procedures in a written manual will increase overall effectiveness of the appraisal program and ensure continuity in the appraisal district’s performance.