Findings of the Appraisal Standards Review
This chapter of the report addresses the findings, commendations and recommendations from the appraisal standards review of the MasonCounty Appraisal District in five sections:
Board of Directors
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 five members. Members of the board are listed in Exhibit 4.
Board of Directors Members
Board Member Represents Starting Date Charles Reichenau, Chair Community 1992 Rodney Jackson Community 2002 Eldon Kothman Mason County 2004 Del Roy Reichenau Community 2004 Harold R. Schmidt Mason ISD 2005 Source: Mason CAD, March 2005.
The board has two elected officials serving on it. Eldon Kothman is a Mason county commissioner and Harold Schmidt is a Mason ISD board of trustee member.
The Board of Directors are nominated and elected by three participating taxing units: City of Mason; Mason ISD; and, Mason County. During the last election, which occurred in October and November of 2004, the process worked like this. Two board members were up for reelection. On October 15, the chief appraiser asked each board member in writing if they would like to serve another two-year term. One board member agreed to serve another term (Eldon Kothman) and one declined (Randy Krause). The chief appraiser notified the voting entities on who was agreeable to reelection and who had declined.
In the same notice the chief appraiser outlined the number of votes each taxing entity had: Mason County (1,400), Mason ISD (3,500) and the City of Mason (100). The taxing units were directed to submit their list of nominees to the appraisal district office by October 30.
The County Commissioners court submitted two names on October 25: Eldon Kothman and Harold Schmidt. The other taxing units did not submit candidates. On November 1, the chief appraiser sent out a notice to each taxing unit with the list of nominees and instructions that they must vote on the nominees in an open meeting and they could distribute their votes among the nominees as they saw fit. They had until November 15 report the vote to the chief appraiser. Each taxing unit split their vote evenly between the two candidates and the chief appraiser posted a notice of the election results on December 1. Each newly elected board member was notified in writing at the same time.
The Board of Directors has the following primary responsibilities:
- Establish the appraisal district's appraisal office;
- Adopt the appraisal district's annual operating budget;
- Contract for necessary services;
- Hire a chief appraiser;
- Hire a taxpayer liaison officer (districts in counties having a population of over 125,000);
- Appoint appraisal review board members; and
- Make general policy on the appraisal district's operation.
The Board of Directors hires a chief appraiser as the chief operating officer of the district.
Board of Directors received a written survey about board activities. The survey was broken down into board policies and procedures, chief appraiser and staff, property appraisals, appraisal review boards, and budgeting and financial management. Three of the five board members returned the survey. In general the board gave itself and the district good markets in most of the areas surveyed. One board member felt the board did not review and update its policies on a biennial basis. Two out of three noted the board does not get annual training. Two out of three board members noted they do not evaluate the chief appraiser in writing and that the chief appraiser does not have a written job description. All noted the chief appraiser is doing a good job, however. And board members could not agree on the following statement "Board policy outlines a periodic reappraisal plan that complies with the requirements of Section 25.18 of the Tax Code. One strongly agreed with this statement, one disagreed and one did not know whether it did or did not.
Financial audits have been prepared in accordance with the Property Tax Code, and the district has addressed the audit findings. Geistweidt, Klein & Company, P.C., Certified Public Accountants, from Fredericksburg, Texas conducted independent audits for the 2001, 2002 and 2003 fiscal years. Their audit of 2003 resulted in three findings, which were addressed in the June 30, 2004 management letter. The auditors recommended that the deferred revenue account (#2650) be used only at the end of the year to record advance payments from the taxing entities. The second finding concerned the Partial Payments account (#1042) and the finding addressed the high balance in the trust fund bank account during heavy collection periods. The third finding concerned making remittances to the taxing units more frequently between November and January, the time period of heaviest tax collection. The auditor noted that between November 1 and December 31 its bank account had grown from $30,276.12 to $1,262,342.72.
According to chief appraiser, the problems outlined in the management letter have been addressed by the appraisal district. The district is no longer using the Partial Payment account and they are now distributing the funds from the trust fund account monthly. During heavy tax collection periods the district distributes funds to the taxing units at least once a month.
It should also be noted that the appraisal district has had a high rate of turnover in the position of bookkeeper, resulting in four different people filling this position during the last two years.
The district has addressed the findings in its 2003 financial audit in a timely manner.
The Board of Directors does not have any written process for the hiring and evaluation of chief appraisers, nor is there evidence of any review process for assessing chief appraiser performance. The district is not able to provide a job description for the chief appraiser. The chief appraiser is 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. Two of three board members noted in surveys that the district does not have a process for evaluating the chief appraiser nor any means of documenting an appraisal
The current chief appraiser was appointed in July 2003. The prior chief appraiser was employed from September 2000 through May 2003. When the current chief appraiser took over the ownership changes for properties had not been updated for more than a year and notices had not yet been sent for 2003. The board did not know that this had not been done.
It appears that many appraisal duties were either incomplete or not done at all during the prior chief appraiser's term as chief appraiser. No job description is in place to assist the new chief appraiser in performing his duties.
All board members returning the board survey noted they were satisfied with the chief appraisers current performance. One board member did not believe the board evaluated the chief appraiser at all.
Chief appraiser responsibilities are varied and some areas where a board might evaluate the chief appraiser are: 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.
Develop a job description and an objective set of evaluation measures for the chief appraiser position and establish an annual evaluation process and evaluate the chief appraiser annually.
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 Mason CAD uses application forms in a computerized format through their software vendor as well as maintains hard copies of necessary applications.
The district does not have documented policies or written procedures for how to perform day-to-day operations, such as paying bills, issuing payroll, or creating a budget. The Mason CAD has a document labeled Policy Manual that was revised in 2003. However, this document deals mainly with the creation of the appraisal district and includes such information on public access policies for meetings, information on a record management program pulled straight from the law, and a resolution on the imposition of penalties.
This document does not address the procedures used to complete each of the required tasks of the appraisal district. The chief appraiser says the district operates with oral procedures.
District operations procedures normally address how to pay bills, process invoices, issue purchase orders, develop budgets, contract for goods and services, arrange for lease space, make payroll, reconcile bank accounts, issue keys and issue checks, among other procedures.
Section 23.12 of the Property Tax Code requires all appraisal districts to have documented policies and procedures.
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. The Jefferson appraisal district, recently reviewed by the comptroller's office, maintains a current and comprehensive policy and procedure manual detailing procedures for payroll, accounting, purchasing, and related office practices.
A policy and procedures manual needs to be in place for the staff to follow, which addresses the policies that govern staff actions and performance and procedures that outline the set of steps or activities staff and management needs to take in implementing the policies.
Develop a comprehensive policy and procedures manual for the appraisal district operations.
The chief appraiser did not prepare and certify an appraisal roll for each taxing unit participating in the district by the end of May. The chief appraiser noted that each entity was notified of their estimated appraisal value, but not by the end of May.
Certification of the appraisal rolls for the 2003 and 2004 tax years by the district were completed late. The 2003 appraisal roll was certified during late August and early September 2003 for the taxing units. The 2004 appraisal roll was certified September 10, 2004.
Furthermore, the documentation showing when the notices were sent, submission of records to the appraisal review board, required notices to be published in the newspaper, and final certification by ARB is not maintained in an organized manner.
This was due primarily to the change in staff and it appears that the 2005 work is on schedule for timely completion.
Maintain documentation showing when the appraisal records are submitted to the ARB, changes made by the ARB, and copies of all required advertised applications and notices.
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.
The district does not use all the appraisal functions of the district's software to improve its appraisals. Mason CAD uses an automated appraisal software system provided by Pritchard & Abbott, Inc. Valuation Services through a lease agreement. The contract includes services/functions for the Appraisal System, Tax Roll and Billing Information, Appraisal Roll, Estimated Values for each Taxing Unit, Appraisal Notices, Final Appraisal Rolls, as well as Electronic Data Submission to the State Comptrollers Office. The software also includes a collection system, which provides the necessary functions for collecting and reporting of property taxes that the district collects. The software also has an integrated GIS system, which the district is in the process of implementing in an effort to create and maintain an adequate mapping system. The software calculates values based upon schedules entered into the system for the different classes of property.
In responding to the self assessment questionnaire in questions on computerization and mapping, district staff seemed unclear about the capabilities of its software system and how or if it interacted with its geographic information system.
District staff collects deed information on property sales and from these ownership changes maintains the ownership records for the CAD. The system generates sales letters, which are mailed to the parties involved in the transaction. The software allows for sales information to be captured, which would allow the staff to calculate a variety of ratio studies for different classes of property. But the district has not used this option in the past, although the chief appraiser said he "does now."
District staff are current on their deed work and sales data and were nearly complete on updating their maps at the time of the onsite review.
District staff do not use the software available to its fullest extent. The system could be used throughout the appraisal year to tract changes, run ratio studies and assist with reappraisal of properties in the district. The system is capable of generating a variety of reports to assist in running ratio studies, changes in values, as well as conducting reappraisals.
The system is also capable of producing reports on roll totals, schedule changes affecting specific property categories and clerical error reports.
Develop specific procedures for using the full capabilities of the appraisal software.
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. Information on staff, certifications, and salaries is included in Exhibit 5.
Mason CAD Staff, Position, Certification, & Salaries
Position Certification BTPE
Years with CAD Salary Chief Appraiser Class III Appraiser,
Class II Assessor/Collector
1.5 $32,760 Deputy Chief Appraiser Class II Appraiser/
Class III Assessor/
3.0 $16,690 Bookkeeper - - 1.3 $13,260 Clerk - - 0.25 $12,480 Source: Mason CAD budget.
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. Tax Professionals that work in collections offices are under a different track and must register and follow the Registered Texas Assessor designation (RTA).
The district contracts with Pritchard & Abbott, Inc. to perform appraisal services for the district. The firm appraises Mineral, Industrial, Utility, and Personal Property in the district. Pritchard & Abbott, Inc. are responsible for appraising approximately 80 properties, which include portions of categories F, G, J, and L.
The Mason CAD has written personnel policies for the district. The personnel policy explains the applicability of the policy, including an Equal Opportunity Statement. The policy also covers issues regarding benefits, disciplinary action, severance, holidays, vacations/leaves, education, and professional registrations.
The personnel policy also includes sections relating to General Conduct, which includes office procedures and travel policy. The policy is well written and provides employees with guidance regarding the Mason CAD employment and personnel policies.
The district has adopted written personnel policies that explain district policy to employees, the public, or a prospective employee.
The Mason CAD does not perform employee evaluations.
The chief appraiser said that he was going to implement an evaluation process in the future. The district personnel policy states that the chief appraiser is to evaluate employees annually unless the chief appraiser finds cause for more frequent evaluations.
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.
Begin the process to perform employee evaluations as outlined in the Mason CAD personnel policy.
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.
By performing evaluations the district is able to have better documentation regarding employees and the employees also have a platform to address any issues with the district in a formal setting.
In appraisal of real and personal property there are generally three approaches to value - cost, income, and market/sales - 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 districts contract appraisal firm, Pritchard & Abbott, Inc., also appraises Mason CAD utilities and some personal property. Mason county does not have any minerals parcels.
The Mason CAD uses a combination of the sales and cost approach in valuing real property improvements. The sales comparison approach is used to estimate the market value for land. The district also subscribes to Marshall and Swift, which is a cost based valuation service. Marshall and Swift 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.
Mason CAD subscribes to two products that Marshal and Swift offers, 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.
Mason CAD does not have a written reappraisal plan to ensure the execution of timely and accurate appraisals.
The chief appraiser, together with support from the board of directors, is in the process of reappraising properties in the district although it is not using a plan to guide the reappraisal process. The district completed a reappraisal of properties in the City of Mason for the 2005 tax year. This was accomplished with the help of contract appraisers. The district is continuing the effort this year by working in the county outside of the city limits.
Section 25.18 of the Property Tax Code requires appraisal districts to implement a plan for reappraisal, which provides for the reappraisal of property within the district once every three years. A comprehensive reappraisal plan is critical to the success of the district in many ways including: budgeting, market analysis, continuity of district performance during staff changes, as well as a directive for current staff.
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.
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 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 the appraisal district produces an appraisal roll that reflects market value for all taxable properties.
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.
Draft and adopt a comprehensive reappraisal plan to guide the district in the future.
Mason CAD's method of determining productivity values for land designated for agricultural use does not comply with Section 23.41 and Section 23.51 of the Property Tax Code.
The chief appraiser is currently responsible for granting or denying exemptions. The chief appraiser grants or denies the exemption based on his personal knowledge of the property, sometimes with a site visit and sometimes not. The district does not have any written procedures for granting or denying an exemption. Specifically, the district does not have a procedure for granting or denying an agricultural or wildlife exemption.
The chief appraiser said they have discussed an agricultural manual and are in the process of appointing an Agricultural Advisory Board. The chief appraiser said he has reviewed some surrounding counties policies regarding agricultural and wildlife exemptions. The chief appraiser said the district's policy for wildlife is a 20-acre minimum and that the policy for agriculture will be the same, plus intensity requirements.
Sections 23.41 and 23.51 state that land designated for agricultural use needs to be valued based on the land's capacity to produce agricultural products. The land's productivity value is found by capitalizing the average net income the land would have yielded under prudent management during the five years preceding the current year.
Section 23.51(4) states that the chief appraiser shall calculate the average net income by considering the income that would have been due a land owner under cash lease, share lease, or whatever lease is typical for the area. Expenses directly attributable to the land's agricultural use are to be deducted and the resulting net income is to be capitalized using a rate established annually by the Farm Credit Bank of Texas (rate plus 2 and one half percent) or 10 percent whichever is greater (Section 23.53 Property Tax Code).
By creating a written policy on exemption procedures, the district would experience an easier transition when staff changes are made. A written procedure would also be beneficial to other staff besides the chief appraiser and would also benefit the property owners and help ensure that exemptions are granted or denied in a uniform manner.
Develop and implement district policies and procedures for granting or denying agriculture use exemptions.
The appraisal district does not have updated property classification manuals and schedules as well as a written manual addressing appraisal procedures for field appraisers.
The district is currently using classification manuals that were developed at an unknown time. The chief appraiser has been with the district for a year and a half and did not know when the classification manuals were originally developed. The manuals are dated and do not include descriptions of properties for all of the schedules being used by the district. These manuals are critical for the proper classification of properties, which will help ensure a more consistent appraisal process. The lack of detailed property classification and appraisal process manuals could cause inconsistent or unequal appraisals.
The property classification manual needs to include a detailed description for the different types of property in the district. Manuals need to be developed primarily for residential, farm and ranch improvements, and land. The districts current classification manual could be used as a starting point and expanded to include the newer schedules that are being used.
The district does not have a written manual or document addressing appraisal procedures for field appraisers. This manual needs to provide the field appraiser with a reference for the procedures in performing fieldwork. When used in conjunction with the classification system an appraiser will be better equipped to properly class and therefore more consistently appraise properties.
By developing the aforementioned manuals and procedures, the district needs to be able obtain a higher degree of performance and consistency. In constructing the manuals and procedures the district must adhere to Section 23.01 of the Property Tax Code, which also includes complying with the Uniform Standards of Professional Appraisal Practice or USPAP.
Create and/or update existing property classification and appraisal procedure manuals for each type of property necessary.