In July 2004, the Mason Independent School District (Mason ISD), located in Mason County, Texas, was identified as one of 54 school districts in the state meeting the criteria that initiate an Appraisal Standards Review (ASR) of the county appraisal district that served them. In March 2005, the Comptroller's Property Tax Division (PTD) began an Appraisal Standards Review of the Mason County Appraisal District (Mason CAD).
Appraisal Standards Reviews
The 78th Legislature, Regular Session, directed the Comptroller's office to conduct appraisal standards reviews of county appraisal districts if the Comptroller finds in its annual Property Value Study (PVS) that the appraisal district has one or more "eligible" school districts. Eligible school districts are those that meet all of the following conditions:
- the district's values are invalid in the most recent property value study;
- the district's values were valid in the two studies preceding the most recent study; and
- the district's local value is above 90 percent of the lower threshold of the margin of error.
In Texas, public education is paid for by a combination of state and local funds. Local funding comes from local property taxes. The chief appraiser of each county appraisal district (CAD) determines local property values, and school districts set tax rates that determine the amount of local tax revenue. Appraisal districts, under most circumstances, are required by law to appraise property at or near market value. Market value, in simple terms, is the price for which a property would sell under normal conditions. State funding is based on the total taxable property value within each school district as determined by the PVS.
The PVS independently estimates the taxable property value in each school district to ensure that state values reflect market value, which in turn ensures that school districts have approximately the same number of dollars to spend per student, regardless of the school district's property wealth or lack of property wealth. School districts with less taxable property value per student receive more state dollars for each pupil than districts with more value per student. The state's fair distribution of school funding depends largely on the Comptroller's taxable value findings.
By conducting appraisal standards reviews, the Comptroller's office helps school districts to understand the reason for the invalid finding so they can effectively work with the appraisal district to correct the problems and achieve market values. ASRs identify problems and recommend changes in procedures or methods to improve appraisal accuracy.
An ASR examines and evaluates a county appraisal district's (CAD) appraisal practices including appraisal planning, appraisal procedures and methodology, and application and adherence to appraisal standards. The Tax Code and Comptroller rules are the major criteria used to measure the appraisal district's performance. The evaluation of the appraisal district's appraisal methods are based on a comparison of local methods and procedures to those generally accepted by the mass appraisal industry in Texas. The Tax Code dictates certain appraisal procedures or standards such as the USPAP, specifically Standard 6: Mass Appraisal and Standard 7: Personal Property. Also the Internatonal Association of Assessing Officers (IAAO) Standards on Assessment are used as guidelines on the operation of an assessment office.
The two principal focuses of the review are to determine why a school district served by the CAD was deemed eligible and to make recommendations to improve appraisal practices so the school district's values can be determined valid in future studies. The review evaluates five broad functional areas of CAD operations, including information processing systems, district staffing, property mapping and discovery, appraisals and appraisal standards.
The review methodology includes a self-assessment completed by the CAD, staff interviews, reviews of written policies, procedures, plans, financial and management audits, and assessments of manual and automated records systems.
As the result of the review process, the Comptroller is issuing this report of its findings that includes recommendations for change and commendations for exemplary district appraisal practices. The appraisal district is required by law to comply with the recommendations within one year of the release of this report. If the Comptroller determines that the appraisal district board of directors failed to take remedial action within one year after the issuance of the review, the Comptroller shall notify the district judges serving in the county, who shall appoint a five-member board of conservators to implement the recommendations. The board of conservators shall exercise supervision and control over the operations of the appraisal district until the Comptroller determines under Section 403.302, Government Code, that in the same year the taxable value of each school district for which the appraisal district appraises property is the local value for the school district. The appraisal district shall bear the costs related to the supervision and control of the district by the board of conservators.
While the review team found several commendable practices implemented by dedicated and hardworking district employees, Mason CAD is facing a number of challenges in achieving and maintaining consistent valid findings, including:
- Updating appraisal procedures and schedule
- Maintaining record
- Reappraising property
Key Findings and Recommendations
Update Appraisal Procedures and Schedules
- Create and/or update existing property classification and appraisal procedure manual for each type of property necessary. The Mason CAD has not developed an appraisal procedures manual that the appraisal staff can reference in completing their appraisals. The district is currently using classification manuals that were developed at an unknown time. 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. Procedure manuals are also useful as evidence during appraisal review board hearings and for demonstrating that the district is complying with its own policies. Section 23.01, Tax Code, mandates that property is to be appraised by applying generally accepted appraisal methods and techniques and that appraisal districts comply with the Uniform Standards of Professional Appraisal Practice (USPAP). CADs must use similar appraisal methods and techniques and apply these to the same or similar properties, while taking care to account for the contributions of individual property characteristics on value.
- Develop more specific procedures for using the capabilities of the appraisal software. The district does not use all the appraisal functions of the district's software to improve its appraisals. The software 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 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 about 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 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. Had the district run ratio studies it likely would have shown that the district was under appraising property in single family residences and rural homes.
- 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. The chief appraiser is required by law to prepare and certify an appraisal roll for each taxing unit participating in the district 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. Maintaining records allow for smooth changes during personnel changes, allowing new personnel to access the history of district activities and respond quickly to open records requests.
- Draft and adopt a comprehensive reappraisal plan that details the process in which the district can accomplish its appraisal duties to the entities. The district has a two-sentence reappraisal plan that is insufficient for guiding district reappraisals of property. A lack of an effective plan contributed to the Mason ISD being declared an eligible district. Section 25.18, Tax Code, requires appraisal districts to implement a plan for reappraisal. A good reappraisal plan not only provides for reappraisal of all real property in a district at least once every three years, but also can be 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 and allows the board to direct the appraisal activities by amending the plan as presented by the chief appraiser.
The review team identified some commendable practices in Mason CAD that other county appraisal districts may do well to review and implement where appropriate.
- The district has adopted a personnel manual that informs employees of their rights and responsibilities. The Mason CAD has a well-written and comprehensive personnel manual that explains the district's policy as an at-will employer and covers federal employment guidelines dealing with the Federal Medical Leave Act. The manual also describes guidelines for employee behavior in dealing with customers, guidance on the use of district equipment including telephones and the Internet, ethics, conflicts of interest, office security, and drug use.