Findings of the Appraisal Standards Review
This chapter of the report addresses the findings, commendations and recommendations from the appraisal standards review of the McMullen 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 five members. Members of the board are listed in Exhibit 4.
Board of Directors Members
Board Member Represents Years of Service Elaine Franklin, Chair McMullen County 10 Mary K. Edwards McMullen County 8 Walt Franklin McMullen County ISD 2 Maximo Quintanilla McMullen County 10 Karen Wheeler McMullen County ISD 8 Source: McMullen CAD, April 2005.
Mary K. Edwards was the county tax assessor collector when the 2003 Appraisal District Operations Survey information was collected and Walt Franklin is a McMullen County ISD board of trustee member.
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.
Board of Directors received a written survey about board activities. Two of the five board members responded. The survey was broken down into board policies and procedures, chief appraiser and staff, property appraisals, appraisal review boards, and budgeting and financial management. The board members responding only answered questions concerning board policies and procedures, for which they gave themselves high marks. The remaining 24 of the 40 questions were unanswered.
McMullen CAD is struggling to meet very basic criteria usually associated with operating a viable and effective appraisal district. The district is not complying with a number of Property Tax Code statutes and the board of directors seems to have a hands-off approach to oversight. Only two of the five board members responded to the Comptroller's survey soliciting the board's opinion on the board's effectiveness and the district's operations. Both members only filled out a portion of the survey, ignoring 24 of the 40 total questions. During the course of the site visit, the reviewer repeatedly asked the board chair why the district did not comply with portions of the Property Tax Code, and the only explanation she offered was that they were different in McMullen County.
McMullen CAD has not established an appraisal district office, has never had a audit of its finances, does not properly develop and publish its budget, has not appointed an agricultural appraisal advisory board to advice the chief appraiser, employs only a part time chief appraiser and does not evaluate the chief appraiser's performance, does not have a bank depository agreement and has county employees working for the appraisal district―one of which is also an elected official. Many of these activities or practices contradict some or all of sections 6.01, 6.05, 6.06, 6.062, 6.063, 6.09, and 6.12 of the Property Tax Code.
The chief appraiser is a part-time employee who works as a fee appraiser in another county and lives outside of McMullen County, working in the district four or five days a month. The chief appraiser negotiates a separate contract with the county appraisal district board once every four years to reappraise the whole county, which takes him four and a half months to do. State law requires a reappraisal every three years.
The County Treasurer works for the CAD as a part time employee, giving at least the appearance of a conflict of interest and possibly actually being a conflict of interest between his duties as County Treasurer and his duties as a CAD employee. The County Treasurer, rather than the chief appraiser, sets the budget for the appraisal district. The County Treasurer also approves many of the agriculture exemption forms, although he is neither a registered professional appraiser nor working towards an RPA designation. In other districts the chief appraiser is responsible for approving these exemptions.
The district does not have any procedures for appraising property, evaluating staff, running an office, determining agriculture exemptions or procedures to gather and evaluate sales, to name a few. McMullen CAD has been repeatedly cited for falling to develop and implement a comprehensive reappraisal plan, which is inexplicable seeing that it only takes four and a half months for the chief appraiser to appraise the whole county.
All district staff are part time employees, with four of the five staff being McMullen County employees, making it difficult for them at times to determine whether they are doing county business or county appraisal district business. Since the interests of the two organizations are not synonymous, this can place the part-time county employees in a position of choosing between the county and the CAD. And this is a problem because none of these employees has an appraisal background and McMullen CAD under appraised property in McMullen County ISD, resulting in the school district being designated as eligible. Even though the school district's funding was not immediately affected, the school district could lose a substantial amount of state funding if McMullen CAD under appraises property in the future. With so much at stake for the school district, McMullen CAD needs to decide how it will change to meet its uncertain future.
With the many challenges the appraisal district faces with coming into compliance with the law and managing an effective appraisal district, the CAD's board of directors and the community should consider consolidating with another appraisal district or outsourcing the appraisal functions to another district in order to assist the district in appraising property at market value. Potter-Randall CAD, for example, is a consolidated county appraisal district that serves both Potter and Randall counties. Many appraisal districts also outsource some appraisal functions. Hansford CAD, for example, in the Panhandle, outsources all of its minerals appraisals to Ochiltree CAD. CADs surrounding McMullen include Frio, Live Oak, La Salle, Atascosa and Duval.
There are a number of advantages and disadvantages to consolidation or outsourcing. The most notable disadvantage to consolidation would be moving county employees to full time on the county payroll.
Simply saying that the district will not consolidate, however, is not enough. If the board and the taxing units decide that is not in the best interests of their children to consolidate with another CAD, the board must be willing to take the steps necessary to rally together to improve the McMullen CAD for the taxpayers and the children of the community. The remainder of this report details a list of recommendations that must be addressed if the district is to remain a viable appraisal district and provide the services that the taxpayers, the taxing units, and ultimately, the children, deserve.
Establish a committee to examine all of the pros and cons of consolidating McMullen CAD with one of the surrounding CADs and put the final decision to a vote of the board.
The committee must be made up of a representative group of parents, community leaders, board members and taxpayers. Committee members must examine all of the opportunities, the advantages and disadvantages and the financial advantages and disadvantages for the school district and the county. The findings and recommendations contained in this report should be included in the discussions and solutions to the identified problems must be sought either through consolidation or through community action. The committee must document its findings and be willing to make recommendations based upon factual and accurate information.
If the district concludes it will not consolidate with another district, then the appraisal district needs to implement all the other recommendations in this report.
The McMullen CAD board of directors has not established an office for the appraisal district.
Section 6.05(a) of the Property Tax Code states that each appraisal district shall establish an appraisal district office. Although the district lists its physical address as 501 River Street in Tilden, Texas one will not find an appraisal district office at this location. 501 River Street is the location of the McMullen County Courthouse. A desktop computer with appraisal software is located in both the county treasurer's office and the county tax assessor-collector's office. Both offices are located within the courthouse.
Section 6.05 (b) provides that the board of directors may contract with another appraisal or tax unit to perform statutory duties. The board of directors does not contract with any entity to perform the duties of the appraisal office for the district. Appraisal records are kept in filing cabinets located in the county judge secretary's office. According to the county treasurer, property owners file applications for exemptions, special use evaluations, and other property tax related documents with either him or the tax assessor-collector. The county treasurer processes and enters all exemptions and special use evaluations into the appraisal system. He also updates ownership records based on deed transfers. The district's appraisal software vendor, Thos.Y. Pickett & Co., generates the district's appraisal rolls and the county tax assessor-collector maintains the supplemental rolls.
The chief appraiser does not maintain an office in McMullen County. He works from his fee appraisal office in Atascosa County. According to the chief appraiser, property owners with questions about appraisals contact him by telephone or set up appointments to meet him at the McMullen County courthouse. Board of directors and appraisal review board meetings are held in the room where the county commissioners meet.
The chief appraiser said he will maintain regular hours―initially one or two days a week or as needed―in the future. He also said someone will answer the phone during regular business hours and he will get access to the district's equipment and software. Typical government business hours are 8 am to 5 pm, Monday through Friday.
Develop and implement a plan to establish an appraisal district office in accordance with Section 6.05 of the Property Tax Code.
Financial audits have not been prepared in accordance with Section 6.063 of the Property Tax Code.
According to the chief appraiser and county treasurer, the financial records of the appraisal district are not being audited. No evidence was provided to indicate that a financial audit of the district has ever been performed. The reason given was a lack of understanding of the code.
Section 6.063 of the Property Tax Code states that at least once a year, the board of directors shall have a financial audit prepared by an independent certified public accountant (CPA) or CPA firm. Furthermore, copies of the audit report shall be delivered to the governing board of each taxing entity in the county.
The chairman of the board of directors said that the board will take immediate action on this item and engage an audit of the 2004 and subsequent fiscal years. The chief appraiser said the district will prepare an annual audit of the district's financial records in the future.
Implement procedures for engaging an annual audit of the district's financial records.
The district's budget is not prepared in accordance with Section 6.06 of the Property Tax Code.
According to the chief appraiser, he does not prepare the district's budget. The county treasurer prepares the budget and submits it to the board of directors for approval. The budget is presented in a regular meeting of the board. According to the county treasurer, copies of the proposed budget are not submitted to the taxing entities. The 2003 budget was approved by the board at its regular meeting on November 15, 2002. The 2004 budget was approved on November 17, 2003 and the 2005 budget was approved by the board at its August 26, 2004 meeting.
Section 6.06 of the tax code states that the chief appraiser shall prepare and deliver a proposed budget to the board of directors and each taxing entity before June 15. The code goes on to state that the board shall approve the budget before September 15.
According to the county treasurer, a budget hearing is not held nor is the budget published in a newspaper as required by Section 6.062 of the Property Tax Code. Both the chief appraiser and county treasurer cite a lack of understanding of this section of the tax code.
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.
Copies of the budgets for 2003, 2004 and 2005 were reviewed. None of the budgets contained detailed listings of proposed capital expenditures, such as equipment, or the required budget allocations to each taxing unit. The county tax assessor-collector does the calculations for the budget allocation for the taxing entities, but the allocations are not presented as a part of the budget. The budgets also failed to contain a listing of each proposed position showing salary and benefits. A summary of the 2003, 2004 and 2005 budgets is in Exhibit 5.
McMullen CAD Budgets for Fiscal Years 2003, 2004 and 2005
2003 2004 2005 Category Budget Percent of Total Budget Percent of Total Budget Percent of Total Chief Appraiser Reimbursement $4,800 3.55% $4,800 4.57% $4,800 4.58% Mineral Appraisal Fee 38,000 28.11% 39,500 37.63% 39,500 37.67% Office Expense & Reimbursement 14,400 10.65% 15,164 14.45% 8,710 8.31% Other Salary & Expense Reimbursement 39,000 28.84% 39,000 37.16% 45,840 43.72% Reappraisal Real Property 32,004 23.67% 0 0% 0 0% Software Fees 7,000 5.18% 6,500 6.19% 6,000 5.72% Total Expenses $135,204 100.00% $104,964 100.00% $104,850 100.00% Source: McMullen CAD, fiscal years 2003, 2004 and 2005 budgets.
The chief appraiser said he plans to prepare a detailed budget and publish it in at least one local newspaper in the adjoining counties of Live Oak or Atascosa in the future. He also said they will hold a public hearing in the future on the public before it is adopted.
The budgets summarized above do not give sufficient detail for a member of a taxing unit or a member of the public to understand how district funds are spent. Specifically, one cannot determine who is receiving a salary, what benefits are being paid to each person receiving a salary, and what equipment the district is proposing to purchase. The chief appraiser was not familiar enough with the budget to comment. The county treasurer stated that the county employees who perform part time duties for the district receive health insurance and retirement benefits. The district pays a pro rata portion of these costs. He further stated that the funds budgeted for equipment would be to replace a computer, if necessary. A computer in the county treasurer's office and one in the county tax assessor-collector's office each contain appraisal software.
Develop, publish, and adopt a budget in accordance with Section 6.06 of the Property Tax Code.
The Property Tax Code states that the chief appraiser shall prepare the district's budget and calculate the budget allocations for the taxing entities. These functions are currently being performed by an elected county official.
The board does not have a written process for hiring and evaluating chief appraisers, nor is there evidence of any informal review process for assessing chief appraiser performance. The district was unable to provide a written job description for the chief appraiser. According to the board chairman, she feels that the chief appraiser is doing a good job.
The current chief appraiser was hired by the board of directors in March 1996, prior to that he was employed by the district as a contract appraiser for real and personal property. He owns and operates a fee appraisal company in a neighboring county and spends an average of 4 to 5 days per month in McMullen County doing appraisal work for the CAD. During a reappraisal year he spends significantly more time in the county. The chief appraiser does not work under an employment contract.
In many ways, the chief appraiser continues to perform as a contractor for the district. He receives a $400 per month salary and $100 per month travel allowance. He receives no other benefits. In a reappraisal year, he receives more compensation because of the number of the appraisals he has to perform. According to the chief appraiser, he negotiates a fee with the board for work associated with reappraisals. 2003 was a reappraisal year for the district and the chief appraiser received $32,004 in additional compensation. While it is not uncommon for appraisal districts to contract for appraisal services, an opinion issued by the Texas Attorney General in 1983 (Op. Tex. Att'y Gen. No, JM-72) states that appraisal districts cannot contract for the duties of the chief appraiser from an independent contractor.
The chief appraiser said that the Board of Directors will develop a written job description for the chief appraiser in the future.
In the 2003 and 2004 Appraisal District Operations Report, McMullen CAD reported the lowest chief appraiser's salary in the state. The average total compensation reported for chief appraisers in 2003 was 52,088. It rose in 2004 to $53,488. The average salary of chief appraisers in counties with 10,000 parcels or less in 2003 was $27,890 and $29,790 in 2004. With an annual salary of $4,800 the chief appraiser in McMullen CAD is paid less than the district's part time support staff.
Section 6.05 of the Property Tax Code states that the chief appraiser is the chief administrator of the appraisal district. In McMullen CAD the chief appraiser's administrative duties are limited. According to the chief appraiser he represents the district at appraisal review board hearings, certifies appraised values to the taxing entities, and along with the board chairman, can sign contracts on behalf of the district. He does not prepare the district's budget or approve district expenditures. According to the chief appraiser he has not delegated these functions to others ― it's just the way it's always been done. According to the county treasurer, the chief appraiser does not have signature authority on the district's bank account. The county treasurer and county tax assessor-collector sign all district checks.
Section 6.05(h) of the tax code allows boards to prescribe what actions the chief appraiser has with respect to the financial and administrative duties of the district, but no evidence was presented to show that the board has developed any guidelines or responsibilities for the chief appraiser.
Develop a job description, and set of criteria, based on statutory responsibilities found in Section 6.05 of the Property Tax Code, for evaluating the chief appraiser's job performance and establish a competitive salary commensurate with the job.
According to Section 6.05 of the Property Tax Code, the chief appraiser is the chief administrator of the district. He can hire and terminate staff. He is responsible for preparing the district's budget and purchasing. The chief appraiser can also delegate authority to staff. The chief appraiser in McMullen CAD performs none of these functions.
The job description should address conflicts of interest and outside employment of the chief appraiser.
Under the current operation, the chief appraiser's primary role is that of a field appraiser. Most of the chief appraiser's responsibilities, as defined by the Property Tax Code, are being performed by part time or non-district employees. The county treasurer prepares the district's budget and the county tax assessor-collector, along with the county treasurer, approves district expenditures.
Failure to clearly define the role of the chief appraiser can create confusion and mistrust. Having non-district employees or elected officials performing the chief appraiser's duties violates the Property Tax Code.
McMullen CAD does not have a depository contract.
Section 6.09 of the Property Tax Code states that the board of directors shall designate a financial institution as the district's depository for a period of 2 years. According to the county treasurer, the appraisal district maintains one bank account with McMullen Bank, the only financial institution in the county. The board did not officially designate McMullen Bank as its depository and does not have a contract with the bank for banking services.
The chief appraiser said the district will establish a depository contract with a local bank in the future.
The district's funds are insured by the Federal Deposit Insurance Corporation (FDIC) for the maximum allowed under the law, currently $100,000. Should the district's funds ever exceed the amount insured by FDIC, its excess funds would be at risk because the bank has not pledged securities to cover them. This situation can be avoided by having a depository contract that requires the bank to pledge securities. The contract should also be used to negotiate interest rates.
Negotiate a written depository contract as required by Section 6.09 of the Property Tax Code.
The district does not have an agricultural appraisal advisory board.
Section 6.12 of the Property Tax Code states that the chief appraiser, with the board of directors' consent, shall appoint an agricultural advisory board. The board should meet at least 3 times a year. Its function is to advise the chief appraiser on the valuation and use of land designated for agricultural use.
The chief appraiser said that the district will appoint an agricultural appraisal advisory board in the future.
In the 2003 Property Value Study (PVS), the McMullen County Independent School District received an invalid finding due in part to its low agricultural use values. An agricultural advisory board would benefit the district by providing expertise on subjects such as typical cash leases and management costs. Having current data will improve the district's agricultural values and provide a better opportunity for the school district to receive a valid finding in the PVS.
Appoint an agricultural appraisal advisory board as required by Section 6.12 of the Property Tax Code.
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 rolls 2002, 2003, and 2004 tax years were completed according to law.
McMullen CAD does not have well documented policies and procedures to guide the day-to-day operations of the district in areas such as payroll processing, accounting, purchasing and the like.
Instead, a few long time employees of the district have a series of memos, notes or long-term memory to guide them through the day-to-day processes. Policies adopted by the board are recorded in board minutes, but it is unclear how certain policies are translated into practice in the district, nor is it clear that the chief appraiser or any other employee is responsible for monitoring day-to-day operations to insure that policy decisions of the board are carried out.
A policy tells a person, department, group of individuals what they must do, whereas as procedure enumerates how it can be accomplished.
Well-written and organized procedures:
- implement and assure compliance with board policies as well as documenting the intent of those policies;
- protect the institutional knowledge of an organization, so that as experienced employees leave, new employees have the benefit of the others' years of experience;
- provide the basis for training new employees; and
- offer a tool for evaluating employees based on their adherence to procedures.
In the absence of well-documented procedures and policies, the work of the appraisal district may come to an abrupt stop if key personnel leave a position as a result of sudden illness, death or other personal tragedies. Other examples abound in other organizations of whole departments without trained back-ups for critical positions like payroll, and of poor training techniques that show new employees how to perform a task, but not why.
The chief appraiser said the district will develop a written policies and procedures manual for district operations in the future.
To be effective, policy and procedure manuals are updated and kept current at all times. This means setting up a system for regular updates and distribution, as well as periodic reviews to ensure that all old policies are removed when no longer needed.
The Jefferson county appraisal district, recently reviewed by the comptroller's office, maintains a current and comprehensive policy and procedure manual detailing procedures for payroll, accounting, purchasing, budget, travel, bank reconciliations and similar procedures.
Develop a comprehensive written policy and procedures manual for district administrative operations.
Determining whether or not land qualifies for agricultural use is an appraisal issue. Only staff registered as appraisers with the Texas Board of Tax Professional Examiners (BTPE) should be making this decision. The chief appraiser is the only person at the district registered with BTPE as an appraiser. Therefore, all applications need to be reviewed by him.
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.
McMullen CAD contracts with Thos.Y. Pickett & Co., Inc. (TYP) for appraisal software. The software, when supplied with appraisal data, can generate values, appraisal cards, tax statements, and appraisal rolls. All of the appraisal data must be entered manually. None of the cost schedules or deprecation tables are maintained within the system. According to the county treasurer, TYP submits the district's appraisal rolls via electronic data submission to the Comptroller's office annually. TYP accesses the district's data via a telephone modem. No information was made available as to the appraisal system's security features.
The chief appraiser maintains appraisal data on his personal computer at his place of business. He developed the appraisal program using Microsoft Excel. By entering data such as square footage, cost per square foot and percent good the program produces an appraised value. It also generates an appraisal card and sketch of any improvements. The chief appraiser gives copies of these appraisal cards to the county treasurer, who in turn, enters the data into the TYP appraisal system. Copies of the appraisal cards are maintained in filing cabinets in the county judge secretary's office. The chief appraiser does not have access to the TYP appraisal system at his business office located in another county. He cannot generate an appraisal roll or summary totals from his appraisal program. Information from his computer must be entered into the district's appraisal system.
Both the TYP system and the appraisal program developed by the chief consider the individual characteristics of the subject property as required by Section 23.01 of the Property Tax Code. Neither system is integrated with a mapping system nor can either system produce a ratio study. The chief appraiser maintains a sales file in Excel that calculates a ratio between the sales price and the property's appraised value, but does not generate any of the other statistical data found in a typical ratio study, i.e., mean, weighted mean, and coefficient of dispersion.
Utilizing two separate appraisal programs is risky and susceptible to errors and omitting of property. No evidence was provided to show that a system of checks and balances exists between the TYP appraisal program and the appraisal data maintained at the chief appraiser's office. Without being able to generate summary totals from the chief appraiser's appraisal program one cannot determine that all of the appraisal data is being transferred into the TYP system.
Provide the chief appraiser with access to the TYP appraisal software and eliminate the dependence on separate appraisal programs.
McMullen CAD's maps do not comply with Comptroller Rule 9.3002.
Appraisal district maps are kept in the county tax assessor-collector's office. Maps of the county's abstracts are found in large abstract books. A single map exists for each abstract. The names of property owners within each abstract are listed on adjoining pages. Individual parcels are not mapped within the abstracts. Parcel or property identification numbers do not exist on any of the maps. If property sells or is split, the new ownership is reflected in the list of owners, but the location of the parcel(s) within the abstract are not identified on the map.
Lot and block maps exist for the towns of Tilden, Calliham, and rural subdivisions located in the county. These maps are copies of maps filed with the county commissioner's court over the years. McMullen CAD does not have a mapper and the maps are not updated to reflect ownership or property identification numbers.
Maps are an integral part of any appraisal process. The lack of current, up to date maps makes the appraisal process difficult and inefficient. Maps are critical to any reappraisal process. Not being to identify those properties or areas that need to be appraised violates Comptroller Rule 9.3002.
Develop and implement a plan to bring the district's maps into compliance with Comptroller Rule 9.3002.