Findings of the Property Value Study and Summary
Overview of Property Value Study
The annual PVS estimates the total taxable property value in each school district in Mitchell CAD. With a few notable exceptions, the law requires all CADs and PTAD to appraise property at market value. Market value, in essence, is the price a willing buyer would pay a willing seller for the property under normal conditions. Agricultural land and timberland, however, are appraised according to the productivity value of the land's category.
The CAD determines the local appraisal roll value and certifies it to each school district; these values become the districts' tax roll values. Each school district must submit an annual self-report of its property values to PTAD, which audits the reports for accuracy.
PTAD's estimate of the total taxable value in a school district, called the state value, is made by estimating market value or by accepting the local appraised value in each property category and then adding these category values for an overall school district value. PTAD then deducts the school district's self-reported, state-mandated homestead exemptions, disabled veterans exemptions, value limitations, reinvestment zones, freeport exemptions, the loss between market value and productivity value of qualified agricultural lands, the school tax ceiling for homeowners over age 65 or with a disability and other state-mandated exemptions.
PTAD issues a preliminary and a final PVS each year. School districts and CADs may protest the findings of the preliminary PVS through an administrative hearings process. This process requires the protester to file a written protest with supporting documentation within 40 days of the issuance of the preliminary PVS. PTAD may amend the findings of the preliminary PVS based on the submission of a written protest, a conference between PTAD and CAD representatives or a formal hearing. A hearings examiner appointed by the Comptroller's general counsel holds the formal hearing; this person is not a PTAD employee. A school district that disagrees with the hearing examiner's final decision may appeal it to Travis County district court.
When conducting the property value study, PTAD assigns properties to various categories, such as residential, commercial and rural property, so like properties can be studied together.
In general, a ratio indicates the percentage of market value, as determined by PTAD, at which a CAD appraises a property or group of properties. A ratio of 1.0 indicates appraisal at market value-the legal standard. Generally, appraisals with ratios that are close to the standard, for instance between 0.95 and 1.05, are considered reasonably accurate for a property group.
Eligible School Districts
The PVS identified Loraine ISD as an eligible school district when its local value fell outside of the confidence interval limit determined by the 2006 PVS. Three property categories were tested in Loraine ISD: Category A, Single-Family Residential; Category D Rural Real; and Category J, Utilities.
Category A, Single-Family Residential, represented 17 percent of the total test value and 14 percent of the school district's value. A review of the Category A sample ratios in the 2006 PVS indicates that the CAD appraised from 55 percent to 146 percent of market value, with a weighted mean ratio of 0.8990.
Category D, Rural Real, made up 64 percent of the total test value and 52 percent of the school district's value.
Rural property includes two subcategories: Subcategory D1, Qualifying Acres, which is primarily farm and ranch land that qualifies for the special productivity appraisal; and Subcategory D2, Non-Qualifying Acres and Rural Improvements, which are primarily rural homes and land that do not qualify for a special appraisal of open-land spaces such as farm, ranch or timberlands. The differences in value between qualified and non-qualified rural land are wide. Qualified land is appraised using a special statutory method to determine the land's productivity value based on the productivity value of farming; ranching operations and non-qualified property appraisal is based on what the land would sell for at market value.
Subcategory D1 made up 34 percent of the total test value and 28 percent of the school district's value. The category ratio of Qualified Acres in the school district was 0.8556. Within Subcategory D1 in the school district, irrigated and dry crops had ratios of 0.3439 and 1.1250, respectively, versus PTAD's unit value estimates in the 2006 PVS. The CAD also valued native pasture in the school district at 0.6243 versus PTAD's unit value estimate in the 2006 PVS.
Subcategory D2, Non-Qualified Acres, comprised 30 percent of the school district's test appraisal and 24 percent of the school district's total CAD appraisal. The CAD appraised Non-Qualified Acres and Rural Improvements from as low as 71 percent to a high of 154 percent of market value, with a weighted mean ratio of 1.0107.
Category J, Utilities, made up 19 percent of the total test appraisal and 24 percent of the school district's total appraisal. A review of the Category J sample ratios in the 2006 PVS indicates that the external appraiser's individual valuations ranged from as low as 35 percent to a high of 192 percent of market value, with a weighted mean ratio of 0.9803.
Mitchell CAD Summary
Mitchell CAD's overall median ratio was 0.97.
Category A, Single-Family Residential, sample ratios ranged from 0.44 to 1.46. The median ratio was 0.94.
Sample ratios from Non-Qualified Acres and Rural Improvements (Subcategory D2) ranged from 0.54 to 1.54. The median ratio was 1.00.
Category F1, Commercial Real, sample ratios ranged from 0.62 to 1.84. The median ratio was 0.95.
Category G, Oil, Gas and Minerals, sample ratios ranged from 0.55 to 1.50. The median ratio was 1.02.
Category J, Utilities, sample ratios ranged from 0.35 to 3.41. The median ratio was 1.00.
While these figures show the range of appraisal-sale ratios in Mitchell CAD, a measure of appraisal performance uniformity includes how many of these ratios were within 10 and 25 percent, respectively, of the median ratio. The median ratio is the ratio in the middle of all the other ratios when sorted by size. When the number of sample ratios is even, the median is the average of the two middle ratios.
These figures, in conjunction with the coefficients of dispersion (CODs) outlined below, measure the consistency of the CAD's property appraisals at the same percentage of market value, without regard to value. A low COD combined with high percentages indicates equitable appraisals, while a high COD paired with low percentages indicates inequitable appraisals.
The median ratio for Category A, Single-Family Residential, in Loraine ISD was 92 percent, with 48 percent of the ratios within 10 percent of the median and 87 percent within 25 percent of the median.
The median ratio for Subcategory D2, Non-Qualified Acres and Rural Improvements, in Loraine ISD was 100 percent, with 71 percent of the ratios within 10 percent of the median and 86 percent within 25 percent.
The median ratio for Category J, Utilities, in Loraine ISD was 100 percent, with 63 percent of the ratios within 10 percent of the median and 75 percent within 25 percent.
Coefficient of Dispersion
The COD, the primary measure of appraisal uniformity, measures the average percentage by which individual ratios vary from the median ratio. According to IAAO in Property Appraisal and Assessment Administration, a low COD indicates appraisals within a category of property are uniform and a high COD indicates inconsistent appraisal of property as a percentage of market value. A very low COD, however, could indicate sales chasing, which is the practice of using the sale of a property to trigger a change in appraised value of that property to (or near) the property's selling price. In contrast, the appraised value of unsold property is not changed. The practice of sales chasing may cause invalid findings in ratio studies like the Property Value Study. In addition, in the IAAO's Standard on Ratio Studies, Category A, Single-Family Residential, should generally be 15 or less, and for new and homogeneous areas, 10 or less. For Category C, Vacant Lots, the COD should be 20 or less, and for income-producing property, the COD should be 20 or less. For other real property and personal property, CODs should reflect the nature of the property, market conditions and the availability of reliable market indicators.
The 2006 COD for the categories tested in Mitchell CAD showed:
- Category A, Single-Family Residential, was 14.43;
- Subcategory D2, Non-Qualified Acres and Rural Improvements, was 11.89;
- Category F1, Commercial Real, was 13.49;
- Category G, Oil, Gas and Minerals, was 10.78; and
- Category J, Utilities, was 17.13.
The 2006 COD for the categories tested in Loraine ISD showed:
- Category A, Single-Family Residential, was 13.46;
- Subcategory D2, Non-Qualified Acres and Rural Improvements, was 10.57; and
- Category J, Utilities, was 22.55.
These numbers indicate relative uniformity of appraisal in these categories except for Category J, Utilities, in Loraine ISD.