Chapter 2
Findings of the Appraisal Standards Review
This chapter of the report addresses findings, commendations and recommendations from the appraisal standards review of Montgomery CAD in two sections:
- 2.1 Generally Accepted Appraisal Practices
- 2.2 Other Recommendations
2.2
Other Recommendations
During the course of the review process, the review team identified certain management and operational issues that may not be directly related to the appraisal process, but can have an indirect impact on the ability of the CAD to accurately and consistently carry out its mission of property appraisal. The CAD is not obligated to implement these recommendations as part of the ASR, but they are provided here for the CAD's consideration as additional ways to enhance its operational effectiveness and efficiency. CADs, as government entities, are required to comply with state statutes.
Governance and Management
The quality of the property tax system depends largely on an appraisal district's board of directors (board). The board should provide knowledge, judgment and expertise in establishing policies and procedures for the district's organization and operation.
Montgomery CAD's board consists of 6 members (Exhibit 7).
Exhibit 7
Montgomery CAD
Board of Directors Members
| Board Member | Entity Member Represents | Start Date | Occupation |
Elected Official (Yes or No) |
|---|---|---|---|---|
| John Wiesner, Chairman | Conroe ISD | January 1992 | Auto Dealership Owner | No |
| Ed Chance | Montgomery County | January 1998 | County Commissioner | Yes |
| Tom Cox | Conroe ISD | January 2004 | Home Builder | No |
| J.R. Moore, Jr. non-voting | Montgomery County Tax Office | January 1990 | County Tax Assessor-Collector | Yes |
| Biff Picone | Special Districts | January 2004 | Sales Manager | Yes |
| Mike Meador | Montgomery County | January 2006 | County Commissioner | Yes |
Source: Montgomery CAD, March 2006.
Five members are elected by the participating taxing entities of Montgomery County. The taxing entities nominate candidates and divide their votes among the nominees. The five individuals receiving the most votes are elected to the board. By statute, the county tax assessor-collector serves as a non-voting member. Board policy provides that utility special districts entitled to vote may nominate a candidate.
The board has the following primary responsibilities established by Tax Code:
- establish the appraisal district's appraisal office, Section 6.05;
- adopt the appraisal district's annual operating budget, Section 6.03;
- approve appraisal contracts, Section 6.05;
- hire a chief appraiser, Section 6.05;
- hire a taxpayer liaison officer (in counties with a population of more than 125,000), Section 6.052;
- appoint appraisal review board members, Section 6.41;
- set general policy on the appraisal district's operation, Section 6.05(h);
- contract for annual financial audit, Section 6.263; and
- designate the district depository, Section 6.09.
The nine-member appraisal review board appointed by the board has met the requirements for membership established by the Tax Code.
As required by the Tax Code, the board appoints a taxpayer liaison officer reach year to assist taxpayers. The liaison officer provides the board with monthly reports.
Audits of the Montgomery CAD's financial records are conducted in accordance with the Tax Code. No adverse findings were issued in the 2003 or 2004 audits. The 2005 audit has not been completed.
The board has established polices as required by Sec 6.04 of the Tax Code and annually evaluates the chief appraiser.
The Comptroller's office asked the board to complete a written survey about its activities. Three of the six board members responded. The survey is broken down into board policies and procedures; chief appraiser and staff; property appraisals; appraisal review boards; and budgeting and financial management. Board members who responded gave Montgomery CAD high marks generally agreeing or strongly agreeing in the affirmative to the questions.
One respondent indicated that prior to January 1, 2006, board members were not required to attend training, but Montgomery CAD's board policy was being amended to require training. The same board member disagreed that the board monitors the training of ARB members and indicated that he felt the chief appraiser should do this and report any noncompliance to the board. When asked if the board regularly solicits feedback from the public on controversial topics, one respondent strongly agreed, one disagreed, and one did not know, but indicated that during his 14-year tenure on the board no controversial topics have arisen. Two board members commented that the county's rapid growth was a continual challenge for Montgomery CAD.
FINDING
Montgomery CAD's budget presentation does not include benefits assigned to each position as required by Section 6.06(a) of the Tax Code.
Copies of the budgets for 2004, 2005 and 2006 were reviewed. The budgets partially comply with Section 6.06(a) of the Tax Code in that they list salaries and benefits attached to each position classification. For example, Exhibit 8 shows that the budget lists four division directors with a salary total of $227,000 and a benefits total of $83,394. The budget does not state the amount of salary and benefits for each individual position within the classification.
Exhibit 8
Montgomery CAD
2006 Operating Budget Salary and Benefit Schedule
| Positions | Classification | Salaries | Benefits |
|---|---|---|---|
| 1 | Chief Appraiser | $100,000 | $29,666 |
| 1 | Deputy Chief Appraiser | 85,000 | 26,381 |
| 1 | Administrative Assistant | 43,000 | 17,934 |
| 4 | Division Directors | 227,000 | 83,394 |
| 1 | Accountant | 42,000 | 17,753 |
| 2 | Secretaries | 43,000 | 28,106 |
| 2 | DP Operators | 69,750 | 32,934 |
| 3 | Supervisors | 145,450 | 59,495 |
| 6 | Senior Appraisers | 250,790 | 113,776 |
| 2 | Commercial/Industrial Appraisers | 65,800 | 34,134 |
| 11 | Field Appraisers | 313,800 | 180,013 |
| 3 | Personal Property Appraisers | 104,360 | 52,223 |
| 1 | Appraisal Specialist | 37,500 | 17,843 |
| 1 | Coordinator Research & Data | 50,500 | 19,287 |
| 14 | Appraisal Support Staff | 336,176 | 203,088 |
| 8 | GIS/Mapping | 241,620 | 120,115 |
| 5 | Property Transaction Clerks | 122,830 | 73,031 |
| 66 | SUB-TOTAL | $2,251,576 | $1,109,172 |
| New Employees (1 Land Appraiser, 1 Support Clerk) | 50,090 | 20,344 |
|---|---|---|
| Reserve for Overtime | 4,000 | 1,320 |
| Merit Increases (3%) | 67,800 | 17,424 |
| Benefit Increases for Increased Travel Allowance | 0 | 8,838 |
| TOTAL | $2,373,466 | $1,157,098 |
Source: Montgomery CAD, Approved Operating Budget for the year 2006.
Section 6.062 of the Tax Code requires the board to host a public hearing on the proposed budget and publish the hearing notice in a newspaper of general circulation in the county. Section 6.06(a) also requires the chief appraiser to prepare and deliver a proposed budget to the board and each taxing entity before June 15.
Section 6.06(a) of the Tax Code requires an appraisal district to list each proposed position with associated salary and benefits, each proposed capital expenditure and an estimate of the amount of the budget allocated to each taxing unit in each budget. The CAD's board must approve the budget before Sept. 15.
Although Montgomery CAD has not complied with the required formats for listing benefits information, the CAD has provided proper notice and hosted hearings required by the Tax Code. The budget was advertised properly and printed in The Courier newspaper. Montgomery CAD identified all capital expenditures during this time and, each budget contained budget allocations for each participating taxing unit.
Exhibit 9 presents Montgomery CAD's 2004-06 adopted budgets.
Exhibit 9
Montgomery CAD Adopted Budgets
2004 through 2006
| 2004 Budget | Percent | 2005 Budget | Percent | 2006 Budget | Percent | Percentage Increase (Decrease) 2004-2006 | |
|---|---|---|---|---|---|---|---|
| Salaries | $2,165,370 | 52.22% | $2,255,576 | 52.15% | $2,373,466 | 52.01% | 9.61% |
| Benefits | 900,060 | 21.71% | 1,030,340 | 23.82% | 1,157,098 | 25.35% | 28.56% |
| Contract Labor | 5,000 | .12% | 6,000 | .14% | 6,000 | .13% | 20.00% |
| Office Supplies | 16,500 | .40% | 16,500 | .38% | 16,500 | .36% | 0.00% |
| Postage | 55,000 | 1.33% | 57,500 | 1.33% | 68,500 | 1.50% | 24.55% |
| Forms | 29,700 | .72% | 32,200 | .74% | 32,800 | .72% | 10.44% |
| Books & Reports | 4,160 | .10% | 4,110 | .10% | 4,500 | .10% | 8.17% |
| Computer Supplies | 12,500 | .30% | 12,500 | .29% | 13,500 | .30% | 8.00% |
| Travel Allowance | 158,900 | 3.83% | 173,700 | 4.02% | 223,750 | 4.90% | 40.81% |
| Dues & Memberships | 5,370 | .13% | 7,035 | .16% | 7,235 | .16% | 34.73% |
| Bonds & Insurance | 40,300 | .97% | 44,000 | 1.02% | 44,000 | .96% | 9.18% |
| General Office | 3,500 | .08% | 3,500 | .08% | 3,500 | .08% | 0.00% |
| Utilities | 33,000 | .80% | 35,000 | .81% | 40,000 | .88% | 21.21% |
| Appraisal Review Board | 23,000 | .55% | 23,000 | 53% | 28,750 | .63% | 25.00% |
| Legal Notices | 3,000 | .07% | 3,000 | .07% | 3,000 | .07% | 0.00% |
| Education | 15,000 | .36% | 15,000 | .35% | 15,000 | .33% | 0.00% |
| Communication | 39,600 | .96% | 39,600 | .92% | 39,600 | .87% | 0.0% |
| Professional Services | 197,500 | 4.76% | 185,000 | 4.28% | 149,400 | 3.27% | (24.35%) |
| Computer Services | 94,815 | 2.29% | 87,015 | 2.01% | 88,215 | 1.93% | (6.96%) |
| Mapping Supplies | 8,000 | .19% | 8,000 | .18% | 8,000 | .18% | 0.00% |
| Appraisal Supplies | 9,500 | .23% | 9,500 | .22% | 9,500 | .21% | 0.00% |
| Equipment Maintenance | 11,960 | .29% | 12,410 | .29% | 9,960 | .22% | (16.72%) |
| Equipment Rental | 9,000 | .22% | 9,000 | .21% | 9,000 | .20% | 0.00% |
| Capital/Office Equipment | 20,000 | .48% | 15,000 | .35% | 15,000 | .33% | (25.00%) |
| Capital/Office Furniture | 500 | .01% | 500 | .01% | 500 | .01% | 0.00% |
| Principal-Long-Term Debt | 150,750 | 3.64% | 132,250 | 3.06% | 119,400 | 2.62% | (20.80%) |
| Interest-Long-Term Debt | 71,250 | 1.72% | 47,750 | 1.10% | 21,900 | .48% | (69.26%) |
| Building Maintenance | 21,000 | .51% | 21,000 | .49% | 21,000 | .46% | 0.00% |
| Custodial Services | 12,900 | .31% | 12,900 | .30% | 12,900 | .28% | 0.00% |
| Custodial Supplies | 3,000 | .07% | 3,000 | .07% | 3,000 | .07% | 0.00% |
| Grounds Maintenance | 9,900 | .24% | 9,900 | .23% | 7,900 | .17% | (20.20%) |
| Security | 1,000 | .02% | 1,000 | .02% | 1,000 | .02% | 0.00% |
| Reserve for Contingency | 15,300 | .37% | 12,500 | .29% | 10,000 | .22% | (34.64%) |
| Total | $4,146,335 | 100.00% | $4,325,286 | 100.00% | $4,563,874 | 100.00% | 10.07% |
| Allowance for Interest & Miscellaneous Income | 25,000 | .60% | 25,000 | .58% | 25,000 | .55% | 0.00% |
| Total Billable to Taxing Entities | $4,146,335 | 99.40% | $4,300,286 | 99.42% | $4,538,874 | 99.45% | 9.47% |
Source: Montgomery CAD, March 2006.
While the budgets summarized in Exhibits 8 and 9 give a great deal of information for a member of a taxing unit or of the public to understand how CAD funds are spent, the budget does not detail what benefits are associated with each individual position, which is a requirement of Section 6.06(a) of the Tax Code. With more than 70 percent of the budget allocated to salaries and benefits, the detail required by state law is needed to easily understand the allocation of all funds. For example, the budget does state salary and benefits amounts specific to the positions of chief appraiser, deputy chief appraiser and administrative assistant. It does not, however, break out the salary and benefits amounts specific to each of the four division director positions or each of the two secretary positions, etc.
Jefferson CAD's budget document, for example, complies with Tax Code 6.06(a). The budget lists all capital expenditures, such as software, computer equipment, furniture, proposed purchases and all employees' salaries and benefits for each proposed position. Jefferson CAD's budget provides enough details to allow members of the taxing units and the public to understand how the money in its budget is spent.
RECOMMENDATION 2
Develop a budget document in accordance with the Tax Code.
Resources and Management
In organizing and administering a county 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 maintaining policies and procedures for the effective operation of the appraisal district.
Each department of Montgomery CAD has written policies and procedures developed locally by administrators and staff. The manuals are updated annually or as needed.
Each staff member has a written job description and receives an annual performance evaluation.
Montgomery CAD staff as of March 29, 2006, is profiled in Exhibit 10.
Exhibit 10
Montgomery CAD Positions, Certifications, Years with Montgomery CAD and Salaries
| Employee Name |
BTPE Certification(s) |
Years with | Salary |
|---|---|---|---|
| Supervisor Personal Property | RPA | 14 | $49,500 |
| Senior Appraiser | RPA | 9 | $38,500 |
| Director of Appraisal Operation | RPA | 2 | $57,500 |
| Appraisal Support Specialist | n/a | 4 | $23,680 |
| Property Transaction Specialist | n/a | 1 | $20,600 |
| Senior Appraiser | RPA | 10 | $40,000 |
| Senior Appraiser | RPA Class III | 4 | $39,000 |
| ARB Coordinator | n/a | 17 | $30,750 |
| Data Entry Supervisor | n/a | 18 | $41,260 |
| Appraisal Support Specialist | n/a | 1 | $21,090 |
| Chief Appraiser | RPA, RTA | 25 | $103,000 |
| Accountant | n/a | 14 | $44,000 |
| Senior Appraiser | RPA | 12 | $42,750 |
| Deputy Chief Appraiser | RPA, RTA | 21 | $87,000 |
| Field Appraiser II | RPA Class III | 3 | $26,300 |
| Field Appraiser I | RPA Class II | 2 | $28,300 |
| Appraisal Specialist | n/a | 2 | $21,750 |
| Appraisal Support Supervisor | n/a | 21 | $38,500 |
| Field Appraiser II | RPA Class III | 3 | $27,300 |
| GIS Mapping Technician | n/a | 1 | $24,000 |
| Supervisor Commercial Dept | RPA | 8 | $47,250 |
| Field Appraiser II | RPA Class II | 2 | $31,000 |
| Senior Appraisal Support Specialist | n/a | 24 | $28,500 |
| Mapping Technician | n/a | 5 | $24,600 |
| Senior GIS Mapping Technician | n/a | 19 | $36,600 |
| Senior Appraiser | RPA | 16 | $41,710 |
| Senior Appraiser | RPA | 24 | $43,440 |
| GIS Mapping Technician | n/a | 1 month | $25,000 |
| Administration Secretary | n/a | 5 | $24,000 |
| Senior Appraiser | RPA | 18 | $40,500 |
| Appraisal Support Specialist | n/a | 4 | $21,750 |
| Appraisal Support Specialist | n/a | 3 | $23,680 |
| Senior Appraisal Support Specialist | n/a | 8 | $26,900 |
| Senior Property Trans Action Spec | n/a | 16 | $29,400 |
| Director Appraisal Support | RPA, RTA | 12 | $54,000 |
| Residential Supervisor | RPA | 1 | $53,000 |
| Director-Accounting & Adm. | n/a | 22 | $67,500 |
| Senior Appraisal Support Specialist | RPA Class II | 12 | $27,000 |
| Mapping Technician | n/a | 7 | $24,800 |
| Property Transaction Specialist | n/a | 20 | $27,600 |
| Appraiser | RPA Class III | 1 | $35,000 |
| Field Appraiser Trainee | RPA Class I | 1 | $26,000 |
| Receptionist | n/a | 10 | $26,500 |
| Appraiser II | RPA | 11 | $32,000 |
| Mapping Technician | n/a | 15 | $30,900 |
| Director of GIS | RPA | 24 | $56,500 |
| Mapping Technician | n/a | 5 | $24,100 |
| Supervisor Ag/Timber | RPA | 17 | $44,200 |
| Appraisal Support Specialist | n/a | 6 | $21,600 |
| Field Appraiser II | RPA | 12 | $31,100 |
| Chief Appraiser's Assistant | n/a | 21 | $45,100 |
| ADP Operator | n/a | 17 | $30,500 |
| Appraisal Support Specialist | n/a | 1 month | $20,090 |
| Appraisal Specialist | RPA | 1 | $39,000 |
| Technical Assistance | RPA | 20 | $52,000 |
| Senior Appraiser | RPA | 2 months | $34,500 |
| Appraiser II | RPA Class III | 1 | $38,000 |
| Property Transaction Specialist | n/a | 8 | $26,600 |
| GIS Technician | n/a | 10 | $26,300 |
| Appraisal Support Specialist | n/a | 1 month | $24,000 |
| Appraiser II | RPA Class III | 6 | $27,500 |
| Mapping Technician | n/a | 9 | $26,300 |
| Senior Appraisal Support Specialist | n/a | 9 | $24,730 |
| Field Appraiser Trainee | RPA Class II | 2 | $25,500 |
| Field Appraiser Trainee | RPA Class I | 1 month | $23,500 |
Source: Montgomery CAD, March 2006.
District employees who conduct appraisals must be registered professional appraisers (RPAs) or be working toward RPA certification; the latter must be certified within five years of their hire dates. Interim certifications include Class II and Class III. In addition, RPAs must recertify every five years to remain registered. All Montgomery CAD appraisers are properly registered.
FINDING
Montgomery CAD maintains comprehensive locally developed polices and procedures for effective district operations, personnel management, appraisal practices and mapping.
The Montgomery Central Appraisal District Personnel Policy Manual was approved by the board in August 1994 and last amended in June 2005. The manual contains Montgomery CAD's mission statement, which provides a work environment that encourages personal growth, innovation and strives to keep the public's trust and confidence by providing quality service with a professional attitude. Employment policies on equal opportunity and affirmative action,
nepotism, Immigration Reform Control Act, Texas New Hire Program and annual performance appraisal are discussed. The manual addresses Montgomery CAD's compensation plan, employee benefits (including the Family Medical Leave Act), conditions of employment, standard work hours (including methods of calculating overtime and compensatory time), health and safety procedures, conduct and discipline policy (including ethics and grievance procedures), harassment policy, administrative policies, substance abuse policies, policies regarding personnel records and a policy on suspected misconduct and dishonesty (including fraud). Employees acknowledge receipt by the manual by signing an acknowledgement form, which is placed in each employee's personnel file.
The Montgomery Central Appraisal District Residential Property and Land Guidelines is updated annually and contains the current year's work plan. The manual contains procedures for staff conduct and field protocol when interacting with taxpayers. It explains the concept of mass appraisal, defines the three approaches to value and outlines field review procedures (including basic measuring procedures). Discussions on how to select comparable sales, calculating depreciation, estimating stages of completion for improved properties, land-valuation techniques and defining neighborhoods are presented. The manual also contains a classification guide containing local photographs and descriptions of characteristics common to each class of residential property appraised by Montgomery CAD. The guide promotes consistency and uniformity in how staff members classify and appraise homes. Appraisal review board procedures, current cost schedules and land tables, depreciation tables and a glossary of terms are also included in the manual. The manual was updated in December 2005.
The Montgomery Central Appraisal District Commercial Manual contains an overview of the commercial and industrial appraisal process. It describes local procedures to be used in the field for discovering and inspecting property. The manual contains procedures for entering appraisal data gathered in the field into Montgomery CAD's automated appraisal system. Commercial construction codes and use codes are explained, and a classification guide with photographs of commercial buildings is included to promote consistency and uniformity. The manual contains building cost and depreciation tables for using the cost approach to value. Guidelines for using the income approach to value are provided with examples of calculations for multifamily, office, retail and industrial/warehouse categories. The manual was updated in December 2005.
The Montgomery Central Appraisal District Personal Property Appraisal Manual contains an introduction to personal property appraisals and a USPAP summary, including the statutory requirements for appraising and rendering business personal property. The manual includes alphabetic and numeric lists of standard industrial codes (SIC) used in the appraisal process. It includes procedures for the equal and uniform appraisal of business inventory, including inventory accounting methodology and guidelines. Locally developed procedures for discovery, field audits and inspections, conduct and appraiser training are included in the manual. Procedures for appraising unique personal property such as aircraft, water systems, leased equipment and auto dealer special inventory are explained. The manual contains procedures for processing renditions and contains copies of all personal property related forms used by Montgomery CAD. Current depreciation and cost schedules are also included in the manual. The manual was updated in December 2005.
The Montgomery Central Appraisal District Property Transaction/Geographic Information Systems Division Procedures Manual contains job descriptions of department staff and workflow charts. The manual contains Montgomery CAD's policy on parcel splits and combinations, procedures for correcting clerical errors and guidelines for tax prorations. Procedures for setting up new subdivisions recorded with the county clerk are described. Property transaction staff creates the accounts and GIS staff creates the map coverage. The manual contains procedures for processing deeds and data entry. Procedures for updating maps are included in the manual. A description of Montgomery CAD's GIS system is presented, including guidelines for data entry, backup procedures, a description of map layers and database design and procedures for data quality control. The manual was updated in December 2005.
Montgomery CAD's appraisal support/public assistance department has developed written procedures for the following activities:
- changing ownership and mailing addresses;
- researching returned mail;
- processing residential exemptions;
- processing over 65 and disability deferrals;
- imaging (scanning documents);
- checking appraisers' work;
- searching mobile home titles;
- CAMA data entry;
- prorating exemptions; and
- updating cap year basis.
Montgomery CAD also has written guidelines, updated in December 2005 for qualifying and valuing land devoted to agricultural, wildlife and timber use.
The statutory responsibilities of an appraisal district are varied. Montgomery CAD's policies and procedures manuals identify the day-to-day procedures used by the CAD to meet its statutory obligations, as well as the staff responsible for achieving these tasks.
COMMENDATION
Montgomery CAD maintains excellent locally-developed polices and procedures for effective operation of the district.
Information Processing and Data Collection
Computers have become a necessity for all appraisal districts. The use of computers allows an appraisal district to amass large amounts of data; perform complex tasks that otherwise would take hundreds of staff hours to perform manually; and more accurately analyze trend data to ensure accurate valuation of similar properties.
Technology infrastructure is the underlying system of cabling, phone lines, hubs, switches, routers and other devices that connect the various parts of an organization through a wide area network (WAN) and through a series of local area networks (LANs). Maintaining a strong infrastructure and integrating the various systems used by an appraisal district is critical to increasing staff productivity, minimizing costly data errors and improving customer service to users, community members and the taxing units that depend on the appraisal district for critical information.
Technology is a critical part of managing large amounts of data effectively and appraisal districts use appraisal systems and mapping or geographic information systems to improve appraisal accuracy and uniformity.
FINDING
Montgomery CAD implemented a highly-sophisticated information system for appraising property that exceeds IAAO, Tax Code and USPAP requirements to address problems with obtaining some appraisal information and to replace an aging appraisal system no longer supported by the software vendor.
Montgomery CAD experienced significant growth in the areas surrounding Lake Conroe, specifically Montgomery and Willis ISDs. The information gathering process for sales information on properties in these areas was not effective. Therefore, information obtained through ratio studies performed by the CAD was inadequate. The CAD changed some of its information gathering practices and literally went door-to-door in an effort to procure correct information. This effort resulted in all ISDs remaining within the confidence interval in the 2005 PVS.
Exhibit 11 presents a list of appraisal and administrative software used in Montgomery CAD.
Exhibit 11
Montgomery CAD
Appraisal and Administrative Software
| Name of Software |
Standalone or Integrated |
When Installed | Last Upgraded | Planned Upgrade |
|---|---|---|---|---|
| Orion | Integrated | February 2004 | March 2006 | As released |
| ArcGIS | Integrated | January 1990 | September 2005 | As released |
| Peachtree | Standalone | January 1987 | January 2006 | January 2007 |
| Symantec | Integrated | January 2005 | March 2006 | As released |
| Microsoft Office | Standalone | 1990 | 2003 | As needed |
Source: Montgomery CAD, March 2006.
In 2004, the software vendor used by MCAD came out with new appraisal software. The vendor told their existing customers that support for the older system would be phased out. In an effort to keep up with technological changes, Montgomery CAD purchased the software in 2004.
Montgomery CAD was one of the first appraisal districts to adopt and implement this new software. The CAD also installed new hardware at the same time. The CAD and the vendor set a higher, ambitious and short complementation timeline, which proved difficult to maintain. Training resources were limited with most training essentially on-the-job, hence staff and management were learning the systems as they entered live data. The implementation and conversion were more complex than anticipated. These difficulties diminished staff productivity and delayed appraisals and information getting into the system. Though staff worked between 14 to 16 hours per day, according to district management, to enter information into the new system, the CAD ran out of time and was unable to verify all of the information for correctness. While converting to the new system, CAD management had to move back and forth between the old system and the new system, running ratio studies off of the old system.
This combination of being an early adopter of the software, installing new hardware, accelerating the installation schedule and the limited training from the vendor contributed to the problems Montgomery CAD had with the conversion. Montgomery CAD strongly believes that the problems implementing the new system were largely the cause of Montgomery and Willis ISDs receiving invalid findings in the 2004 PVS.
The software allows appraisers to access all the data needed in order to analyze sales and make comparisons to other, similar property. A comparable sales module allows appraisers and the appraisal review board to view data and photos of sold properties, comparing them to a similar property that has not sold. It allows an appraiser to make an accurate appraisal of each property by having all of the required data available. Building cost and land schedules, classification codes, sales information and other appraisal data are stored electronically. By entering data in the required fields, appraisal values are generated on demand. The software also has an edits program that will generate reports used for checking appraisal accuracy.
It allows Montgomery CAD to run ratio studies on sold properties in order to update the appraisal schedules. The CAD also uses it to record ownership, exemptions and values. The automated system allows Montgomery CAD to successfully participate in the Comptroller's electronic appraisal roll submission (EARS) program, reducing dependence on paper reports.
The CAD can use the software to upload appraisal data from hand-held computers, but Montgomery CAD does not currently use this feature. Montgomery CAD uses the software's imaging module to display photos of properties taken in the field with digital cameras. Imaging assists the appraisal district in the reappraisal process by reflecting improvements that existed at the last inspection of the property. Photos are also helpful during the appeals process. The software system can assess appraisal trends through time because it retains multiple years of data.
The software can generate appraisal notices and has a detailed system for tracking taxpayer appeals. It can generate logs and reports that show which accounts are under appeal, when and if the appeal was resolved, values before and after the appeal and the amount of change in value. Knowing the value under protest is critical during the appraisal roll certification process.
Data security on the software system is maintained by unique user password protection. System data is stored on a network server. Data integrity is maintained by a firewall and virus protection.
The software is integrated with Montgomery CAD's GIS system. From the software, a user can locate parcels on maps, view streets, rivers, jurisdictional boundary lines and other topographical data that affect appraisals. This feature is useful for identifying where sales are occurring. Identifying market areas is critical in the reappraisal process.
Section 23.01(b) of the Tax Code, IAAO Standard on Mass Appraisal of Real Property, and USPAP Standard 6 state all appraisals must consider the individual characteristics of the subject property.
IAAO's Standard on Automated Valuation Models states mass appraisal procedures used by valuation models must produce market values and the choice of appraisal software is very important to the process.
COMMENDATION
Montgomery CAD has an automated appraisal system that exceeds industry and state requirements.
FINDING
To increase appraisal efficiency, Montgomery CAD maintains a geographic information system (GIS) that benefits the CAD, other governmental entities and the general public.
While not in response to any prior problems, Montgomery CAD proactively participates in an AU's group that shares data. Users can access base digital maps. According to the chief appraiser, a base digital map is defined as parcels, aerial photos and street centerlines.
Montgomery CAD maintains the parcel layer and the Montgomery County Emergency Communications District (911) maintains the street centerline layer. The user's group shares the cost with the Houston-Galveston Council of Governments to acquire aerial photography of the county. Montgomery CAD received aerial photos in 1995, 1999, 2002 and 2004. Its share of the cost for aerial photos has averaged about $5,000 per project.
Data is shared among the users through an FTP site provided by Montgomery County. Montgomery County, Elections Central, the city of Conroe and Woodlands Community Association have GIS systems and participate in the Arc User's Group.
According to Montgomery CAD's GIS director, school districts have requested assistance in developing bus routes and Montgomery CAD is researching ways to use the GIS to provide help in this endeavor.
Participation in the user's group has allowed Montgomery CAD to maximize the use of its automated mapping system and minimize costs associated with aerial photography.
IAAO's Assessment Practices: Self-Evaluation Guide states as a collaborative project, a GIS allows more users access to more timely data and facilitates better decision-making and more cost-effective operations and allocations of resources.
COMMENDATION
Montgomery CAD maintains a geographic information system (GIS) that benefits the CAD, other governmental entities, and the general public.
Assessment Administration
Appraisal districts have three responsibilities: property discovery, property listing and property appraisal. Although much attention is placed on the appraisal process, discovery and listing are equally important.
Another important appraisal district responsibility is the administration of exemptions. An exemption is an exclusion of all or part of a property's value from taxation. Texas law grants a number of total and partial exemptions. Between January and May, the chief appraiser decides which taxpayers and which properties will receive exemptions.
The chief appraiser is legally responsible for preparing the appraisal roll within a statutory time frame. The chief appraiser certified Montgomery CAD's 2003 appraisal rolls on July 25, 2003, the 2004 rolls on July 27, 2004, and the 2005 appraisal rolls on July 25, 2005.
Section 5.07(a), Tax Code, requires the Comptroller to prescribe the contents of all forms necessary for the administration of the property tax system in the state. Section 11.43(f) requires the Comptroller to prescribe exemption applications, though not by rule. The contents of the forms must be uniform but the Comptroller may prescribe or approve substitute forms. Appraisal districts must also file various reports to the taxing units and the state and comply with many other laws, rules and regulations. Additionally, the Comptroller is required by Section 5.07, Tax Code, to prescribe a uniform record system to be used in submitting data for the school district and appraisal district annual studies required by law.
All forms and applications used by Montgomery CAD comply with the Tax Code and Comptroller rules. A link to the Comptroller's Web site ensures that Montgomery CAD is using the most current form or application.
Montgomery CAD filed a records management policy and records control schedule with the Texas State Library in December 1990, in accordance with the Local Government Code. The CAD amended the records control schedule in December 1998.
FINDING
Because of its pride in good customer service, Montgomery CAD has developed procedures to provide excellent public service to taxpayers.
Montgomery CAD serves a large, urban county and gets a continuous amount of day traffic in its customer service area. Property owners routinely stop by to discuss issues concerning property valuation, changes to their property, equity issues and other property related information. Montgomery CAD's public information area has five computer terminals for public access. Taxpayers can access appraisal records and print maps. Three senior appraisers are stationed in the public information area to assist taxpayers with issues concerning property appraisal and valuation. The review team observed a constant stream of property owners requesting to speak with an appraiser during the visit in July 2005, and the three appraisers are routinely kept very busy addressing customer concerns.
Since appraisal notices are typically mailed out each year in May, many CADs do not have a lot of customer requests concerning appraisals in July. Because of its size and large urban area, Montgomery CAD is one of the exceptions. By assigning these experienced appraisers to the customer service area, customers can get questions about properties answered immediately and can avoid having to set appointments with a field appraisers. Thus, field appraisers can continue work in the field and return to the office only as required for the appraisal process.
Montgomery CAD has developed a Web site, www.mcad-tx.org, which is very informative and user-friendly. Taxpayers can view individual appraisal records by searching by name, situs address or account number. They can download and print all tax forms and applications and print property maps. The Web site also contains information about tax exemptions, the appraisal process and how the appeals process works. The Web site contains links to other sites of interest, such as the Comptroller of Public Accounts, Montgomery County and the county's school districts. According to the chief appraiser, the Web site is updated daily.
Montgomery CAD's appraisal support/public assistance department uses electronic versions of all forms and applications. The electronic system automatically enters taxpayer information such as name, address and property legal description from information found on the taxpayer's appraisal record. Taxpayers use an electronic signature pad to verify and attest to applications. This system reduces paperwork and the amount of time needed to complete forms and applications.
In 1989, Montgomery CAD developed a customer survey for feedback on appraisal district performance. Each visitor to Montgomery CAD is encouraged to complete the Property Owner's Survey and return the survey to the CAD's taxpayer liaison officer. The liaison officer makes monthly reports to the board. Taxpayers are asked to comment on the courtesy and professionalism of Montgomery CAD staff. The survey also requests suggestions for improving customer service. Responses are reviewed by Montgomery CAD administration.
Appraisal districts are political subdivisions funded by taxpayers. As public servants, Montgomery CAD employees are expected to provide high levels of public service to their clients-the taxpayers of Montgomery County. Montgomery CAD has demonstrated strong commitment to public service.
COMMENDATION
Montgomery CAD has developed procedures to provide excellent public service to taxpayers.
FINDING
Montgomery CAD's current contract with P&A for professional appraisal services does not reference or define due dates for deliverables as recommended by IAAO Standard on Contracting for Assessment Services.
On October 20, 2005, the board entered into a two-year contract with P&A for appraisal services. The contract covers services for tax years 2006 and 2007.
P&A is to provide appraisals on mineral, utility, industrial and associated personal property in the county. The contract contains lists of specific properties to be appraised. In addition to appraisals, P&A will present testimony to the appraisal review board. P&A will also provide professional services should an ARB order be appealed, at an hourly rate of $93.75, not to exceed $750 per day. The board agreed to pay P&A $75,900 in 2006 and $80,500 in 2007 for these services. The contract calls for quarterly payments.
The chief appraiser indicated that he is responsible for monitoring the contract. According to the chief appraiser, Montgomery CAD corresponds with P&A throughout the year to determine the firm's progress in completing its appraisals. Written correspondence between Montgomery CAD and P&A shows confirmation of dates for providing appraisals. The chief appraiser indicated that P&A has complied with requests for submitting appraisal data in a timely manner.
The chief appraiser further indicated that Montgomery CAD has several contract review committees. Each committee always includes the chief appraiser, deputy chief appraiser and the finance director. Each proposed contract is reviewed by Montgomery CAD's attorney and by members of the MCAD Board of Directors before execution. The district's staff has the expertise to monitor appraisal vendors.
Exhibit 12 presents a summary of professional services contracts.
Exhibit 12
Montgomery CAD
Professional Service Contracts
| Contract |
In Writing (Yes or No) |
Key Terms and Conditions | 2003 Budget | 2003 Actual | 2004 Budget | 2004 Actual | 2004 Budget | 4004 Actual |
|---|---|---|---|---|---|---|---|---|
| Pritchard & Abbott, Inc. | Yes | Appraisal Services | $43,450 | $43,260 | $66,000 | $65,000 | $71,500 | $71,500 |
| The Software Group | Yes | Appraisal Software & Support | $54,515 | $54,512 | $54,515 | $54,512 | $54,515 | $54,512 |
| ESRI | Yes | Mapping Software & Support | $9,900 | $10,700 | $10,700 | $10,700 | $10,700 | $12,338 |
Source: Montgomery CAD, March 2006.
Exhibit 13 shows the agreed upon dates for submitting appraisal information for the 2004 - 2006 tax years.
Exhibit 13
Montgomery CAD
P&A Data Submission Dates
| Category | 2004 Values | 2005 Values | 2006 Values |
|---|---|---|---|
| Minerals | April 9, 2004 | April 20, 2005 | April 19, 2006 |
| Utilities | May 3, 2004 | May 23, 2005 | May 23, 2006 |
| Industrial | May 3, 2004 | May 23, 2005 | May 23, 2006 |
| Personal | May 3, 2004 | May 23, 2005 | May 23, 2006 |
Source: Montgomery CAD, March 2006.
Montgomery CAD benefits from monitoring P&A's progress, but lacks dates for submitting appraisals in its contract, which may make enforcing the contract problematic in the event of a dispute. By revising the contract to include dates tied to deliverables, the CAD will clearly define its needs and protect both parties by detailing rights and responsibilities.
In order to prepare its appraisal roll each year, the CAD must have all of the appraisal information complete and in the appraisal district system before the appraisal notices are printed. Section 25.19 of the Tax Code states that appraisal notices will be printed and mailed in May of each year. Without dates for specific deliverables and identifying which properties are to be appraised, the CAD may have difficulty enforcing the contract.
IAAO Standard on Contracting for Assessment Services recommends contracts have specific provisions, including the timeframes when services or goods will be delivered. The IAAO standard for monitoring contract performance recommends the tax appraiser to monitor the provisions in the contract. IAAO's standard also recommends establishing project review committees for projects affecting several departments or that have multiple objectives. A project review committee can provide the CAD with an effective mechanism for coordination, monitoring and review. Section 5.5 states that contract monitors are generally hired to review the services and products provided under the contract (the monitor may also be an independent third party). An effective monitor must be thoroughly familiar with the request for proposal (RFP) and successful bid, and, in fact, may also have served as a consultant in development of the RFP or selection of the successful bidder. The contract monitor must stay in close contact with the project and review major tasks in a timely manner.
RECOMMENDATION 3
Revise the contract for professional appraisal services to include dates for deliverables.
FINDING
Montgomery CAD has not developed a comprehensive disaster recovery plan.
Montgomery CAD developed an emergency notification plan for implementation in the event of a disaster. The emergency notification plan was developed as a result of Hurricane Rita and provides phone lists for department directors to use in contacting staff.
At the same time, Montgomery CAD developed procedures for protecting system data in anticipation of a prolonged power outage. The procedures involve backing up system data and personal computers, placing backup tapes in Montgomery CAD's fireproof vault and keeping backup tapes offsite. The offsite locations are not identified, but staff was instructed to take a backup copy home and bring it back upon return to work. The chief appraiser indicated that Montgomery CAD was exploring the feasibility of locating mirror servers in an underground bomb proof offsite location-a former bomb shelter currently being used by several other businesses and governmental agencies in Montgomery County to house their backup systems.
While the CAD regularly performs backups and has developed a phone call list, the loss of the appraisal system and hardcopy records in a disaster could result in confusion for taxpayer and taxing units and make it difficult, if not impossible, for the CAD to perform its responsibilities, which would jeopardize the values used to set tax rates. By developing an effective disaster recovery plan, Montgomery CAD will ensure business continuity for the CAD, taxpayers and the taxing units.
An effective disaster recovery plan addresses:
- immediate response;
- incident control/evaluation;
- notifications;
- environmental restoration; and
- resumption of critical business function.
Prudent appraisal districts have a plan to recover data and continue appraisal district operations with minimal interruptions in disaster situations. Key items in the plan include instructions for alternative office locations and communications, and recreating appraisal and mapping systems. With an effective disaster recovery plan, the CAD will ensure business continuity for the CAD, taxpayers and the taxing units.
Exhibit 14 lists some of the key elements of an effective disaster recovery plan.
Exhibit 14
Key Elements of a Disaster Recovery Plan
| Step | Detail |
|---|---|
| Build a disaster recovery team | Identify a disaster recovery team that includes key policy makers, building management, end-users, key outside contractors and technical staff. |
| Obtain and/or approximate key information |
Develop an exhaustive list of critical activities performed within the district. Develop an estimate of the minimum space and equipment necessary for restoring essential operations. Develop a timeframe for starting initial operations after a security incident. Develop a list of key personnel and their responsibilities. |
| Perform and/or delegate key duties |
Develop an inventory of all computer technology assets, including data, software, hardware, documentation and supplies. Set up a reciprocal agreement with comparable organizations to share each other's equipment or lease backup equipment to allow the CAD to operate critical functions in the event of a disaster. Make plans to procure hardware, software and other equipment as necessary to ensure the CAD can resume critical operations to soon as possible. Establish procedures for obtaining off-site backup records. Locate support resources the CAD needs, such as equipment repair, trucking and cleaning companies. Arrange with vendor to provide priority delivery for emergency orders. Identify data recovery specialists and establish emergency agreements. |
| Specify details within the plan |
Identify individual roles and responsibilities by name and job title so that everyone knows exactly what they need to do. Define actions to be taken in advance of an occurrence or undesirable event. Define necessary actions at the onset of an undesirable event to limit damage, loss and compromised data integrity. Identify actions to betaken to re-establish normal operations. |
| Test the plan |
Test the plan frequently and completely. Analyze the results to improve the plan and identify further needs. |
| Deal with damage appropriately |
If a disaster actually occurs, document all costs and videotape the damage. Be prepared to overcome downtime on your own; insurance settlements can take time to resolve. |
| Give consideration to other significant issues |
Don't make a plan unnecessarily complicated. Make one individual responsible for maintaining the plan, but have it structured so that others are authorized and prepared to implement if it is needed. Update the plan regularly and whenever system changes occur. |
Source: Adapted from National Center for Education Statistics, "Safeguarding Your Technology."
RECOMMENDATION 4
Develop and test a disaster recovery plan.