Executive Summary
In July 2005, the Texas Comptroller of Public Accounts identified Montgomery Independent School District and Willis Independent School District, located in Montgomery County, as two of 34 Texas school districts meeting the criteria that initiate an Appraisal Standards Review (ASR) of the appraisal district that serves them. In March 2006, the Comptroller's Property Tax Division (PTD), with the assistance from contractors, began its review of the Montgomery County Appraisal District (Montgomery CAD).
School Districts, the Property Value Study and Appraisal Standards Reviews
Texas public education is funded by a combination of state and local funds. Local funding comes from property taxes assessed by a school district's board of trustees. State funding is based on the amount of money that can be raised locally on the total taxable property value within each school district. Each school district in the state is served by a county appraisal district charged with appraising property in the school district at market value. The chief appraiser of each appraisal district determines the property values used by the district to set tax rates, which allocates the tax burden among taxpayers.
The Texas Comptroller's Property Tax Division (PTD) annually conducts a Property Value Study (PVS) that assigns a value to all taxable property within each school district for state funding purposes. The PVS, an independent estimate mandated by the Legislature, is designed to ensure equitable school funding. The PVS ensures equity by detecting instances where school property values are inaccurate and adjusting property values to market value in the state's funding formula. The state's formula sends more money to those districts less able to raise money locally because of lower taxable property value.
The Comptroller's values do not directly affect local values or property taxes, which are set by local authorities. However, when local values are more than 5 percent below state values, the school district could receive fewer state dollars because the formulas will use state values to calculate funding. Through an appeals process, a district can contest the state values, but understanding the reasons for the differences in the valuations is critical for school districts and the appraisal districts that serve them.
In 2003, a new law recommended by the Comptroller's Property Tax Division Technical Advisory Committee granted a "grace period" for schools negatively impacted by PVS findings. The Comptroller does not believe schools should be punished for the actions or inaction of their appraisal districts. The "grace period" permits schools to receive full state funding while ASRs are performed by the Comptroller.
By law, to be eligible for this state funding "grace period," a school district must have an invalid local value in the current year, valid local values in the two preceding years, and an aggregate local value in the current year that is not less than 90 percent of the lower limit of the margin of error.
If the aggregate local value is less than 90 percent of state value, the school district is not eligible for a grace period and the state value will be used to determine financial aid.
Appraisal Standards Reviews
Appraisal standards reviews are conducted by the Comptroller's office when a school district is eligible for the "grace period." By conducting ASRs, the Comptroller's office helps school districts understand the reason for the invalid finding so they can work with the appraisal district to correct problems and determine accurate taxable values. ASRs identify problems and recommend changes in procedures or methods to improve appraisal accuracy and compliance with state law and appraisal standards.
An ASR examines and evaluates appraisal practices including planning, procedures and methodology and the application of and adherence to appraisal standards. The Texas Property Tax Code and Comptroller rules are the major criteria used to measure appraisal district performance.
The Texas Property Tax Code dictates certain appraisal procedures or standards such as the Uniform Standards of Professional Appraisal Practice, specifically Standard 6: Mass Appraisal. The International Association of Assessing Officer's (IAAO) Standards on Assessment Practice also is used as the professional and industry standard.
The two principal focuses of the ASR are to determine why the local value is deemed invalid and to recommend improvements in appraisal practices. Upon completion of the review process, the Comptroller issues a report of findings that includes commendations for exemplary appraisal practices and recommendations for change. The appraisal district is required by law to comply with the recommendations within one year of the release of the report.
By law, if the county appraisal district fails to comply with the recommendations in the report and the Comptroller finds the board of directors of the county appraisal district failed to take remedial action within a year from when the report was issued, the Comptroller is required to notify the judge of each district court in the county for which the county appraisal district is established. The district judge is required to appoint a board of conservators consisting of five members to implement the recommendations. The board of conservators shall exercise supervision and control over the operations of the county appraisal district until each school district is determined to have local a valid value in an annual PVS. The county appraisal district shall bear the costs related to the supervision and control of the county appraisal district by the board of conservators.
While the review team found several commendable practices implemented by dedicated and hard working district employees, Montgomery CAD is facing several challenges in achieving and maintaining consistent valid findings, including improving management practices and oversight.
Key Findings and Recommendations
- Continue to correct land tables, improve market analysis and boost property inspections to correct appraisal weaknesses identified in 2004. The CAD took a number of steps to improve appraisal practices after having two school districts identified as eligible in the 2004 Property Value Study (PVS). This initially resulted in all school districts achieving local value in the 2005 PVS. But, the preliminary 2006 PVS shows two school districts still receiving invalid local value at the time of this report, even after the school districts had protested the 2006 PVS findings. By continuing and expanding practices begun in 2005, the CAD should be able to maintain valid local value in future PVSs.
Commendable Practices
The review team identified some commendable practices in Montgomery CAD that other county appraisal districts may do well to review and implement where appropriate.
- Montgomery CAD maintains a geographic information system (GIS) that benefits the CAD, other governmental entities and the general public. Participation in the Arc User's Group has allowed Montgomery CAD to increase appraisal efficiency, 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.
- Montgomery CAD has developed procedures to provide high levels of public service to taxpayers. Because of its pride in good customer service, Montgomery CAD has developed procedures to provide a high level of public service to taxpayers. The CAD developed its own Web site, http://www.mcad-tx.org , which is informative and user-friendly. Taxpayers can view appraisal data, print applications and forms, view and print maps, view tax rates and get Internet links to other tax-related sites. Montgomery CAD also uses customer surveys to solicit comments from taxpayers on ways to improve customer service. Due to a high volume of customer service traffic, the CAD has five computer terminals for taxpayer use and three senior appraisers assigned to help taxpayers with questions.