Chapter 2:
Findings of the Appraisal Standards Review
This chapter of the report addresses findings, commendations and recommendations from the appraisal standards review of Morris CAD in two sections:
2.1 Generally Accepted Appraisal Practices
2.2 Other Recommendations
2.1
Generally Accepted Appraisal Practices
Three general appraisal methods or approaches – cost, income and market – must be considered in determining the market value of property. The appraiser must use the method most appropriate to a particular property.
Additional information about the approaches to determining or appraising value may be found in appraisal textbooks and IAAO Technical Standards. Appraisers usually determine the value of producing mineral deposits, such as oil, gas and coal, and the value of many utility and commercial properties by using the income approach to value. Most appraisal districts contract with consultants to appraise mineral and utility properties. The chief appraiser can provide information that helps the contractor decide the proper method to use to appraise mineral and utility properties.
FINDING
Morris CAD does not have local schedules for the appraisal of personal property as recommended by IAAO's Standard on Valuation of Personal Property.
The IAAO Standard on Valuation of Personal Property provides recommendations for defining, classifying, discovering, reporting, verifying and appraising personal property for ad valorem tax purposes. This standard also requires that an appraiser establish an audit program to verify that it reports and gives accurate information on all personal property.
The chief appraiser indicated that the CAD has not developed local schedules or descriptions for personal property, but has used Comptroller publications as a resource. According to the chief appraiser, however, the CAD is planning to develop a local personal property manual and schedule. The chief appraiser stated that the CAD generally considers the rendered values and historical information on personal property accounts. The Comptroller's Field Appraiser's Guide is three years out of date, is no longer in publication and was never intended for use by CADs as a standalone manual. The guide is useful only as a tool that may help a CAD establish local schedules and appraisal procedures.
Continuing reliance on the Comptroller's Field Appraiser's Guide will preclude the appraisal district from creating local schedules, inspecting property and otherwise appraising personal property according to local market conditions.
The CAD provided a 2006 USPAP Mass Appraisal Report that outlines how it performs its personal property appraisals. Additionally, the CAD has developed a Personal Property Manual that includes procedures for classification, appraisal procedures, commercial personal property, pricing and determining replacement cost new. This manual contains pricing schedules and descriptions from the Comptroller's outdated Field Appraiser's Guide. As another resource for staff, the chief appraiser provided a document titled Morris CAD Business Personal Property Appraiser Duties for 2006. This document briefly outlines the actual procedures and processes the CAD follows during the appraisal year, starting in January and continuing throughout the year. The appraiser's duties include appraisal activities for special inventories, such as car dealerships and commercial vehicles.
As a result of not developing local schedules and using rendered values, instead of inspecting property accounts and appraising personal property according to local market conditions, the appraisal district's COD for this category in the 2005 PVS was 34.77, which reflects poor appraisal uniformity, and the level of appraisal was outside the range of reasonably accurate category ratios at 1.07 on the 2005 PVS. By developing local personal property schedules and appraisal procedure manuals, Morris CAD helps ensure more consistent, accurate appraisal results, which should result in uniform and equitable personal property appraisals.
Property Tax Code Section 23.01 requires appraisal districts to appraise all property at market value, taking into consideration the individual characteristics of each property. Annual inspections help identify changes in the character of the accounts, as well as changes in ownership and location of property. Independent verification, inspection and appraisal of inventories, fixtures and equipment ensure that appraised values reflect market value.
Property Tax Code Section 22.07(a) gives the chief appraiser or a designated authorized representative permission to enter the premises of a business, trade or profession and inspect the property to determine the existence and market value of tangible personal property used for the production of income. Section 22.07(c) authorizes the chief appraiser to request supporting rendition information.
According to the IAAO's Standard on Valuation of Personal Property, the extent to which personal property can be appraised depends upon its discovery. Full discovery of personal property requires that the appraisal district have sufficiently trained staff and resources. Discovery of personal property is contingent upon identifying the property owner. Useful sources include the following:
- previous appraisal records and renditions;
- physical inspection (on-site review);
- real property field appraiser reports;
- audits;
- state and local sales tax permits;
- business licenses and registrations;
- building permits;
- chamber of commerce membership lists;
- new business listings from news media (newspapers, magazines, etc.);
- public records (assumed name filings, partnership articles, corporation charters);
- property transfer documents;
- classified advertisements;
- telephone directories;
- city directories;
- Internet research on business operations and contacts; and
- Web sites, specifically sales and leasing.
Once the property has been discovered and the owner is identified, the CAD should inspect the property.
Successful appraisal districts meet or exceed appraisal industry standards to ensure accurate appraisals as a basis for taxpayer assessments. For example, Johnson County CAD gathers information on real property through construction permits received from member cities, septic permits from the county and temporary electric service permits in rural areas and records them in the appraisal records. Business personal property information is received from DBA ("doing business as") recordings with the county clerk in addition to newspaper and other advertisements. Using this process resulted in almost doubling the number of renditions.
RECOMMENDATION 1
Using IAAO's Standard on Valuation of Personal Property, develop local schedules and update procedures and resources used in the valuation of personal property accounts.
FINDING
Morris CAD has not updated commercial real property improvement cost and land schedules as needed to accurately reflect local trends in market value.
The IAAO's Standard on Mass Appraisal of Real Property, Section 4.6.3, Commercial and Industrial Property, states that when a sufficient supply of sales and income data is not available, the CAD should use the cost approach. According to the standard, however, the appraising authority should periodically check values generated against sales data. The standard states, "Cost factors, land values and depreciation schedules must be kept current through regular review."
Morris CAD uses the cost approach to appraise commercial real property. Failing to gather sufficient sales data to use for calibrating its appraisal model, however, caused the CAD to appraise commercial property in Daingerfield-Lone Star ISD well below market value as measured in the Comptroller's 2005 PVS. The 2005 PVS found a weighted mean ratio of 81 percent of market value in that CAD. According to the chief appraiser, the CAD researches sales as much as possible, but cannot verify most of them and, because the county is small, there are very few sales. The individual PVS stratum ratios measuring level of appraisal and variance shown in Exhibit 6 indicate inaccurate results in the CAD's appraisal model for the lower strata of commercial properties in 2005-06.
Exhibit 6
Morris CAD
Commercial Real Property Stratified Values in Daingerfield-Lone Star ISD 2005-06
| Stratum | PVS Year | Weighted Mean Ratio | Stratum Variance |
|---|---|---|---|
| 2 | 2005 | 0.6697 | 0.0870 |
| 2 | 2006 | 0.8543 | 0.1864 |
| 3 | 2005 | 0.7029 | 0.0309 |
| 3 | 2006 | 0.8641 | 0.0320 |
| 4 | 2005 | 0.9044 | 0.0723 |
| 4 | 2006 | 0.8753 | 0.0478 |
| 5 | 2005 | 1.0815 | 0.0011 |
| 5 | 2006 | 1.0350 | 0.0003 |
Weighted Mean Ratio for Commercial Real
| Category Wtd. Mean Ratio | 2005 | 0.8148 |
|---|---|---|
| Category Wtd. Mean Ratio | 2006 | 0.9054 |
Source: 2005 and 2006 PVS.
In the 2005 PVS, the difference between state and local appraisals of sample commercial real parcels in Morris CAD was $5,141,409 in property value, which was 45 percent of the PVS margin of error. In response to the contribution that Category F1 made to the PVS finding of invalid taxable value in Daingerfield-Lone Star ISD, Morris CAD reappraised these properties in 2006 and improved the category appraisal performance. The chief appraiser indicated that the CAD updated tables of feature-specific adjustments and revised site valuation schedules to include a parcel's parking lot if present.
The CAD's 2006 Appraisal Manual and Guide details the commercial building construction classes, construction quality classes and property class schedules. There are three construction classes (1-Fire Resistive, 2-Brick, 3-Frame) and four quality classes (low, average, good and excellent quality). The guide states that "the cost-per-square foot was worked up by several methods and is applied through mass appraisal by classification." The CAD uses commercial building costs and sales data for the guide and they check them for reasonableness with the Marshall & Swift commercial manual. This practice is not uncommon among Texas appraisal districts.
The chief appraiser said the CAD adjusts schedules with the sales data or building costs it is able to gather. A review of historical data from the PVS and CAD show the CAD adjusted commercial appraised values in response to the 2003 and 2004 PVS, but values did not change on the 2004 and 2005 PVS. The 2002-05 CAD reappraisal plan indicates 2004 was a reappraisal year for the Daingerfield-Lone Star ISD; but the plan also states the CAD monitors schedules annually.
Another difference between the CAD and PVS valuations is the local modifier that is applied to Marshall & Swift cost estimates. The CAD uses a local modifier of 25 percent. PTD uses 15 percent. Modifiers are typically applied to Marshall & Swift cost estimation tables to adjust their cost estimates to local properties. CADs develop local modifiers by analyzing the CAD cost schedules against local sales or cost data. Morris CAD did not provide PTD with market research and analysis that support its use of a 25 percent local modifier. The CAD did not appeal PTD's use of a 15 percent local modifier in the 2005 PVS.
The IAAO Standard on Mass Appraisal of Real Property-2002 states that land values play a role in overall commercial appraisal and that the appraisal authority should review them annually. At least once every four to six years, according to the IAAO, the CAD should physically inspect and revalue the properties. The sales comparison approach is the primary approach to land appraisal and is always preferred when sufficient sales are available. A review of a small sample of ratio studies provided by the CAD shows it has not adjusted commercial land appraisals in several years (Exhibit 7).
Exhibit 7
Morris CAD
Commercial Site Values
2003 Compared to 2006
| Geographic Identification Number | Sale Date | 2003 Land Value | 2006 Land Value |
|---|---|---|---|
| 10297-000-00-001-1 | 12/02/02 | $6,780 | $6,780 |
| 12080-002-00-003-0 | 04/15/02 | $9,150 | $9,150 |
| 10167-000-00-014-0 | 02/08/02 | $13,500 | $13,500 |
| 11040-014-00-001-0 | 10/25/02 | $30,560 | $30,560 |
| 10022-000-00-900-0 | 11/01/02 | $7,500 | $7,500 |
Source: Morris CAD Internal Ratio Study Jan. 1, 2002 – April 12, 2003; Morris CAD Web site.
Prudent and effective appraisal districts review and revise appraisal schedules whether a jurisdiction is under reappraisal or not, and this process is part of regular appraisal maintenance. The CAD's failure to measure local trends in market value and to incorporate the resulting adjustments into its commercial schedules caused inaccuracies in the CAD's appraisal model. This inaccurate model helped cause Daingerfield-Lone Star's local value to fall outside the 2005 PVS confidence interval.
The cost approach is a reliable and effective method for appraising property improvements with newer structures and produces accurate valuations. The weaknesses in the cost approach arise from inaccurate estimation of accrued depreciation and determination of land values.
To continue to improve its commercial appraisal process, a CAD must do the following:
- update site appraisal schedules and test them against sales of vacant lots;
- check improvement cost schedules for accuracy versus local building costs; and
- calibrate depreciation and specific-feature adjustment tables.
By updating land schedules, cost factors, local modifiers, depreciation factors and schedules, the CAD can help ensure that accurate and uniform values are produced for commercial land parcels.
In Kaufman CAD in 2004, for example, the appraisal district assigned the appraisal of all commercial real estate to the CAD's director of personal property valuation. Prior to 2004, commercial property was valued by the appraiser assigned to the school district in which the property was located. The director of personal property/commercial real valuations stated that he began updating the district's commercial cost schedules in 2004 and would continue to do so in 2005. The 2003 PVS indicated that Commercial Real values were inaccurate in the ISDs where they were tested, but the 2004 PVS found improvements to Category F1 appraisal ratios. Historically speaking, verified commercial sales information is limited in Kaufman County. According to the director of commercial valuations, the CAD uses information from builders and fee appraisers to derive modifiers for the Marshall & Swift building cost tables.
RECOMMENDATION 2
Gather and use local sales and cost data to update commercial improvement cost and site valuation schedules according to generally accepted appraisal standards and practices.
2.2
Other Recommendations
During the course of the review process, the review team identified 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, but the Comptroller's office offers them for the CAD's consideration as additional ways to enhance its operational effectiveness and efficiency. Some recommendations may refer to compliance with state law. As a governmental agency, appraisal districts are required to comply with state laws.
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 to establish policies and procedures for the appraisal district's organization and operation.
The Morris CAD's board of directors consists of the five members shown in Exhibit 8.
Exhibit 8
Morris CAD
Board of Directors Members
| Board Member | Entity Member Represents | Start Date |
|---|---|---|
| Danny Lily | Daingerfield-Lone Star ISD, City of Daingerfield, Morris County, Pewitt ISD, City of Omaha | 1996 |
| Willie Giles Smith | Morris County, City of Daingerfield, Daingerfield-Lone Star ISD, Pewitt ISD | 1999 |
| Scott Pollan | Daingerfield-Lone Star ISD, City of Daingerfield, Morris County, Pewitt ISD | 2007 |
| Kenneth Mac Allen | Hughes Springs ISD | 2008 |
| Odis Cline | Morris County, Daingerfield-Lone Star ISD, City of Daingerfield, Pewitt ISD, City of Omaha | 2001 |
Source: Morris CAD, April 2008.
According to Property Tax Code Sections 6.03 through 6.13, the board has the following primary responsibilities:
- establish the appraisal district's appraisal office;
- adopt the appraisal district's annual operating budget;
- approve appraisal contracts;
- hire a chief appraiser;
- hire a taxpayer liaison officer (in counties with a population of more than 125,000);
- appoint appraisal review board members;
- set general policy on the appraisal district's operations;
- contract for an annual financial audit; and
- designate the district depository.
The Comptroller's office asked the board to complete a written survey about its activities. Three of the five board members responded. The survey includes sections on board policies and procedures; chief appraiser and staff; property appraisals; appraisal review boards; and budgeting and financial management. Board members who responded gave Morris CAD positive feedback.
Morris CAD has professional services contracts with two firms as shown in Exhibit 9.
Exhibit 9
Morris CAD
Professional Service Contracts
| Contract | In Writing (Yes or No) | Key Terms and Conditions | 2004 Budget | 2004 Actual | 2005 Budget | 2005 Actual |
|---|---|---|---|---|---|---|
| Professional Appraisal Services | Yes | Industrial Appraisals | $52,500 | $51,050 | $52,500 | $52,000 |
| Computer Equipment and Software | Yes | Leased Computer Hardware and Software | $32,000 | $27,540 | $32,000 | $27,540 |
Source: Morris CAD, invoices and contracts 2004, 2005 and 2006.
FINDING
The Morris CAD board does not use a formal process for evaluating the chief appraiser.
The CAD has employed the chief appraiser since March 1981 and she has served as chief appraiser since January 1986. The chief appraiser feels the board continually evaluates the position during board meetings and during the preliminary budget processes.
Section 2 of the chapter District Administration, in the Board of Directors Operating Policies, states that the chief appraiser is the chief administrator of the appraisal district and lists the duties and responsibilities of the chief appraiser as follows:
- establish a comprehensive program for conducting all appraisal activities and keep the board informed on the progress of appraisal activities;
- develop and implement sound administrative procedures for conducting all district functions;
- develop and implement an effective internal budget development system and prepare a proposed budget by June 15 of each year;
- serve as the district's spokesperson in providing information to news media, taxing units, and the general public on the operations of the appraisal district and provisions of the property tax laws;
- prepare the agenda for each board meeting, attend all meetings and provide staff recommendations for all appropriate board actions;
- in conjunction with district counsel, provide recommendations for board action on litigation;
- develop and implement a personnel management system for job assignments, evaluations, hiring, staff policy and personnel related matters; and
- employ and compensate professional, clerical and other personnel as provided by the budget upon approval of the board of directors.
Without a formal evaluation process in place, the board runs the risk of not meeting its objectives and the possibility of miscommunication between the chief appraiser and the board.
By developing a formal written procedure to evaluate the chief appraiser annually, the board can help ensure clear communication with the chief appraiser concerning performance and further ensure it meets its goals.
In Nueces CAD, for example, the board has developed a well-defined job description for the chief appraiser and constructed an objective evaluation tool for measuring the chief appraiser's job performance. The chief appraiser's job description contains the statutory responsibilities set forth in Property Tax Code Section 6.05, as well as specific goals and expectations required from the board. The job description clearly defines the role of the chief appraiser and lays the groundwork for an objective evaluation. The chief appraiser receives an annual performance evaluation on the hiring date anniversary. The board uses an evaluation instrument that allows for input from all board members, and allows the chief appraiser to address his own goals and objectives during the evaluation period. In addition, the evaluation sets up goals and objectives for the next 12 months.
RECOMMENDATION 3
Develop an objective set of evaluation criteria for measuring chief appraiser performance and establish an annual evaluation process.
FINDING
Although Morris CAD's budget formats conform to Property Tax Code Section 6.06(a), they indicate the appraisal and collection budgets do not comply with Texas Attorney General Opinion No. GA-0030 (2003).
Property Tax Code Section 6.06(a) requires an appraisal district to list the following items in its budget:
- each proposed position with associated salary and benefits; and
- each proposed capital expenditure.
Each year the Morris CAD chief appraiser prepares a proposed appraisal and collection budgets package to present to the board of directors. This budget has sections for Personnel Services; Professional Services; Supplies and Materials; Other Operating Expenses and Capital Outlays. Each section has columns for the appraisal, collections and combined budgets.
The Personnel Services section of the appraisal budget lists each proposed position with salary and insurance benefits and lists totals for retirement, Social Security/Medicare, unemployment and worker's compensation. The CAD splits the salaries for three positions between the appraisal and collection functions. While Morris CAD's appraisal budget lists each proposed position and corresponding salary with benefits, the data extracted from the appraisal and collection budgets in Exhibit 10 implies that the CAD is funding 100 percent of the health and retirement benefits from the appraisal budget for the following employees whose time and salaries are allocated, in part, to the collections budget.
Exhibit 10
Percentage Allocation of Appraisal/Collections Employees' Salaries and Benefits
| Position |
2004 Percent Salary Paid by Collection Budget |
2004 Percent Health Insurance and Retirement Benefits Paid by Appraisal Budget |
2005 Percent Salary Paid by Collection Budget |
2005 Percent Health Insurance and Retirement Benefits Paid by Appraisal Budget |
2006 Percent Salary Paid by Collection Budget |
2006 Percent Health Insurance and Retirement Benefits Paid by Appraisal Budget |
|---|---|---|---|---|---|---|
| Chief Appraiser | 20% | 100% | 19% | 100% | 19% | 100% |
| Office/Collection Mgr. | 77% | 100% | 76% | 100% | 77% | 100% |
| Collection/File Clerk | 68% | 100% | 62% | 100% | 61% | 100% |
Source: Morris CAD 2004-06 Adopted Appraisal and Collection Budgets.
Op. Tex. Att'y Gen. No. GA-0030 (2003) precludes, however, that the pro rata share of health benefits that correspond to collection budget salaries be paid entirely with appraisal budget resources:
The budget of a tax appraisal district may allocate to the taxing units within the district only the costs of operating the appraisal district for its appraisal purposes. The costs of tax assessment or collection, which the appraisal district may opt to perform for taxing units under contract, are paid for by the taxing unit that has contracted with the district for these services and are not allocated to all taxing units within the district regardless of whether or not the unit contracted with the district for assessment or collection services.
Chapter 5 of the Property Tax Code requires, in part, that the Comptroller adopt rules for administration and operation of appraisal districts. Under this authority, the Comptroller has issued the Appraisal District Director's Manual, which describes the appraisal district budget as follows:
Collection or assessment services are a separate budget from the main appraisal district budget. Only units using these services pay for them, so the chief appraiser should budget separately for these services. This separation permits allocating costs to the responsible taxing units.
A taxing unit's use of the CAD for tax collection is optional, unlike its use of the CAD's appraisal services. If a taxing unit does not use the CAD for tax collection, it is unfair to allocate to it in the appraisal budget a pro rata share for 100 percent of the cost of health, retirement and employment insurance benefits of part-time tax collection employees. Further, the chief appraiser must keep the respective budgets separate regardless of whether or not all units contracted with the appraisal district for assessment or collection services.
Exhibit 11 presents Morris CAD's 2004-06 adopted appraisal budgets.
Exhibit 11
Morris CAD
2004-06 Adopted Appraisal Budgets
| Personnel Salaries | 2004 Budget | Percent | 2005 Budget | Percent | 2006 Budget | Percent | 2004-06 Percent Increase (Decrease) |
|---|---|---|---|---|---|---|---|
| Chief Appraiser | $42,009 | 11.5% | $43,411 | 11.4% | $45,731 | 11.6% | 8.9% |
| Insurance Allowed | 5,100 | 1.4% | 5,760 | 1.5% | 6,276 | 1.6% | 23.1% |
| Appraiser | 36,838 | 10.0% | 38,593 | 10.1% | 40,251 | 10.2% | 9.3% |
| Health Insurance | 5,100 | 1.4% | 5,760 | 1.5% | 6,276 | 1.6% | 23.1% |
| Office/Collection Manager | 5,844 | 1.6% | 7,646 | 2.0% | 6,482 | 1.7% | 10.9% |
| Insurance Allowed | 5,100 | 1.4% | 5,760 | 1.5% | 6,276 | 1.6% | 23.1% |
| System Operator/Data Entry/Personal Property | 26,772 | 7.3% | 26,772 | 7.0% | 28,710 | 7.3% | 7.2% |
| Insurance Allowed | 5,100 | 1.4% | 5,760 | 1.5% | 6,276 | 1.6% | 23.1% |
| Collection/File Clerk | 12,955 | 3.5% | 4,414 | 1.2% | 8,600 | 2.2% | -33.6% |
| Health Insurance | 5,100 | 1.4% | 5,760 | 1.5% | 6,276 | 1.6% | 23.1% |
| Mapper/Deed Research | 29,013 | 7.9% | 30,383 | 8.0% | 31,794 | 8.1% | 9.6% |
| Health Insurance | 5,100 | 1.4% | 5,760 | 1.5% | 6,276 | 1.6% | 23.1% |
| Part-Time Help | 2,291 | 0.6% | 0 | 0.0% | 2,128 | 0.5% | -7.1% |
| Retirement Contribution | 19,580 | 5.3% | 20,328 | 5.3% | 21,262 | 5.4% | 8.6% |
| Social Security Medicare | 1,400 | 0.4% | 3,500 | 0.9% | 3,500 | 0.9% | 150.0% |
| Social Security Medicare | 0 | 0.0% | 13,247 | 3.5% | 0 | 0.0% | 0.0% |
| Unemployment Insurance | 500 | 0.1% | 500 | 0.1% | 500 | 0.1% | 0.0% |
| Worker's Compensation | 1,100 | 0.3% | 1,100 | 0.3% | 1,300 | 0.3% | 18.2% |
| Total Personnel | $208,902 | 57.0% | $224,454 | 58.8% | $227,914 | 57.9% | 9.1% |
| Professional Services | 2004 Budget | Percent | 2005 Budget | Percent | 2006 Budget | Percent | 2004-06 Percent Increase (Decrease) |
|---|---|---|---|---|---|---|---|
| Appraisal Review Board | $2,500 | 0.7% | $2,500 | 0.7% | $2,700 | 0.7% | 8.0% |
| Appraisal Services | 52,500 | 14.3% | 52,500 | 13.8% | 54,500 | 13.9% | 3.8% |
| Auditing Fees | 4,500 | 1.2% | 4,800 | 1.3% | 4,800 | 1.2% | 6.7% |
| Computer Services | 17,541 | 4.8% | 17,541 | 4.6% | 18,541 | 4.7% | 5.7% |
| Contingency Fund | 5,000 | 1.4% | 5,000 | 1.3% | 5,000 | 1.3% | 0.0% |
| Electric Service | 3,500 | 1.0% | 3,500 | 0.9% | 3,500 | 0.9% | 0.0% |
| Fiscal Agent Fee | 600 | 0.2% | 600 | 0.2% | 0 | 0.0% | -100.0% |
| Legal Services | 10,000 | 2.7% | 10,000 | 2.6% | 10,000 | 2.5% | 0.0% |
| Maintenance Agreements | 2,300 | 0.6% | 2,500 | 0.7% | 2,700 | 0.7% | 17.4% |
| Office Lease | 6,000 | 1.6% | 6,000 | 1.6% | 6,000 | 1.5% | 0.0% |
| Telephone Internet | 3,900 | 1.1% | 3,900 | 1.0% | 3,900 | 1.0% | 0.0% |
| Total Professional Services | $108,341 | 29.6% | $108,841 | 28.5% | $111,641 | 28.4% | 3.1% |
| Supplies & Materials | 2004 Budget | Percent | 2005 Budget | Percent | 2006 Budget | Percent | 2004-06 Percent Increase (Decrease) |
|---|---|---|---|---|---|---|---|
| Advertising | $2,000 | 0.6% | $2,000 | 0.5% | %2,200 | 0.6% | 10.0% |
| Custodial Supplies | 500 | 0.1% | 500 | 0.1% | 500 | 0.1% | 0.0% |
| Deed Records, Plats, & Notices | 3,000 | 0.8% | 3,300 | 0.9% | 3,300 | 0.8% | 10.0% |
| General Office Supplies | 2,916 | 0.8% | 2,916 | 0.8% | 3,416 | 0.9% | 17.2% |
| Mapping Supplies/Service/ Maintenance | 3,100 | 0.9% | 3,100 | 0.8% | 3,400 | 0.9% | 9.7% |
| Printing Supplies/Computerized Records | 9,000 | 2.5% | 9,000 | 2.4% | 9,000 | 2.3% | 0.0% |
| Postage | 4,434 | 1.2% | 5,174 | 1.4% | 5,174 | 1.3% | 16.7% |
| Total Supplies and Materials | $24,950 | 6.8% | $25,990 | 6.8% | $26,990 | 6.9% | 8.2% |
| Other Operating Expenses | 2004 Budget | Percent | 2005 Budget | Percent | 2006 Budget | Percent | 2004-06 Percent Increase (Decrease) |
|---|---|---|---|---|---|---|---|
| Custodial Services | $2,300 | 0.6% | $2,400 | 0.6% | $2,400 | 0.6% | 4.4% |
| Dues, Subscriptions, Publications | 1,800 | 0.5% | 1,800 | 0.5% | 2,300 | 0.6% | 27.8% |
| Insurance Bond Fees | 9,000 | 2.5% | 7,000 | 1.8% | 7,000 | 1.8% | -22.2% |
| Travel/Local | 3,000 | 0.8% | 3,000 | 0.8% | 3,000 | 0.8% | 0.0% |
| Travel & Tuition Out of District | 4,000 | 1.1% | 4,000 | 1.1% | 5,000 | 1.3% | 25.0% |
| Total Other Operating Expenses | $20,100 | 5.5% | $18,200 | 4.8% | $19,700 | 5.0% | -2.0% |
| Capital Outlays | 2004 Budget | Percent | 2005 Budget | Percent | 2006 Budget | Percent | 2004-06 Percent Increase (Decrease) |
|---|---|---|---|---|---|---|---|
| Appraisal/Mapping Tools | $600 | 0.2% | $600 | 0.2% | $800 | 0.2% | 33.3% |
| Building Improvements | 500 | 0.1% | 500 | 0.1% | 2,000 | 0.5% | 300.0% |
| Furniture, Fixtures, and Equipment | 2,000 | 0.6% | 2,000 | 0.5% | 3,500 | 0.9% | 75.0% |
| Mapping Equipment | 1,000 | 0.3% | 1,000 | 0.3% | 1,000 | 0.3% | 0.0% |
| Total Capital Outlays | $4,100 | 1.1% | $4,100 | 1.1% | $7,300 | 1.9% | 78.1% |
| TOTAL | $366,393 | 100.0% | $381,585 | 100.0% | $393,545 | 100.0% | 7.4% |
Source: Morris CAD fiscal year budgets 2004, 2005 and 2006.
Exhibit 12 presents Morris CAD's 2004-06 adopted collection budgets.
Exhibit 12
Morris CAD 2004-06 Adopted Collection Budgets
| Personnel | 2004 Budget | Percent | 2005 Budget | Percent | 2006 Budget | Percent |
Percent Increase (Decrease) 2004-06 |
|---|---|---|---|---|---|---|---|
| Chief Appraiser | $10,291 | 15.1% | $10,458 | 15.1% | $10,754 | 15.5% | 4.5% |
| Office/Collection Manager | 17,078 | 25.0% | 18,363 | 26.5% | 20,807 | 30.0% | 21.8% |
| Collection/File Clerk | 12,222 | 17.9% | 12,586 | 18.2% | 10,000 | 14.4% | -18.2% |
| Total Personnel | $39,591 | 58.1% | $41,407 | 59.8% | $41,561 | 59.9% | 5.0% |
| Professional Services | 2004 Budget | Percent | 2005 Budget | Percent | 2006 Budget | Percent |
Percent Increase (Decrease) 2004-06 |
|---|---|---|---|---|---|---|---|
| Computer Services | $14,459 | 21.2% | $14,459 | 20.9% | $14,459 | 20.8% | 0.00% |
| Total Professional Services | $14,459 | 21.2% | $14,459 | 20.9% | $14,459 | 20.8% | 0.00% |
| Supplies and Materials | 2004 Budget | Percent | 2005 Budget | Percent | 2006 Budget | Percent |
Percent Increase (Decrease) 2004-06 |
|---|---|---|---|---|---|---|---|
| General Ofc. Supplies | $3,584 | 5.3% | $3,584 | 5.2% | $3,584 | 5.2% | 0.0% |
| Postage | 10,566 | 15.5% | 9,826 | 14.2% | 9,826 | 14.2% | -7.0% |
| Total Supplies & Material | $14,150 | 20.7% | $13,410 | 19.4% | $13,410 | 19.3% | -5.2% |
| TOTAL | $68,200 | 100% | $69,276 | 100% | $69,430 | 100% | 1.80% |
Source: Morris CAD fiscal year budgets 2004, 2005 and 2006.
RECOMMENDATION 4
Comply with Texas Attorney General Opinion No. GA-0030 (2003) by allocating collection or assessment services to a separate budget from the main appraisal district budget.
Resources and Management
In organizing and administering a county appraisal district, the chief appraiser is responsible for hiring, firing and training personnel; ensuring compliance with a wide range of legal requirements; and maintaining policies and procedures for the CAD's effective operation.
CAD employees who conduct appraisals must be a Registered Professional Appraiser (RPA). New appraisers must receive certification within five years of their hire date. Interim certifications include Class II and Class III. In addition, RPAs must recertify every five years to remain registered. Exhibit 13 shows all Morris CAD appraisers are properly registered. The collections staff includes personnel certified as Registered Texas Assessor/Collector (RTA) and Registered Texas Collector (RTC) with the Board of Tax Professional Examiners (BTPE).
Exhibit 13
Morris CAD
Positions, Certifications, Salaries and Length of Service
| Position | BTPE Certification(s) | Years with CAD | Salary |
|---|---|---|---|
| Chief Appraiser/Tax Assessor-Collector | RPA/RTA-IV/CTA | 25 | $56,484 |
| Field Appraiser | RPA/RTC | 20 | $40,251 |
| Personal Property Clerk/Appraisal & Transfer Clerk | RPA-III | 15 | $28,710 |
| Collection/Office Manager | RTC-III | 6 | $27,289 |
| Collection/File Clerk | RTC-I | 1 | $18,600 |
| Mapping/Deed Research | None | 21 | $31,794 |
Source: Morris CAD, January 2006.
FINDING
The Morris CAD chief appraiser does not perform annual written employee evaluations and does not have a written policy regarding employee evaluations.
In the absence of a formal employee evaluation process, the chief appraiser stated that she examines employee performance during the annual budget process. Moreover, the close working relationship with CAD staff allows for sufficient familiarity with employee performance.
During the budget process, the chief appraiser prepares an information data packet for the board of directors. For example, the 2006 budget data included a section on employee status and salary information that listed the proposed salaries for 2006, per the chief appraiser, and the salaries for the two previous budgets. According to the chief appraiser, this information allows the board to project salaries and assess staff experience and qualification, including certifications. In addition to the salary information, the data for the 2006 budget included a work experience section that summarizes the performance of staff over the prior year. For instance, one employee is described as follows:
She has mastered her job and has taken on new projects and made improvements to existing tasks, such as balancing monthly and year end reports. She is very helpful to the taxpayers that come in or call.
While the budget information data is useful and appropriate for use by the board of directors in analyzing and adjusting salaries for future budgets, it is not a substitute for performing formal annual employee evaluations. Formal evaluations have many benefits, including documenting poor performance and recommendations for corrective actions. They can provide documentation to support an employee's dismissal if deficient performance is not corrected. A CAD can also use an evaluation as a communication tool between the employee and supervisor, providing a process for exchange of information such as goals, objectives and employee expectation. Finally, personnel evaluations provide a means for career planning or training, including discussions on what the CAD anticipates for the future.
Annual evaluations can help ensure that employees understand the standard of performance expected of them, provide employees with the guidance they need to improve performance and productivity and increase the level of understanding between management and staff.
IAAO points out a number of practices and techniques employed by good management in dealing with personnel, including:
- current position descriptions;
- merit-based selection and promotion;
- current, written personnel policies;
- regular management and staff meetings;
- regular performance reviews; and
- fair administration of progressive disciplinary procedures.
Grayson CAD, for instance, has developed a performance evaluation document that uses a 5-point rating system for performance standards with a 5 rating denoting "meritorious commendation for excellence" and a 1 rating signifying an inability to meet job requirements. The document includes performance categories as well as goals and objectives that the employee and supervisor agreed on during the previous year's evaluation. When evaluations are completed, the supervisor discusses it with the employee and they jointly discuss goals and objectives for the next year. Both parties sign the document and maintain a copy with the original placed in the employee's personnel file. Grayson CAD conducts employee performance evaluations in December at which time job descriptions are also reviewed. The CAD uses job descriptions and work plans to serve as the basis for the annual performance evaluation.
RECOMMENDATION 5
Develop and incorporate into the personnel manual a method for annual written employee evaluations.
Information Processing and Data Collection
Computers have become a necessity for all appraisal districts. The use of computers allows the CAD 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 a series of local area networks (LANs). Maintaining a strong infrastructure and integrating the various systems used by the appraisal district is critical to increased staff productivity, the reduction of costly data errors and better customer service to users, members of the community and the taxing units dependent on the appraisal district's information.
Exhibit 14 presents a list of appraisal and administrative software used in Morris CAD.
Exhibit 14
Morris CAD
Appraisal and Administrative Software
| Type of Software | Standalone or Integrated | When Installed | Last Upgrade | Planned Upgrade |
|---|---|---|---|---|
| Appraisal Software | Standalone | 1981 | 2005 | None |
| Computer-aided design software for GIS | Standalone | 2001 | 2001 | None |
Source: Morris CAD, November 2006.
FINDING
Morris CAD does not have a disaster recovery plan.
The CAD performs an automatic backup of the entire appraisal and collection system on site nightly. Employees do a backup of documents on individual computers regularly. The CAD's software vendor performs an offsite backup weekly. The CAD stores the daily onsite backups in an onsite vault.
While frequent backup of computer data is commendable, it is not enough to assure that an appraisal district can recover from a natural disaster in a timeframe to provide the services it is obligated to perform for taxing entities and property owners. Appraisal districts cannot predict natural disasters such as Hurricane Rita, or a fire that recently destroyed a Texas CAD office.
Prudent appraisal districts have a plan to stabilize and restore critical functions. Development of a disaster recovery plan borrows heavily from the strategic planning and budgetary processes to define and estimate support resources, tasks and data needed to overcome site outages and ensure prompt business continuity. Information integrity – in the form of data protection and vital records' security – is a primary goal for appraisal districts and will require a resilient infrastructure.
In addition to recovering system data, disaster recovery plans should also identify an off-site facility and the critical staff necessary for recovery. In the case of loss of CAD facilities, it should have a written plan directing employees where and when to report to work.
Exhibit 15 lists the key elements of an effective disaster recovery plan.
Exhibit 15
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 CAD. Develop an estimate of the minimum space and equipment necessary for restoring essential operations. Develop a timeframe for starting initial operations after a disaster. 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 reciprocal agreements 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 as 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 vendors 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 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 be taken to re-establish normal operations. |
| Test the plan | Test the entire 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: National Center for Education Statistics, "Safeguarding Your Technology."
An effective disaster recovery plan addresses:
- immediate response;
- incident control/evaluation;
- notifications;
- environmental restoration; and
- resumption of critical business functions.
Key elements of an appraisal district's disaster recovery plan include instructions for alternate office locations and communications, and recreating its vital records and the appraisal and mapping systems. An effective disaster recovery plan will ensure business continuity for the CAD, taxpayers and constituents.
For example, Van Zandt CAD completed a disaster recovery plan in September 2004. Each year the disaster recovery plan is reviewed and updates to the plan are made available to CAD staff. Business resumption procedures have been developed for each major function of the appraisal district (collections, administration, appraisal, mapping, data processing and records management). Each department's procedures are further developed to address the possible temporary loss of staff, network, power and facilities in a disaster situation.
RECOMMENDATION 6
Develop, implement and test a comprehensive written disaster recovery plan.
Assessment Administration
Appraisal districts have three primary responsibilities: property discovery, property listing and property appraisal. Although much attention is placed on the appraisal process itself, discovery and listing are equally important.
Another important appraisal district responsibility is the administration of exemptions. An exemption excludes 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 properties will receive exemptions.
The chief appraiser is legally responsible for preparing the appraisal roll within a statutory timeframe.
Property Tax Code Section 5.07(a) requires the Comptroller to prescribe the contents of all forms necessary for the administration of the property tax system in the state. The forms must be uniform and the Comptroller may approve substitute forms in certain circumstances. A review of Morris CAD's forms and applications shows they comply with state laws.
Appraisal districts must also file various reports to the taxing units and the state and comply with many laws, rules and regulations. The Comptroller must prescribe a uniform record system to be used in submitting data for the annual studies required by law.
FINDING
In order to mitigate adverse publicity for the CAD during a reappraisal year that was resulting in rising property values, the chief appraiser drafted a letter and published it in the newspaper.
The letter informed taxpayers that the CAD had completed a reappraisal of property values and taxpayers would be receiving appraisal notices in the mail reflecting the updated value for 2006. The announcement went on to describe that the reappraisal process ensures that all similar houses, land, businesses, etc. will be priced and valued fairly.
The letter describes general results of the reappraisal, such as "In making the sales study for 2006, the local real estate market has reflected major increases in properties." It goes on to explain that the process is needed to comply with the Property Tax Code and alerts taxpayers that they can expect to see an increase in their values due to market changes. It then describes how homestead increases are handled, when notices will be mailed, and gives instructions on how a taxpayer can protest values or correct errors.
In addition to the public service announcement regarding the reappraisal, the CAD published an article alerting taxpayers that property taxes are due before Feb. 1 to avoid penalty.
The IAAO Standard on Public Relations notes, "Direct communication with constituents should be used to explain the role of the assessing office and the services it provides." The standard goes on to state, "The public needs to know why assessments are made and what is financed by property taxes."
COMMENDATION
By providing public service announcements, Morris CAD is taking a proactive role in keeping constituents informed of CAD operations.