Appraisal Standards Review
Sabine County Appraisal District Follow-Up Report
August 2007
Introduction
In July 2004, Hemphill Independent School District (ISD), in Sabine County, Texas, was identified as one of 54 school districts in the state meeting the criteria that initiate an Appraisal Standards Review (ASR) of its county appraisal district (CAD).
In January 2006, the Comptroller’s Property Tax Division (PTD) released the results of the ASR of Sabine County Appraisal District. The report made 11 recommendations to improve Sabine CAD’s appraisal practices and operations. ASRs are intended to determine why the Comptroller’s Property Value Study (PVS) found local values invalid and to recommend changes in operations and management that would improve appraisal practices. The Sabine CAD review team evaluated five functional areas: board of directors; appraisal district policies, procedures and operations; information processing systems; staffing, personnel qualifications and positions; and generally accepted appraisal practices, equality and uniformity of appraisal standards.
At the time of the review, Sabine CAD faced a number of challenges including:
- improving district operations;
- documenting procedures and appraisal methods; and
- developing reappraisal tools and practices.
Texas Property Tax Code Section 5.102(d) requires that if the appraisal district fails to comply with the recommendations in the report and the Comptroller finds that the board of directors of the appraisal district failed to take remedial action before the first anniversary of the date the report was issued, the Comptroller must notify the judge of each district court in the county for which the appraisal district is established. The judge(s) must appoint a five-member board of conservators to implement the recommendations. The board of conservators exercises supervision and control over the operations of the appraisal district until the Comptroller determines, under Government Code, Section 403.302 that the taxable value of each school district for which the appraisal district appraises property is the local value for the school district. The appraisal district shall bear the costs related to the supervision and control of the district by the board of conservators.
For the one-year follow-up report, an appraisal district complies with the statute if it takes remedial action to implement the recommendations in the ASR. Remedial action means the CAD has corrected or intends to correct, remedy or improve the deficiencies identified in the ASR. The CAD demonstrates remedial action by having implemented or nearly completed most of the recommendations of the report. The Comptroller recognizes that some recommendations included in ASRs require more than a year to implement. Some ASRs include more recommendations than a CAD with limited resources can implement within a year. As long as the CAD is working to implement the recommendations, the Comptroller continues to work with the CAD to achieve full compliance. CADs that complete all recommendations by the one-year anniversary will not require additional monitoring.
In January 2007, the PTD team conducted an on-site follow-up review to assess Sabine CAD’s progress in implementing the ASR recommendations. PTD found that six recommendations are complete, and five are in various stages of progress.
PTD sent the CAD’s board members surveys soliciting their views and comments on the ASR. None of the board members responded.
PTD believes that Sabine CAD’s efforts to date meet the state’s legal requirements. PTD will continue to monitor the CAD’s progress in the remaining tasks needed for full implementation. The following pages outline specific steps that the CAD should take.
History and Significant Events
Sabine CAD received an ASR because the 2003 Property Value Study (PVS) found property values in Hemphill ISD to be invalid. The school district was eligible for the “grace period” provided in Government Code Section 403.3011. The second district (West Sabine ISD) slightly exceeded the state’s upper limit of the confidence interval. Within Hemphill ISD, sample property ratios that contributed to the overall finding of invalid value included Category A, Single-Family Residential, with a weighted mean ratio of .8785; Category C, Vacant Lots, with a weighted mean ratio of .9433; and Category F, Commercial Real Property, with a weighted mean ratio of .9400.
The CAD’s continuing efforts to improve appraisals throughout 2004, 2005 and 2006 have produced mixed results. In 2005, property value ratios for most property categories in Hemphill ISD improved from those in 2003, and local value was certified. The weighted mean ratios have since decreased and Hemphill ISD’s local values were found to be invalid in the 2006 PVS.
What Remains to Be Done
The Appendix lists the 11 recommendations identified in the ASR, with a summary of actions taken to date. PTD acknowledges the work that Sabine CAD has performed over the last year. The six completed recommendations have assisted the CAD in improving its management and appraisal practices.
The five recommendations remaining in progress, Recommendations 5, 6, 8, 9, and 11, need the following efforts:
Recommendation 5: Develop a comprehensive written policy and procedures manual for district operations.
The CAD’s operation manual, with an effective date of January 2007, contains 13 sections that comprehensively describe appraisal- related procedures. The chief appraiser developed the manual in 2006. The chief appraiser did not initially submit it to the board for approval, but plans to do so at the board’s next meeting.
While the operations manual describes appraisal procedures and processes as well as payroll and purchasing, it does not describe the CADs accounting operation, as recommended by the initial ASR. The chief appraiser indicated that this is because the activity of this function is limited or is not performed by CAD staff. For example, accounting activity consists of the chief appraiser entering the checking account information onto a ledger and providing a copy of the ledger to the external accounting firm for its audit.
PTD recommends that the chief appraiser expand the existing operations manual to include a section describing the accounting process and submit the entire manual for approval by the board at its next scheduled meeting. An approved copy must be provided to PTD by December 2007.
Recommendation 6: Develop a plan with project specifications and a timeline for completion of the conversion of the appraisal records from the hardcopy appraisal files to the data processing system.
The chief appraiser indicated that, in 2006, the CAD hired temporary workers to enter appraisal record data into the appraisal system. The CAD opted to perform the work in-house thereafter because the use of temporary workers proved to be inefficient and ineffective. The data entered by the temporary workers contained errors that CAD staff were forced to correct.
In 2007, CAD employees are entering appraisal record information into the system on an ad hoc basis, after hours and on some weekends. As of January 2007, the chief appraiser and the CAD staff performing the data entry estimated that the project is about 60 percent complete. The chief appraiser has a target completion date of December 2007.
PTD recommends that the chief appraiser monitor the progress of this activity to ensure that the target completion date is met. The chief appraiser can accomplish this by identifying a target number of records for data entry each month, monitoring actual entry against the target and adjusting staff workloads to meet the targets as needed until all records are entered.
Recommendation 8: Adopt a detailed reappraisal plan that, at a minimum, includes the vital steps in the process, explains exactly how and when the steps will be executed, and explains how sufficient resources will be allocated to follow the plan.
The chief appraiser contacted other appraisal districts to obtain examples of reappraisal plans to use as models for Sabine CAD.
The submitted reappraisal plan does not meet the requirements identified in the original ASR because it does not fully describe activities to allow a reader to ascertain what reappraisal tasks the CAD will perform, how and when the tasks will be performed and the properties to be reappraised in any given year. The submitted reappraisal plan is generic in nature and does not specify how Sabine CAD operates. To address these shortcomings, PTD recommends the CAD revise its plan to add more detail concerning appraisal record updates, appraisal activities and valuation models. The reappraisal plan, as it stands, does not meet the requirements of Tax Code Section 25.18.
The CAD should fully identify its market areas by listing specific neighborhoods or divisions that constitute its defined markets. The CAD also should describe how it will update its appraisal records to ensure it documents relevant property characteristics. For each valuation type—commercial, residential, industrial, business property and land—the CAD should describe the process to be followed, activities to be performed, the resources that will be applied and timelines and schedules that will be followed. Finally, the reappraisal plan should include references to the appraisal of timberland and agriculture. The CAD should mail a revised copy of the board-approved reappraisal plan to PTD by December 2007.
Recommendation 9: Prepare and issue to each appraiser detailed appraisal procedures manuals that provide local procedures and practices for each type of property the staff appraises.
The chief appraiser and field appraiser developed and completed the appraisal manuals in December 2006. The submitted appraisal manuals consist of a section of the Tax Code, the 2007 land value schedule, the 2007 residential cost schedule with associated construction classifications and the personal property manual consisting of the depreciation schedule and SIC codes.
The submitted appraisal manuals do not meet the requirements identified in the original ASR recommendation. They do not fully describe the procedures or steps to be followed in appraising each category of property. In addition, the manuals do not contain procedures or methods for commercial or industrial property.
PTD recommends the CAD revise its manuals to add sections for commercial and industrial property and to include detail in the manuals for each type of property (land, residential, commercial, personal and industrial). The detail should fully describe the steps the appraiser should follow or activities the appraiser should perform in conducting an appraisal for each type of property. The information also should explain how the appraiser should apply the applicable schedules (land, residential and depreciation) in determining the value of a particular property. The revised manuals should be submitted to PTD by December 2007.
Recommendation 11: Establish comprehensive written ratio study procedures that allow proper reappraisal and maintenance planning.
The chief appraiser performs ratio studies by reviewing subdivisions that list sales and comparing the information with actual sales data he receives from a local realtor and through sales questionnaire responses. The chief appraiser indicated that the ratio study is limited because the CAD has few sales upon which to base the ratios.
The chief appraiser acknowledged that while he does perform ratio studies, he has not developed written procedures describing the steps taken to perform them.
PTD recommends that the chief appraiser document the process for staff to follow in conducting ratio studies, submit it to the board for approval and send a copy to PTD by December 2007.
Appendix
Sabine County Appraisal District Appraisal Standards Review Implementation Status Report
2.1 Board of Directors
| Rec. # | Recommendation | Implementation Status | If Not Complete, Projected Completion Date | Description of Actions Taken to Date |
|---|---|---|---|---|
| 1 | Expand the detail of the budget to include the benefits proposed for each position and capital expenditures as required by Section 6.06 of the Tax Code and maintain copies of adopted budgets. |
Complete |
|
The chief appraiser expanded the budget detail in the 2006-07 CAD budget by adding a section entitled “Employee Benefits” that lists the insurance coverage provided for the appraiser, clerical staff and mapper. The chief appraiser receives insurance benefits from his job as the tax assessor-collector for Hemphil ISD. The appraisal district does not provide other employee benefits. |
| 2 | Develop a job description and an objective set of evaluation measures for the chief appraiser position and establish an annual evaluation process based on objective measures. |
Complete |
|
The chief appraiser developed the draft job description and evaluation format and presented it to the board for approval. In developing both documents, the chief appraiser obtained examples from various entities such as Sabine County, Angelina County and Hemphill ISD. He then combined elements from each of the samples into a single job description and evaluation format. The chief appraiser finalized the job description and evaluation format in July 2006. At its July 2006 meeting, the board adopted the chief appraiser job description and evaluation form. It also completed the chief appraiser’s evaluation using the new format. |
| 3 | Determine those taxing units eligible to vote for the board of directors according to Section 6.03, Tax Code. |
Complete |
|
The chief appraiser determined the eligible taxing entities based on Texas Property Tax Code Section 6.03. Notices to eligible taxing entities were sent on Nov. 17, 2005. |
| 4 | Establish an agricultural advisory board to advise the chief appraiser on the valuation and use of land designated for agricultural use as provided by Section 6.12, Tax Code. |
Complete |
|
The chief appraiser identified three individuals to serve on the board and presented this list to the CAD board of directors at its July 2006 meeting. The CAD board of directors approved the list as presented in July 2006. The chief appraiser indicated the agriculture appraisal advisory board did not meet in 2006 after it was established in July. The first meeting with the advisory board was held in March 2007. |
2.2 Appraisal District Policies, Procedures and Operations
| Rec. # | Recommendation | Implementation Status | If Not Complete, Projected Completion Date | Description of Actions Taken to Date |
|---|---|---|---|---|
| 5 |
Develop a comprehensive written policy and procedures manual for district operations. |
In Progress | December 2007 |
The chief appraiser developed the manual by obtaining an example from another appraisal district and customizing it for Sabine CAD use. The initial ASR recommendation stated the manual should include accounting procedures; this function was not included in the operations manual. PTD recommends the chief appraiser monitor progress to ensure that the target completion date is met. |
2.3 Information Processing Systems
| Rec. # | Recommendation | Implementation Status | If Not Complete, Projected Completion Date | Description of Actions Taken to Date |
|---|---|---|---|---|
| 6 |
Develop a plan with project specifications and a timeline for completion of the conversion of the appraisal records from the hard-copy appraisal files to the data processing system. |
In Progress | December 2007 |
Data entered by temporary workers had errors that CAD staff were forced to correct. Data now are being entered by CAD employees on an ad hoc basis and should be completed by December 2007. PTD recommends the chief appraiser monitor progress to ensure the target completion date is met. |
2.4 Staffing, Personnel Qualifications and Positions
| Rec. # | Recommendation | Implementation Status | If Not Complete, Projected Completion Date | Description of Actions Taken to Date |
|---|---|---|---|---|
| 7 |
Develop a personnel policy manual for Sabine CAD with job descriptions and an annual personnel performance evaluation system to use in evaluating all district staff. |
Complete |
In April and May 2006, the chief appraiser obtained example job descriptions, manuals and evaluation formats from various entities. The chief appraiser used these to expand and update the existing CAD manual. The chief appraiser revised and formalized the current descriptions. The chief appraiser also obtained example evaluation forms from various governmental entities. He combined elements from these examples to customize the formats for use at Sabine CAD. The chief appraiser submitted the job descriptions, evaluation forms and employee handbook for board approval at its July 2006 meeting. The board approved all documents. The chief appraiser used the new evaluation forms for employee evaluations conducted in January 2007. |
2.5 Generally Accepted Appraisal Practices; Equality and Uniformity of Appraisal Standards
| Rec. # | Recommendation | Implementation Status | If Not Complete, Projected Completion Date | Description of Actions Taken to Date |
|---|---|---|---|---|
| 8 |
Adopt a detailed reappraisal plan that, at a minimum, includes the vital steps in the process, explains exactly how and when the steps will be executed and explains how sufficient resources will be allocated to follow the plan. |
In Progress |
December 2007 |
The chief appraiser developed a reappraisal plan, but it does not meet the requirements outlined in the ASR. The CAD must revise the plan to include more specific detail and resubmit it to PTD. |
| 9 |
Prepare and issue to each appraiser detailed appraisal procedures manuals that provide local procedures and practices for each type of property the staff appraises. |
In Progress | December 2007 |
The chief appraiser and field appraiser developed and completed the appraisal manuals in December 2006, but they did not contain information related to commercial or industrial property. PTD recommends the CAD revise its manuals to contain the details requested in the ASR. |
| 10 |
The district should perform an analysis of its current residential property classification system for both residential homes and residential lots and develop a more detailed valuation method with descriptions of the different classes of residential homes and residential lots. |
Complete |
The chief appraiser and field appraiser analyzed and updated the schedules in October 2006. Based on the analysis, the CAD expanded the number of classes from seven to eight and increased the square footage ranges from four to 17. The CAD loaded the classifications schedules in the appraisal system in December 2006. |
|
| 11 |
Establish comprehensive written ratio study procedures that allow proper reappraisal and maintenance planning. |
In Progress | December 2007 |
The chief appraiser performs ratio studies, but they are limited because they are based on limited sales data. PTD recommends the chief appraiser document the process and steps for staff to follow in conducting ratio studies, submit it to the board for approval and then provide it to PTD. |