Appraisal Standards Review
Starr County Appraisal District Follow-Up Report
July 2007
Introduction
In July 2004, Roma Independent School District (Roma ISD), in Starr County, Texas, was identified as one of 54 school districts in the state meeting the criteria that initiate an Appraisal Standards Review (ASR) of the county appraisal district that serves them. In December 2005, the Comptroller’s Property Tax Division (PTD) released the results of the ASR of Starr County Appraisal District (Starr CAD).
The report made 12 recommendations to improve Starr CAD’s appraisal practices and operations. ASR’s are intended to determine why the local values were deemed invalid and to recommend changes in operations and management that would improve appraisal practices. The Starr CAD review 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 and equality and uniformity of appraisal standards.
At the time of the review, the challenges facing Starr CAD included the lack of formal appraisal procedures and lack of documentation in most areas of operations, including the reappraisal of property on a timely basis.
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’s office determines, under Section 403.302 of the Government Code, 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 is in compliance with the statute if it has taken remedial action to implement the recommendations in the ASR. Remedial action means that the CAD has corrected or intends to correct, remedy or improve the deficiencies identified in the ASR. The CAD can demonstrate that it has taken remedial action by having implemented or nearly completed the majority of the recommendations within a year of the report’s release.
The Comptroller recognizes that some ASR recommendations may 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 in good faith to implement the recommendations, the Comptroller’s office will continue to work with the CAD to achieve full compliance. CADs that complete all recommendations by the one-year anniversary have met their statutory obligations and will not require additional monitoring.
The PTD team reviewed documentation submitted by Starr CAD in December 2006 and conducted a follow-up on-site visit to assess its progress in implementing the report recommendations. The review team documented that Starr CAD has substantially completed six of the 12 recommendations. The CAD has made considerable progress on four other recommendations, but it has not implemented two recommendations.
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 Starr CAD’s efforts to date, although considerable, are not complete. PTD will continue to monitor the CAD’s progress in implementing the six remaining recommendations.
History and Significant Events
PTD performed the ASR of Starr CAD because the 2003 Property Value Study (PVS) found the local property values of one of the three CAD school districts (Roma ISD) to be invalid and the school district was eligible for the grace period provided by Section 403.3011 of the Government Code. Within Roma ISD, single-family residential properties sampled contributed to the overall finding of invalid value, with a weighted mean ratio of .9219.
The PVS tested six property categories in Roma ISD, including:
- single-family residences, making up 36.3 percent of the school district’s value with a weighted mean ratio of .9219;
- vacant lots, making up 6.9 percent of the district’s value with a weighted mean ratio of .8288;
- rural real properties, making up 7.7 percent of the school district’s value with a weighted mean ratio of .9320;
- commercial real property, making up 7.4 percent of the school district’s value with a weighted mean ratio of .9818;
- minerals, making up 22.3 percent of the school district’s value with a weighted mean ratio of .9682; and
- utilities, making up 8.8 percent of the school district’s value with a weighted mean ratio of .9555.
The CAD’s reappraisal efforts in 2004 and 2005 produced positive results as all three of the CAD’s school districts received local value in the final 2004 and 2005 PVS. However, the 2006 PVS shows invalid local values for Rio Grande City and Roma ISDs
What Remains to Be Done
The Appendix that follows lists the 12 recommendations identified in the ASR, with a summary of the actions taken to date. The Comptroller’s office acknowledges the work Starr CAD has performed over the last year and encourages it to implement all remaining recommendations.
The chief appraiser states that the CAD has worked hard to implement the recommendations, especially with regard to the mapping system, the reappraisal plan and employee evaluations.
The chief appraiser indicated that the lack of available sales information was a significant barrier in addressing several of the recommendations.
Further action is required to address six recommendations fully.
Recommendation 1: Expand the detail of the budget presented to the Board of Directors for adoption to include the salary and benefits for each employee and a detailed list of each capital expenditure.
The CAD budget for 2007 contains line item budget expenditures labeled “Construction Fund” and “Capital Expense” with budgeted amounts of $50,000 and $1,000, respectively. The item labeled “Construction Fund” was budgeted to complete a new building for the CAD, scheduled for completion in May 2007. This amount also includes funds for new computers and furniture. The “Capital Expense” item is a contingency fund for any capital items needed during the year.
Texas Property Tax Code Section 6.06 requires appraisal district budgets to list each proposed capital expenditure. As currently presented, it is unclear that the line item expenditure labeled “Construction Fund” is for a new building and the amounts designated for computers and furnitures are not itemized.
After the review team’s onsite visit, the CAD developed a detailed listing of the salary and benefits associated with each position, but the chief appraiser has not yet presented that information to the board.
To complete this recommendation, the CAD should include an explanation for each capital expenditure and add the detail listing in its budget. The CAD can easily do this by amending its current budget and ensuring future budgets have the required detail. The CAD should mail a copy of the amended budget to PTD no later than July 2007.
Recommendation 2: Develop a procedure for creating and monitoring contracts, put deliverables and due dates in all future contracts and tie payments to all deliverables.
Starr CAD’s current contract for professional appraisal services does not conform to the International Association of Assessing Officers (IAAO) Standard on Contracting for Assessment Services. Specifically, the appraisal services contract does not contain dates for when appraisals are to be completed and delivered to the CAD, does not tie payments to deliverables does not contain provisions for monitoring the contractor’s performance.
The CAD’s contract for “on-line” data processing also does not include provisions for monitoring performance.
The board approved the current contracts covering the years 2006 and 2007 in May 2005, before the release of the ASR in December 2005. The board did not revise the existing contract because the contractor has always performed in a timely manner. The board intends to revise subsequent contracts to comply with IAAO Standard on Contracting for Assessment Services. The contractor has expressed a willingness to make the needed modifications when submitting contracts for 2008 and 2009.
In November 2006, the board approved a contract with a mapping firm for mapping all real properties in the CAD. This contract did not tie payments to deliverables and did not include contract monitoring provisions.
To complete this recommendation, the chief appraiser should develop a written procedure on contract development and monitoring. The board should amend all current contracts in accordance with the IAAO Standard on Contracting Assessment Services and include provisions for tying payments to deliverables and contract monitoring. The CAD should mail a copy of the written procedure and amended contracts to PTD no later than July 2007.
Recommendation 5: Implement a complete automated mapping system, integrate the mapping and appraisal systems and acquire the proper hardware for all staff.
Starr CAD has made significant progress in implementing this recommendation. In June 2006, the chief appraiser informally solicited proposals for a mapping system. He considered proposals from firms with experience in the field. The CAD received three bids and selected a firm with the second-lowest price but that had an office in nearby McAllen. The branch office in McAllen was the key factor in selecting the firm. The board approved hiring the firm on Nov. 2, 2006, at the regular board meeting. The chief appraiser signed the contract on Nov. 30, 2006. Implementation began in December 2006 with an expected completion date in 2008. The review team observed the implementation process during the onsite visit at the end of December 2006.
To complete this recommendation, the chief appraiser should develop quarterly status reports on the progress of the mapping system. These status reports should include how the CAD plans to integrate the mapping system with the appraisal system. The CAD should send the first status report to the PTD no later than July 2007, and then every three months until the CAD completes implementing the system, no later than Dec. 31, 2008.
Recommendation 9: Develop an appraisal manual that includes comprehensive instructions on how to perform an appraisal for typical property in Starr County.
The assistant chief appraiser developed a seven-page manual that addresses appraiser interaction with property owners and the preparation of paperwork, but it does not provide instructions on how to perform appraisals or guidelines for using sales and ratio studies. The manual does not provide instructions on how to use the appraisal methods described in the reappraisal plan or how to update relevant property characteristics. The assistant chief appraiser is aware of the need to provide this additional information but does not know how to develop the needed instructions.
The assistant chief appraiser also provided copies of schedules used by the appraisers in the field, some of which the CAD last updated in 1995, but there are no guidelines or instructions on their use.
The CAD should consider consulting with other appraisal districts for guidance in this area. To complete this recommendation, the chief appraiser must prepare a detailed procedures manual that provides local policies and procedures for each type of property the staff appraises and should mail a copy of the manual to PTD no later than July 2007.
Recommendation 10: Establish written procedures for gathering and analyzing sales.
The CAD has not developed written procedures for gathering and analyzing sales data because the appraisal district does not have access to sales information. Many rural CADs face this problem due to limited sales in the county, the number of non-arms-length transactions and reluctance of buyers to report sales information. The current informal process includes sending out a sales survey to buyers once a year and making telephone calls to developers for the value of lots. The CAD also talks to a local contractor regarding changes in ownership and improvements.
Given these barriers, the CAD needs to expand its current efforts to gather sales data. Starr CAD sends out sales surveys once a year and has not taken steps to request information from developers and contractors. Other CADs, such as Hunt CAD, send out sales surveys to both buyers and sellers within 30 days of the sale and have indicated increased numbers of responses due to the timeliness of the request and the fact that it contacts both buyers and sellers. The Comptroller’s initial review also gave the CAD the option of providing the state with deed information, which the state could then use to give the CAD confirmed sales data.
To implement this recommendation, the chief appraiser should first determine how to best identify sales information and then develop written procedures on the actual steps in the process. The CAD should consider the steps taken in other CADs to increase sales reporting as well as the Comptroller’s suggestion to provide it with sales and deed information. The CAD should mail a copy of the written procedure to PTD, no later than July 2007.
Recommendation 12: Develop a process for collecting income data and use the data to develop income schedules for valuing properties.
The CAD has not implemented a process for collecting income data or developed income schedules because it does not have the data or resources needed to do this. The CAD’s reappraisal plan specifically provides for the CAD to apply the income approach to real properties that are typically viewed by market participants as “income-producing.”
To implement this recommendation, the chief appraiser should first determine the best means to obtain the needed, skilled resources to use the income approach for appropriate properties like hotels and apartments, as well as develop a documented process that addresses the expectations set out in the CAD’s reappraisal plan. The CAD may want to consider contracting with a firm to perform these appraisals, which it already does for utilities. The CAD should mail a copy of the documented process in the form of a written procedure to PTD, no later than July 2007
Appendix
Starr County Appraisal District
Appraisal Standards Review Implementation Status
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 presented to the Board of Directors for adoption to include the salary and benefits for each employee and a detailed list of each capital expenditure. | In Progress | July 2007 |
Starr CAD’s chief appraiser has expanded the budget format to include the salary and benefits for each employee and provided additional detail for the capital expenditures. The chief appraiser submitted the expanded budget detail for benefits to the board at the regular meeting on Jan. 26, 2007, as an information item. |
| 2 | Develop a procedure for creating and monitoring contracts, put deliverables and due dates in all future contracts and tie payments to all deliverables. |
Not Implemented | July 2007 |
Starr CAD has not yet developed a procedure for creating and monitoring contracts. The current process is to have all contracts reviewed by the CAD’s general counsel before submitting them to the board for approval. The CAD’s existing contracts for appraisal services and data processing were signed in May 2005. The chief appraiser plans to include deliverables and due dates in the subsequent contracts and to tie payments to all deliverables. |
| 3 | Implement an audit rotation policy, develop specifications for a financial audit and solicit proposals for audit services. |
Complete |
The CAD has developed a formal audit rotation policy that the board approved on Jan. 26, 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 |
|---|---|---|---|---|
| 4 |
Develop a comprehensive policy and procedures manual for district operations. |
Complete |
The chief appraiser, working with the assistant chief appraiser, developed a comprehensive set of operating policies and procedures for CAD operations. This manual includes a description of files to be maintained with related forms, accounting policies and procedures, purchasing policies and procedures, inventory control and mail processing. The chief appraiser submitted the manual to the board, and the board approved the manual at its regular meeting on Oct. 19, 2006. |
2.3 Information Processing Systems.
| Rec. # | Recommendation | Implementation Status | If Not Complete, Projected Completion Date | Description of Actions Taken to Date |
|---|---|---|---|---|
| 5 |
Implement a complete automated mapping system, integrate the mapping and appraisal systems and acquire the proper hardware for all staff. |
In Progress | December 2008 |
The CAD is encouraged to continue its efforts until the mapping is complete and to develop procedures to integrate the mapping system into CAD appraisal activities. The CAD should send the first status report to the PTD no later than July 2007, and then every three months until the CAD completes implementing the system in 2008. |
2.4 Staffing, Personnel Qualifications and Positions
| Rec. # | Recommendation | Implementation Status | If Not Complete, Projected Completion Date | Description of Actions Taken to Date |
|---|---|---|---|---|
| 6 |
Reassess existing job descriptions to ensure job descriptions match staff duties; develop additional job descriptions; and adopt an annual personnel performance evaluation system to use in evaluating all district staff |
Complete |
In October 2006, the chief appraiser and the assistant chief appraiser reviewed and updated employee job descriptions, and supervisors performed evaluations of all employees. The CAD developed a written employee evaluation procedure and form that describes the purpose of the system. |
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 |
|---|---|---|---|---|
| 7 |
Develop procedures for agriculture valuation and annually calculate productivity values for land designated for agricultural use |
Complete |
The chief appraiser developed comprehensive procedures for agricultural valuations and calculated productivity values for 2006. In April 2006, the chief appraiser completed the development of the procedures for agricultural production and market values for 2006 and five-year averages for different uses of land in the CAD. This procedure was submitted to the board and approved on Nov. 2, 2006. |
|
| 8 |
Develop and adopt a comprehensive reappraisal plan. |
Complete |
The chief appraiser, working with the assistant chief appraiser, reviewed reappraisal plans of three other CADs and developed a plan that was tailored to address the needs of Starr CAD. The chief appraiser began the process in spring 2006. The chief appraiser submitted the completed plan to the board for approval on Sept. 14, 2006, following a public hearing on the same date. The CAD posted notice of the hearing and published it in the local newspaper. The reappraisal plan meets the requirements of the Texas Property Tax Code and Standard 6 – 2006 Uniform Standards of Uniform Appraisal Practice (USPAP). The plan includes the following:
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| 9 |
Develop an appraisal manual that includes comprehensive instructions on how to perform an appraisal for typical property in Starr County. |
In Progress | July 2007 |
The chief appraiser developed a seven-page manual, but it does not provide information on how to perform an appraisal or the information described in the CAD reappraisal plan. The CAD should take immediate steps to develop a practical manual that staff can use to guide appraisal activities. |
| 10 |
Establish written procedures for gathering and analyzing sales. |
Not Implemented | July 2007 |
The chief appraiser has not developed written procedures for gathering and analyzing sales because the CAD does not have access to actual sales. The CAD should consider the steps taken in other CADs to increase the sales reporting. |
| 11 |
Inspect business personal property accounts and develop an independent valuation of the business personal property. |
Complete |
The CAD has identified the USPAP standards to be used in the independent valuation of business personal property and designated one of its appraisers as a personal property appraiser who, working with the assistant chief appraiser, has begun to inspect businesses. The two appraisers have started by going to new commercial businesses in the area, including the new bank and supermarket. |
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| 12 |
Develop a process for collecting income data and use the data to develop income schedules for valuing properties. |
In Progress | July 2007 |
The assistant chief appraiser has developed an outline of the seven steps appraisers can use in the development of income schedules. The chief appraiser submitted the outline to the board in October 2006, and the board approved it. However, the outline is not sufficient to guide the CAD in collecting income data. The chief appraiser and assistant chief appraiser suggested that the CAD does not have the data or resources to develop income schedules. The CAD may want to consider contracting with an external firm to perform these appraisals, which it already does for utilities. |