Findings of the Appraisal Standards Review
This chapter of the report addresses commendations, findings and recommendations from the ASR of the Stonewall CAD.
Stonewall CAD formed in 1981 and became active in 1982. As of January 2009, Stonewall CAD has a total of two full-time staff positions, with one supervisory position and no part-time positions. Two positions are full-time appraisers, including the chief appraiser. Stonewall CAD has a contract with a professional appraisal services firm. The company appraises minerals, utilities and industrial property in the CAD.
The Comptroller's office asked the CAD's board of directors to complete a 21-question written survey covering board policies and procedures; chief appraiser and staff; and property appraisals. Six of the seven directors prepared responses to the questionnaire at the Aug. 5, 2008, meeting, giving Stonewall CAD generally high marks and responding in the affirmative to most questions.
All respondents agreed that the board-approved reappraisal plan complies with Property Tax Code Section 25.18 requirements and disagreed that board member training requirements are stipulated in board policy. Five members commented that the state does not have specific training requirements for CAD board members. All respondents agreed that the board maintains a comprehensive, well-documented set of policies and procedures to guide CAD operations. All respondents disagreed that the board uses measurable criteria to evaluate the chief appraiser annually. They agreed that the board has a written job description and performance plan for the chief appraiser and an open line of communication between the board and chief appraiser. All respondents agreed that the chief appraiser effectively manages the day-to-day CAD operations and have confidence in the chief appraiser. Each respondent agreed that staff appraisers are knowledgeable, perform their jobs well and have the skills, experience and credentials to appraise property appropriately.
As part of the review process, PTAD makes recommendations to address challenges identified during its review of a CAD. Below are recommendations addressing key challenges associated with Stonewall CAD's appraisal activities.
Stonewall CAD has not updated residential building schedules and rural land schedules as needed to accurately reflect local trends in market value.
IAAO's Standard on Mass Appraisal of Real Property, Section 4.6.1, Single-Family Residential Property states the following:
The sales comparison approach is the best approach for single-family residential property, including condominiums. Automated versions of this approach are highly efficient and generally accurate for the majority of these properties. The cost approach is a good supplemental approach and should serve as the primary approach when sales data available are inadequate. The income approach is usually inappropriate for mass-appraisal of single-family residential properties, because most of these properties are not rented.
When appraising land, IAAO's Standard on Mass Appraisal of Real Property, Section 4.5, Land Valuation, states, in summary, that land should be physically inspected regularly and values reviewed annually.
According to the chief appraiser, the CAD uses the market data to appraise residential property, but recorded only 14 single-family residential sales in 2007. Fewer than 20 sales were recorded in 2006 and 2005. Lack of sufficient market data may be contributing to inadequate calibration of the CAD's residential building schedules. The 2007 PVS showed single-family residences in Aspermont ISD appraised at 94.47 percent of market value. Preliminary results of the 2008 PVS show an appraisal ratio of 79.82 percent.
IAAO's Property Appraisal and Assessment Administration, Chapter 20, Sales Analysis and Mass Appraisal Performance Analysis, states the following:
Stratification permits analysis of mass appraisal performance within and between property groups.
Exhibit 1 shows the 2005-07 PVS and 2008 Preliminary PVS weighted mean ratios by value stratum for single-family residences in Aspermont ISD and indicates a lack of appraisal uniformity between value strata.
Weighted Mean Ratios by Value Stratum
Single-Family Residences, Aspermont ISD
2005-07 PVS, 2008 Preliminary PVS
|Stratum||2005 PVS||2006 PVS||2007 PVS||2008 Preliminary PVS|
Source: Texas Comptroller of Public Accounts, 2005-07 PVS, 2008 Preliminary PVS, Aspermont ISD.
Exhibit 1 shows the CAD consistently appraised the lower stratum of homes below market value, an indication that the CAD's residential building cost schedules are not properly calibrated. The chief appraiser stated she knew the older homes in the CAD were inaccurately appraised because people from out of town were paying premium prices to own a house in the country. Lower quality class residential schedules have not been updated since 1995. Residential schedules for some high quality class homes were updated in 2002, 2004 and 2006 yielding higher appraisal ratios as shown in strata 3-5 for years 2005-07. Residential schedules were not updated in 2008, but the chief appraiser stated all residential schedules will be re-evaluated in 2009.
The CAD's rural land schedules produced below market value appraisals for the past three years. PVS results show rural land market values accelerating, but the CAD's appraisal ratios declining.
Exhibit 2 shows weighted mean ratios for Category D3: Non-Qualified Acres and Farm and Ranch Improvements from the 2005-07 PVS and 2008 Preliminary PVS for Aspermont ISD.
Weighted Mean Ratios
Non-Qualifying Acres and Farm/Ranch Improvements
2005-07 PVS, 2008 Preliminary PVS
|Total CAD Value||Total PVS Value||Ratio|
|2008 Preliminary PVS||$10,227,233||$15,133,520||0.6758|
Source: Texas Comptroller of Public Accounts, 2005-07 PVS, 2008 Preliminary PVS, Aspermont ISD.
Exhibit 2 shows the CAD's land schedules do not produce market value appraisals and need to be completely re-worked. Preliminary 2008 PVS results show CAD land values increased, but remain significantly below market value.
The CAD's ratio study results in Exhibit 3 show similar results indicating rural land is valued below market.
Rural Land Ratio Study Results
Source: Stonewall CAD In-house Ratio Studies 2005-07.
Better use of ratio studies could help the CAD improve its residential and land schedules. When sales data is limited, however, the CAD needs to test its schedules by other means.
To improve residential and land appraisal processes, the CAD should do the following:
- update rural land schedules and test them against sales of vacant tracts;
- check residential building schedules for accuracy versus sales and local construction costs; and
- compare the CAD's residential and land schedules with neighboring CADs.
By updating residential and land schedules, the CAD can help ensure that accurate and uniform values are produced.
Brazoria CAD, for example, improved its appraisal schedules by plotting sales on maps to identify market areas needing updated schedules, improving data collection procedures and observing how neighboring CADs develop and maintain appraisal schedules. These efforts resulted in higher levels of appraisal performance.
Gather and use local sales and construction costs to update residential building and rural land schedules.
Stonewall CAD does not effectively use ratio studies to measure appraisal performance.
Property Tax Code Section 23.01 states the following:
(a) Except as otherwise provided by this chapter, all taxable property is appraised at its market value as of January 1.
(b) The market value of property shall be determined by the application of generally accepted appraisal methods and techniques. If the appraisal district determines the appraised value of a property using mass appraisal techniques, the mass appraisal standards must comply with the Uniform Standards of Professional Appraisal Practice. The same or similar appraisal methods and techniques shall be used in appraising the same or similar kinds of property. However, each property shall be appraised based upon the individual characteristics that affect the property market value.
IAAO's Standard on Ratio Studies, Section 4.6, Evaluation and Use of Results, states the following:
A properly designed ratio study is a powerful tool for analyzing appraisal performance and suggesting strategies for improvement.
Ratio studies conducted by the CAD show rural land is not appraised at market value. Exhibit 4 shows the results of CAD-generated ratio studies in Aspermont ISD for rural land for the years 2005-07.
Rural Land Ratio Study Results
Source: Stonewall CAD In-house Ratio Studies 2005-07.
The CAD's own ratio study results in Exhibit 4 show the CAD is not appraising rural land at market value. For PVS purposes, acceptable appraisal ratios fall between 95 percent and 105 percent of market value. Category D: Rural Real property comprises 54.3 percent of the CAD's total appraised value.
Exhibit 5 shows PVS results for Category D3: Non-Qualified Acres and Farm and Ranch Improvements, from the 2005-07 property value studies for Aspermont ISD.
Non-Qualifying Acres and Farm/Ranch Improvements
|2005 PVS||2006 PVS||2007 PVS|
Source: Texas Comptroller of Public Accounts, 2005-07 Property Value Studies, Stonewall CAD.
Below market value appraisals of rural land contributed to Aspermont ISD's invalid findings in the 2007 PVS. Results of the 2007 PVS were not appealed.
The COD is a statistical tool that measures appraisal uniformity and consistency. It determines how tightly or loosely individual sample ratios are clustered around the sample's median ratio. A lower COD indicates better appraisal uniformity and consistency. The IAAO recommended COD for rural land appraisals is 20 or less. In 2007, the PVS showed the COD for Category D, Rural Real in Stonewall CAD to be 27.79. When compared to the 8.23 COD in 2005 and 21.18 COD in 2006, the 2007 COD of 27.79 indicates increased appraisal inconsistency and lack of uniformity.
Research conducted by the Real Estate Center at Texas A&M University in 2008 indicated rural land values in Stonewall and surrounding counties rose 20 percent from 2006 to 2007 and by 50 percent from 2005 to 2007.
The Texas Chapter of the American Society of Farm Managers and Rural Appraisers in its report, Trends in Texas Rural land Values for the Year 2007, stated farmland prices in Stonewall and neighboring counties continue to increase because of good production years and high commodity prices.
The chief appraiser stated she tried to gradually increase land market values over the past few years. She stated that because many of the sales in the CAD's ratio studies may not have been properly adjusted for personal property or other non-real estate items included the sales, ratio study results were not considered accurate and not used for appraisal maintenance. The chief appraiser stated she knew the CAD's land values were low and did not appeal the 2007 PVS. In 2008, using information from Realtors and sales of vacant land, the chief appraiser updated all rural land schedules.
The importance of establishing market values on land qualifying for agricultural use becomes evident when qualified acreage comes out of production and rollback taxes are assessed. Property Tax Code Section 23.55 requires additional taxes be imposed when land appraised at productivity value changes use. Rollback taxes are based on the difference between taxes that would have been imposed on the land at its market value and taxes that were assessed based on productivity values for each of the five years preceding the change in use, plus 7 percent interest annually. If the CAD's market values are low, taxing jurisdictions cannot collect the total amount of rollback taxes due them.
The 2007 PVS showed Category A: Single-Family Residential in Aspermont ISD appraised at 94.47 percent of market value, down from 103.34 percent in 2006. The chief appraiser stated residential building schedules are updated when there are enough sales to justify doing so. A review of the CAD's residential building schedules showed updates occurred to various residential property classes in 2002, 2004 and 2006. In 2007, the CAD recorded 14 single-family residential sales, but not enough within any one particular class to justify a schedule change, according to the chief appraiser. The 2007 PVS identified single-family residential in Aspermont ISD valued below $18,690 as being appraised at 82 percent of market value. Of Aspermont ISD's reported 591 single-family residences, 373 or 63 percent, fall within the stratum of houses valued below $18,690. The chief appraiser stated it is difficult to determine the market value on many of the lower-valued houses because there are not comparable sales and buyer motivation is unknown.
By improving ratio study methods, the CAD can ensure necessary adjustments are made to produce values at or near the market. Effective CADs conduct frequent ratio studies with associated appraisal maintenance, ensuring necessary adjustments are made to produce values at or near market.
IAAO's Standard on Ratio Studies, Section 188.8.131.52, in summary states CADs should use ratio study results to monitor appraisal performance, establish reappraisal needs, test appraisal procedures, define market areas and update appraisals. According to its reappraisal plan, Stonewall CAD is to follow IAAO standards regarding appraisal practices and procedures.
Nueces CAD, for example, has a computerized appraisal system and conducts ratio studies within property classes by ISD and county to determine appraisal performance. The CAD bases reappraisal and value maintenance decisions for some properties or locations on the ratio study results.
Improve methods of using ratio studies to eliminate unequal levels of appraisal and to make certain that all property categories are appraised at current market value.
Methods of improving ratio studies should include only using sales that have been properly adjusted.
Stonewall CAD does not have written procedures for analyzing and adjusting sales.
IAAO's Standard on Ratio Studies, Section 6.4, Screening Sales, addresses the importance of analyzing and adjusting sales, stating:
To help analysts make wise and uniform judgments, screening procedures should be in writing, and each sales analyst should be thoroughly familiar with these procedures as well as underlying real estate principles.
The CAD's deputy chief appraiser routinely mails sales surveys to buyers for all recorded deed transactions. Deed transactions serve as the basis for the CAD's sales database. The appraiser enters the grantor, grantee, deed volume and page, sales date and sales price, if shown, on the deed. The surveys request information such as the sales price, down payment, type of financing and type of improvement or personal property included in the sale. The chief appraiser and deputy chief appraiser use this information to determine if a sale needs adjusting and meets the requirements of a market transaction. The chief appraiser said the number of surveys mailed each month varies, but estimates 75-100 letters are mailed annually with a 25-30 percent response rate. Other sources of sales information come from local realtors. The CAD makes its sales information available to PTAD.
Guidelines for analyzing and adjusting sales are not written, but based on appraiser knowledge and experience. The chief appraiser has 15 years of appraisal experience and the deputy chief appraiser has 12 years of appraisal experience. Both are registered professional appraisers. The chief appraiser stated there has never been an abundance of sales in the county, and she and the deputy chief appraiser do their best to screen sales using information provided by buyers and realtors and by conducting site inspections, but this process is very time-consuming and sometimes sales are not properly adjusted. For example, large rural tract sales may contain livestock, game fencing or machinery and equipment and the chief appraiser states determining what value these items contributed to the sale price is difficult. It should be noted that while the CAD's sales survey letter asks if items other than real estate were included in a sale, it does not ask the respondent to provide a value for the non-real estate items. The CAD's reappraisal plan states sales must be verified and ratio studies used to test appraisal accuracy and uniformity, but the reappraisal plan does not contain the criteria for sales verification or provide instructions for performing adjustments.
According to IAAO's Standard on Ratio Studies, Section 6.4.1, Sales Generally Invalid for Ratio Studies, examples of non-market sales include the following:
- sales involving government entities and public utilities;
- sales involving charitable, religious or educational institutions;
- sales involving financial institutions;
- sales between relatives or corporate affiliates;
- sales of convenience;
- sales settling an estate;
- forced sales; and
- sales of doubtful title.
IAAO's Standard on Ratio Studies, Section 6.5, Adjustments to Sales Prices, requires that sales be analyzed to determine if adjustments are needed for personal property, financing, assumed leases and time.
Without common guidelines for determining how to verify, confirm and adjust sales, the CAD risks using sales for appraisal maintenance that do not accurately reflect current market value. Confirmation and validation of sales is critical in determining local market values, especially for rural land. Aspermont ISD received an invalid finding in the 2007 PVS, primarily because Category D3: Non-Qualifying Acres and Farm and Ranch Improvements tested with a weighted mean ratio of 0.4927.
Written guidelines help appraisers in selecting and adjusting sales for assigning values and as evidence before the ARB. Knowing what analysis needs to be done, when to perform the analysis and how to perform it is key to maintaining continuity and a high level of appraisal accuracy. By providing comprehensive, written guidance to appraisal staff, Stonewall CAD can help assure that sales data is applied consistently as valid indicators in achieving market value, particularly for rural land.
Nueces CAD, for example, has a written market analysis procedures manual that describes the processes used to obtain sales information and the procedures necessary for sales confirmation. Written procedures assure the market analyses are done consistently, regardless of personnel changes.
Establish written procedures for analyzing and adjusting sales data.
Procedures should include revising the CAD's sales questionnaire to request the respondent to submit an estimate of value for non-real property included in the sale.
Stonewall CAD's maps do not comply with Comptroller Rule 9.3002.
Section 9.3002 of the Texas Comptroller's Property Tax Rules addresses mapping as follows:
(a) All appraisal offices and all tax offices appraising property for purposes of ad valorem taxation shall develop and maintain a system of tax maps covering the entire area of the taxing units for whom each office appraises property.
(b) Each tax map system shall be drawn to scale and delineated for lot lines or property lines or both, with dimensions or areas and identifying numbers, letters, or names for all delineated lots or parcels.
(c) Each tax map shall be divided into sections drawn at a scale large enough to serve the purposes of property assessment. Developed or subdivided areas may be drawn at a different scale than undeveloped or unsubdivided tracts.
(d) The tax map, each section thereof, and each parcel thereon shall be assigned numbers in accordance with a parcel identification numbering system. Such numbers shall be recorded on the tax map, section, and parcel. The identifying number for each parcel as recorded on the tax map shall also be recorded on the appraisal card maintained for that parcel.
(e) The tax map system shall be annually updated to incorporate any new subdivisions or property transfers as indicated by the filing of subdivision plats or deeds with the county clerk's office of the county or counties in which the taxing units for whom each office appraises property are located.
(f) Any information required by these sections may be maintained in electronic data processing records rather than physical documents.
(g) Development of tax map systems (or substantial progress toward development) shall be completed by January 1, 1983.
(h) Appraisal offices and tax offices failing to establish a tax map system as required in this section may be judged to be in compliance upon a showing to the board that a tax map system substantially equivalent to that required in this section has been established.
The IAAO Property Appraisal and Assessment Administration, Chapter 1, The Ad Valorem Tax System, points out that an accurate set of maps showing every parcel of real property is the most important tool in identifying and locating taxable property. Chapter 7, Land Valuation, notes that a complete set of maps showing parcel boundary lines is required for land appraisals and Chapter 17, Mapping System Management, states, "A good mapping system is essential for the location, identification and inventory of all parcels within a jurisdiction." According to the chief appraiser, the CAD uses county maps purchased from a map company, soil maps and town site plat maps. The most recent county maps were purchased in 2004 and show ownership at the time the maps were made. Ownership changes are not made on this map, but are maintained in the automated appraisal system. The undated plat maps are old and show town site lots and blocks. Soil maps are used to identify soil types.
In the 1990s, the chief appraiser developed two map books. One book is devoted to town site maps with each block represented on a single page. Each page identifies the block number and shows the lot locations within each block. The chief appraiser manually updates the ownership for each lot when changes occur and records the property identification number from the CAD's automated appraisal system on each parcel.
The second book contains ownership information for land located in abstracts outside of platted town sites. The book does not show graphic representation of parcels, as seen in the first book, but shows ownership based on an abstract's legal description. For example, the page dedicated to Section 12, Block D, H&TC RY Survey, Northern-half of Abstract #1838, containing 320 acres shows three property owners, the year each property was purchased, the number of acres owned by each person (12.16 acres, 5.00 acres and 302.84 acres) and the property identification number for each parcel. The deputy chief appraiser maintains ownership in the CAD's appraisal system when deeds are filed with the county clerk and the chief appraiser keeps ownership updated in the two map books.
The CAD does not have a cartographer and the chief appraiser stated the CAD's maps are not redrawn to show parcel splits or combinations. She stated the CAD does the best it can with limited funds. The chief appraiser and deputy chief appraiser are county natives and can locate most property in the county without the use of maps.
Exhibit 6 shows the required mapping elements set forth by Comptroller Rule 9.3002 and the status of the CAD's maps.
Compliance with Rule 9.3002
On Tax Maps
|Comptroller Rule 9.3002Mapping Requirement||Description of CAD's Level of Compliance with Specific Sections of Rule 9.3002|
|Does the CAD draw its tax map system to scale and delineate lot and property lines with dimensions or areas and identifying numbers, letters or names for all delineated lots or parcels?||Not all maps are drawn to scale, delineated for property lines or contain identifying numbers, letters or names.|
|Does the CAD divide the tax map into sections drawn at a scale large enough to serve the purposes of property assessment?||Maps are divided into sections, but not all maps are drawn to scale.|
|Does the CAD tax map assign each section and each parcel numbers in accordance with a parcel identification numbering system?||Most, but not all, maps have parcel identification numbers based on a parcel identification numbering system. The large county map does not contain parcel identification numbers linked to the appraisal system.|
|Does the CAD record these numbers on the tax map, section and parcel?||In most cases the CAD records these numbers on the tax map, section and parcel. The exception is the larger county abstract map.|
|Does the CAD also record the identifying number recorded on the tax map for each parcel on the appraisal card for that parcel?||Most CAD maps have parcel identification numbers corresponding to parcel identification numbers on appraisal cards. The larger abstract map is not regularly maintained to show parcel splits and combinations and new identification numbers.|
|Does the CAD annually update the tax map system to incorporate any new subdivisions or property transfers as indicated by the filing of subdivision plats or deeds with the county clerk's office?||The CAD's maps are updated regularly for ownership, but map drawings are not always updated.|
|Does the CAD maintain information required by Rule 9.3002 in electronic data processing records rather than physical document?||No, maps are not maintained in electronic format due to the cost of digitizing the CAD's paper maps.|
Source: Comptroller Rule 9.3002, Stonewall CAD.
The CAD cannot identify and list all parcels for property tax purposes if its mapping system is not fully functional. The basic function of being able to locate all county parcels geographically is critical to the reappraisal process. Given the status of the CAD's maps, the onsite reviewer would have been unable to locate properties without the assistance of the chief appraiser. The chief appraiser and deputy chief appraiser are the CAD's only employees and rely on personal knowledge of the area to locate most properties. This could hinder fieldwork and place the CAD at risk of not completing scheduled reappraisals in a timely manner should there be a personnel change.
Brown CAD, for example, has a fully functional computerized mapping system. The mapping and appraisal systems are integrated. The CAD maintains all mapping data layers to industry professional standards. The mapping coordinator regularly updates maps to reflect changes in ownership and boundaries. All parcels have a unique identification number.
Develop a timeline and devote necessary resources to develop maps that comply with Comptroller Rule 9.3002.
Options available to the CAD include hiring full-time or part-time mapping staff, outsourcing the mapping to a third party and reviewing mapping systems of neighboring CADs. Consideration should be given to developing an integrated mapping and appraisal system or geographic information system (GIS).
Stonewall CAD's appraisal manuals lack local procedures and directives for completing appraisals.
IAAO's Property Appraisal and Assessment Administration, Chapter 1, The Ad Valorem Tax System, describes the importance of written procedures or standards of practice and states in summary they may incorporate or be contained in laws, regulations, policy memoranda, procedural manuals and guidelines, appraisal manuals and schedules. Repeated tasks, particularly those done by more than one person, should be described in guidelines or manuals. There should be a procedure for establishing standards of practice, including regularly updating manuals. Procedures are required for monitoring the quality of appraisals, editing data and reviewing appraisals.
The chief appraiser and deputy chief appraiser are the CAD's only employees. The chief appraiser has been with the CAD for 15 years and the deputy chief appraiser for 12 years. Both are professional registered appraisers. Through fieldwork, they gather specific information such as a property's condition, age, construction details and physical dimensions. They gather information about the land on which real property is located, including dimensions of the land, shape and location. The same information is gathered for vacant land, whether a vacant lot or a rural tract. The CAD lacks written procedures for transforming the field data into an appraisal.
Data gathered in the field is entered into the CAD's automated appraisal system (valuation model). Separate values for land and improvements are calculated. The model, when directed, produces a market value for each property based on the property's characteristics.
According to the chief appraiser, residential properties are appraised using market-based schedules developed from local sales, although there are a limited number of residential sales each year. Ratio studies generated by the CAD show less than 20 residential sales occurring in each of the past three years. Residential building cost schedules are updated when there are enough sales to justify doing so. Some of the schedules were updated in 2008. The residential appraisal manual consists of an undated classification guide showing descriptions of typical classification characteristics and representative pictures for each residential class. Most pictures were taken in 1997 and 1998. The guide lacks detailed instructions on its use. The chief appraiser stated depreciation is based on appraiser judgment and there are no written instructions. Because the CAD's staff members are experienced appraisers, they are able to appraise residential property without detailed written procedures. Should there be a change in appraisal personnel, however, the CAD would benefit by having a written residential appraisal manual. To be an effective manual and training tool for new appraisers, procedures included in the manual should focus on measuring classification, identifying property attributes, applying depreciation and site valuation procedures.
The chief appraiser stated the CAD uses market data to appraise land. Size, location and use are factors affecting land values and the CAD appraises rural land by the acre and residential lots are flat-valued. Rural land schedules were updated in 2008. The CAD's land schedule contains 60 land classifications with corresponding values-per-acre. The CAD lacks instructions explaining how and when to apply the land schedules.
According to the chief appraiser, Stonewall County has very few commercial sales and no new commercial construction, which hinders appraising commercial property and developing accurate local modifiers. The CAD subscribes to Marshall & Swift's Commercial Valuation Guide (M&S) and receives annual updates to the M&S commercial building schedules. The CAD lacks local procedures and directives for using M&S and completing commercial appraisals.
Personal property values are largely based on taxpayer renditions. When a rendition is not received during the regular filing period, the chief appraiser assesses a 10 percent penalty. The chief appraiser reviews the renditions for reasonableness by comparing the rendered values of similar businesses. For new business personal property, the chief appraiser conducts an onsite visit and requires the business owner to provide a rendition. The CAD does not have personal property appraisal schedules or instructions to guide the chief appraiser in the review of renditions or in the reasonableness determination.
The CAD contracts with an outside appraisal vendor to appraise its industrial, utility and mineral accounts. Utilities are appraised using the unit value technique. The unit value technique requires the appraiser to determine the entire utility company's market value. The utility company value is then apportioned to each taxing unit based on an agreed measure of the company's presence in the taxing unit, such as miles of track, historical cost or number of meters. The unit valuation is widely accepted as the preferred income technique for appraising utility properties. Industrial properties are typically appraised using the cost approach and minerals are appraised using the income approach. The vendor provides a general explanation of the methods used to appraise these properties in the CAD's reappraisal plan.
Part of the ASR required the Comptroller's onsite reviewer to audit a sample of the CAD's appraisal records. Twenty-five parcels were randomly selected from Aspermont ISD's 2007 PVS sample: 12 Category A: Single-Family Residential and 13 Category D3: Non-Qualifying Acres and Farm and Ranch Improvements to determine if the reviewer could arrive at the same or similar appraised value as the CAD by using its appraisal procedures and manuals. Because the CAD lacks written appraisal manuals and instructions on how to use its appraisal schedules, the reviewer relied on generally recognized appraisal concepts to arrive at appraised values for the properties sampled.
With the assistance of the chief appraiser, the reviewer conducted an onsite inspection of each property. Information pertaining to property characteristics contained on the CAD's appraisal cards was examined for accuracy. Age, condition and size were reviewed for reasonableness. Using descriptions of property classifications found in the CAD's residential classification guide, the reviewer classified each property based on type and quality.
Residential property was classified as either frame or brick veneer with quality ratings from one to seven-plus, one being lowest quality and seven-plus being the highest quality. Using the CAD's calculated square footages for each building component, such as living area, porches and garages, the reviewer applied the corresponding costs-per-square foot from the appraisal manual and calculated a replacement cost new.
For example, a frame class 4 house (RF4) with 1,536 square feet of living area has a base cost-per-square foot of $21.50. The reviewer estimated the effective age of the improvement to arrive at a depreciation factor and applied the factor to the replacement cost new to calculate the current value of the improvement, then calculated land values by applying the appropriate unit value from the CAD's land schedule for the land code found on the appraisal card. For example, if the appraisal card showed a land code of CR1, he appraised the land at $500 per acre, the unit cost-per-acre for land table CR1. If a residential lot was flat-valued, the reviewer appraised the lot using the value shown on the appraisal card. The reviewer combined the improvement and land values to arrive at the total property value.
Exhibit 7 shows the weighted mean ratios between the reviewer and CAD appraisals for the two categories of property reviewed.
Sample Appraisal Results
|Category||Parcels||Review Sample Value||CAD Sample Value||Weighted Mean Ratio|
|Non-Qualifying Acres and Farm and Ranch Improvements||13||$5,491,329||$5,489,700||0.9997|
Source: ASR Sample Appraisals & Stonewall CAD.
The results of the audited appraisal sample did not show any material differences between the reviewer's appraisals and the CAD's values. Because the reviewer was an experienced appraiser, he was able to use the CAD's residential classification guide and appraisal schedules to complete the appraisals without written instructions. It is unlikely that someone without appraisal experience could use the CAD's appraisal documents without written instructions. The fact that the reviewer was able to replicate most of the CAD's values does not suggest the values are reflective of current market value; it just means that they are reflective of the steps taken by the CAD.
An effective appraisal manual serves as a training tool for new appraisers and promotes appraisal consistency among all appraisers. Procedures included in the manual should focus on measuring, classification, identifying property attributes, applying depreciation and valuing sites. Stonewall CAD staff members and taxpayers would benefit from having written procedures that explain each step in the appraisal process and detailed instructions on how and when to use the CAD's appraisal manuals, guides, schedules and tables.
Should the CAD experience a change in appraisal personnel, the lack of detailed appraisal procedures manuals could cause inconsistent appraisals and may cause property values to deviate from market value. The deviation could cause Aspermont ISD to receive additional invalid findings in the state's property value study. If the level of appraisal (percentage of market value) varies between property categories, or from taxpayer to taxpayer, some taxpayers may bear more than their fair share of the local tax burden.
Property Tax Code Section 23.01 states, in summary, that CADs appraise property by applying generally accepted appraisal methods and techniques, complying with the USPAP and applying similar appraisal methods and techniques to the same or similar properties. CADs must account for the contributions of individual property characteristics to value. A comprehensive appraisal procedures manual can help ensure that the CAD meets these standards and requirements.
Williamson CAD, for example, maintains an updated set of procedure manuals for the appraisal of all property types and classes in the CAD. It provides ongoing training for use of its appraisal manuals, field procedures, codes, classifications and appraisal records.
Develop appraisal procedures manuals and include detailed instructions and local procedures for completing appraisals.
Appraisal manuals should be developed for each category of property in the CAD and include updated building cost and land schedules and guidelines for depreciation.