In July 2005, the Texas Comptroller of Public Accounts identified Sabinal Independent School District, located in Uvalde County, Texas, as one of 34 Texas school districts meeting the criteria that initiate an Appraisal Standards Review (ASR) of the appraisal district that serves them. In January 2006, the Comptroller's Property Tax Division, with assistance from contractors, began its review of the Uvalde County Appraisal District (Uvalde CAD).
School Districts, the Property Value Study and Appraisal Standards Reviews
Texas public education is funded by a combination of state and local funds. Local funding comes from property taxes assessed by a school district's Board of Trustees. State funding is based on the amount of money that can be raised locally on the total taxable property value within each school district. Each school district in the state is served by a county appraisal district that is charged with appraising property in the school district at market value. The chief appraiser of each appraisal district determines the property values that school districts use to set tax rates and allocate the tax burden among taxpayers.
The Texas Comptroller's Property Tax Division (PTD) annually conducts a Property Value Study (PVS) that assigns a value to all property within each school district for state funding purposes. The PVS, an independent estimate mandated by the Legislature, is designed to ensure equitable school funding. The PVS ensures equity by detecting instances where school property values are inaccurate and adjusting property values to market value in the state's funding formula. The state's formula sends more money to those districts that are less able to raise money locally because of lower taxable property value.
The Comptroller's values do not directly affect local values or property taxes. However, when study statistics give the Comptroller a high degree of confidence that the aggregate local value for property categories tested in the study is lower than the state's estimate of the correct value, and that aggregate local value is more than 5 percent below the state's estimate, the school district may receive less state funding than expected. Through an appeals process, a district can contest the state values, but understanding the reasons for the differences in the valuations is critical for school districts and the appraisal districts that serve them.
In 2003, a new law, recommended by the Comptroller's Property Tax Division Technical Advisory Committee, was enacted to grant a "grace period" for schools negatively impacted by PVS findings. The Comptroller does not believe schools should be punished for the actions or inaction of their appraisal districts. The "grace period" permits schools to receive full state funding while ASRs are performed by the Comptroller.
By law, to be eligible for this grace period, a school district must have an invalid local value that does not exceed the state value; valid local values for the two preceding years; and a current aggregate local value for tested property categories that is at least 90 percent of the lower limit of the margin of error.
Appraisal Standards Reviews
Appraisal standards reviews are conducted by the Comptroller's office when a school district is eligible for the "grace period." By conducting ASRs, the Comptroller's office helps school districts understand the reason for the invalid finding, so they can work with the appraisal district to correct problems and determine accurate taxable values. ASRs identify problems and recommend changes in procedures or methods to improve appraisal accuracy and compliance with state law and appraisal standards.
An ASR examines and evaluates appraisal practices including planning, procedures and methodology and the application of and adherence to appraisal standards. The major criteria the Comptroller's office uses to measure appraisal district performance are the Texas Property Tax Code and Comptroller Rules.
The Texas Property Tax Code requires appraisal districts to use certain appraisal procedures or standards such as the Uniform Standards of Professional Appraisal Practice (USPAP), specifically Standard 6: Mass Appraisal. The International Association of Assessing Officer's (IAAO) Standards on Assessment Practice also is recommended for use as a professional and industry standard. Without using appraisal procedures and standards, appraisal districts may have difficulty effectively appraising property at acceptable market value.
The two principal focuses of the ASR are to determine why the local value is deemed invalid and to recommend improvements in appraisal practices. The review evaluates five functional areas of operations: governance and management; generally accepted appraisal practices; resources and management; information processing and data collection; and assessment administration.
Upon completion of the review process, the Comptroller issues a report of findings that includes commendations for exemplary appraisal practices and recommendations for change. The appraisal district is required by law to comply with the recommendations within one year of the release of the report.
According to Texas Property Tax Code Section 5.102(d), if the CAD fails to comply with the recommendations in the report and the Comptroller finds that the board of directors of the CAD failed to take remedial action within a year from when the report was issued, the Comptroller is required to notify the judge of each district court in the county for which the CAD is established. The district judge is required to appoint a five-member board of conservators to implement the recommendations. The board of conservators exercises supervision and control over the operations of the CAD until each school district is determined to have a valid local value in an annual PVS. The CAD bears the costs related to the supervision and control by the board of conservators.
While the review found a commendable practice implemented by dedicated and hard working employees, Uvalde CAD faces challenges in achieving and maintaining current market valuations:
- planning and conducting appraisals;
- developing and implementing policies and procedures; and
- managing staff and resources.
Key Findings and Recommendations
- Develop written procedures for performing ratio studies and analyzing sales data. Uvalde CAD lacks written procedures or policies for performing ratio studies or analyzing sales data. This may have contributed to the CAD valuing properties inconsistently. Developing procedures for conducting frequent ratio studies and the appraisal maintenance that follows will help Uvalde CAD keep values at or near the market.
- Adopt a reappraisal plan that complies with Texas Property Tax Code Section 25.18. Uvalde CAD lacks a reappraisal plan that is in compliance with Property Tax Code Section 25.18. Lack of a sufficient reappraisal plan may have resulted in property values in the CAD that deviate from market value, contributing to the Sabinal school district receiving an invalid finding in the PVS. Adopting a reappraisal plan that includes the standards required by Property Tax Code Section 25.18 will provide the CAD with a valuable guide to follow in maintaining market values and complying with the law.
- Consolidate current appraisal procedures to create a new, comprehensive appraisal procedure manual. Uvalde CAD lacks an updated and comprehensive appraisal procedures manual. Lack of an adequate appraisal procedures manual may result in inconsistent appraisals from school district to school district and from taxpayer to taxpayer, resulting in property values that deviate from market value or result in unequal appraisal between property categories. Adopting an adequate appraisal procedures manual may help the CAD determine appraised values in the county's school districts that are determined to be market value by the PVS.
- Develop a written timeline and implementation plan for completing the GIS mapping and integration of the CAD's mapping system and appraisal systems. Uvalde CAD has not fully integrated its digital mapping system with the appraisal software. Appraisers must obtain GIS data from the appraisal system via an appraisal card and from the mapping system via a map, which makes appraisal completion a longer and less efficient process with a greater chance of error. By developing a plan and completing a fully integrated GIS and appraisal system, appraisers will be able to locate property faster, perform a more thorough review of the property and better document how the property was appraised.
Uvalde CAD has a commendable practice that may be useful for other county appraisal districts.
- Uvalde CAD has developed and implemented an effective system for monitoring contracts and complying with purchasing laws. When the chief appraiser was appointed in 2005, the CAD did not have a method for monitoring or tracking contracts or agreements or ensuring compliance with purchasing laws, which made it difficult for the CAD to monitor and renew contracts. The chief appraiser developed a spreadsheet for tracking professional services as well as other contracts and agreements relating to CAD operations and regularly takes items to the board that need competitive bids. The spreadsheet and procurement process used by the chief appraiser allows a simple, yet efficient means to monitor contract agreements and helps ensure contract agreements are current. This spreadsheet also helps provide the board with adequate notice of when it needs to approve agreements and helps the CAD follow timely and proper bidding procedures.
In addition to the recommendations directly linked to the appraisal process, the report makes the following management-related recommendations for the CAD's consideration. Several of these recommendations include compliance with existing laws. As Texas governmental entities, appraisal districts are required to comply with all applicable existing laws.
- Include major capital purchases and the required information of benefits in the budget at the beginning of the year when the CAD holds its public hearing to consider the budget.
- Appoint an Agricultural Advisory Board as required by the Texas Property Tax Code Section 6.12.
- Conduct a documented staffing analysis and establish staffing allocation guidelines that ensure the number and type of staff are appropriate.
- Certify appraisal rolls to taxing entities by the required date.
- Complete the process of updating the existing employee handbook and job descriptions. The chief appraiser can involve staff in the process of developing the handbook. When complete, the CAD should provide the staff a copy of the new handbook. The chief appraiser should use job descriptions as a basis for completing performance evaluations.
- Develop and implement a written disaster recovery plan.