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Chapter 2
Findings of the Appraisal Standards Review

This chapter of the report addresses the findings, commendations and recommendations from the appraisal standards review of the Wharton County Appraisal District in five sections:

2.1Board of Directors
2.2Appraisal District Policies, Procedures and Operations
2.3Information Processing Systems
2.4Staffing, Personnel Qualifications and Positions
2.5Generally Accepted Appraisal Practices; Equality and Uniformity of Appraisal Standards

2.1 Board of Directors

The quality of the property tax system depends on the appraisal district's Board of Directors. Individuals serving on the Board of Directors bring to the board knowledge, judgment and expertise in establishing policies and procedures for the district's organization and operation.

The appraisal district was formed in 1981 and became active in 1982. The district Board of Directors consists of nine members. The following eight entities select a representative: City of Wharton, City of El Campo, Wharton ISD, El Campo ISD, Boling ISD, East Bernard ISD, Louise ISD and Wharton County. In addition to the previous representatives, the County Tax Assessor-Collector also serves on the board.

Members of the board are listed in Exhibit 4.

Exhibit 4
Board of Directors Members
Board Member Represents Starting Date
Anthony Dorotik, Chair El Campo ISD 01/98
Marc Aaronson Wharton ISD 01/02
Danny Alewine Louise ISD 11/00
Jimmy Kainer Wharton County 02/04
Bryce D. Kocian City of Wharton 01/95
Patrick Kubala, Non-voting Wharton County Tax Assessor-Collector 01/94
Larry Russell City of El Campo 09/04
Winston Stein Boling ISD 02/04
Bill Whitley East Bernard ISD 04/02
Source: Wharton CAD, April 2005.

The Board of Directors has the following primary responsibilities:

  • Establish the appraisal district's appraisal office;
  • Adopt the appraisal district's annual operating budget;
  • Contract for necessary services;
  • Hire a chief appraiser;
  • Hire a taxpayer liaison officer (districts in counties having a population of over 125,000);
  • Appoint appraisal review board members; and
  • Make general policy on the appraisal district's operation.

The Board of Directors hires a chief appraiser as the chief operating officer of the district.

The Board of Directors received a written survey about board activities. Four of the nine board members responded. The survey was broken down into board policies and procedures, chief appraiser and staff, property appraisals, appraisal review boards, and budgeting and financial management. The board members generally gave themselves, the chief appraiser and the staff high marks. One board member did not believe the board's policies were reviewed and updated each year. Two others disagreed and one did not know. One board member did not believe the board had a policy on hiring and firing staff. Two others disagreed with that assessment and one did not know. One board member felt they only evaluated the chief appraiser at contract time, while the others felt they evaluated the chief appraiser annually. One board member wrote he has had disagreements with the chief appraiser and was generally concerned with activities that were going on in the district relating to agriculture evaluation.

FINDING
The Wharton CAD's budget does not have the necessary detail to comply with Section 6.06 of the Property Tax Code. The current district budget has one line item each for employee insurance, retirement and workers compensation insurance. The insurance, retirement and workers compensation benefits are not broken out for each position. Section 6.06(a) of the Property Tax Code states that the chief appraiser "shall include in the budget a list showing each proposed position, the proposed salary for the position, all benefits proposed for the position, each proposed capital expenditure, and an estimate of the amount of the budget that will be allocated to each taxing unit."

The budget also combines office/clerical and appraisers salaries. Additionally, the budget does not list out individual capital expenditures, having a single line item for "equipment."

Exhibit 5 outlines the 2003 and 2004 CAD budgets.

Exhibit 5
Wharton CAD Budget for Fiscal Years 2003 and 2004
Category 2003
Budget		 Percent
of Total		 2004
Budget		 Percent
of Total
Chief Appraiser $59,263 9.36% $61,063 9.64%
Administrative Finance $37,045 5.85% $37,971 6.00%
Office & Clerical $68,941 10.88% $51,522 8.13%
Deed Mapping $44,588 7.04% $45,994 7.26%
Appraisers $92,819 14.65% $95,576 15.09%
Payroll Contingency Fund $11,276 1.78% $1,854 0.29%
Total Personnel Services $313,932 49.57% $293,980 46.42%
Postage $10,295 1.63% $10,000 1.58%
Cameras & Film $1,000 0.16% $500 0.08%
Office Supplies $5,150 0.81% $4,750 0.75%
Equipment $7,600 1.20% $4,000 0.63%
Equipment Maintenance $2,776 0.44% $2,776 0.44%
Books & Subscriptions $390 0.06% $390 0.06%
Furniture $1,700 0.27% $300 0.05%
Janitorial Supplies $550 0.09% $450 0.07%
Printing $3,000 0.47% $3,000 0.47%
Telephone $5,000 0.79% $6,000 0.95%
Legal & Advertising $1,572 0.25% $1,572 0.25%
Total Supplies & Misc. Services $39,663 6.26% $33,738 5.33%
Valuation Engineers* $82,800 13.07% $91,800 14.49%
Data Services $2,100 0.33% $2,600 0.41%
Legal Services & ARB Expenses $9,700 1.53% $9,700 1.53%
Janitorial Services $2,860 0.45% $2,860 0.45%
Registration & Dues $2,665 0.42% $2,665 0.42%
Audit $2,800 0.44% $2,800 0.44%
Postage Equipment Rental $900 0.14% $900 0.14%
Total Professional Services $103,825 16.39% $113,325 17.89%
Computer Maintenance $27,364 4.32% $27,364 4.32%
Programming $2,030 0.32% $2,030 0.32%
Computer Supplies $5,400 0.85% $5,400 0.85%
Total Data Processing $34,794 5.49% $34,794 5.49%
Rent $9,159 1.45% $12 0.00%
Maintenance $500 0.08% $9,792 1.55%
Remodeling $145 0.02% $0 0.00%
Utilities $7,443 1.18% $7,443 1.18%
Total Building $17,247 2.72% $17,247 2.72%
Supplies $3,500 0.55% $3,000 0.47%
Equipment $500 0.08% $500 0.08%
Total Maps & Supplies $4,000 0.63% $3,500 0.55%
Appraisers Car Allowance $21,840 3.45% $21,840 3.45%
Board of Directors & ARB Travel $300 0.05% $300 0.05%
Total Automobile Allowance $22,140 3.50% $22,140 3.50%
Training $1,500 0.24% $1,500 0.24%
Conferences $1,600 0.25% $1,600 0.25%
Total Training & Conferences $3,100 0.49% $3,100 0.49%
Fire Contents $3,086 0.49% $3,086 0.49%
Vehicle Liability $200 0.03% $100 0.02%
Worker's Compensation $1,200 0.19% $1,500 0.24%
Liability $4,700 0.74% $5,250 0.83%
Bonds $225 0.04% $525 0.08%
Health & Accident $55,000 8.68% $72,027 11.37%
Retirement $21,494 3.39% $20,494 3.24%
Payroll Taxes $4,463 0.70% $4,463 0.70%
Group Life & Disability $4,300 0.68% $4,100 0.65%
Total Insurance $94,668 14.95% $111,545 17.61%
TOTAL BUDGET $633,369 100.00% $633,369 100.00%
Source: Wharton CAD, 2003 and 2004 budgets.
*Capitol Appraisal Group appraisal services contract.

The budget does not give sufficient detail for a member of a taxing unit or a member of the public to understand how district employees are compensated. With more than 47 percent of the budget going to wages and benefits, both taxing units and the public need the detail required by state law to be assured the number of staff in the district is sufficient to perform the work and that the staff is correctly compensated.

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 detail on capital expenditures.

FINDING
The board has an outdated and incomplete policy handbook of board policies. The board's Policy Handbook, was adopted September 8, 1988. The Policy Handbook has not been updated since its adoption.

The following information is found in the Comptroller's Appraisal District Directors Manual:

The Board of Directors has the following primary responsibilities:

  • Establish the appraisal district's appraisal office;
  • Adopt the appraisal district's annual operating budget;
  • Contract for necessary services;
  • Hire a chief appraiser;
  • Hire a taxpayer liaison officer (districts in counties having a population of over 125,000);
  • Appoint appraisal review board members; and
  • Make general policy on the appraisal district's operation.

The law requires the board to have some specific written policies. The board may include these policies in the policy manual.

An appraisal district board must develop a written plan describing how non-English speaking and disabled persons have access to the appraisal district's programs. At a minimum, such a plan should show how the district will obtain foreign language and sign language interpreters, provide access to those in wheelchairs and give telephone services to the deaf.

The board must have a written policy showing citizens how to make complaints and how the board handles and resolves complaints. The board also must prepare and make available to the public written information explaining the board's functions and protest procedures. The board must include in the complaint policy provisions the process for keeping files on all complaints and for notifying the complainant at least quarterly of the status of the complaint until resolved. The district's taxpayer liaison officer (if one is appointed) is required to implement these policies.

Finally, the board must have a policy providing the public an opportunity to appear and speak at board meetings on any subject under the board's jurisdiction. The policy must provide reasonable time for the public to speak about appraisal district and appraisal review board procedures and for a report from the taxpayer liaison, if one is appointed, about complaints. The liaison officer, if one is appointed, is also responsible for administering these procedures.

The current chief appraiser has been with the district for more than 17 years. The chief appraiser plans to retire in August 2005. The chief appraiser, as well as most of the district staff, are long-term employees. In the event of future personnel changes, there are limited policies for the board to follow. This could make it difficult for the board to find and hire a new chief appraiser when the need arises. With no policies in place, it would also be difficult for the board to evaluate a new chief appraiser.

RECOMMENDATION 2
Update the existing Policy Handbook for the district.

FINDING
The board of directors does not have a written process for hiring and evaluating the chief appraiser.

According to the chief appraiser, the board usually evaluates him on his hire date anniversary. He said the board reviews his performance in an executive session of a board meeting. The chief appraiser receives no written documentation of the evaluation.

In Nueces CAD, 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 Section 6.05 of the Property Tax Code, 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 anniversary date of his/her hire. The board uses a separate evaluation instrument for the chief appraiser than is used for other district staff. The instrument allows for input from all board members, and affords the chief appraiser an opportunity to address his/her own goals and objectives during the evaluation period. In addition, the evaluation sets up goals and objectives for the next 12 months. Having an objective evaluation system in place ensures that the board and the chief appraiser are in agreement as to what is expected of the chief appraiser, and eliminates performance evaluations that may be subjective and based on emotion rather than actual performance.

RECOMMENDATION 3
Develop a hiring process and an objective set of evaluation measures for the chief appraiser position and evaluate the chief appraiser annually.

FINDING
The contract for professional appraisal services with the Capitol Appraisal Group (CAG) does not include the dates when services will be delivered to the appraisal district nor does it contain adequate monitoring provisions.

The contract requires CAG to appraise all producing oil and gas leases, oil related properties, sulfur producing properties, sulfur plant, petroleum products and underground storage facilities, gravel pits, public utilities, railroad and pipeline systems, telephone and electric companies, and other properties to be designated by the chief appraiser, in the appraisal district. The contract covers the 2004 and 2005 tax years and was signed on December 11, 2003.

The CAG contract defines each of these types of property but does not include a specific list of the properties to be appraised, although it does list the types of properties to be appraised. In addition, the contract requires CAG to present testimony at the appraisal review board. For these services the appraisal district agrees to pay CAG $91,800 for both the 2004 and 2005 tax years. The 2004 and 2005 payments will be made in equal amounts in January, April, July and October each year. Payments are not tied to the delivery of any services, making contract monitoring difficult and providing the district no checkpoints to assess whether or not services are being performed on a timely basis.

The contract details the records CAG is required to provide the appraisal district, which includes the following: a list of record owners of all producing oil and gas leases and valuations of oil and gas leases, oil related properties, sulfur producing properties, sulfur plant petroleum products and underground storage facilities, gravel pits, public utilities, railroad and pipeline systems, telephone and electric companies and other industrial property designated by the chief appraiser.

The contract has a funding out clause and a general venue clause. The contract does not include an addendum or similar device that outlines which specific properties would be appraised or the total number of parcels being appraised by CAG.

In 2004, there were 16,646 mineral, 692 utility and 795 industrial properties appraised in the district, for a total of 18,133 properties. Dividing the total of these properties by the total of the contract, the district is paying $5.06 per property. CAG has notified the district to expect a price increase for 2006, with CAG's price increasing to $102,200, an 11.3 percent increase. The proposed increase will result in the district paying $5.62 per property valuation. CAG sited as reasons for the increase in cost as rising cost to hiring qualified appraisal staff, the extra burden placed on its staff from increasing number of legislative exemptions on property, and growth in its workload to appraise personal and light industrial property and telecommunication systems.

In order to get the appraisal roll ready each year, the appraisal district must have all of the appraisal information complete and in the appraisal district system before the appraisal notices are prepared for mailing. Appraisal notices are usually mailed in May of each year. Without product delivery dates, the district has no recourse to compel the vendor to perform the services within the most advantageous timeframe.

IAAO's Standard on Contracting for Assessment Services, Section 4, requires that contracts have specific provisions, including the timeframes when services or goods will be delivered. The IAAO standard for monitoring contract performance requires the tax appraiser to monitor the provisions in the contract. Section 5.5 states that contract monitors are generally hired to review the services and products provided under the contract (the monitor may also be an independent third party). An effective monitor must be thoroughly familiar with the request for proposal (RFP) and successful bid, and, in fact, may also have served as a consultant in development of the RFP or selection of the successful bidder. The contract monitor must stay in close contact with the project and review major tasks in a timely manner.

RECOMMENDATION 4
Amend the professional appraisal services contract in accordance with the IAAO standards on contracting when it comes up for renewal later this year and consider competitively bidding the appraisal services in 2006.

2.2
Appraisal District Policies, Procedures and Operations

In organizing and administering an appraisal district, the chief appraiser is responsible for hiring, firing, and training personnel, for ensuring compliance with a wide range of legal requirements and for the maintenance of policies and procedures for effective appraisal district office operations. The district is also required to comply with Comptroller rules concerning application forms and appraisal records.

The chief appraiser is required by law to prepare and certify an appraisal roll for each taxing unit participating in the district. Certification of the appraisal roll for the 2003 tax year by the district was completed according to the law.

FINDING
The Wharton CAD does not have well-documented, locally developed policies and procedures to guide the day-to-day operations of the district in areas such as payroll, accounting, purchasing and the like. According to the chief appraiser, Wharton CAD computers are programmed with audit controls and software manuals are followed for procedures.

The district has two different The Software Group (TSG) User Guides and a two-page set of instructions for accounts payable, a two-page set of instructions for budgetary accounting and a two-page set of instructions for payroll. The instructions are undated, do not include reference to policies concerning these activities, and do not include when the instructions should be used or by who. The TSG User Guides explain how to perform functions in the TSG software. One guide provides instructions on how to add employees to the system, generating a payroll, and printing reports. The user guide does not explain who performs these functions, when they are performed or any specific exceptions. The other user guide explains how to do budgetary accounting on the software. This user guide does not explain who performs these functions, when they are performed or any specific exceptions. The chief appraiser also said that staff follow the State Comptroller's Tax Calendar, the Property Tax Code, the State Constitution and the Comptroller's rules. None of these are locally developed policies and procedures specifically developed to guide the day-to-day activities of staff.

A policy tells a person, department, or group of individuals what they must do, whereas as procedures enumerates how tasks can be accomplished.

Well-written and organized procedures:

  • implement and ensure compliance with board policies as well as documenting the intent of those policies;
  • protect the institutional knowledge of an organization, so that as experienced employees leave, new employees have the benefit of the others' years of experience;
  • provide the basis for training new employees; and
  • offer a tool for evaluating employees based on their adherence to procedures.

In the absence of well-documented procedures and policies, the work of the appraisal district may come to an abrupt stop if key personnel leave a position as a result of sudden illness, death or other personal tragedies. Other examples abound of whole departments without trained back-ups for critical positions like payroll, and of poor training techniques that show new employees how to perform a task, but not why.

To be effective, policy and procedure manuals are updated and kept current at all times. This means setting up a system for regular updates and distribution, as well as periodic reviews to ensure that all old policies are removed when no longer needed.

The district currently has nine employees and has in place a brief list of job descriptions for each position. The district is currently operating in an efficient manner with most employees generally being long-term. In the event of staff changes, it would be beneficial to the new employee and district to have in place a detailed procedure for the different duties the specific employee performs. For example, the administrative assistant performs and is responsible for a wide range of duties including, but not limited to, banking activity, payroll, insurance and retirement. It would be difficult for a new employee or even another current employee of the district to perform the various tasks without a written guideline.

The chief appraiser said that the staff is cross-trained, to some degree, in other areas besides those outlined in the job descriptions.

The Jefferson County Appraisal District, recently reviewed by the Comptroller's office, maintains a current and comprehensive policy and procedure manual detailing procedures for payroll, accounting, purchasing, budget, travel, bank reconciliations and similar procedures.

RECOMMENDATION 5
Develop a comprehensive policy and procedures manual for district operations and integrate available procedures, instructions or guidelines into the manual as appropriate.

2.3
Information Processing Systems

Appraisal districts use information technology to provide detailed records that are easily accessible to staff and the public. Information technology systems allow staff to effectively manage large amounts of data on individual properties and make the appraisal process more efficient.

The Wharton County Appraisal District uses appraisal software supported by TSG. The district has a separate mapping program with P&A.

FINDING
The Wharton County Appraisal District does not have written procedures for granting or denying an exemption including agricultural and homestead exemptions. The district appointed an Agricultural Advisory Board in March 2005.

The district uses two state publications: Manual for the Appraisal of Agricultural Land & Qualifications of Agricultural Land in Wildlife Management Use as well as the Property Tax Code for administering exemptions. The chief appraiser approves or denies exemptions.

Chapter 23, Subchapter C of the Property Tax Code states in part: "Land designated for agricultural use is appraised at its value based on the land's capacity to produce agricultural products. The value of land based on its capacity to produce agricultural products is determined by capitalizing the average net income the land would have yielded under prudent management from production of agricultural products during the five years preceding the current year. However, if the value of land as determined by capitalization of average net income exceeds the market value of the land as determined by other generally accepted appraisal methods, the land shall be appraised by application of the other appraisal methods."

Section 23.51 offers definitions of qualifying land including the following: "Qualified open-space land means land that is currently devoted principally to agricultural use to the degree of intensity generally accepted in the area and that has been devoted principally to agricultural use or to production of timber or forest products for five of the preceding seven years, or land that is used principally as an ecological laboratory by a public or private college or university. Qualified open-space land includes all appurtenances to the land. For the purposes of this subdivision, appurtenances to the land means private roads, dams, reservoirs, water wells, canals, ditches, terraces, and other reshapings of the soil, fences, and riparian water rights."

The Wharton Journal-Spectator, the local newspaper in Wharton, has a number of articles in the last year about the awarding of an agriculture exemption for a specific piece of property. The county tax assessor-collector, who is on the district's board of directors, has questioned the awarding of agriculture exemption for the Lasata Subdivision in Newgulf. The county challenged the exemption for this subdivision in an Appraisal Review Board (ARB) hearing and the ARB found for the district and against the county. The county subsequently appealed to district court, but later withdrew its appeal.

A written procedure benefits other staff besides the chief appraiser and would also benefit the property owners and help ensure that exemptions are granted or denied in a uniform manner.

RECOMMENDATION 6
Develop and implement district policies and procedures for granting or denying exemptions.

2.4
Staffing, Personnel Qualifications and Positions

Personnel and human resources management are a critical function of appraisal districts. Successful management of personnel includes efficient recruiting, hiring, classification and compensation, benefit administration, training and development, and performance evaluation. Compliance with equal employment opportunity statutes and other applicable federal and state laws and the establishment of fair and workable policies, procedures and training are important for the recruitment and retention of competent staff.

The Wharton CAD staff is organized as outlined in Exhibit 6.

Exhibit 6
Wharton County Appraisal District Positions,
Certifications, Years with Wharton CAD and Salaries
Position BTPE Certification Years with Wharton CAD Salary
Chief Appraiser RPA & RTA 17 $64,824
Administrative Assistant - 10 $40,310
Appraiser RPA 13 $36,172
Appraiser RPA 13 $33,207
Appraiser RPA 6 $32,083
Appraiser Registered Hired 02/05 $27,438
Receptionist/Sales/ARB Clerk - 5 $28,489
Data Processing - 16 $26,207
Mapping Technician - 3 $21,389
Source: Wharton CAD, fiscal year 2004 budget.

Appraisal district staff who appraise property is required to be Registered Professional Appraisers (RPA) or to be working towards certification as an RPA. Staff members must be certified within five years of their hire date. In addition, RPAs must re-certify five years from the date of first certification and every five years while registered.

The district provides appraisal services for 18 taxing units, including: Wharton County; cities of Wharton, El Campo and East Bernard; Boling ISD, East Bernard ISD, El Campo ISD, Wharton ISD and Louise ISD; Isaacson MUD and Hungerford MUD; Louise WD; Coastal Bend Groundwater Conservation District; West Wharton County HD; Wharton County Junior College District; Wharton County WCID; Boling MWD; and Wharton County ESD #1.

FINDING
The number of parcels in Wharton CAD has increased by 8.5 percent since 2000, but the number of total staff has decreased by 18 percent. The number of appraisers employed by the district has remained the same through 2004. Total parcel per staff member increased by 45 percent during this period. In 2005, a fourth appraiser was hired by the district, although the total number of staff did not change.

District staffing trends are located in Exhibit 7.

Exhibit 7
Staffing Trends 2000-01 through 2003-04
  2000-01 2001-02 2002-03 2003-04 Percent
Change
Total Parcels 46,094 47,991 49,679 50,006 8.5%
Parcels/Staff 3,841 3,691 3,821 5,556 45%
Full Time 11 10 10 9 -18%
Part Time 1 3 3 0 -100%
Supervisory 2 2 2 2 0%
Supervisory to Total 1:6 1:7 1:7 1:5 n/a
Full - Time Appraisers 3 3 3 3 0%
Part - Time Appraiser 0 0 0 0 0%
Source: Comptroller Appraisal District Operations Reports, 2000-2001 through 2003-2004.

According to the 2003-04 Appraisal District Operations Report, the chief appraiser performs appraisals. While doing appraisals, the chief appraiser has less time for managing the district's functions, such as developing or maintaining schedules, creating procedures, training and evaluating staff or developing a reappraisal plan.

Wharton CAD reported nine full-time staff and no part-time staff during the 2003 appraisal cycle when parcels were being appraised locally. Wharton CAD has half the number of staff of the state average and three fewer staff than its peer districts that are part of the 35,000 to 49,999 category of locally appraised parcels (Exhibit 3). The chief appraiser said he felt the work load is spreadout among other staff members to allow the appraisers to inspect a larger number of properties per each individual appraiser.

IAAO standards indicate that appraisal districts such as Wharton should allow around 3,000 to 3,500 parcels per staff member, with a slightly higher count per staff appraiser.

Based on this analysis, staff-to-parcel ratios are higher than its peer districts and the state.

RECOMMENDATION 7
Conduct a staff needs analysis and establish staffing allocation guidelines that will ensure that the number and type of staffing are appropriate and annually adjusted to meet reappraisal plan goals each year based on growth.

FINDING
The chief appraiser does not perform annual employee evaluations as outlined in the Personnel Management portion of the district's Policy Handbook.

The Wharton CAD Policy Handbook has a section on personnel management. The document was adopted and effective on September 8, 1988. The Policy Handbook has not been updated since it was adopted.

Section 202.1 of the Personnel Management portion states that "employees are evaluated annually in writing to determine the level of performance for merit pay increases." The chief appraiser said that he has an ongoing evaluation process with employees as needed throughout the year, but does not have any formal written or documented evaluation process.

Property Appraisal and Assessment Administration in Chapter 16, "Administration" states, "Although employees may improve their skills by their own efforts and the help of peers, managers have organizational responsibility for employee development. They use training, education, counseling, and performance reviews to identify talents and help employees grow."

The employee's performance of assigned duties and other job-related criteria provides the basis for an annual (at a minimum) employee evaluation. Employees are informed of the criteria on which they will be evaluated. Evaluation and performance appraisal ratings are based on the evaluation instrument and cumulative performance data gathered by supervisors throughout the year.

Each employee needs to have at least one evaluative conference annually to discuss the written evaluation and may have as many conferences about performance of duties as the supervisor deems necessary. Evaluation records and forms, reports, correspondence and memoranda may be placed in each employee's personnel records to document performance. All records that support appraisal ratings need to be maintained for at least two years. Official appraisal records are then maintained throughout a person's employment with the district and for two years after an employee ceases to be employed with the district. All employees need to receive a copy of their annual written evaluation. A proper personnel evaluation process is essential to employee development and high morale.

By performing evaluations, the district is able to have better documentation regarding employees and the employees also have a platform to address any issues with the district in a formal setting.

RECOMMENDATION 8
Perform employee evaluations as outlined in the district's Policy Handbook.

2.5
Generally Accepted Appraisal Practices; Equality and Uniformity of Appraisal Standards

In appraisal circles there are generally three approaches to value ― cost, income, and market ― that a chief appraiser must consider in determining the market value of property. The chief appraiser must use the method most appropriate in appraising a particular property.

Background

The appraisal district's contract appraiser, Capitol Appraisal Group, also appraises Wharton CAD's minerals, utilities and business personal property. Minerals are appraised using the income approach, which involves estimating the income likely to be generated by selling the minerals. Utilities are appraised using the unit value technique. The unit value technique requires the appraiser to determine the market value of the entire utility and apportion the value to each taxing unit within the appraisal district.

FINDING
The district has a comprehensive document entitled the "2005 Mass Appraisal Report." The document addresses appraisal district operations, including information on the following issues: Scope of Responsibility, Personnel Resources, District Data, Information Systems, Shared District boundaries, Independent Performance Test, and information on Appraisal Activities for all categories of property in the district.

The document goes into considerable detail with regards to the activities the district performs during the appraisal process, including details on the following: Residential Valuation Process, Commercial Valuation Process, Industrial Valuation Process and Business Personal Property Valuation Process. For each of these categories of property, the document contains processes that are used in the valuation of that category. These processes, which are thoroughly explained in the document, include: Scope of Responsibility, Appraisal Resources, Analysis, Data Collection and Validation, Valuation and Statistical Analysis, Individual Review Processes and Performance Tests.

In addition to the above information, the Mass Appraisal Report also contains the district's residential and commercial property descriptions and schedules.

COMMENDATION
The Wharton CAD Mass Appraisal Report is a comprehensive and detailed report that explains the appraisal process to the public as well as addresses the district's compliance with USPAP and IAAO standards.

FINDING
Wharton CAD does not have a written reappraisal plan. Section 25.18, Tax Code, requires each appraisal district to implement a plan for periodic reappraisal of property. Senate Bill 1652, passed in the 79th Regular Legislative Session, requires appraisal districts to develop and adopt a written reappraisal plan biennially.

The chief appraiser said that the district performs a complete reappraisal every three years. The staff has the district divided into thirds with one-third of the district being reappraised annually. For the 2005 Tax Year, the district has reappraised the cities and towns. The rural eastern portion of the county is scheduled for 2006 and the rural western portion for 2007. The chief appraiser said the reappraisal work is integrated into the existing budget. The chief appraiser said he only adjusts schedules for areas where he has sales. According to the chief appraiser, subdivisions are the smallest area adjusted for sales.

The district uses its appraisal and mapping software efficiently during reappraisals. Field appraisers are provided a list of mapped properties before the actual field work takes place. This allows for productive work while inspecting properties. The district also codes properties in the computer system with the date of last reappraisal.

Section 25.18 of the Property Tax Code requires appraisal districts to implement a plan for reappraisal, which provides for the reappraisal of property within the district once every three years. A comprehensive reappraisal plan is critical to the success of the district in many ways, including: budgeting, market analysis, continuity of district performance during staff changes, as well as a directive for current staff.

According to USPAP Standard 6, a functional reappraisal plan includes the following activities:

  • identifying properties to be appraised;
  • identifying and updating in the appraisal records the relevant characteristics of each property to be appraised;
  • defining market areas;
  • identifying property characteristics that affect property value in each market area;
  • developing an appraisal model that reflects the relationship among the property characteristics affecting value in each market area;
  • calibrating the model to determine the contribution of the individual property characteristics affecting value;
  • applying the conclusions reflected in the model to the characteristics of the properties being appraised; and
  • reviewing the appraisal results.

A reappraisal plan also provides for a physical inspection of the properties being appraised. Alternatively, the plan can include reliance on reliable sources of property information instead of physical inspections. Such sources include, but are not limited to, deeds or other legal documentation, aerial photographs, land-based photographs, surveys, maps and property sketches. A complete plan would indicate instances or types of properties that will be appraised using sources of information other than physical inspections.

The primary function of every appraisal district is to appraise all taxable property equally and uniformly at market value. The chief appraiser and appraisal district staff are responsible for the day-to-day operations of the appraisal district, but the Board of Directors must adequately plan to accomplish these objectives and establish policies that serve as clear directives to the chief appraiser and staff. As representatives of the member taxing units, the Board of Directors is responsible for ensuring that the appraisal district produces an appraisal roll that reflects market value for all taxable properties.

A thorough reappraisal plan discusses in detail how and when the district plans to perform each of the activities mentioned above. A detailed reappraisal plan, if executed properly, would help ensure that values in each school district are valid in the PVS, thereby avoiding the possibility of a school district receiving less than the expected amount of funding from the state. A detailed and properly executed plan would also ensure that taxpayers are treated uniformly in the payment of property taxes.

RECOMMENDATION 9
Deveop and implement a detailed reappraisal plan.

The reappraisal plan needs to also implement the standards for mass appraisal as set forth in The Uniform Standards of Professional Appraisal Practice (USPAP) Standard 6.

FINDING
The Wharton CAD has not used ratio study results in a consistent manner in the past.

The Wharton CAD's computerized appraisal system allows the appraisal district to analyze its appraisals through ratio studies within and among property classifications and more specifically, by subdivision. According to IAAO's Property Appraisal and Assessment Administration, a ratio study is a study of the relationship between appraised or assessed values and market values. Indicators of market values may be either sales or independent "expert" appraisals. Of common interest in ratio studies are the level and uniformity of the appraisals or assessments.

The chief appraiser said that ratio studies are run by subdivision. In the past, adjustments to district schedules were made only in areas or subdivisions in which the district had an adequate amount of sales data to support a value change. The district changed this practice to some degree for the 2004 tax year by expanding schedule adjustments to areas where limited sales data was available. For the 2005 tax year, the district has further expanded ratio study results in an effort to provide more uniform appraisals for district properties. The staff has the district divided into similar zones or market areas; within these areas are specific subdivisions or neighborhoods. While some subdivisions or neighborhoods may have limited sales data available, if sales data is available within a subdivision within the same zone or neighborhood, the district staff has made changes to consider that data for the entire zone or market area.

The appraisal district's automated appraisal system will produce ratio studies statistics on demand. The district inputs sales data and is able to run ratio studies in subdivisions where data is available.

Appraisal districts use ratio studies to plan appraisal maintenance programs. The ratio study results indicate those market areas in the appraisal district whose values no longer reflect the market. If the ratio study in a market area shows the appraised values do not reflect the market, the appraisal district appraises the available sales to determine the market adjustment factor. The market adjustment factor is the percentage the appraisal district uses to adjust the appraisal schedules to reflect the market value.

Frequent ratio studies and the appraisal maintenance that follows it enable an appraisal district to keep its values at or near the market. Ratio studies are also used to determine actual appraisal performance of the district.

RECOMMENDATION 10
Continue the process of analyzing ratio studies and considering market changes for all properties within the district zones.

By expanding and considering sales data for the zone or market area, the district should experience more successful and uniform appraisal results.

FINDING
The appraisal district has appraisal procedures manuals, but the manuals lack specific details, procedures, appraisal information and, in a number of instances, are out of date. The district provided four manuals. One is an appraisal procedures manual, one is a personal property handbook and the other two are books of schedules the district uses.

None of the manuals have a table of contents or an index and no information shows when they were last updated. Some information references 1999, 2002, and 2004 in the different manuals. One of schedules includes information on agriculture values, land information and residential properties. The other schedule manual includes information on residential properties and commercial properties.

According to the chief appraiser, Wharton CAD uses schedules based upon an historic benchmark to appraise residential property improvements. The schedules were developed locally and are adjusted with comparable sales data. The district also uses cost data and uses the income approach on properties such as shopping centers, apartments and motels. The information does not appear to have been updated recently and looks several years old. For example, in the personal property handbook, there is information on how to value laundromats. The district information for assessing value based on quality is located in Exhibit 8.

Exhibit 8
Laundromat Washers Per Unit - Quality
  Fair Average Good
Top Load, 12-14 lbs. $450 $600 $700
Front Load, 20 lb. $1,450 $1,700 $2,300
Front Load, 35 lb. $2,600 $3,200 $3,600
Source: Wharton CAD Personal Property Handbook.

The information for the Comptroller's Field Appraisal Guide 2003 in Exhibit 9 shows the same type of information, with the dollar amount being higher in all categories. The information in the guide is two years old, yet the dollar amounts are higher than in the district's handbook.

Exhibit 9
Laundromat Washers Per Unit - Quality
  Fair Average Good
Top Load, 12-14 lbs. $539 $719 $837
Front Load, 20 lb. $1,566 $1,833 $2,480
Front Load, 35 lb. $2,804 $3,456 $3,882
Source: Comptroller Field Appraisal Manual 2003.

Wharton CAD subscribes to two products that Marshall & Swift offers. Specifically, the district subscribes to the Residential Cost Handbook, for the cost appraisal of residential and multi-family properties, and the Marshall Valuation Service manual for the valuation of commercial properties. The chief appraiser said they use the manuals primarily to compare the market versus cost values for the district.

Although it is difficult to determine this using the manuals, the chief appraiser noted that residential properties are classed based upon a "point system." The total number of "points" a property receives determines the classification of the house. Field appraisers issue points based upon the subject properties' foundation, siding, roof, eaves, HVAC, brickwork/woodwork, windows, front porch/entry, front door, garage/carport and patio/back porch. Based upon the cumulative points of a property, it will be placed in the appropriate frame or veneer class. The chief appraiser said that the classification system works well and removes individual bias. The system allows for different appraisers to classify a property in the same way, which results in a consistent manner in which individual properties are judged or classed. However, there are no instructions in the manuals on how to award points to a property.

Section 23.01, Property Tax Code, mandates that property be appraised by applying generally accepted appraisal methods and techniques. This section also requires appraisal districts to comply with the USPAP and requires similar appraisal methods and techniques be applied to the same or similar properties, while taking care to account for the contributions of individual property characteristics on value. A comprehensive appraisal procedures manual would help ensure that these standards and requirements are attained.

Section 25.18 of the Property Tax Code requires all appraisal districts to have documented policies and procedures. The statutory responsibilities of the appraisal district are varied. Given the imminent retirement of the chief appraiser, it is imperative that polices and procedures be developed to identify the day-to-day procedures used by the district to meet its statutory obligations, as well as the staff responsible for achieving these tasks.

RECOMMENDATION 11
Prepare a detailed appraisal procedures manual that provides local procedures and practices for each type of property the district appraises.