Executive Summary
In July 2004, the Boling Independent School District (Boling ISD), located in Wharton County, Texas, was identified as one of 54 school districts in the state meeting the criteria that initiate an Appraisal Standards Review (ASR) of the county appraisal district that served them. In April 2005, the Comptroller's Property Tax Division (PTD) began an Appraisal Standards Review of the Wharton County Appraisal District (Wharton CAD).
Appraisal Standards Reviews
The 78th Legislature, Regular Session, directed the Comptroller's office to conduct appraisal standards reviews of county appraisal districts if the Comptroller finds in its annual Property Value Study (PVS) that the appraisal district has one or more "eligible" school districts. Eligible school districts are those that meet all of the following conditions:
- the district's values are invalid in the most recent property value study;
- the district's values were valid in the two studies preceding the most recent study; and
- the district's local value is above 90 percent of the lower threshold of the margin of error.
In Texas, public education is paid for by a combination of state and local funds. Local funding comes from local property taxes. The chief appraiser of each county appraisal district (CAD) determines local property values, and school districts set tax rates that determine the amount of local tax revenue. Appraisal districts, under most circumstances, are required by law to appraise property at or near market value. Market value, in simple terms, is the price for which a property would sell under normal conditions. State funding is based on the total taxable property value within each school district as determined by the PVS.
The PVS independently estimates the taxable property value in each school district to ensure that state values reflect market value, which in turn ensures that school districts have approximately the same number of dollars to spend per student, regardless of the school district's property wealth or lack of property wealth. School districts with less taxable property value per student receive more state dollars for each pupil than districts with more value per student. The state's fair distribution of school funding depends largely on the Comptroller's taxable value findings.
By conducting appraisal standards reviews, the Comptroller's office helps school districts to understand the reason for the invalid finding so they can effectively work with the appraisal district to correct the problems and achieve market values. ASRs identify problems and recommend changes in procedures or methods to improve appraisal accuracy.
An ASR examines and evaluates a CAD's appraisal practices including appraisal planning, appraisal procedures and methodology, and application and adherence to appraisal standards. The Tax Code and Comptroller rules are the major criteria used to measure the appraisal district's performance. The evaluation of the appraisal district's appraisal methods are based on a comparison of local methods and procedures to those generally accepted by the mass appraisal industry in Texas. The Tax Code dictates certain appraisal procedures or standards such as the Uniform Standards of Professional Appraisal Practices (USPAP), specifically Standard 6: Mass Appraisal and Standard 7: Personal Property. Also the International Association of Assessing Officers (IAAO) Standards on Assessment are used as guidelines on the operation of an assessment office.
The two principal focuses of the review are to determine why a school district served by the CAD was deemed eligible and to make recommendations to improve appraisal practices so the school district's values can be determined valid in future studies. The review evaluates five broad functional areas of CAD operations: information processing systems, district staffing, property mapping and discovery, appraisals and appraisal standards.
The review methodology includes a self-assessment completed by the CAD, staff interviews, reviews of written policies, procedures, plans, financial and management audits, and assessments of manual and automated records systems.
As the result of the review process, the Comptroller is issuing this report of its findings that includes recommendations for change and commendations for exemplary district appraisal practices. The appraisal district is required by law to comply with the recommendations within one year of the release of this report. If the Comptroller determines that the appraisal district board of directors failed to take remedial action within one year after the issuance of the review, the Comptroller shall notify the district judges serving in the county, who shall appoint a five-member board of conservators to implement the recommendations. The board of conservators shall exercise supervision and control over the operations of the appraisal district until the Comptroller determines pursuant to the annual Property Value Study, Section 403.302, Government Code, that in the same year the taxable value of each school district for which the appraisal district appraises property is the local value for the school district. The appraisal district shall bear the costs related to the supervision and control of the district by the board of conservators.
While the reviewer found several commendable practices implemented by dedicated and hardworking district employees, Wharton CAD could improve its practices in some areas, including:
- documenting and updating procedures;
- planning for reappraisal.
Key Findings and Recommendations
Document and Update Procedures
- Develop and adopt a comprehensive written policy and procedures manual for district operations. The district does not have a comprehensive policy and procedures manual for appraisal district staff to follow. The district has some instructions for some functions and has some software user guides. Written policies and procedures are essential to effectively managing day-to-day operations. Procedure manuals outline, step-by-step, the methods and activities of all the key functions of the district. A policy and procedures manual is also necessary for training new employees and as a reference guide for current employees
- Develop and implement written district procedures for granting or denying exemptions. Wharton CAD does not have written procedures for granting or denying exemption requests, including agriculture use and homestead exemptions. The district uses two state publications to support this process, but no information on local conditions and practices is available. Developing procedures would ensure all exemptions are granted in a uniform manner
- Update the existing Policy Handbook for the district. The district's personnel manual does not address issues of ethics, conflicts of interest, security, the Family Medical Leave Act and the Americans with Disabilities Act. Personnel policy and procedures manuals help organizations define major employment issues. Good policy and procedure manuals protect both management and employees from arbitrary practices and help management resolve conflicts in a consistent manner.
Plan for Reappraisal
- Develop and implement a detailed reappraisal plan. The district does not have a written reappraisal plan. Section 25.18, Tax Code, requires appraisal districts to implement a plan for reappraisal. A good reappraisal plan not only provides for reappraisal of all real property in a district at least once every three years, but also can be a roadmap for performing the work.
Commendable Practices
The reviewer identified commendable practices in Wharton CAD that other county appraisal districts may do well to review and implement where appropriate
- The Wharton CAD Mass Appraisal Report is a comprehensive and detailed report that explains the district's appraisal process. The report explains how the district conducts appraisals, the information the district gathers and the specific types of valuation with which the district is involved.
