Findings of the Appraisal Standards Review
This chapter of the report addresses the findings, commendations and recommendations from the appraisal standards review of the Glasscock County Appraisal District in four sections:
2.1 Board of Directors 2.2 Appraisal District Policies, Procedures and Operations 2.3 Staffing, Personnel Qualifications and Positions 2.4 Generally Accepted Appraisal Practices; Equality and Uniformity of Appraisal Standards
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 five members. Members of the board are listed in Exhibit 4.
Board of Directors Members
W. E. Bednar Glasscock ISD 1/1/1992 Dennis Fuchs, Chair Glasscock ISD 1/11990 Eugene Hirt Glasscock County 1/1/2000 Hugh B. Schafer Glasscock County 1/1/2000 Michael Hoch Glasscock ISD 1/1/2005 Source: Glasscock CAD.
Eugene Hirt is a Glasscock County ISD board of trustee and an elected official. State law establishes that the tax assessor-collector sits on the board of directors of the county appraisal district, except when the tax assessor-collector is also the chief appraiser. In Glasscock County, the chief appraiser and the tax assessor-collector are the same person.
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. Three of the five 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 generally gave itself, the chief appraiser, and staff high marks for running the district. The board did not note any concerns.
The district's budget contains the detail necessary to comply with Section 6.06 of the Tax Code.
Section 6.06 requires a listing of each proposed position in the CAD including the salary and benefits for the position, each proposed capital expenditure and an estimate of the amount of the budget allocated to each taxing unit. Taxing units are required to maintain a copy of the budget for public inspection at its principal administrative office. The district's 2005 budget had a listing of the benefits for each position, which was included in the 2004 budget. A summary of the budgets is in Exhibit 5.
Glasscock CAD Budgets for Fiscal Years 2004 and 2005
2005 2004 Category Budget Percent
Salary Chief Appraiser $13,700 15.12% $13,700 15.38% Extra Help 2,050 2.26% 2,050 2.30% FICA Taxes 1,048 1.16% 1,048 1.18% Retirement/Supp Death Benefits 1,681 1.86% 1,681 1.89% Sub Total Salary 18,479 20.40% 18,479 20.74% Board of Directors 0.00% 0.00% Board of Review 300 0.33% 300 0.34% Office Supplies 1,000 1.10% 1,000 1.12% Postage 2,000 2.21% 2,000 2.25% Office Equipment 0.00% 0.00% Telephone 1,500 1.66% 1,500 1.68% Forms & Printing 100 0.11% 100 0.11% Dues & Memberships 400 0.44% 400 0.45% Schools & Education 3,000 3.31% 3,000 3.37% Books; Subscriptions 0.00% 0.00% Legal Services 900 0.99% 900 1.01% Appraisal Engineers 61,400 67.79% 61,400 68.93% Audit 1,500 1.66% 0.00% Subtotal 72,100 79.60% 70,600 79.26% Total Expense $90,579 100.00% $89,079 100.00% Source: Glasscock CAD, fiscal years 2004 and 2005 budgets.
The Boards of Directors are required by law to hold a public hearing on the budget.
Glasscock CAD's budget gives sufficient detail for a member of a taxing unit or a member of the public to understand how the money is spent. With more than 20 percent of the budget going to wages and benefits, both taxing units and the public have 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.
The district includes the necessary detail information in its current budget to comply with Section 6.06, Tax Code.
Glasscock CAD is struggling to meet very basic criteria usually associated with operating a viable and effective appraisal district.
The chief appraiser in Glasscock wears many hats. He is the chief appraiser, the county tax assessor-collector and the county sheriff. He works as the chief appraiser part time; he is a RPA and a RTA. The chief appraiser is the only CAD employee. All appraisals are performed by Capitol Appraisal Group, Inc. The district was never able to provide answers to the self-assessment questionnaire used in the appraisal standards review. While three of the five board members responded to a board survey used in the appraisal standards review, none of them noted any problems with the operation of the district. The board appears to be taking a hands-off approach to district management.
The Glasscock CAD appraisal district office is located in the county jail administrative office. The sheriff's staff is responsible for running the county appraisal district's day-to-day operations. The district employs only a part-time chief appraiser and does not evaluate the chief appraiser's performance. County employees who are not appraisal district employees work for the appraisal district.
The district does not have procedures for appraising property, evaluating staff, running an office, determining agriculture exemptions or gathering and evaluating sales. Glasscock CAD has been cited for failing to develop and implement a comprehensive reappraisal plan, which is inexplicable seeing that it only takes four and a half months for the chief appraiser to appraise the whole county.
The chief appraiser holds three important jobs in the county and his attention is naturally divided. As the chief law enforcement officer for the county, his obvious top priority is the safety of the citizens of Glasscock County. County staff are left to run the day-to-day operations of the district, even though they are not CAD employees. While they are dedicated county employees, they have no appraisal background. And because they are not CAD employees, their natural allegiance would be to county duties, which is likely to make it difficult for them at times to determine whether they are doing county business or county appraisal district business. Since the interests of the two organizations are not synonymous, this can place the county employees in a position of choosing between the county and the CAD. This is a problem because none of these employees has an appraisal background and Glasscock CAD under-appraised property in Glasscock County ISD, resulting in the school district being designated as eligible. Even though the school district's funding was not immediately affected, the school district could lose a substantial amount of state funding if Glasscock CAD under-appraises property in the future. With so much at stake for the school district, Glasscock CAD needs to decide how it will change to meet its uncertain future.
With the many challenges the appraisal district faces with managing an effective appraisal district, the CAD's board and the community should consider consolidating with another appraisal district in order to assist the district in appraising property at market value. Potter-Randall CAD, for example, is a consolidated county appraisal district that serves both Potter and Randall counties. CADs surrounding Glasscock County include Howard, Martin, Midland, Upton, Reagan and Sterling.
There are a number of advantages and disadvantages to consolidation and the board will need to determine these.
Simply saying that the district will not consolidate, however, is not enough. If the board and the taxing units decide that is not in the best interests of their citizens to consolidate with another CAD, the board must be willing to take the steps necessary to rally together to improve the Glasscock CAD for the taxpayers and the children of the community. The remainder of this report details a list of recommendations that must be addressed if the district is to remain a viable appraisal district and provide the services that the taxpayers, the taxing units, and ultimately, the citizens, deserve.
Establish a committee to examine all of the pros and cons of consolidating Glasscock CAD with one of the surrounding CADs and put the final decision to a vote of the board.
The committee should be made up of a representative group of parents, community leaders, board members and taxpayers. Committee members should examine all of the opportunities, the advantages and disadvantages, including those of a financial nature for the school district and the county.
The findings and recommendations contained in this report should be included in the discussions, and solutions to the identified problems must be sought either through consolidation or through community action. The committee must document its findings and be willing to make recommendations based upon factual and accurate information. If the committee and the board decide to continue to operate the CAD independently, then all of the following recommendations will have to be completed immediately or as soon as practical to ensure that the work of the CAD is completed in compliance with the law and USPAP standards.
The board does not have a written process for hiring and evaluating the chief appraiser, nor is there evidence of any informal review process for assessing chief appraiser performance.
The board does not have written policies or procedures for hiring a chief appraiser nor any policies or procedures for evaluating the chief appraiser. The district was unable to provide a job description for the chief appraiser or any written evaluations of the chief appraiser. Chief appraisers are responsible for ensuring that competent staff are hired, procedures are documented, appraisals are performed, and employees are evaluated and all other functions performed by an appraisal district. Having a qualified chief appraiser is important to effective district operations.
The current chief appraiser was appointed in 1981 as he was the elected County Sheriff. According to the Texas Constitution Article VIII also serves as the Tax Assessor-Collector of the county. The board contracts with the cchief appraiser and he contracts with Capitol Appraisal Group, Inc. to appraise all of the property in Glasscock County.
The contract with Sheriff Pruitt has no evaluation or job description. While the contract indicates that the employee will perform all duties incumbent upon that position, it gives no detail or mention of evaluations by the board.
Develop a job description and an objective set of evaluation measures for the chief appraiser position, establish an annual evaluation process based on objective measures and include it in the chief appraiser's contract.
The Agreement for Appraisal Service contract with Capitol Appraisal Group, Inc. (CAG) for professional appraisal services does not include the dates when services are delivered nor a process for monitoring the contract. The Board of Directors' chair and the chief appraiser signed the two-year contract on January 21, 2004. The contract covers services for tax years 2004 and 2005. The contract does not cover the local properties, which CAG appraises along with the contracted properties at no charge.
CAG is to provide appraisals "of all oil and gas leases, industrial complexes, telephone and electric utility systems, electric generating plants, pipeline systems, railroad companies and industrial and oil field supply and service facilities" properties located in the district. The contract includes a list of these properties. Besides appraisals, CAG will, for additional monies, also present testimony to the Appraisal Review Board and help with tax abatement issues. The district agreed to pay CAG $61,400 in 2003 and $61,400 in 2004 for these services. The contract calls for quarterly payments. The contract covers all mineral, utility and industrial properties in the district, but does not cover the local properties, which are also appraised by CAG at no cost to the district. The per parcel cost of the appraisal services delivered by CAG amounts to $2.81 per parcel.
In order to get the appraisal roll ready each year, the appraisal district should have all of the appraisal information complete and entered in the appraisal district system before the appraisal notices are printed. Appraisal notices are printed and mailed in May of each year. Without dates for specific deliverables, the district would have no recourse to compel the vendor to perform the services within a prescribed 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. Also, the IAAO Standards Section 5, Monitoring Contract Performance, requires contract monitoring. Section 5.4 of the Standard speaks to a Project Review Committee. According to the Standard, a district needs to establish a Project Review Committee for projects that affect several departments or that have multiple objectives. A project review committee can provide the agency with an effective mechanism for coordination, monitoring, and review. Section 5.5 states that a contract monitor is generally a party hired by the agency 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 any requirements for Request for Proposals and successful bid. The contract monitor must stay in close contact with the project and review major tasks in a timely manner.
The appraisal district does not have written procedures for monitoring contracts to ensure the contractor is delivering the contracted goods or services on time and that the quality and quantity are in accordance with the contract. A good procedure identifies the contract monitor and the duties that the contract monitor is to perform for each contract. Without contract monitoring, the district cannot make a decision on the quality of services rendered by the contractor.
The chief appraiser said the district will work with CAG in the future to include dates when CAG will perform its services and deliver its appraisals to the district and include a list of all properties that CAD is responsible for appraising. The chief appraiser said the district will have a board member sign any future contracts, according to board policy, and will include the contract monitoring in the process.
Revise the professional appraisal services contract to include dates when the appraisal firm will perform its services and deliver its appraisals to the district; include a list of all properties that the appraisal firm is responsible for appraising; ensure that a board member signs any future contract, according to board policy; and include contract monitoring in the process.
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.
Glasscock CAD has no written policy and procedures manual for district operations. Since the entire staff is employed by the county, and holds other positions, all of the appraisal work is done by Capitol Appraisal Group, Inc. The district does have informally documented policies for managing district operations. An effective set of procedures would include guidelines for the work of the appraisal company and the part-time staff located in the appraisal district office.
A policy and procedures manual needs to be in place for the staff to follow and for the contract monitoring. A procedures manual helps taxpayers and staff understand the steps the appraisal district follows to accomplish the tasks of the appraisal district.
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 old policies are removed when no longer needed.
The Jefferson CAD, recently reviewed by the Comptroller's office, maintains a current and comprehensive policy and procedure manual detailing procedures for payroll, accounting, purchasing, budget and similar procedures.
Develop and adopt a written policy and procedures manual for district operations.
Personnel and human resources management is 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 Glasscock CAD staff is organized as outlined in Exhibit 6.
Glasscock County Appraisal District Staff, Positions,
Certifications, Years with Glasscock CAD and Salaries
BTPE Certification Years with
Salary Royce Pruitt Chief Appraiser RPA and RTA 22 Years $13,700 Source: Glasscock CAD, fiscal year 2004 budget Board of Tax Professional Examiners.
Appraisal district staff who appraise property are 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. Interim certifications include Class II and Class III. In addition, RPAs must re-certify five years from the date of first certification and every five years while registered. Tax Assessor-Collectors must be registered and have a designation of Registered Texas Collector.
The appraisal district has only part-time staff to carry out the mandates of the Tax Code and contracts for appraisal services for property in the district. The district outsources all of its appraisals and does not have an appraisal system or a geographic information system.
The Glasscock CAD appraisal district office is located in the county jail administrative office. The sheriff's staff is responsible for running the county appraisal district's day-to-day operations.
The part-time staff of the district also have other duties outside the appraisal district, including the collection of taxes and the duties related to the sheriff's office. This would be impossible in a larger district; but with the population and economy of Glasscock County, the staffing levels seem to work for the appraisal district, although local practices resulted in Glasscock County ISD being designated an eligible district in 2003. The overall average cost per parcel for the appraisal district operations was $4.05 per parcel for 2003 and $4.15 per parcel for 2004, since the appraisal district contracts with an outside vendor for all appraisal service work.
Hire a full time chief appraiser who has appraisal experience and staff the appraisal district accordingly.
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.
The appraisal district's contract appraiser appraises all properties located in Glasscock CAD including minerals and utilities. Minerals are appraised using the income approach including a discounted cash flow method. 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. The Glasscock CAD's contract appraiser, CAG, uses cost-based schedules to appraise real property improvements.
The schedule for residential, commercial building cost data and mobile homes include real estate cost valuations developed for use in Glasscock CAD. The CAG schedule has no detail as to how it was compiled and it has no instructions on its use. The manual has dates of when it was adopted, but the dates vary from 1983 to 1993. No updates to the data are listed in the manual.
Glasscock CAD lacks a detailed reappraisal plan to ensure the execution of timely and accurate reappraisals.
Glasscock CAD's reappraisal plan is not a written policy statement. Reappraisals are conducted when the chief appraiser tells the contract appraiser which properties to reappraise each year, but no formal plan is in place to follow.
The reappraisal plan does not link the costs associated with the appraisal district's budget, training, contracting, market analysis, field inspections and data processing in one document. The appraisal district's undocumented policy includes these elements, but the board has not adopted a formal plan that includes documentation of how the appraisal district staff will implement the reappraisal plan. In addition, the Board of Directors has not adopted or reviewed the work plan that the staff and contractor would follow to accomplish the reappraisal policy.
Lack of a detailed reappraisal plan could cause the execution of the plan to go awry, and result in property values that deviate from market value. This market value deviation could cause the Glasscock County's school district to receive an invalid finding in the state's property value study.
Section 25.18, Property Tax Code, requires appraisal districts to implement a plan for reappraisal. The plan for reappraisal shall provide for reappraisal of all real property in the district at least once every three years. A reappraisal plan is a roadmap for performing the work. It is also a communication tool that shows the appraisal district board of directors how the appraisal district staff plans to accomplish its appraisals, and if the board chooses to require the chief appraiser to submit the plan for approval, the board can direct the appraisal activities by amending the plan.
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.
The USPAP, Standards Rule 6-2(g), requires appraisers to "identify the characteristics of the properties that are relevant to the purpose and intended use of the mass appraisal, including:
(i) the group with which a property is identified according to similar market influence;
(ii) the appropriate market area and time frame relative to the property being valued; and
(iii) their location and physical, legal, and economic characteristics."
To comply with this standard, appraisal districts typically record property characteristics that include, but are not limited to: the Comptroller's property category code, the location and market area of property; the physical attributes of the property such as the size, age, condition, and construction type; the number of various kinds of rooms such as bedrooms, bathrooms, etc.; the presence of amenities such as central air conditioning; any legal and economic attributes or restraints; and the presence of easements, covenants, leases, special appraisals, ordinances or other legal restrictions.
A reappraisal plan also provides for a physical inspection of the properties being appraised. Alternatively, the plan can include reliance on trustworthy 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 inspection.
Adopt a detailed reappraisal plan that, at a minimum, includes the steps in the process, explains exactly how and when the steps will be executed and explains how sufficient resources will be allocated to follow the plan.
The appraisal district's written appraisal procedures manuals for the contract appraisal staff are old and have not been updated.
In reviewing the appraisal manual for local properties at the Glasscock CAD, the reviewer noted that the dates in the manual ranged from 1983 to 1993 and that not all items in the manual have dates. In order to have a current appraisal manual, it should be updated as the market dictates.
The chief appraiser said appraisal manuals and procedures will be updated to reflect current costs, sales and other information. The chief appraiser also said that there are limited 'arms-length' transactions in Glasscock County, with most transfers being family transfers. This makes it difficult to build comprehensive land and building schedules.
The manual should follow the requirements of the Uniform Standards of Appraisal Practice for Mass Appraisal Standard Number Six. As part of its computerized model, Glasscock CAD uses cost-based schedules to appraise improvements. The CAG cost-based schedule that the contractor uses is based on a schedule from Capitol Appraisal Group, Inc. and was developed for Glasscock CAD.
Although Glasscock CAD's valuation model generally appears to follow the Marshall & Swift/Boeck type procedure, the CAD has not developed a manual that would provide guidance in using the cost-based model. Rather than employing a procedures manual for the appraiser to reference, the appraisal district relies on its contract appraiser, CAG, to train the appraiser assigned to Glasscock CAD.
Glasscock CAD contracts the appraisal of mineral properties to CAG. CAG uses the income approach on mineral properties. CAG appraises mineral properties using the discounted cash flow (income) technique. Using this technique, CAG projects the net income for each year of the property's remaining economic life. Then, the net incomes are discounted to the present value. Stated another way, appraisers use this technique to convert future income to its present value. This technique is a common and accepted income appraisal standard for income producing property, but no manual is available at the district for use in explaining or defending the mineral appraisals to the public.
CAG also appraises Glasscock CAD's utility properties. Utilities are appraised using the unit value technique. This is a technique that requires the appraiser to determine the market value of the entire utility company. 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, but again, no manual is available for use in explaining or defending the appraisals to the public.
Personal property inspections are done every three years. Personal property values, however, are largely based on taxpayer renditions and appraisals by CAG appraisers. The CAG appraisers review the renditions for reasonableness by comparing the rendered values to the personal property value schedule used by CAG.
The appraisal manual used by CAG is certainly a helpful tool and it is specifically designed for use in Glasscock County. However, it is outdated according to the dates in the manual. In addition, the valuation guidebook does not contain local procedures and directives for completing appraisals. The district needs a detailed procedure for the appraisal of land that is updated as the market conditions change.
While CAG has some manuals on the appraisal of property in the district, the lack of detailed appraisal procedures manuals could cause inconsistent appraisals and result in property values that deviate from market value. This market value deviation could cause Glasscock County's school district to receive an invalid finding in the state's property value study. As mentioned previously, Glasscock County ISD did receive an invalid finding in the Comptroller's 2003 Property Value Study, and an invalid finding, if uncorrected, could eventually cause the school district to receive less funding from the state than expected.
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.
Prepare detailed appraisal procedures manuals that provide local procedures and practices for each type of property appraised and tie these local procedures to the existing Marshall & Swift/Boeck procedures.
Glasscock CAD does not have written procedures for gathering and analyzing sales. Glasscock County does not have a multiple listing service (MLS) for real estate professionals. To obtain market data from sales, the appraisal district researches deed recordings to identify property transactions. The district contractor sends sales confirmation letters to buyers and sellers as recorded in the deed to confirm and verify the transaction and the amount of the transaction.
After the site visit, the chief appraiser said the district was developing a sales database. The chief appraiser said that sales would be analyzed and used in developing land and building schedules and the chief appraiser anticipated that this would allow for statistical analysis of sales, when sufficient sales exist. No other details of the database were provided to the review team.
The district's confirmation and verification procedure is one that appraisal districts use, especially those appraisal districts that do not have access to a multiple listing service. However, the appraisal district's procedure for gathering and analyzing sales and market data is not written or contained in a procedures manual.
Written procedures ensure the market analyses are done consistently, regardless of changes in personnel. Knowing what analysis needs to be done, when to perform the analysis, and how to actually perform it is key to maintaining continuity and a high level of appraisal performance.
Establish written procedures for gathering and analyzing sales.
The appraisal company needs to include the sales analysis procedures in the appraisal procedures manual. Compiling these procedures in a written manual will increase overall effectiveness of the appraisal program and ensure continuity in the appraisal district's performance.