Executive Summary

In July 2004, the Alvin Independent School District (AISD), located in Brazoria 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 serves them. In February 2005, the Comptroller's Property Tax Division (PTD) began an Appraisal Standards Review of the Brazoria County Appraisal District (Brazoria 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 county appraisal district's (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 CAD's performance. The evaluation of the CAD's appraisal methods are based on a comparison of local methods and procedures to those generally accepted by the appraisal industry in Texas. The Tax Code dictates certain appraisal procedures or standards such as the Uniform Standards of Professional Appraisal Practice (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 include 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 PVS, 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 review team found several commendable practices implemented by dedicated and hard working district employees, Brazoria CAD is facing several challenges in achieving and maintaining consistent valid findings, including:

• planning for regular reappraisals;
• managing and monitoring contracts; and
• meeting industry appraisal staffing standards.

Key Findings and Recommendations

Plan for Regular Reappraisals

• Adopt a detailed reappraisal plan. The district has a one-page reappraisal plan that has insufficient detail for guiding district reappraisals of property. Tax Code Section 25.18 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. It is also a communication tool that shows the appraisal district board how staff plan to accomplish its appraisals and allows the board to direct the appraisal activities by amending the plan as presented by the chief appraiser.

Manage and Monitor Contracts

• Formalize the contract monitoring process. Brazoria CAD's contract monitoring guidelines are only shared informally, as there are no written procedures for appraisal district staff to reference. New and reassigned district staff may not be aware of the informal guidelines for ensuring that a 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 formal contract monitoring, the district has not confirmed that it received the quality or quantity of services specified for delivery, as rendered by the contractor

• Revise the mineral, utility and industrial professional appraisal services contract to comply with IAAO standards. This contract has nine provisions but only one deadline and payments are not tied to deliverables. IAAO standards require contracts have specific provisions, including the timeframes when services or goods will be delivered. Without clearly defined contract services and deliverables, tied to vendor deadlines that correspond with appraisal district target function dates, the district is not alerting the vendor to its critical deadlines or ensuring that critical deliverables are received timely.

Meet Industry Appraisal Staffing Standards

• Implement staffing analyses with a goal of achieving IAAO standards. In tax years 2003 and 2004 Brazoria CAD did not meet IAAO appraisal staffing standards for the growing number of parcels in its district. Although the chief appraiser promptly made positive staffing and procedural changes based on the land valuation problems identified in the 2003 PVS, staffing levels have not yet reached IAAO recommended levels. With current appraisal staff parcel counts at about twice what IAAO recommends, the district is at risk of losing both complete parcel coverage and appraisal accuracy. Successful appraisal districts monitor staffing and parcel counts and make necessary adjustments to ensure adequate county coverage while maintaining appraisal accuracy.

Commendable Practices

The review team identified some commendable practices in Brazoria CAD that other county appraisal districts may do will to review and implement where appropriate

• Brazoria CAD management has a successful process for effectively identifying and obtaining needed services. Outcomes from this process, which include identifying needed services and reviewing available in-house and outside provider options, prior to making purchasing decisions, have resulted in the following purchasing successes. Brazoria CAD management investigated ways to reduce purchasing costs and subsequently entered into an interlocal agreement with the Regional Education Service Center IV (Region 4) in January 2004, joining its purchasing cooperative. In addition, Brazoria CAD has contracted with an Internet provider since 1998 to provide the public with a Brazoria CAD searchable database. Since June 1, 2002 Brazoria CAD has contracted with AFLAC Administrative Services to offer employees Flex One Cafeteria Plan services, with employees having a choice between cash or the offered services

• Brazoria CAD has a comprehensive ratio study system that allows proper reappraisal and maintenance planning. Brazoria CAD's computerized appraisal system allows the appraisal district to analyze its appraisals through ratio studies within and among property classifications. Of common interest in ratio studies are the level and uniformity of the appraisals or assessments. The appraisal district's automated appraisal system can produce ratio studies statistics on demand once staff input the property sales information and identify the market area to be studied. 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

• Brazoria CAD improved appraisal accuracy by changing staffing, procedures, and the way it analyzed and valued land sales. According to the chief appraiser, staffing and procedure analyses were conducted when a deficiency in Brazoria CAD land values was identified in the 2003 PVS. Currently Brazoria CAD uses a unit value per acre and square foot and primary measures, along with an emphasis on mapping and or tabling of land values. This methodology complements and conforms to having limited staff and helps ensure uniformity in appraisal. Even with Brazoria CAD's increasing parcel counts and variable land values, the above changes have helped in sustaining acceptable land values.

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