Hidalgo County Appraisal District Re-Appraisal Plan 2023 - 2024 Approved By: Hidalgo County Appraisal District Board of Directors August 10, 2022 Table of Contents Executive Summary 1 Plan for Periodic Reappraisal 2-4 Revaluation Decision (Reappraisal Cycle) 5 Reappraisal Year Activities 6-7 Performance Analysis 7 Analysis of Resources 7 Appraisal Resources 7 Computer Resources 7-8 Mapping Resources 8 Information Resources 8 The Database 8-9 Planning and Organization 9 Calendar of Key Events -- 2023 10 Calendar of Key Events – 2024 11 Mass Appraisal System 12 Real Property Valuation 12 Personal Property Valuation 12-13 Noticing Process 13 Hearing Process 13 Data Collection Requirements 13 Identification and Update of Relevant Characteristics Affecting Value Neighborhood Analysis/Defining Market Areas 13-14 Number of Designated Neighborhoods or Market Areas By 14 School Districts in HCAD 2023 – 2024 Reappraisal Plan New Construction/Demolition 15 Remodeling 15 Re-Inspection of Problematic Market Areas 15 Re-Inspection of the Universe of Properties 15 Field or Office Verification of Sales Data & Property Characteristics 15 Office Audit 15-16 Market Adjustment 16 Pilot Study 16 Valuation by Appraisal Year 16 Residential Property 16-18 Cost Approach 16-17 Sales Comparison Approach 17 Income Approach 18 Inventory Residential Property 18 Land Analysis 18-19 Appraisal of Rural Land 19 The Production Land Market 19 The Investment Land Market 19 The Consumptive Land Market 19-20 Analysis of Local Market 20 Commercial and Multifamily Real Property 20-23 Cost Approach 20-21 Sales Comparison Approach 21 Income Approach 21-23 Utilities, Railroad & Pipelines 23 Mineral Interests 23 Special Valuation Properties 23 Business and Industrial Tangible Personal Property 24-25 Cost Approach 24 Sales Comparison Approach 24 Income Approach 25 The Mass Appraisal Report 25 Value Defense 25 Exhibit A 26 Hidalgo CAD 2023 Reappraisal Work Timeline (Proposed) 27 Hidalgo CAD 2024 Reappraisal Work Timeline (Proposed) 28 Hidalgo CAD 2022 – 2024 Reappraisal Plan Estimated Parcel by ISD 29 HCAD Annual Calendar of Events 30-35 Exhibit B 36 Map of Hidalgo County with School District Boundaries 37 2023 – 2024 Calendar Years 38-40 EXECUTIVE SUMMARY INTRODUCTION Section 6.05 (i) of the Texas Property Tax Code (PTC) requires Appraisal Districts to develop a biennial written reappraisal plan and hold a public hearing to consider the plan. No later than September 15th of each even-numbered year, the Appraisal District Board of Directors must finally approve the reappraisal plan and distribute copies to the taxing units and the Comptroller within 60 days of board approval. This document serves as the biennial written reappraisal plan described above. Hidalgo County Appraisal District (HCAD) is responsible for the appraisal of all classes of taxable property located within its jurisdictional boundaries. The boundaries include all property located in Hidalgo County. HCAD is responsible for the appraisal of approximately 305,528 real property parcels; 7,680 mineral accounts; and 41,168 business and other personal property accounts (including utilities). The District serves 50 taxing units. Those taxing units consist of 16 independent school districts, 20 cities, 1 county, 1 community college district, and 12 special use districts, such as drainage, irrigation, and emergency services. HCAD employs an outside appraisal firm to appraise minerals, oil and gas, utilities, and various other complex properties. Contract appraisers are also guided by the principles set forth in USPAP and a copy of this firm’s valuation methodology is included in the district’s appraisal manual. In mass appraising property for the purpose of ad valorem taxation, HCAD subscribes to the Standards established by the International Association of Assessing Officers (IAAO). In addition, HCAD is guided by the principles set forth in The Appraisal Foundation’s “Uniform Standards of Professional Appraisal Practice” (USPAP). USPAP Standards and Statements are included in this Appraisal Plan. In appraising property for ad valorem tax purposes, HCAD employs generally accepted appraisal methods and techniques. Our analysts conduct mass appraisal utilizing the three approaches to value: the cost, market, and income approaches. Section 6.05(i), of the Texas Property Tax Code, Tax Code reads as follows: (i) To ensure adherence with generally accepted appraisal practices, the Board of Directors of an appraisal district shall develop biennially a written plan for the periodic reappraisal of all property within the boundaries of the district according to the requirements of Section 25.18 and shall have a public hearing to consider the proposed plan. Not later than the 10th day before the date of the hearing, the Secretary of the Board shall deliver to the presiding officer of the governing body of each taxing unit participating in the district a written notice of the date, time, and place of the hearing. Not later than September 15 of each even numbered year, the board shall complete its hearings, make any amendments, and by resolution finally approve the plan. Copies of the approved plan shall be distributed to the presiding officer of the governing body of each taxing unit participating in the district and to the comptroller within 60 days of the approval date. 1 PLAN FOR PERIODIC REAPPRAISAL Texas Property Tax Code Sec. 25.18. Periodic Reappraisals. (a) Each appraisal office shall implement a plan for periodic reappraisal of property approved by the board of directors under Section 6.05(i). (b) The plan shall provide for the following reappraisal activities for all real and personal property in the district at least once every three years: (1) identifying properties to be appraised through physical inspection or by other reliable means of identification, including deeds or other legal documentation, aerial photographs, land-based photographs, surveys, maps, and property sketches; HCAD receives listings of all deeds filed with the Hidalgo County Clerk’s office. Deeds are read and abstracted by clerical staff in the deed department of HCAD. Information is recorded in the computer assisted mass appraisal system (CAMA) software including grantor, grantee, date of recording, volume and page. Property identification numbers are assigned to each parcel of property. Business personal property is located by canvassing the county street by street, using data sources such as yellow pages, sales tax permit holder lists and other business listing publications to ensure that all property owners are located. All businesses are mailed a rendition about January 1 of each year. Owners are required by law to list all their business personal property. Failure to render results in an automatic 10% penalty and a possible 50% penalty if a false rendition is filed. Lists of commercial vehicles are also purchased annually and these vehicles are tied to appropriate business accounts. Renditions are also required of utility companies, railroads and pipelines. Oil and gas wells are discovered using Texas Railroad Commission records. Production records are processed by a contracted appraisal firm. Ownership is determined by records known as division orders. HCAD utilizes a highly developed geographic information system (GIS) that show ownership lines for all real estate. Aerial photography is interfaced with the GIS for an Additional layer of vital information. (2) identifying and updating relevant characteristics of each property in the appraisal records; All real estate is physically reviewed once every three years. HCAD’s 16 school districts are reappraised on a three-year rotation. In 2023 the School Districts of Donna, P-SJ-A, Progreso, Mercedes, and Weslaco, will be reappraised. In 2024 the School Districts of Edinburg, Edcouch-Elsa, La Joya, La Villa, Monte Alto and Lyford will be reappraised. See Exhibit A of this plan for the proposed 2023 and 2024 work schedules. A category breakdown of properties to be appraised within each school district is also included. Appraisers drive the county and gather data about each home, commercial business or vacant tract. The appraisers walk from property to property measuring the structures and noting the condition of the property and noting any changes to the property since the last 2 physical inspection. In addition, the use of Aerial Photography (Pictometry) has become an integral part of the appraisal process for property inspections to insure quality of work. Pictures are taken to capture the property’s current quality and condition. The appraiser notes the date of the physical inspection on the field card, and that information along with any property changes is entered in the Computer Assisted Mass Appraisal System (CAMA). The pictures are stored in the CAMA system and used to assist the appraiser in making decisions in the office. Other data stored in the CAMA system includes an exterior sketch of the improvement which allows for the calculation of square footage for the building and its components such as, garages, porches, patios, and other structures not attached to the main improvement. Other property characteristics maintained in the CAMA system are components found within the building such as bathrooms, fireplaces, air conditioning, roof type, roof pitch, wall heights and exterior finish. New property is discovered using building permits, utility hook up permits, aerial photography and driving the county. Rural and urban acreage is inspected to verify existing agricultural use annually. New applications for agricultural use are inspected annually. Business personal property is physically inspected annually. The quality and density of inventories are determined as of January 1, and the age and condition of furniture, fixtures, machinery and other equipment is noted. If the appraiser’s observation differs from that of the rendition filed by the business owner, additional information is requested from the business owner and sometimes a value that differs from the rendered value may be assigned. HCAD contracts with an appraisal firm that specializes in the appraisal of oil and gas properties, utilities, railroads and pipelines. Specialized software is used to determine well production, decline and economically recoverable reserves. The reserves are appraised discounting for the time it will take to recover them from the earth. Utility companies, railroad and pipelines are appraised using the income approach, where the net income is capitalized and allocating the resulting value to the various taxing entities in the county. (3) defining market areas in the district; Annually, appraisers combine similar types of properties into “neighborhoods”. These neighborhoods or “market areas” typically have improvements of similar construction and type. Market sales that are used, define market areas and improvement and land schedules are developed accordingly. Apartments and commercial properties are categorized by market demand. Trade areas with similar rents, quality and age are combined to analyze sales and rental data. Economic factors weigh heavily when defining market areas. In some instances, large geographic areas of mixed-use property types can be viewed as a single market area because of location, such as property along the Texas/Mexico border, or because of the effects of a natural disaster, such as hurricanes and droughts. (See Exhibit B for list of HCAD neighborhoods/market areas and area map). Market areas are also developed for land. Adjustments are determined based on location, size, topography and other characteristics recognized by market sales. (4) identifying property characteristics that affect property value in each market area, including: (A) the location and market area of property; 3 (B) physical attributes of property, such as size, age, and condition; (C) legal and economic attributes; and (D) easements, covenants, leases, reservations, contracts, declarations, special assessments, ordinances, or legal restrictions; Each parcel of property has detailed information recorded in the CAMA system. Land attributes consist of legal description, dimensions, zoning, size, utilities, road access and any other special, unique or legal characteristics are noted and used for developing schedules and defining market areas. Each improvement record consists of a current sketch with measurements, a photograph of the improvement and individual property characteristics such as class, construction quality, year of construction, roof covering and style, exterior finish, number of bathrooms, fireplaces, heating and air conditioning, pools, out buildings and other attributes specific to the improvement. (5) developing an appraisal model that reflects the relationship among the property characteristics affecting value in each market area and determines the contribution of individual property characteristics; HCAD’s computer assisted mass appraisal (CAMA) system utilizes an appraisal model that reflects the relationship among the property characteristics affecting value in each market area and determines the contribution of individual property characteristics. The model uses the cost approach to value to estimate the original cost of each building component. Market sales are studied for improvement contributions in each market area and adjustments to cost schedules are applied to each improvement via depreciation and market adjustment factors. Similar models are used when appraising apartments, commercial and industrial properties, but market sales and income data are key components of the valuation process for these properties. (6) applying the conclusions reflected in the model to the characteristics of the properties being appraised; and HCAD uses conclusions reflected in appraisal model results to construct and maintain property classification guides identifying minimum property characteristics typical for each property class. By utilizing sales data for each neighborhood and market area, conclusions concerning age, quality, condition, construction components, depreciation and other variables are tested against the model’s results. (7) reviewing the appraisal results to determine value. HCAD tests the results of its appraisal model values (appraisals) against market data (sales) to determine the accuracy and level of appraisal, as well as to monitor the integrity of the appraisal model (CAMA). Ratio study results are used to maintain and update appraisal schedules to achieve market value appraisals. Sales ratios are performed for each neighborhood and market area to determine if values assigned by the model fall within a 95% - 105% confidence interval level. 4 REVALUATION DECISION (REAPPRAISAL CYCLE) HCAD by policy adopted by the Chief Appraiser and Board of Directors reappraises all property in the district at least once every three years, as required by Section 25.18, Property Tax Code. The District has been divided into three equal geographic areas defined by school district boundaries. HCAD’s 16 school districts are reappraised on a three-year rotation. A reappraisal rotation will be administered to ensure that all three geographic areas are reappraised within the three-year period. School Districts or geographic areas scheduled for reappraisal for 2023 and 2024 are as follows: 2023 Donna ISD Mercedes ISD P-SJ-A ISD Progreso ISD Weslaco ISD 2024 Edinburg ISD Edcouch-Elsa ISD La Joya ISD La Villa ISD Monte Alto ISD Lyford ISD The reappraisal year is a complete appraisal of all properties in the geographic area; therefore, both years covered by this plan are reappraisal years. 5 REAPPRAISAL YEAR ACTIVITIES 1. Performance Analysis - The equalized values from previous appraisal year are analyzed with ratio studies to determine appraisal accuracy and appraisal uniformity overall and by market area within property categories. Ratio studies are conducted in compliance with the current Standard on Ratio Studies of the International Association of Assessing Officers. 2. Analysis of Available Resources - Staffing and budget requirements for appraisal year 2023 are detailed in the 2023 appraisal district budget and for 2024 will be analyzed during the 2024 budget process, as adopted by the Board of Directors. Existing appraisal practices, will be specified by district management. Information Systems (IS) support is detailed with year specific functions identified and system upgrades scheduled as necessary. Existing maps and data requirements are specified and updates scheduled as required. 3. Planning and Organization – A calendar of key events with critical completion dates is prepared for the district. This calendar identifies the key events for the preparation of the appraisal roll. A calendar is prepared and included for appraisal years 2023 and 2024. Production standards for field activities are calculated and incorporated in the planning and scheduling process in order to reach goals set by both district management and the Tax Code. 4. Mass Appraisal System – Computer Assisted Mass Appraisal (CAMA) system revisions required are specified and scheduled with Information Systems and the district’s software vendor. All computer forms and IS procedures are reviewed and revised as required. 5. Data Collection Requirements – Field and office procedures are reviewed and revised as required for data collection. Activities scheduled for each appraisal year include new construction, demolition, remodeling, re-inspection of problematic market areas, re- inspection of the universe of properties on a specific cycle, and field or office verification of sales data and property characteristics. 6. Pilot study by appraisal year – New and/or revised mass appraisal models/schedules are tested each appraisal year. Ratio studies, by market area, are conducted using proposed values each appraisal year. Proposed values in each category are tested for accuracy and reliability using standardized testing procedures and ratio study statistics. 7. Valuation by appraisal year - Using market analysis of comparable sales and locally tested cost data, valuation models will be specified and calibrated in compliance with the supplemental standards from the International Association of Assessing Officers and the Uniform Standards of Professional Appraisal Practice. The calculated values will be tested for accuracy and uniformity using ratio studies 8. The Mass Appraisal Report – Each appraisal year the required Mass Appraisal Report will be prepared and certified by the Chief Appraiser at the conclusion of the appraisal phase of the ad valorem tax calendar (on or about May 15th). The Mass Appraisal Report is completed in compliance with STANDARD RULE 6 of the Uniform Standards of Professional Practice (USPAP). The signed certification of the Chief Appraiser is compliant with STANDARD RULE 6 – 3 of USPAP. 6