Scope of Work:
The personal property division of the commercial appraisal department is responsible for developing fair and uniform market values for business personal property located within the district. There are four different personal property types appraised by the personal property appraisers, these include:
- Business Personal Property accounts
- Leased Assets
- Multi-Location Assets.
Sources of Data:
Renditions: The primary source for the discovery of leased and multi-location tangible assets is property owner renditions. A rendition is a form that may be used by a property owner to report taxable property owned on Jan. 1 to the appraisal district and must be filed before the statutory filing deadline. The rendition identifies, describes and gives the location of the taxable property. Business owners are required by law to report a rendition of their personal property. Persons filing renditions who are not the property owner, owner’s employee or affiliated entity or a secured party must have the rendition notarized.
Business Personal Property Inspections: In addition to data collected and verified by the field appraisers, various discovery publications such as the Court Reporter and state sales tax listings will be used to discover personal property. Tax assessors, city and local newspapers, and the public often provide the district information regarding new personal property and other relevant facts related to property valuation.
Vehicles and Leased Vehicles: The district purchases data from Infonation Inc. which provides MCAD with a listing of vehicles within Midland County. The vendor develops this listing from the Texas Department of Transportation (DOT) Title and Registration Division records. MCAD also uses national and regional publications to research vehicle value benchmarks. Other sources of data include property owner renditions and field inspections.
Procedure for Collecting and Validating Data:
Field Inspection: Data characteristics for each personal property account in Midland County will be collected in the field and data entered to the district’s computer-assisted personal property appraisal (CAPPA) system. The property characteristics data drives the (CAPPA) system. There are 3 appraisers assigned to the discovery and collection of business personal property data. Other appraisers will be utilized as needed.
Personal property data collection procedures are published and distributed to all appraisers involved in the appraisal and valuation of personal property. The appraisal procedures will be reviewed and revised in the reappraisal year. The Personal Property Division of the Commercial Department will be given a four-year period to complete a universal inspection of business personal property.
Highest and Best Use Analysis: The appraisal district will analyze the highest and best use of the personal property. The highest and best use of property is the reasonable and probable use that supports the highest present value as of the date of the appraisal. The highest and best use must be physically possible, legal, financially feasible, and productive to its maximum. The highest and best use of personal property is normally its current use.
Depreciation Schedule and Trending Factors: The coordinator of the personal property department, working with appropriate staff, will develop depreciation tables and trending factors which will be incorporation into the CAPPA system. These trends and factors will be applied as needed with consideration to the individual characteristics of the type of personal property being appraised.
Business Personal Property: The primary approach to the valuation of business personal property is the cost approach. The replacement cost new (RCN) is either developed from property owner reported historical cost or from developed valuation models. The trending factors to be used to develop RCN will be based on published valuation guides. The percent good depreciation factors are also based on published valuation guides. The index factors and percent good depreciation factors will be used to develop present value factors (PVF), by year of acquisition, as follows:
PVF = INDEX FACTOR x PERCENT GOOD FACTOR
The PVF is used as an “express” calculation in the cost approach. The PVF is applied to reported historical cost as follows:
MARKET VALUE ESTIMATE = PVF x HISTORICAL COST
This mass appraisal PVF schedule is used to ensure that estimated values are uniform and consistent within the market.
Computer Assisted Personal Property Appraisal (CAPPA):
The CAPPA valuation process has two main objectives: 1) Analyze and adjust existing SIC models. 2) Develop new models for business classifications not previously integrated into CAPPA. The delineated sample is reviewed for accuracy of SIC code, square footage, field data, and original cost information. CAPPA model values will be used in the general business personal property valuation program to estimate the value of new accounts for which no property owner’s rendition is filed.
Model values are used to establish tolerance parameters for testing the valuation of property for which prior data years’ data exist or for which current year rendered information is available. The calculated current year value or the prior year’s value will be compared to the indicated model value by the valuation program. If the value being tested is within an established acceptable percentage tolerance range of the model value, the account passes that range check and moves to the next valuation step. If the account fails the tolerance range check, it is flagged for individual review. Allowable tolerance ranges may be adjusted depending on the analysis of prior results.
- Model Specification: Four-digit numeric codes, called Standard Industrial Classification (SIC) codes will be used by MCAD as a way to delineate personal property by business type. MCAD will further stratify these codes by adding alpha suffixes to SIC codes in order to group business types that have similar personal property characteristics. All of the personal property analysis work done in association with the valuation process is SIC code specific. The SIC codes will be delineated based on observable aspects of homogeneity and will be reviewed to determine if further stratification is warranted. Models will be created and refined using actual original cost data to derive a typical replacement cost new (RCN) per square foot for a specific category of assets. The RCN per square foot will be depreciated by the estimated age using the depreciation table adopted for the tax year. The data sampling process will be conducted in the following order: 1) Prioritizing Standard Industrial Classification (SIC) codes for model analysis. 2) Compiling the data and developing the reports. 3) Field checking the selected samples. The models are built and adjusted using district CAMA systems and internally developed software.
- Model Calibration: The models are then tested against the previous year’s data. The typical RCN per square foot (or applicable unit) is determined by a statistical analysis of the available data. The Personal Property Coordinator will adjust cost schedules based on SIC codes. Cost data from property owner renditions, hearings, Comptroller of Public Accounts state schedules, and published cost guides will be utilized to adjust and modify the cost schedules. The cost schedules will be reviewed and modified as needed during the reappraisal year in order to conform to changing market conditions. The schedules are typically in a price per square foot format, but some SIC codes are in a price per unit format, such as per room for hotels.
Summary statistics including, but not limited to, the median, weighted mean, and standard deviation will provide the personal property department with an analytical tool by which to determine both the level and uniformity of appraised value by SIC code. Review of the standard deviation will be use to discern appraisal uniformity within SIC codes.
Vehicles and Leased and Multi-Location Assets
Value estimates for vehicles are to be provided by an outside vendor and are based on NADA published book values and Hunter McLean published book values. Vehicles that are not valued by the vendor are valued by an appraiser using present value factor (PVF) schedules or published guides.
Leased and multi-location assets are valued using the PVF schedules mentioned above. If the asset to be valued in this category is a vehicle, then published book values or similar values provided by a vehicle data vendor will be adjusted according to current economic criteria. Assets that are not valued by the vendor will be valued by an appraiser using PVF schedules or published guides.