Ansible-playbook with group_vars

I'm trying to organize ansible from a ssh model to pull. Before I had a setup like

group_vars/
  all
  prod
  stage
  dev

Now I'm trying to run everything via cron so I tried this setup

staging/
   inventory
   group_vars/
      server
prod/
   inventory
   group_vars/
      server

inventory on both look like

[server]
localhost   ansible_connection=local

for stage my group_vars look like

---
rails_env: staging

I have an example play

- hosts: server
  user: root
  sudo: no
  gather_facts: True

  tasks:
     - debug: msg="reading from {{ rails_env }}"

My run output is

# ansible-playbook -i staging test.yml

PLAY [server] *****************************************************************

GATHERING FACTS ***************************************************************
ok: [localhost]

TASK: [debug msg="reading from {{ rails_env }}"] ******************************
fatal: [localhost] => One or more undefined variables: 'rails_env' is undefined

FATAL: all hosts have already failed -- aborting

PLAY RECAP ********************************************************************
           to retry, use: --limit @/root/test.retry

localhost                  : ok=1    changed=0    unreachable=1    failed=0

Not sure what I'm doing wrong as it should pick that up