KINGMAN - A statewide group of residents is fed up with the Arizona property tax system. Arizona Tax Revolt will be circulating an initiative in the next few weeks to put a constitutional amendment on the November ballot.
"People have budgets. They budget so much for groceries, bills and other items every month. They budget for their property taxes. They expect them to be so much," said Marc Goldstone, chair of Arizona Tax Revolt.
"Many people are going to go into a panic when they see their assessments," he said. Residents across the state have seen their property assessments double or triple in some areas in the last three years, he said.
Goldstone blames the rising assessment rates on large 100- and 1,000-home subdevelopments going up all over the state, especially in Mohave County. Developers sell the homes at hundreds of thousands of dollars, which pushes up the assessed values of the existing homes surrounding the subdevelopment.
The Arizona Tax Revolt's initiative closes a loophole in Proposition 101, which was approved by voters last year. Proposition 101 only applies to county, city, town or community college taxing districts. That left school districts, improvement districts, police, fire and other types of districts free to continue collecting taxes as before.
The initiative would close the loophole by bringing those districts left out of Proposition 101 under a similar tax cap.
The Arizona Tax Revolt initiative is based on California's Proposition 13. Proposition 13 passed in 1978. At the time, California was faced with an increased demand for housing that was raising property taxes at a substantial rate. Many older residents were being taxed out of their homes.
Proposition 13 held real estate property taxes at 1 percent of a property's assessed full cash or market value. According to Proposition 13, the assessed value of a property can only be increased by a maximum of 2 percent a year. If new improvements to a property are made, such as an addition to a home or the property is sold, its value can be reassessed. The property tax collected is then spread to tax jurisdictions such as schools, fire and police districts throughout the state.
Like Prop. 13, the Arizona Tax Revolt's Property Tax Rollback Initiative is a constitutional amendment. It would limit property tax increases to a maximum of 2 percent a year and require a two-thirds majority of voters in a November election to approve an increase or a new tax. It would also require a two-thirds vote to establish a new taxing district.
Unlike Proposition 13, the Arizona Property Tax Rollback Initiative would not focus on adjusting property assessments but on adjusting property tax levies.
"Adjusting property assessments would only shift the burden onto other property owners," Goldstone said.
When California's Proposition 13 fixed property assessments at the value of a property when it was purchased, it created a new problem for property owners. Older residents who had lived in their homes for many years saw a substantial savings in property taxes. However, residents who moved to a new home or moved into California after Proposition 13 passed found themselves paying a lot more for a home and in property taxes.
The Arizona Property Tax Rollback Initiative would adjust taxing jurisdictions' budgets by rolling back levy values in 2009. The initiative would take the average income from levies in the last four years to calculate how much to roll back the levies. It would also allow a 2 percent annual increase in levies.
It could start tax relief for Arizona residents now before voters approve it, Goldstone said.
Just knowing that a correction might be coming in 2009 will hopefully cause more taxing jurisdictions to lower their budgets in 2007 and 2008 in order to get less of a rollback in 2009, he said.
Right now, taxing jurisdictions do not have to raise tax rates to increase the amount of funds they get every year. As long as property assessments continue to rise, the jurisdictions will automatically get more funds.
Goldstone said some taxing jurisdictions have been taking advantage of the situation by increasing their budgets to match the increase in funds.
Taxing jurisdictions that held the line on their budgets in 2007 and 2008 won't be affected that much by the 2009 rollback, while those that were "piggish" may face a large correction, Goldstone said. This could cut some jurisdiction's tax income by as much as 40 percent, he said.
Any improvements made to home or property that would increase the value of the property would increase the property tax paid by the owner. The tax increase for an addition or improvement would be based on the value of the addition or improvement.
For example, a homeowner adds an addition onto their home that costs $100,000. According to the proposed initiative, the local school district could only increase the homeowners' property tax based on the $100,000 value of the addition and the annual 2 percent increase allowed.
Another incentive for local taxing jurisdictions to lower their budgets in 2007 and 2008 is any budget increases needed for new growth after 2009 is conditional on the state Legislature approving a series of seven tax limitations.
Those seven tax limitations are:
Requiring a two-thirds vote in a November election for any new taxes or increases in tax rates.
Limit annual valuation increases for all properties to 2 percent.
Property taxes collected can only be used in the county they are collected in.
Require a two-thirds vote to establish a new improvement district.
Limit the amount paid by new property owners in their first year to their fair share of taxes. A new homeowner's first tax bill will be based on the purchase price of their home for the first year of ownership. After that first year, the tax bill will revert to the market value of the property with a maximum 2 percent annual increase like everyone else.
Require detailed tax bills listing all taxing jurisdictions to be sent to all residents.
Prevent mergers or splits of taxing jurisdictions.
Because local taxing jurisdictions will want and need to collect the revenue generated by new growth, they will apply pressure to the Arizona Legislature to pass the seven tax limitations, Goldstone said.
As each tax limitation is passed, local tax jurisdictions will be able to increase their levies by one seventh of the rate of growth. Any delay could cause budget shortfalls and a possible tax savings to property owners, he said.
"It's Draconian, but I think that it is his [Goldstone's] intent to make a substantial difference," said Ron Nicholson, Mohave County tax assessor.
He said he applauds the fact that Goldstone and those involved in the Arizona Tax Revolt are getting involved in their local governments.
"Even if it fails, it should be an eye-opener," Nicholson said.
Local taxing jurisdictions have some services that they are mandated by law to provide to residents. Passing legislation like the Arizona Tax Revolts' proposed initiative would force taxing jurisdictions to defend the parts of their budgets that are not mandated by the state or the federal government.
Budgets should be set to budget goals and rates should be met to meet goals, Nicholson said.
He encouraged residents to become involved in the budgeting process of their local taxing jurisdictions. Many taxing jurisdictions will be working on their budgets in the next few months. Nicholson lists the different taxing jurisdictions, their tax rates and contact numbers on the county assessor's Web site at www.co.mohave.az.us.