Boost in home values fattens coffers

By JASON MASSAD, TRIBUNE

Rising home values in Arizona over the last several years mean that communities across the East Valley could reap more from taxpayers in 2007 for projects such as road construction, park improvements and sewer and water upgrades.

The rise in assessed value for East Valley homes this year runs counter to the recent decline in area home values. However, Arizona tax assessments run well behind actual market values for property.

In Gilbert, Chandler, Scottsdale and Tempe, the assessed value for the average home has spiked between 47 and 63 percent between 2005 and 2006, according to the Maricopa County Assessor.

That means area residents likely will see increases in this year’s tax bills, tax researchers said.

How much is unclear. The Mesa Unified School District, for instance, hasn’t even set its tax rate for 2007, while it awaits final revenue projections in the state budget. School taxes account for around 60 percent of the total charges contained in a typical Arizona tax bill.

Taxes for communities vary, but they account for a much smaller amount of the overall tax obligation. In recent months, East Valley municipalities have been locking in their tax rates for the 2007-08 budget year.

While a primary tax that pays for communities to keep the lights on and compensate employees can only increase by 2 percent, the secondary tax is a different story.

Secondary taxes are completely unrestricted, and pay for road improvements, park upgrades and other municipal projects.

The spike in home prices between 2005 and 2006 means communities will cash in this year by handing a bigger tax bill to the average homeowner, said Kevin McCarthy with the Arizona Tax Research Association.

“It’s a windfall, and the cities plan to access it,” he said.

Gilbert, for instance, saw a 60 percent increase in the median value of a home. However, the town is contemplating keeping its same $1.15 tax rate in 2007.

That would mean the average homeowner would pay $107 more this year, just for the town’s share of taxes, due to higher values.

Mayor Steve Berman wants to lower the town’s tax rate by 0.05 percent. Councilman Steve Urie said Gilbert needs the money for street improvements, especially in the quickly developing southeast part of town.

By keeping the tax rate the same, Gilbert can pay for up to $103 million in bond issue projects. The town has voter approval for $92 million in bond debt.

“What came through loud and clear in the last election is that voters wanted the streets to be built,” Urie said.

Government watchdogs say that thinking is a classic baitand-switch tactic. Officials routinely ask voters to approve bonds by saying they won’t lead to new taxes. However, the bond debt drives tax rates, which can lead to higher taxes, McCarthy said.

“They sell bond elections on the premise that it’s not a tax increase,” he said. “More astute property owners know that’s not true.”

Some East Valley residents say the bottom line is not as important as municipal services.

Tempe resident Phil Amorosi supported Tempe’s move to keep its secondary tax rate at $1.40, one of the Valley’s highest. A project to calm traffic in his neighborhood near Hudson Park has been delayed for years, and would have been shelved had Tempe lowered its rate, he said.

Rising taxes: Here's the secondary property tax rates that East Valley cities are contemplating for the new budget year, which begins July 1. While rates are holding firm or going down slightly, cities will reap the benefits of higher property values.

SOURCE: Maricopa County Assessor/Jason Massad; Scott Sheils/TRIBUNE