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Arizona
Capitol
Times
October
3,
2003
Calling
business
property
taxes
a
major
threat
to
the
state’s
economic
stability,
three
organizations
are
asking
the
Legislature
for a
change
in
the
tax
system.
“The
single
greatest
imbalance
in
Arizona’s
tax
system
is
the
extreme
burden
placed
on
business
property,”
said
a
paper
presented
by
the
Arizona
Chamber
of
Commerce
State
Budget
Committee
to
the
Legislature’s
Tax
Reform
for
Arizona
Citizens
Committee
meeting
on
Sept.
23.
“Arizona
ranks
third
in
the
nation
and
highest
in
the
Rocky
Mountain
region
in
business
property
taxes,”
the
paper
said.
“The
burden
is a
significant
obstacle
for
the
retention,
expansion
and
new
location
of
business
property
in
Arizona.”
Dick
Foreman,
co-chairman
of
the
Arizona
Chamber
committee,
urged
members
of
the
tax
reform
committee
to
consider
equalizing
assessment
ratios
but
to do
it
over
a
period
of
time
to
soften
the
impact.
“There
is no
single
greater
threat
to
economic
stability,”
Mr.
Foreman
said
of
the
current
assessment
ratios.
Currently,
the
assessment
ratio
for
business
property
is 25
per
cent,
and
the
assessment
ratio
for
residential
property
is 10
per
cent.
Businesses,
under
this
system,
pay
two
and a
half
times
the
taxes
homeowners
pay
for
the
same
amount
of
property
value.
Groups
Urge
Change
The
National
Association
of
Industrial
and
Office
Properties
(NAIOP)
and
the
Arizona
Tax
Research
Association
(ATRA)
joined
the
Arizona
Chamber
of
Commerce
in
urging
a
change.
“ATRA
believes
the
most
pressing
issue
in
Arizona’s
tax
system
is
the
effect
of
the
classification
system
on
business
property
taxes,”
said
Kevin
McCarthy,
president
of
the
tax
association.
“There
are
two
ways
to
deal
with
the
problem
—
reduce
property
taxes
overall
or
create
equity
across
the
classes.
“Considering
the
importance
of
the
property
tax
for
both
state
and
local
government,
significant
reductions
in
the
property
tax
are
unrealistic,”
he
continued.
“That
leaves
equity
as
the
only
other
avenue
to
begin
addressing
the
problem
of
high
business
taxes.”
John
Lentine,
representing
NAIOP,
told
the
tax
reform
committee
members
that
property
taxes
constitute
35
per
cent
of
the
operating
expenses
for a
typical
office
building
and
55
per
cent
for a
typical
industrial
building.
He
said
because
of
Arizona’s
property
tax
system,
cities
in
other
states
have
an
advantage
in
attracting
business.
He
gave
members
the
results
of a
study
prepared
for
NAIOP
on
comparative
business
expenses
in
Reno,
Los
Angeles,
Salt
Lake
City,
San
Jose,
Calif.;
and
Phoenix.
For a
company
with
50
employees
and
gross
revenues
of $5
million,
the
study
concluded
that
expenses,
including
property
taxes,
were
$4.61
million
for a
company
in
Phoenix
compared
to
$4.5
million
in
Reno,
$4.59
million
in
San
Jose,
$4.5
million
in
Los
Angeles
and
also
$4.5
million
in
Salt
Lake
City.
The
major
factor
in
the
higher
expenses
in
Phoenix
was
property
tax.
For
Phoenix,
the
property
tax
load
was
$103,802.
The
next
highest
load
was
in
San
Jose
at
$91,133.
Los
Angeles
had a
property
tax
load
of
$29,655.
Equalization
of
property
taxes
has
been
advocated
often
in
the
past,
but
attempts
at
pure
equalization
—
everyone
paying
at
the
same
assessment
ratio
—
have
not
been
successful
because
equalizing
the
ratios
means
homeowners
would
pay
significantly
higher
property
taxes
if
the
same
level
of
property
tax
revenue
were
to be
required.
Topic
Came
Up In
2000
Sharon
Megdal,
an
economist
who
is
associate
director
of
the
University
of
Arizona
Water
Resources
Research
Center,
was
chairman
of a
study
group
in
1989
that
published
a
report
called
Fiscal
2000.
In a
recent
interview,
she
discussed
the
problems
of
trying
to
work
on
the
property
tax
system.
“We
[the
Fiscal
2000
study
group]
like
others
recommended
simplification
of
the
property
tax.
It’s
a
hard
thing
to do
politically
but
most
would
agree
it
would
be
good
if we
could
lower
business
property
taxes.
“But,
as
everybody
knows,
unless
you
lower
reliance
on
property
taxes
significantly
the
only
way
you
do
that
is by
raising
residential
property
taxes.
And,
that’s
problematic.”
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