Initiative Seeks Property-Tax Cap On Ballot in Fall

The Arizona Republic
Friday, March 3, 2006
Mary Jo Pitzl

Fed up with rising property valuations that it fears will lead to sky-high taxes, a group has started a petition drive to bring California-style limits on property taxes to Arizona.

The measure, if it gets on the November ballot, would use 2003 property valuations as the basis for future tax bills, negating any potential effect from this year's higher levels. Taxes would be limited to 1 percent of the property's assessed valuation.

"We're revolting against a tax system that is unfair, and we're going to fix that," said Marc Goldstone, a Bullhead City resident who is chairman of the Arizona Tax Revolt.

Motivated by an 80 percent increase in his home's valuation in Mohave County, Goldstone decided to ask voters to amend the state Constitution and limit property-tax hikes.

The initiative drive is gathering steam just as property owners across the state receive valuations of their properties' worth in the mail. More than 1.3 million valuation notices were sent out this week in Maricopa County. The county's residential properties were last assessed two years ago.

Goldstone and several other western Arizona activists consulted with the Howard Jarvis Taxpayers Association in California and borrowed much of the language for the Arizona proposal from it. Jarvis was the architect of Proposition 13, which California voters approved in 1978.

Goldstone, a retired electrical engineer and former California resident, said he has no faith in local governments to restrain spending as more tax dollars pour in due to the higher property valuations. Although tax bills based on this winter's valuations won't be determined for 18 months, Goldstone says he expects the tab to rise at the same rate as the property values.

"Our money says, 'In God we trust,' and I do," Goldstone said. "However, I don't trust the politicians who hire the PR firms to sell us on how this won't be so bad."

He was referring to Maricopa County, where Assessor Keith Russell hired a public-relations firm to help explain the double-digit increases in property values and to caution that the higher values "may not necessarily mean an increase in your tax bills."

The ballot initiative would cap the combined tax rate for any property -- residential, commercial or agricultural -- at 1 percent of its 2003 value.

That means a home valued at $150,000 three years ago would face a combined tax bill of $1,500, regardless of the school district or city in which it was located. Now, tax rates vary with the school district, city council, community college district or other taxing jurisdiction that has property-tax authority.

The initiative is similar to a proposed ballot item that state Sen. Ron Gould, R-Lake Havasu City, is promoting in the Legislature. His measure, SCR 1025, would not roll back valuations to 2003 levels, and limitations would apply only to residential property.

Business groups, which are pushing for a property-tax cut in the Legislature, say they're nervous about California-style limits coming to the state.

"This would devastate local government," said Tim Lawless, president of the Arizona chapter of the National Association of Industrial and Office Properties. "It's not good public policy. You could have draconian impact fees for everything under the sun. Local governments will find a way to replace that money and perhaps in a more regressive way."

The Arizona Chamber of Commerce and chapter of the National Federation of Independent Business also are skeptical.

"If you freeze (taxes) on one end, somebody else will pay it," said Michelle Bolton, the chapter's director.

In California, other fees went up as local governments were limited in how much money they could raise through the property tax. For example, Californians saw an increase in "special assessments" to pay for everything from road and sewer maintenance to prisons and streetlights.

And economists at the University of California-Berkeley have noted that some California communities tilted their policies to promote more retail and its reliable sales-tax base rather than encourage businesses that create jobs and housing.

The Arizona Tax Research Association, which typically champions tax cuts, said a Proposition 13-style limit on property taxes would take away local control of the property taxes that fuel the budgets of everything from city governments to school districts to county flood-control districts.

And it would effectively convert Arizona's property-tax rates, which vary from year to year depending on local budget determinations, into a static rate, much like the sales tax, said Kevin McCarthy, the group's executive director.

McCarthy, Lawless and other business representatives lauded the awareness that groups such as Arizona Tax Revolt could bring to the state's complex property-tax system. For example, the valuation notices this winter will be used to help set tax rates in fall 2007, 18 months from now.

But they feel a constitutional cap on tax rates goes too far.

They are backing legislation that would eliminate a state property tax that pays for education as well as require local governments to adhere to "truth in taxation" practices as an alternative. That measure, HB 2685, was approved by the House on Tuesday and is awaiting debate in the state Senate.

Goldstone said business groups shouldn't condemn the ballot initiative before learning more about it.

"I'm wondering if those folks may have some sort of moral and philosophical block against anything that sounds like Proposition 13," he said.

Fighting property taxes

Several efforts are under way to cut property taxes, given the increase in property valuations.

* HB 2685 and SB 1289. These similar bills would eliminate the county education tax, which is

43 cents per $100 of assessed valuation, require an election to raise taxes and allow growth in government budgets for inflation and new construction without having to go to voters.

* SCR 1025. This ballot initiative would cap residential property taxes at 1 percent of cash value. Valuations could grow no more than 2 percent a year. It also would, by 2035, lower the assessment ratio on commercial, agricultural and vacant land to 10 percent, and it would require an election for taxing districts (school boards, city councils, etc.) to hike property taxes.

* Arizona Tax Revolt. This ballot initiative is like SCR 1025, but it would extend the 1 percent cap on taxes to all classes of property, not just residential. It also would require supermajorities of the voters to pass any property-tax hike.,