Tax flow gushing for agencies

Construction, rising property values a boon for cities, schools, county
The Arizona Republic
Sunday, March 6, 2005
Christina Leonard

Construction and skyrocketing property values could translate into millions of dollars in extra funds for cities, schools and Maricopa County agencies this year.

That boost could spell some relief for cash-strapped government agencies.

Experts say, theoretically, the construction and growth should broaden the tax base and lower property taxes. But many taxing jurisdictions have traditionally kept their property tax rates level, garnering little to no political backlash over "raising taxes" while still raking in more money to pay for services and keep up with the growth.

Although the jurisdictions have enjoyed large increases in funds during the past several years, experts warn that they should not come to depend on property tax growth because it is cyclical in nature.

Maricopa County is expecting more than 10 percent in property growth this year, including $1.5 billion in new taxable property.

"We're in a tremendous growth cycle right now," Chief Deputy Assessor Fred Kelly said. "These numbers are up from last year because you have two things you're working with: new construction and appreciation. Even though residential was frozen, commercial land was revalued."

At its current tax rate, Maricopa County could collect an estimated $43 million more in property taxes compared with last year. Phoenix could receive about $16 million more. And the community college district could gain $31 million depending on its levy limits, according to information compiled by the Assessor's Office.

Smaller cities and towns, such as Buckeye and Surprise, will have the largest percentage of growth. Officials say that may be directly related to expanding town limits or construction.

The bulk of property tax funds go to Valley school districts, which receive 70 percent of property tax funds.

The Assessor's Office recently mailed out 1.3 million valuation notices. Homes are on a two-year valuation cycle, so most homeowners won't see a change in this year's notice. Appeals are due by April 26.

Property tax bills based on the 2005 assessed value won't go out until September.

Maricopa County residents generally experience lower property tax rates compared with other areas nationally.

Don Watz, 38, moved to the Valley from Milwaukee in 2001. He said Arizona is known for its low property taxes.

"It's one of the items my friends marvel at because we get the better end of it," he said.

For example, Watz said he expects to pay about $2,100 in taxes for his Glendale home valued at $390,000. He estimated a similar home in Milwaukee would cost $5,000 to $6,000 in taxes.

Watz said he would not want Valley jurisdictions to raise their rates, but he would not be surprised if they did.

Although many cities complain that they're drowning in debt and worry that the state will cut other funding sources, they most likely will not raise property tax rates significantly this summer.

Phoenix is facing a $69 million deficit as it looks to the next fiscal year because expenses are outpacing revenues.

But the city will impose its maximum levy limit this year, so it couldn't collect more from primary taxes even if it wanted to, said Lauri Wingenroth, deputy budget and research director. The primary tax rate will increase slightly, but the city will reduce the secondary rate so it evens out.

The city has not raised its overall tax rate for at least 10 years. Although Kelly said jurisdictions that hold the line on rates can still expect a "ton of extra money," they often have more costs as well.

"Cities have got another 50,000 houses and thousands of people they need to provide for, so they need to provide that much more fire and police and everything else," he said.

Experts say Arizona residents have come to expect increases in their property tax bills. Most taxing entities don't reduce their rates enough to keep up with rising values.

Kevin McCarthy, president of the Arizona Tax Research Association, said Valley residents may be more tolerant of increases because of the area's lower-than-average property taxes.

But people also may not pay attention to their bills or have a clue where their money goes.

"If people wrote checks to Maricopa County to pay their property tax bill as opposed to the mortgage company, it would change the dynamic incredibly," McCarthy said. Assessor Keith Russell said people should pay attention and get involved in the process.

"They ought to be paying attention to what their school districts are doing with their tax rates, and what the different jurisdictions are going to be doing," he said. "Those are going to be set over the next few months . . . (People have) an opportunity to let them know 'This is what we expect from government.' "