Southeast Valley property taxes drop for most homeowners

The Arizona Republic
September 7, 2010
Edythe Jensen

Most Southeast Valley homeowners saw a small bright spot in a gloomy real-estate market when they got their property-tax bills in the mail last week. Most will owe slightly less than last year because home values plummeted and because most of the region's city councils voted not to increase tax rates.

However, the tax drops don't match the steep decline in real-estate values, and some homeowners could be seeing increases if their home values didn't decline as much as those elsewhere or if they live in areas where special district or school tax rates were increased to pay off debts.

Many Southeast Valley homeowners are benefitting from decisions made a few months ago by Chandler, Gilbert, Tempe, Phoenix and Queen Creek city councils.

They voted to hold municipal rates the same even though it required budget cuts to do so.

In Chandler, a split council decided not to raise the property-tax rate even though the city staff had warned that a large reduction in revenue could force the city to defer street maintenance.

Chandler also has put off several parks projects and construction of a museum that has twice been approved by voters.

However, council members who supported the stagnant rate said residents have been hammered by the recession and deserve tax relief.

In Gilbert, the decision not to raise the sales-tax rate means the town will not get enough additional property-tax revenue to issue bonds approved by voters in 2007. That means the town must put plans for street improvements and new parks on hold indefinitely.

Town spokeswoman Beth Lucas said that even before the downturn, Gilbert elected officials "were committed to maintaining a low-cost government" and keeping property taxes as low as possible for residents.

Only Mesa, which has a significantly smaller property-tax levy than the other communities, raised its property-tax rate. But that city's rate is so much lower than those of neighboring municipalities that the increase didn't have a big effect on the total tax bill. Arizona's property taxes are complex and are levied by several jurisdictions; city taxes represent about 10 percent of the total; the largest portion - nearly half - goes to schools. Each of the taxing jurisdictions figures out how much money it needs then divides up the total among properties based on value. Owners of homes that are valued the same but built in different parts of the same city may pay different taxes because school and special-district boundaries don't follow city lines.

School districts are especially complex because there are separate tax categories for bonds, overrides and other school needs.

Also complicating matters is the time lag. Values are assessed annually, and tax bills based on those assessments arrive 18 months later. The current bills are based on "2010" valuation notices that were done in 2008.

Kevin McCarthy, executive director of the Arizona Tax Research Association, said property owners anticipated a bigger drop in their taxes to match the drastic decline in their homes' values but didn't get it.

The declining values are making it difficult for governments and school districts to repay bonds and are prompting rate increases, he said.

That could change public response to future bond elections, including one that the Chandler Unified School District is putting before voters in November, he said.

Since most homeowners pay property taxes through their mortgage companies, even those who see a significant reduction in this year's bill may not notice a change in their monthly payments for a while.

Kevin Ross, a Gilbert mortgage broker and former Maricopa County assessor, said federal law gives mortgage companies a year to refund surplus property-tax collections although some may adjust payments sooner.