Property taxes up as values increase

Christina Leonard
The Arizona Republic
Nov. 13, 2003

Arizona property owners paid $334 million more in property taxes this year compared with last year, shattering the one-year growth record set in 2000, a recent analysis shows.

Western state comparison

Taxes paid on a $200,000 residential property ($150,000 land and building, $50,000 fixtures).

New Mexico...$1,399

Utah...$1,442

Nevada...$1,597

Washington...$1,641

Arizona...$1,741

California...$1,788

Oregon...$3,051

Much of the increase came from new construction. Maricopa County alone experienced $1.4 billion in new taxable property last year. But a substantial amount of growth came from the average 7 to 8 percent increase in the value of existing homes.

The bottom line: Most Arizonans continue to see a steady rise in their property tax bills, though governments that set the taxes - counties, cities and other entities - generally have been holding the line on rates.

Tony D'Alessio, for example, lives in an unincorporated area of Pinal County outside Apache Junction. The 65-year-old retired engineer said his property taxes have increased 10 percent every year for the past three years.

"Our sleazy politicians claim that they have not increased taxes. They are correct. They have relied on the county assessor to do the dirty work for them," he said. "It's really sickening. Is anyone deceived by this party line?"

Government officials say there is no deception. Over the past five years, about 60 percent of the property tax collection increases in Maricopa County came from new construction and 40 percent from rising appreciation values.

Homeowners benefit from the higher values, even though their tax bills may be rising. And the amount of money that schools, counties and others receive from rising property taxes still often falls short of what's needed to keep up with inflation and population growth, authorities say.

Maricopa County officials say more property tax funds don't necessarily equate to bigger budgets. The fiscal 2004 budget actually reflects a $12 million, or 5 percent, reduction from the previous year. The biggest blow came from the state, which hit the county with about $21 million in cost shifts last year.

"I'd love to cut the (property tax) rate," Supervisor Andy Kunasek said. "I really find the property tax is the most onerous taxes going. ... But when somebody upstream tells us we have to provide these services, the money has to come from somewhere."

County Assessor Kevin Ross said higher property tax revenues amount to "a significant amount of money, but when you break it down and eliminate the amount of new construction, the actual impact on homeowners will be far less noticeable."

In the Valley, about 70 percent of property taxes pay for local school districts. The rest goes to cities, towns and counties, as well as libraries, flood control and special districts. This year, the biggest jump in levies came from cities, which took in an additional $39 million. And funding for special districts, which include fire and street lighting districts, climbed by almost $26 million, according to the Arizona Tax Research Association.

Critics say that's not the ideal way the property tax system should work.

"Most economists will tell you the growth we have seen should broaden the tax base and lower the tax rate," said Kevin McCarthy, president of the association. "In this instance, in most jurisdictions, rates are not being reduced commensurate with growth and values."

This year, governments throughout the state collected about $4.7 billion in property tax levies, a 7.6 percent increase from 2002, according to the association. The association based the calculations on figures provided by counties.

"This gets at the heart of why the property tax is the most-hated tax," McCarthy said.

"On the one hand, taxpayers see ever-increasing growth in their values . . . then they watch the politicians hold a press conference saying they haven't raised taxes. And a couple of months later, they get their tax bill, and their tax bill has gone up 10 percent."

The reason is simple: Your taxes depend heavily on the assessed value of your property. And although the statewide average rate fell slightly, most taxing entities didn't reduce rates enough to keep up with values, which jumped by more than 10 percent.

The statewide average rate did fall from $12.49 per $100 of net assessed value last year to $12.18 for 2003, a 2.5 percent drop. Arizona property taxes are below the nation's average.

Jennifer Schuldt, a senior research analyst with the association, said jurisdictions are increasingly comfortable keeping tax rates flat, especially in a struggling economy, because property taxes are a reliable funding source.

The Truth in Taxation law, pushed by the association and passed in 1997, requires state and local governments to revise primary tax rates each year to offset changes in property values or they have to make an announcement.

In Maricopa County, supervisors have reduced or held the overall property tax rate flat for the past decade, but the amount collected has increased by more than $115 million during those years.