No one knows what it's going to cost us

Assessed values are going through the roof. But will residential property taxes increase in tandem?
The Arizona Republic
Saturday, March 4, 2006
Matthew Benson

Escalating property values across Arizona appear destined to push property taxes to new heights.

The question is: How high? That depends on whom you ask.

The precise answer won't be known until 18 or so months from now after local governments and taxing entities have set their budgets and tax rates. But many homeowners aren't waiting.

They've been sitting around kitchen tables, punching calculators and sketching out their 2007 property-tax bills since getting notice from the county this week that they're sitting on properties suddenly worth 50, 60 or nearly 70 percent more than when their homes were last assessed in 2005.

Richard Gayer's 1,275-square-foot, 1930s-era home in the Willo Historic District of central Phoenix saw a 62 percent hike in value. The county valued the home at $294,000, $113,000 more than when it was last assessed in 2005. He figures he'll end up paying nearly $720 more in property tax for 2007.

"There's not going to be a disaster," the 67-year-old retiree said, "but the quality of life suffers. That's $720 I won't have to spend on something else."

Homes in Maricopa County, which are assessed every two years, saw a median increase in value of nearly 52 percent. Homes on all sides of the Valley saw substantial gains, but Ahwatukee, a suburb of Phoenix, saw the biggest with median increases of 69 percent.

Metropolitan Phoenix home values routinely jumped from 30 to 50 percent in 2005 alone, according to an Arizona Republic analysis. County assessed values, done on a two-year cycle, generally lag behind market values.

But not everyone is convinced the eye-popping increases will lead to sticker shock when tax bills come due in fall 2007.

Count Maricopa County Treasurer David Schweikert among the optimistic. His 1,499-square-foot Fountain Hills ranch home's value jumped nearly 60 percent, from $185,000, when the home was last assessed in 2005, to $295,000 for 2007.

But he projects his 2007 property taxes will increase just $66 over what he'll pay this year.

That projection assumes cities, school districts and other taxing entities increase their budgets to account only for income from new construction and that voters don't approve new bonds or additional government spending.

Fat chance, says Kevin McCarthy, president of the Arizona Tax Research Association. He believes it's more likely that many local governments, ranging from school districts to city or town councils, will keep their tax rates steady or cut them just slightly, allowing them to dip into the windfall from climbing property values.

McCarthy ran a projection of his own, and with his model estimates, he'll be paying more than $1,000 in additional property taxes in 2007. The latest county assessment added 60 percent of value to his 2,728-square-foot Gilbert home. It's now valued at $473,500, up from its 2005 assessment of $295,500.

"I know for a fact this is going to result in a tax increase," McCarthy said of the growth in property values. "It's going to be more than what anybody has experienced in the past.

"The policymakers at the state level ought to be concerned about this," added McCarthy, whose group lobbies in behalf of tax reform and generally favors efforts to cut rates. "They ought to be doing something to drive rates down."

Otherwise, he said taxpayers may take matters into their own hands.

As much as the assessed values have risen, homeowners can rest assured their property taxes won't increase at the same rate. Taxes are calculated based on local spending and the tax measures voters approve and not simply on the rate at which a property appreciates.

California-style limits

Property taxes are a concern across Arizona, and a group calling itself Arizona Tax Revolt is collecting signatures to place a measure on the November ballot that would institute California-style property-tax limits here. Taxes, under the proposal, would be limited to 1 percent of a property's assessed value.

Bullhead City resident Don Dixon is volunteering for the effort.

He and his wife, Judy, moved to the area from California in 2004. Although he is confident they can afford the additional property taxes they stand to pay now that the home that cost them $164,900 is valued at $210,000, he is not so sure about others. Dixon said he was mortified recently when he overheard elderly women in Bullhead City lamenting whether they could afford their property taxes.

For Dixon, the issue is simple: He has no faith in government officials to hold the line or cut tax rates in the face of escalating property values.

"I didn't go to war for this country to come back and see the elders crying because they can't keep their homes," said Dixon, a Vietnam veteran.

Following the mandates

Although his office is the target of much of the angst from homeowners, Maricopa County Assessor Keith Russell said he is simply following state mandates. Arizona requires local assessors to value properties according to market conditions. That means a system of mass appraisal that takes into account a property's basic characteristics as well as the recent sale of comparable properties.

Residents with a concern about their property taxes would be better off focusing on the spending of their local governments and taxing entities, Russell said.

Or consulting a mirror. Residents heap many of the taxes onto themselves through voter-approved bonds and other tax measures.

Ahwatukee resident Randy Bass doesn't plan to appeal his valuation, which saw his home shoot up nearly 60 percent, to $258,000.

Bass, 51, called the assessment "reasonable" and noted that he has always found the county estimate to be at least slightly below his home's actual value.

That's by design and typical, Russell said.

But below value or not, Bass said, the assessment increases and tax hikes that often follow are what hit hard.

Many Valley residents are living in homes they purchased not that long ago for not that much. Although in many cases the homes have become gold mines, the financial standing of the people living within them often hasn't changed.

"Just because you're in a home that's suddenly worth way more doesn't mean you have more income," Bass said. "You shouldn't have to take out a second mortgage just to be able to pay the property taxes."

So they sit, property assessment notice in one hand, a calculator in the other.