Mary Schuh has watched in dismay as her property values--and her property-tax bill--have climbed since 2004.
A longtime anti-tax activist who has served as president for the Pima Association of Taxpayers, Schuh has seen the value of her four-bedroom home on Tucson's northwest side jump more than $50,000--to $182,947--in the last three years.
When she got the latest valuation, her value had jumped nearly $29,000 in just one year.
"I literally went--well, I won't use the language," says Schuh. "I really was upset. It's out of control."
Schuh says she's getting an earful from people who are seeing similar increases in their property values as they receive notices in the mail.
"People are literally in kind of a shock," Schuh says. "They're looking at them twice. They're taking them over to a strong light with a magnifying glass and saying, 'I read that wrong. That couldn't have been what I read.'"
Pima County Assessor Bill Staples has heard plenty of similar complaints since he started sending property owners the latest batch of valuation notices (which will be the basis for budgets that will be set in 2007, not later this year). He estimates that property values are up, on average, between 15 and 20 percent.
Staples says the rising property values reflect a hot real estate market, which he is obligated by law to consider when he does his job of appraising property for taxation purposes. By keeping property values close to actual market values, property taxes are equitably distributed among similar properties. If property values are frozen below market value and only increase when homes are sold, says Staples, then over time, "you have properties that are right next door to each other paying vastly different amounts for the same services."
Staples argues that the ultimate factor in how much people pay in property taxes isn't the value, but the tax rates that are set by elected officials such as the Pima County Board of Supervisors and the Tucson Unified School District. Staples points out that those politicians could be cutting tax rates to compensate for increasing values. Or, he suggests, the Arizona Legislature could reduce the percentage that homeowners pay, just as they have reduced the percentages for mines, utilities and commercial properties, which has resulted in more of the overall property-tax burden falling on homeowners.
"Why not shift it over to everybody else?" asks Staples. "That's what's been going on for years from nearly every other classification of property to residential property. It just seems a little disingenuous that the legislators have been doing that for 2 1/2 decades now, and all of a sudden, we have this huge problem."
Pima County isn't the only place where property values are on the rise. In Maricopa County, where the median value for residential housing is up more than 50 percent over the last year, Assessor Keith Russell has hired a public-relations firm to help with an "informational campaign" to "help dispel some of the confusion and misunderstanding" between values and tax rates.
Meanwhile, out in rural Mohave County, Marc Goldstone has launched a petition drive to put the Arizona Tax Revolt on the ballot. A 50-year-old computer engineer who retired to Bullhead City from California three years ago, Goldstone has been horrified to see his property values skyrocket for his 2007 valuation from $185,907 to $334,273, or about 80 percent. (His limited value, on which his primary property tax will be based, has risen 23 percent.)
Goldstone says he doesn't expect his local jurisdictions to ease back the tax rates to give property owners a break.
"We weren't born yesterday," Goldstone says. "I think we all know that when the counties and the jurisdictions have the opportunity to reap a windfall tax increase, they're going to take advantage of that."
The Arizona Tax Revolt--check out arizonataxrevolt.org for details--would mimic California's legendary Proposition 13, which was passed by Golden State voters in 1978. The initiative would roll statewide property values back to their 2003 levels. (Properties purchased since then would be on the rolls at their sales price.) Future increases in value would be limited to 2 percent a year; in a recession, values would actually decrease.
The proposal would also cut taxes for commercial properties by taxing them at the same rate as homes. Under the current structure, businesses essentially pay 2.4 times what homeowners pay.
Staples says he is "flat-out opposed to any type of ballot initiative that would remove the value notices that this office sends out every year from the market standard," because it would create deeper inequities over time.
Goldstone isn't worried about the equity issue.
"No bill is perfect," says Goldstone. "The system that we have right now is so screwed up that we couldn't possibly do anything worse."
Goldstone, who has been collecting signatures for a little more than a month in Mohave County, says he's just getting an effort underway in Maricopa County. With a minimum of 183,917 valid signatures required before July 6, he faces a nearly impossible challenge to get the Arizona Tax Revolt on the November ballot.
Despite the unlikelihood that voters will decide the fate of the Arizona Tax Revolt, state lawmakers are responding to constituent anger over rising property values. A proposed referendum that would ask voters to virtually freeze property values passed the Senate on a narrow 16-14 vote this year, but was killed in the House by Rep. Steve Huffman, chair of the House Ways and Means Committee.
A Tucson Republican who is among a crowded field seeking to replace retiring Congressman Jim Kolbe, Huffman says SCR 1025, sponsored by Lake Havasu Republican Sen. Ron Gould, is "not real tax reform."
Huffman says freezing values doesn't stop local governments from increasing tax rates, which would hurt businesses more than homeowners, because they're taxed at a higher rate. On top of that, a different constitutional provision would force the state general fund to pick up a portion of the homeowners' increased property-tax bill.
Despite those downsides, Huffman admits the idea of freezing values could prove popular with voters.
"It would do severe damage to our economy, to the state general fund and to property taxpayers, but there are a lot of folks that it's appealing to," Huffman says. "We have to really be careful that we don't do something that does more harm than good."
Huffman has proposed an alternative "Truth in Taxation" reform plan that would force county supervisors to ask voters for permission to increase spending after taking into account new construction and inflation.
"The responsibility for your taxes lies with the people who spend the money and set the rate," Huffman says. "It's not with the assessor, who's doing a constitutionally mandated job of setting the value of your property."
Under the current Truth in Taxation law, county supervisors, school board members and other elected officials have to advertise a special meeting and take a public vote if they want to increase the overall property tax take beyond the annual boost in revenues as a result of new construction, combined with inflation.
Huffman's bill, which has already passed the House and is being merged with a similar bill that has passed the Senate, would put more teeth into the Truth in Taxation statute. If county supervisors or city council members wanted to increase spending beyond growth-plus-inflation two years in a row, they'd have to put the plan before voters in the second year.
The legislation--House Bill 2685--would also grant immediate property-tax relief by eliminating a property tax that county governments now collect on behalf of the state to help pay for education. Roughly $200 million in property taxes would be replaced by the state's general fund.
The bill's details will be tinkered with as part of budget talks between lawmakers and Gov. Janet Napolitano in upcoming weeks, with Republican lawmakers pushing for $250 million in cuts to property and income taxes.
Pima County Chuck Huckelberry says the county is opposed to Huffman's legislation.
"This is counter to local-government authority," Huckelberry says. "We oppose anything that takes away the flexibility of the Board of Supervisors to manage Pima County."
Given the increase in property values, Huckelberry says he plans to present a budget that includes a cut in the property-tax rate. But as he assembles that budget, he notes that most of his departments are asking for more money.
On top of that, the county stands to lose millions in federal money due to budget cuts at the same time the state is asking for more dollars for employee health-care benefits and retirement costs. And the county will have to raise property taxes as part of a five-year deal to take over the library system from the city of Tucson, which no longer wants to provide roughly $10 million a year from its general fund.
Huckelberry argues that one reason homeowners are getting socked is because state lawmakers have given breaks to businesses, mines and utilities.
"Our entire property-tax system gets distorted from time to time because of what our Legislature does," Huckelberry says. "The Legislature, over 10 or 20 years, has moved the property-tax base away from mines and utilities to homeowners. So there are all sorts of fingers to be pointed if you talk about distortion of the tax base and the complicated system we have."
Finger-pointing aside, Huckelberry says that all five supervisors have told him they want to cut the tax rate when they pass a budget later this year.
"I've heard every one of the members of the board talk about tax relief," Huckelberry says. "Regardless of what people say, they're in tune with their constituents."
Board of Supervisors chairman Richard Elias says the county has to lower the tax rate both this year and next, when the latest round of valuations becomes the base.
"We've seen such a dramatic change in the last couple of years in valuations, we have to lower the tax rate this year," says Elias, a Democrat who represents District 5. But he cautions that a budget squeeze resulting from fewer federal and state dollars will require more county tax dollars to avoid trimming services. Elias has already learned that proposed Bush budget cuts would cost the county $2.5 million in federal funding for law-enforcement, health-care and community-service programs.
The two Republicans on the board say they want to see the rate cut this year as well. District 4 Supervisor Ray Carroll says he's "positive" the board will reduce rates; District 1's Ann Day says "the time is right for substantial tax relief."
Back at her rapidly appreciating home on Roller Coaster Road, Mary Schuh remains skeptical that she's going to see much property-tax relief, especially with the county picking up the library bills and more jurisdictions talking about bonds programs that will be repaid through the property tax.
"I don't believe them," Schuh says. "They're not going to walk away from a windfall like this."
FIGHT THE VALUE!Think your home or business property value is too high? You can appeal the assessed value within 60 days of receiving your notice in the mail. For details on appealing your valuation, visit www.asr.co.pima.az.us.
The Pima Association of Taxpayers is hosting a forum on tips and tricks to win your appeal from 1 to 4 p.m., Saturday, April 15, at the Pima Community College Downtown Campus, 1255 N. Stone Ave.
Assessor Bill Staples and his staff will be on hand to help you understand the appeals process. You can make it easier on them by bringing your valuation notice. For more info on the forum, call 887-0112.
If you're a senior on a fixed income, you may qualify for a program that allows you to freeze your property value for three years. The qualifying criteria:
- You have to be at least 65 years old.
- Your property must have been your primary residence for a minimum of two years.
- Your household income cannot exceed $28,944 for a single owner or $36,180 for a couple.