Property-tax bills finally reflect fall in Phoenix-area home values

Property-tax bills are in the mail, and many Phoenix-area homeowners will be happy to see they owe less this year.

The 2010 assessments will finally begin to reflect the region's plummet in home values, although tax bills are not declining nearly as far as the recent plunge in home prices.

The average property-tax assessment is down 3.7 percent from last year. But some homeowners will see their bills stay the same or even increase, as several municipalities and special districts had to raise their tax rates this year to offset budget shortfalls.

Property values are assessed annually, and state tax bills based on those assessments arrive 18 months later. So, the current bills are based on valuation notices homeowners got in 2008. That year saw average values drop by 23 percent on average.

"We often hear from citizens wanting to know why their tax bills have gone up, even though the assessed value of their property has gone down. And the answer is increased government spending," said Charles Hoskins, Maricopa County treasurer.

How it works

Arizona homeowners are taxed through a formula based on two factors: property valuations set by the assessor and tax rates set by dozens of municipalities and other tax jurisdictions.

Those jurisdictions - counties, cities, school districts, community-college districts and other special districts - determine the actual tax load for any given home.

A tax bill is a composite of the taxes assessed by those many different districts. A home that is inside a certain parks district, for example, may pay higher taxes than an identical home nearby that lies outside district lines.

Other factors can also push a tax bill higher, such as local bond issues or voter-approved school-funding increases called budget overrides.

The bills being mailed show property owners which taxing jurisdictions are contributing to their total assessment.

Setting tax rates

Current tax rates were set earlier this summer. The rates are based on the assessed values of the homes, but as home values decline, rates may go up.

The taxing jurisdictions first figure out how much money they need to fund their budgets, Hoskins said. Then, they work backward to come up with a tax rate. Under this system, a decline in value without an equal drop in a jurisdiction's budget will cause tax rates and taxes to go up. But all jurisdictions have a legal cap on how much they can raise tax rates, which is mandated when they are formed.

The foreclosure crisis also can push up taxes in some cases. As struggling homeowners stop paying their mortgages and property taxes, taxing jurisdictions may have smaller pools of taxpayers to fund their budgets.

Hoskins said some property owners could see big increases in their tax burden because of a special tax district for fire, library or water service. There are thousands of special tax districts in Maricopa County.

Last year, a property owner with 15 vacant-home lots in Buckeye saw his property-tax bill climb from $800 to $23,000 because the municipality increased its fire-district tax, Hoskins said.

There are various caps on rate increases that special districts can levy on property taxes. The Arizona Department of Revenue reviews all taxing districts' rates each year.

This year's property-tax assessments include the state equalization tax, which was reinstated in 2008 after a three-year hiatus. The tax, which helps fund education in Arizona, adds about $50 to a typical Valley homeowner's bill.

Next year's property taxes will be based on valuations sent in February of this year, which showed home values fell 15 percent during 2009.

Property taxes in 2011, based on 2009 valuations, could climb with a recent budget shift. Currently, a rebate subsidizes part of the property tax that homeowners owe for education. The change will limit the homeowner rebate and force school districts to raise their taxes on homeowners.

There has been backlash over Arizona property-tax increases during the past two years. A group known as Prop 13 Arizona wants to simplify the state's property-tax system by using homeowners' purchase prices as the basis for their taxes, doing away with the state's current annual assessed-value method. The plan would be modeled after a California tax policy created by 1978's Proposition 13 ballot initiative.

However, property-tax reform doesn't draw as much support in Arizona as other parts of the country because the state has one of the lowest tax rates in the nation. In 2009, Arizona had the 39th-lowest property-tax rate in the nation, according to the Tax Foundation, a Washington, D.C.-based non-profit.

by Catherine Reagor The Arizona Republic Sept. 3, 2010 12:00 AM




Property-tax bills finally reflect fall in Phoenix-area home values