Vote No on Prop 117!
This is from JLBC’s own fiscal note. It’s clear this will hurt the State General fund and shift more property tax to homeowners.
| BILL # SCR 1025 | TITLE: property tax assessed valuation; limitation |
| SPONSOR: Yarbrough | STATUS: As Introduced |
| PREPARED BY: Hans Olofsson |
Description
SCR 1025 would amend the Arizona Constitution, upon voter approval, by limiting the annual growth of locally assessed real property to 5%, beginning in Tax Year (TY) 2014. By way of comparison, current law limits the annual valuation growth of such property to the greater of: (1) 10% or (2) 25% of the difference between the parcel’s full cash value in the current year and the parcel’s limited value in the prior year. In addition, under current law, as well as under the resolution, a parcel’s limited value can never exceed its full cash value.
Under current law, primary taxes are levied on a parcel’s limited value, whereas secondary taxes are levied on its full cash value. Primary taxes are levied to pay for the maintenance and operation of local governments and secondary taxes are levied to pay for debt service, budget overrides, and special taxing districts. SCR 1025 would provide that all property taxes be levied on the limited value.
If approved by voters in the 2012 General Election, SCR 1025 would become effective in TY 2014. Under the state’s valuation calendar, the 5% cap would first apply to 2013 property valuations, which are not subject to taxes until FY 2015. For this reason, the fiscal impact of the valuation growth cap would not occur until earliest FY 2015.
Estimated Impact
When future property values grow by more than 5%, there could be a relatively small increase in the state’s General Fund cost for the constitutional 1% Cap provision (see discussion below). The timing of this fiscal impact is uncertain, however, since it depends on when residential and commercial property values will begin growing again, which cannot be determined in advance. Additionally, it is also difficult to predict the exact rate at which future values will grow.
Analysis
According to historical county levy limit worksheets, the statewide annual growth in locally assessed real property values has varied over time. For example, primary assessed real property appreciated at an average annual rate of 4.8% between TY 2000 and TY 2006. This was followed by average annual growth of 9.7% between TY 2007 and TY 2009, and average annual decline of (11.5)% between TY 2010 and TY 2012.
Preliminary notice of value data indicates that real property values will decline in TY 2013. It is still uncertain, however, whether real property values will increase or decrease in TY 2014. It is also difficult to predict exactly when statewide locally assessed valuation growth will first exceed 5%. When this occurs, however, the resolution’s growth cap would result in a higher truth-in-taxation (TNT) rate for the K-12 qualifying tax rate (QTR) and state equalization tax rate (SETR) than under current law. Under TNT, the QTR and SETR are adjusted each year to offset the change in statewide existing property values. For example, if property values grow by 7% under the current law, the QTR declines by 7% to hold the tax levy on existing property constant. Under SCR 1025, the growth will be limited to 5% and the QTR will only decline by 5%.
Unless the Legislature decided to override the automatic rate adjustments under TNT, SCR 1025 would have essentially no impact on Basic State Aid to schools since the higher K-12 tax rates would be offset by commensurately lower property values.
(Continued)
The 5% growth cap would also result in higher maximum allowable tax rates for local governments than under current law. The Arizona Constitution allows counties, community colleges, cities and towns to increase their primary property tax levies on existing property by 2% each year. While levy limits would not change under SCR 1025, the lower tax base under the resolution could result in higher local property tax rates than under current law. These higher local tax rates could potentially raise the cost of the “1% Cap.” Under the Arizona Constitution, the total combined primary tax levied on owner-occupied residential property is limited to 1% of the parcel’s value. When the combined tax rate exceeds 1% of residential property values, the state holds school districts harmless by paying them the amount in excess of 1% that otherwise would have been paid by homeowners. The estimated statewide cost of the 1% Cap was $6.8 million in FY 2012. The increased cost of the 1% Cap under SCR 1025, if any, cannot be determined in advance.
Local Government Impact
Since all property taxes under SCR 1025, including taxes to pay for bonds, overrides, and special districts, would be based on limited value rather than full cash value, the resolution would limit future bonding capacity for local governments in years when full cash value would grow faster than 5%.
2/17/12
Well that’s a no brainer. Why would I want to increase my taxes or add cost to the General Fund?
What is the point of a fiscal note anyway?
Let’s face it!
To really reduce taxes, budgets must be brought under control or to be candid, slashed!
Under the present system, if valuations decrease tax rates increase and for the most part
the middle class homeowner, who is currently unorganized bears the greatest burden.
Prop 117 continues the trend. Businesses pay less, homeowners pay more and of course the parasitic
class pays nothing.
This “limits” an increase to 5%. Does it also limit a decrease to 5%?
It is a bad law. Caps are always a bad idea anyway. Vote NO on Prop 117
All I know is that half of my annual propery taxes go to pay for shcools! Despite that, voters keep voting to approve MORE school spending! Somehow they think that more money equals a better education! That has been disproven countless times!
Prop 117 – Property Tax Valuation Limit ONLY, Sponsored by ATRA Lobbyist for the Big Boys. Google “Property Valuation Limits” to see the independent studies. Sample the Top 100 Real Estate Trades in the state compared to the 2013 assessments already on the tax rolls. Somebody already spotted the Big Boys a few decades of under-assessments and guess who will subsidize this Regressive, Trojan Horse Proposition? Exactly, the little guy takes one on the chin again. VOTE NO on Prop 117. Send a message to ATRA Lobbyists and Legislators that caved in to the big boys and come up with something that does not make it a runaway right out of the gates for the big boys…I pay my fair share, I expect others to do the same, including the Big Boys……
Limits that constrain changes in assessed or appraised value of property may appear to provide control but actually distort the distribution of the property tax, destroying property tax equity and increasing public confusion and administrative complexity. Owners whose properties are increasing in value more rapidly than the permitted rate of increase (say, 5 percent) receive a windfall at the expense of those whose properties are decreasing in value or are increasing at lower rates. In effect, valuation increase limits result in lower effective property tax rates for owners of desirable property and higher effective property tax rates for owners of less desirable property. Similarly, when state funds are distributed to school districts or other taxing jurisdictions based on taxable property value (indirect equalization), funding will tend to shift from poorer areas to wealthier areas with rapid appreciation—an illogical and undesirable result. Legislators and the public should be made aware of the inequities resulting from valuation increase limits and be actively discouraged from pursuing such limitations. Any other control is preferable.