ANALYSIS BY LEGISLATIVE COUNCIL
Proposition 117 would amend the Arizona Constitution to cap the annual increase in the value of real property used to calculate property taxes to 5% over the value of the property for the previous year, beginning with the 2015 tax year. Currently, there is no limit on full cash value. This limitation would apply to property values used in determining all property taxes on the real property.
ARGUMENTS “FOR” PROPOSITION 117
Vote YES on Prop 117 – Limit Growth in Property Valuations & Exposure to Tax Increases The Arizona Tax Research Association (ATRA) urges your support of Prop 117 because it will protect property taxpayers from dramatic increases in property valuations that often lead to significant tax increases. Prop 117 will limit annual assessed value growth to 5%. In addition, Prop 117 will simplify one of the most complicated property tax systems in the country. Currently, property in Arizona is taxed on two values: full cash, or market value (FCV) and the limited property value (LPV). The Constitution requires that FCV represent the market value, which is unlimited in the amount it can increase each year. In contrast, the LPV is required to annually increase by the greater of 10% or 25% of the difference between the current year FCV and the previous year’s LPV. That doesn’t just sound complicated – it is. Prop 117 limits the taxation of property to the LPV and the FCV will no longer be taxable. Eliminating the tax on market value will prevent a repeat of the dramatic increases in property taxes that occurred between 2004 and 2009 when real estate values skyrocketed. ATRA strongly believes that the 5% limit is fair for taxpayers and Arizona state and local governments. A reasonable limit will not only provide greater predictability for taxpayers, it will bring much needed stability to future local government budgets. Had the 5% limit been in place over the last decade, it would have prevented $33 billion in value from being added to the tax rolls that was ultimately removed when the market collapsed.
David L. Minard, Treasurer, Arizona Tax Research Association, Peoria
Kevin J. McCarthy, President, Arizona Tax Research Association, Gilbert
I am in full support of Proposition 117. I have worked in the Assessor’s Office since 1977 and witnessed, first hand, the installation of the current property tax formula in 1980. At the time, it was a welcome relief from the runaway taxation that was occurring due to rising property values. However, the current system is flawed with many complicated formulas that are outdated and no longer are applicable to the times we live in. For many years I have been advocating that the Limited Value formula needed to be simplified and that property taxes needed to be more predictable. This measure does both. Having all ad-valorem property taxes calculated from the Limited Property Value and simplifying the LPV formula to a simple 5% calculation will greatly assist Arizona assessors in explaining tax bills to the property owner. Please join me and vote Yes on Proposition 117.
Joe Wehrle, Yuma County Assessor, Yuma
Proposition 117 is good for the taxpayers of Arizona. It creates a limitation for valuations of locally assessed taxpayers. The provision would not shift tax burdens from commercial properties to residential properties (homeowners). The original two tiered system of Full Cash Value and Limited value was to protect the taxpayers from rising values and uncontrolled spending by the taxing jurisdictions. History has shown that as property tax values grow, the impulse by government to “keep the tax rates steady”, thus generate more revenue, increases. This proposal is timely as in most areas of the state; Full Cash and Limited Values are identical. Additionally, the administrative and judicial appeal systems will remain intact. I support Proposition 117 to provide more predictability and stability to the taxpayers of Arizona.
James R. Brodnax, Glendale
Farm Bureau Supports a “Yes” Vote on Proposition 117 Prop. 117 seeks to simplify one of the most complex property tax systems in the country and provide stability to property owners and taxing jurisdictions alike. By taxing property owners on one value rather than the current method that uses two different valuations, everyone, including farmers and ranchers, will be better able to predict their property tax burden. In addition, reasonable limits on the growth of property valuations subject to taxation will ensure short term spikes in property value, like those experienced during the housing bubble, do not result in exorbitant, unsustainable tax bills for property owners. The stability of the property tax system should have a positive effect on the economy as capital thrives on stability and predictability and attracting capital equates to attracting jobs. Passage of proposition 117 would provide clarity, simplicity and predictability for all taxpayers.
Kevin G. Rogers, President, Arizona Farm Bureau Federation, Gilbert
James W. Klinker, Chief Administrative Officer, Arizona Farm Bureau Federation, Gilbert
VOTE YES ON PROP 117 – SIMPLIFY AND LIMIT YOUR PROPERTY TAXES
As the largest commercial real estate trade association in the state with a vital interest in reducing property taxes for all our citizens, we urge your support of Prop 117. Arizona has one of the most complicated property tax systems in the country . We believe this property tax reform proposal will simplify Arizona’s property tax system. Arizona’s property tax system, which employs multiple sets of taxable values, has been the subject of considerable criticism for decades. The two sets of taxable values (secondary and primary) largely serve to confuse property taxpayers . For the first time in decades, these two taxable values are now almost identical due to the dramatic decline in the real estate market. As a result, Arizona citizens have a rare opportunity to limit the taxation of property to just one value without negatively impacting local government budgets. Currently, there is no limit on the annual growth in secondary values. The lack of any limit in the growth of secondary values added considerably to the volatility that characterized Arizona’s property tax system over the last decade. Prop 117 will limit the taxation of property to one value (primary), which will be limited to 5% annual growth . This measure will not only increase the stability of Arizona’s property tax system but also provide greater predictability for both government and taxpayers. We strongly encourage you to take advantage of the opportunity to SIMPLIFY AND LIMIT this system that has been in place since 1980.
Tim Lawless, President, Arizona Chapter of NAIOP, Commercial Real Estate Development Association, Phoenix
Keaton Merrell, Vice Chairman of the Board, Arizona Chapter of NAIOP, Commercial Real Estate Development Association, Phoenix
Keep Your Home Affordable – Yes on 117!
Keeping home prices affordable is essential to the recovery of Arizona’s housing market. A key variable impacting affordability is the property taxes paid by a homeowner. For every dollar of new taxes the ability of a buyer to afford a home is diminished. Prior to the recent downturn, Arizona homeowners experienced dramatic increases in their property tax bills because of the major increases in their property values. Supporting Prop. 117 will prevent these dramatic increases from happening in the future, by placing a reasonable limit on the increase in property value that the government can use, while ensuring the tax revenues are stable for necessary government services. Keeping your property taxes more predictable and stable will help ensure that you will not be taxed out of your current home or priced out of buying your next home. Please Vote YES on 117!
Connie Wilhelm, President, Home Builders Association of Central Arizona, Phoenix
Spencer Kamps, Vice-President of Legislative Affairs, Home Builders Association of Central Arizona, Phoenix
Arizona Chamber of Commerce & Industry Supports Proposition 117
The Arizona Chamber supports a tax system that is globally competitive, fair, consistent, and equitable. Proposition 117 moves Arizona toward such a system by capping the annual growth in locally assessed property values at 5% and simplifying one of the most complicated property tax systems in the country. The 5% cap will protect taxpayers from dramatic increases in tax bills due to real estate market volatility. This is especially important during a real estate bubble such as the one Arizona experienced during the last decade. Had the 5% cap been in place during that time, over $30 billion in property value that was added during the bubble and subsequently lost during the recession would never have been added to the tax rolls in the first place. In addition to providing taxpayers with greater property tax stability and predictability, the 5% cap also provides greater stability and predictability to governments. Highly volatile revenue streams make it difficult for elected officials to consistently match revenues with expenditures. Proposition 117 will enhance the ability of governments to confidently budget and plan for the future by increasing the stability of property tax revenues. Finally, Proposition 117 greatly simplifies Arizona’s property tax system by using one value to calculate all property taxes. Instead of using one value to determine the tax that funds maintenance and operations of local governments and another that funds voter approved bonds and overrides, Proposition 117 creates a system where one value is used for all purposes. We urge voters to support Proposition 117.
Glenn Hamer, President & CEO, Arizona Chamber of Commerce & Industry, Phoenix
Doug Yonko, Chairman, Arizona Chamber of Commerce & Industry, Phoenix
Sensible property tax reform is not a partisan issue
I am proud to have sponsored the legislation, SCR 1025, that referred Proposition 117 to the ballot for consideration by Arizona voters. Furthermore, I was pleased by the bipartisan support the measure received at the Legislature. Legislators from both sides of the political aisle recognized the need to simplify and restrain our current property tax system. Proposition 117 will have real benefits for Arizona homeowners and businesses. This measure will provide predictability to a system that has been extremely volatile. This volatility has placed significant burdens on homeowners who have experienced significant tax increases and businesses seeking to plan for new investments in hiring and capital. Proposition 117 will also simplify the property tax system by using a single limited value for the calculation of all property taxes. Now is an ideal time to remove some of the unnecessary complexity from our property tax system. Please join me in supporting Proposition 117. Thank you,
Steve Yarbrough, State Senator, Arizona State Senate, Chandler
Agriculture supports a simpler and more stable property tax system
As farmers in Arizona we have enough challenges without having to deal with the rollercoaster ride of our state’s overly complex property tax system. Proposition 117 would simplify our current property tax system and smooth out some of the bumps. Farmers will still have to deal with weather, changing market conditions, and pests; but at least we will know what to expect when it comes to our property taxes. Proposition 117 will cap annual increases in the assessed value of property to 5% and use just one value for the calculation for all property taxes. These are good things and are welcome changes to our current property tax system. With one less thing to worry about we can focus more attention on the success of our farms, the people we employ, and the food we bring to your table. Please support Proposition 117.
Velma Wright Townsend, Yuma
YOUR PROPERTY TAX IS ABOUT TO SKYROCKET UP , and only you can stop it. Your property value on average has dropped more than 30 percent. Has your tax dropped that much? No, it has not. Here is why: GOVERNMENT HASN’T GIVEN YOU THE WHOLE TRUTH. Read on… If nothing changes in Arizona tax law and/or government behavior, you can expect another expensive property tax shock on your family home and small business – and very soon. You haven’t been told the truth about property taxes. Government in Arizona quietly raised the tax rate as values plummeted, taking a higher percentage of your equity. OUR MIDDLE CLASS FAMILIES are about to be hit with yet ANOTHER PROPERTY TAX INCREASE, one that will pain those on fixed incomes and seniors the most. As values start rising again, so will your tax bill, and now based on newer rates that in most cases are the highest they have been in years. We must stop this before our families and in particular seniors once again have to choose between paying rising mortgage costs and daily staples like food and medicine, and the middle class has a greater burden imposed. PROPOSITION 117 WOULD PUT A 5% CAP ON THE GROWTH OF LOCALLY ASSESSED PROPERTY. It would limit government from gorging on property owners in times of rapidly increasing valuations, which we might be facing again. It will limit government to more sustainable growth levels. If you want predictable, reasonable and limited property tax increases, vote for Proposition 117.
Sal DiCiccio, Phoenix City Councilman, Phoenix
Please Vote Yes on 117!
As a homeowner on a fixed income, I can’t wait to vote Yes on 117! When the real estate boom occurred, property values skyrocketed and tax bills increased. When the real estate crash occurred most of us did NOT see a decrease in our property taxes despite considerable reductions in our property value. That’s just not right!!! With the real estate market starting to turnaround, we should not forget the hard lessons learned from the recent recession. We need to protect against unreasonable increases in our property taxes from happening again. As I read it, that’s what Prop. 117 will do – it will protect homeowners from dramatic increases in their tax bills. Homeowners should vote Yes on Prop. 117!
JoAnne Sandquist, Retired, Sierra Vista
Vote YES on Prop 117 to Protect Taxpayers
Prop 117 will protect taxpayers from exorbitant increases in AZ property values. As most tax payers are aware, Arizona’s property tax system is highly complicated for the average property owner. Our government’s tax system uses two sets of value to tax, one is supposedly reflective of the market value of property (full cash value or FCV) and the other value (limited property value or LPV) stems and grows annually from a complicated technical statutory formula, typically no less than 10%. When property values grow dramatically and local governments keep tax rates the same, taxes increase by the same rate as the growth. This is what happened to a majority of property taxpayers during the 2001-2008 real estate boom. During that time, 150 taxing jurisdictions tricked taxpayers into thinking our government was not increasing taxes because tax rates remained the same. Yet what happened was that as each property value grew the result was a tax increase. Property values grew nearly 50% in the City of Phoenix between 2001 and 2008, and overall in the state, property taxes collected grew at an even greater rate of more than 60%. Why did the City of Phoenix stick to its policy of continuing the fixed combined tax rate of $1.82 while ignoring the explosive growth in values? Because the City of Phoenix received extra-ordinary cash windfall simply by doing nothing (certainly not protecting the good business sense a city government should have towards its taxpayers). Prop 117 will protect taxpayers against dramatic increases in their property tax bill and require sensibility and business acumen for each jurisdiction entity. Vote for Prop 117 which will help property owners limit the growth in taxes when they choose to keep tax rates the same during growth times.
Kurt Schneider, Phoenix
Ranching Families Support Prop 117
If only nature gave us rain like our government gives us property tax increases-we would be awash in green grass. Ranching families and all property owners should not have to be subject to such wide swings in values from one year to the next. Proposition 117 will provide for a more stable tax system without wide swings in property values from one year to the next. It’s bad enough just waiting for the rain… Please vote YES on Proposition 117!
Norman J. Hinz, President, Arizona Cattle Feeder’s Association, Phoenix
Patrick Bray, Executive Vice President, Arizona Cattlemen’s Association, Phoenix
(Under Arizona’s complicated property tax system, homeowners have seen unpredictable increases of 95 percent in property taxes between 2004 and 2009. To everyone’s dismay, many of these unexpected increases in property taxes actually occurred during a time when the market value of homes was decreasing . Under Prop 117, the amount that the tax can increase will be limited to 5 percent per year. Tax rates will stabilize. Property tax rates for new construction will be calculated to harmonize with the rates of existing homes. Local governments will be able to reliably anticipate future tax revenue. Taxpayers will be shielded from the alarming increases in property taxes that have occurred in the past with real estate bubbles. There is no effect on state aid to schools. It somewhat limits the bonding capacity of local governments – not a bad thing. There is no downside to Proposition 117. It’s a win-win for everyone. VOTE “YES” ON PROP 117 .)
Sylvia Allen, State Senator, Arizona State Senate, Candidate for Navajo County Board of Supervisors District 3, Snowflake
Lester Pearce, Former Justice of the Peace, Candidate for Maricopa County Board of Supervisors District 2, Mesa
Arizona’s current property tax system is too complex for the average property owner to understand. An ideal system is one that is simple, predictable and easily understood. Under our current property tax system, property is taxed on two values: 1) the market value, which is unlimited in the amount it can grow each year, and 2) a statutorily set value that can increase each year based on a complicated formula. Both values are subject to tax and fund a wide variety of government services. Prop 117 will limit the taxation of property to only one value and that value will be limited in annual growth of 5% (currently there is no limit). No longer will property be taxes at its market value. Narrowing the taxation of property to one value that has a reasonable limit will simplify Arizona’s property tax system and will provide greater predictability for both government and taxpayers.
Gary M. Gitlin, Paradise Valley