Property Tax Valuations February 14, 2010

This month, and most likely this week we will be receiving the 2011 Property Tax Valuation Notice. To save money, the Assessor's Office is now printing property valuations on a single sheet of paper that is folded to postcard size for mailing.

Most people pay their Property Tax through the mortgage company and are unaware of the fluctuations in them. Unaware how they are determined, sometimes with little notice to homeowners and a lot of assumptions like the value went down then what I pay will go down. Read the article below and note that this is not necessarily the case ....especially now.

County property valuations were previously sent in standard business envelopes that also contained several public-information inserts.

The Assessor's Office saved 40 percent in printing costs by switching to the single-sheet valuation report.

Please note the new format for valuations so you don't mistake them for something else and throw them away. If property owners think their valuations are too high or low, they must lodge an appeal with the Assessor's Office by April 13. I have provided links on how to read the notices and how to file an appeal HERE on this web site. There are informational links to the County web site included.

For a very clear understanding of the property tax valuation, where the money goes and how it all shakes out in relation to the the State Budget I have included a current article in the Republic with a link to their site that goes into greater details on extended related topics.

The Senior Homeownership Protection program is designed "to freeze the full cash value of a primary residence owned by seniors based on income and age". More information is available from the Maricopa County Assessor web site.

Wayne AKA RateroReporter

Home pain: Values fall while taxes might rise
by Catherine Reagor - Feb. 14, 2010 reporter Arizona Republic
Link to Republic Article HERE

Most Maricopa County homeowners will see  another significant decline in their homes'  value when they open their 2011 property- assessment notices in the next few days. But for the coming year still may go up as the  state, cities and school districts struggle to  close huge budget deficits.

Less money coming in from lower property  taxes would mean less money in state and  local coffers and less money for education.  Faced with growing operational deficits,  municipalities and schools could be forced  to raise property taxes by 10 percent or  more to pay salaries and provide basic  services, government officials and real- estate experts say.

During 2009, the overall median value of  homes in the county fell 15.2 percent, from  $155,300 to $131,700, according to the  latest report by the Maricopa County  Assessor's Office. This decline follows a 23  percent drop in home values during 2008.
A drop in values usually leads to a drop in  property taxes.

But Arizona homeowners are taxed through  a formula based on two main factors:  property valuations set by the county  assessor and tax rates set by cities and  school districts. Tax rates set by cities and  schools fluctuate each year based on  funding needed for maintaining services and  facilities. 
Annual home valuations come out in February. Tax rates are set in the summer,  then property- are mailed out in September.  Property-tax rates are based on valuations  from 18 months earlier. That means the bill  homeowners receive this September will be  based on 2008's 23 percent decline in  values.

"Now that home values are nose-diving, we  expect to reap the benefits of lower taxes,"  said Jay Butler, director of realty studies at  Arizona State University. "But with all the  state money drying up, local governments  and schools can increase their taxes so they  don't have to deal with such severe  shortfalls. It won't be popular, but it's likely  to happen."

Tax jurisdictions in any community can  include elementary schools, community  colleges and fire, water and library districts.  The more than 1,000 jurisdictions in  Maricopa County that rely on property taxes  for funding must hold meetings open to the  public to discuss all proposed rate hikes.  Local decisions on tax rates are then handed  over to the Maricopa County Board of  Supervisors, which must approve them.

Arizona's property taxes have been low  compared with property taxes in the rest of  the country. Any increases have been small  and raised little opposition. But this summer,  the proposed increases predicted by  economists and government leaders are  bound to draw more attention from  homeowners. 

"Most jurisdictions will have little choice and  will have to raise property taxes this year,"  said Keith Russell, Maricopa County  assessor. "Residents will have to decide how  many potholes they are willing to live with in  their community and whether they want to  get back the music class cut at their local  school. Some jurisdictions will be sensitive  to people's pocketbooks, and some  jurisdictions will be sensitive to keep  important services."

About 75 percent of Arizona's property  taxes are earmarked for K-12 education.  State schools are guaranteed certain  funding, even if property taxes don't cover it  all. The law requires any shortfalls from  property-tax collection to be covered by the  state's general fund. Some state leaders  already are pressuring school districts to  raise property taxes to reduce their  dependence on the general fund.

"School districts don't lose spending  authority because of losses in assessed  values from property taxes," said Chuck  Essigs of the Arizona Association of School  Business Officials.
Arizona is still facing a huge budget deficit  this year. The statewide school sales tax  generated $150 million less in 2009 than it  did in 2008. That means there already is a  large gap in school funding without the drop  in property taxes.

If a sales- proposed by Gov. Jan Brewer is approved by voters, K-12 education is still  facing a $300 million to $500 million budget  cut this year. If the sales-tax measure fails,  the shortfall in funding to education could  be much more. 
Growth impact 
Arizona's relatively low property taxes have  long been a draw to businesses and  residents.

The state's property-tax rate averaged  about 0.60 percent of a home's value in  2009. That makes Arizona's property tax the  39th lowest in the nation, according to the  Tax Foundation, a Washington, D.C.-based  non-profit. Texas has the highest rate at  1.76 percent.

As more people moved to Arizona and  bought houses, home values climbed  steadily and so did property-tax revenues.  Arizona was able to use money from  property taxes, as well as sales and , to pay  for the infrastructure and services needed to  sustain growth.
But now most homeowners are seeing their  third straight drop in property valuations,  and wages are down, and Arizona's  government coffers are depleted. Raising  property taxes is the only option for most  municipalities to maintain the education and  public services necessary to attract future  growth.

In an effort to collect more property taxes,  an Arizona lawmaker last month introduced  a bill that would eliminate the 50 percent tax  break that owners of historic homes receive.  The tax break was enacted in the 1970s to  entice people to buy homes in older  neighborhoods and revitalize those areas.  Only about 5,000 homes in the state are  designated as historic, so the increase in  property-tax revenue from those homes  won't be enough.

Because of budget shortfalls the past three  years, almost every city in Maricopa County  has laid off employees, closed library  branches and cut services. Now, the cuts are  getting deeper. Phoenix recently announced  it would lay off hundreds of police officers  and firefighters, though their unions  tentatively agreed Wednesday to a pay cut to  save jobs. Phoenix also is implementing a 2  percent tax on food sales for five years to  try to save some public-safety jobs.

"Arizona's future growth is at stake," Butler  said. "Who wants to move to a city without  enough firefighters and police officers, even  if the property taxes are low?"

Raising property taxes would help narrow  government budget gaps and save some  services. But higher taxes would hurt  homeowners, especially those already  struggling to afford their mortgage  payments. Most homeowners pay their  property taxes through their mortgage  payment to their lender. But a record  number of Arizona homeowners are behind on their mortgage payments and in  foreclosure. Already, it has become more  difficult to collect property taxes in Maricopa  County, according to the county treasurer.

Property-tax hikes for homeowners will be  decided this summer as the many taxing  jurisdictions balance their budgets for  2010-11. 
"Schools and cities really have no choice but  to raise property taxes," said Arizona real- estate analyst RL Brown. "Low property taxes  do play a role in attracting new residents,  particularly retirees.

"But the entire tax structure of the state  must now be reviewed and revised," he said.  "Now, we can't provide a satisfactory level of  services to promote job growth." 
Legislation has been introduced to research  ways to improve Arizona's complex  property-tax formula.

Some jurisdictions are now limited in how  much they can raise property taxes each  year. So even if a fire district, for example,  raises property taxes this year as much as  the law allows, the increase might not be  enough to keep open all the fire stations in  an area.
Although 2009's decline in valuations was  smaller than 2008's drop, the state's  property-tax system works on a formula  that lags, so cities will likely have to raise  taxes even more next year. One state official  said Valley homeowners could see a 25  percent increase in the property-tax rate on  their 2011 bill.

Understanding property taxes

Property-tax calculations and the terms used to discuss them can be confusing. Here are some basics:

Full-cash value (FCV) is the figure that reflects a property's current market value. This number is used to calculate secondary taxes such as bonds, budget overrides and special districts such as fire and flood control.

Limited-property value (LPV) is used to assess taxes for school districts, cities, community colleges and the county. It's calculated using a complex formula set by the state Legislature and can't be higher than a property's FCV. The FCV and various LPVs from your assessment determine your share of taxes.

Property taxes are determined through a formula based primarily on (a) property valuations set by the county assessor and (b) tax rates set by municipalities and school districts.

Formulas vary from city to city. But here is an average breakdown of how much different kinds of taxing districts factor into property taxes: special districts, 7 percent; community college, 10 percent; county, 11 percent; cities, 11 percent; and schools, 61 percent. Financial decisions those groups make this summer will determine what property-tax bills look like this fall.

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