Proposition 117 limits annual property value increases to 5%

2012-09-26T00:00:00Z 2012-11-16T20:00:04Z Proposition 117 limits annual property value increases to 5%Howard Fischer Capitol Media Services Arizona Daily Star
September 26, 2012 12:00 am  • 

PHOENIX - Supporters of Proposition 117 say the proposed 5 percent limit in annual property value increases will protect homeowners from wild fluctuations in their property tax bills.

But critics say Proposition 117 is window dressing. Property taxes are based on both the assessed value and the tax rate, said Lynne Weaver, head of Prop 13 Arizona. As long as city councils, boards of supervisors and school boards can all raise their own tax rates at will there is no real control of individual tax bills.

Yes there is, Kevin McCarthy says. It's the power of the ballot box. Elected officials are afraid of angering voters, said the president of the business-oriented Arizona Tax Research Association.

Central to the fight is the state's complex property tax system.

All property is supposed to be assessed annually at its "full cash value," which is an approximation of the market value.

Where things get complicated is all property also gets a "limited value" which can increase only 10 percent a year - unless there is a real estate boom, in which case it can be increased by a larger amount every three years.

That limited value is used to calculate most property taxes levied by governments for their daily operating expenses.

The full-cash value, however, is used to determine how much they can collect in taxes to pay off voter-approved measures, ranging from bonding to special districts for fire protection and lighting.

return to old system

Proposition 117 would return Arizona to a single assessed value, the way it was before 1980. And that value could go up no more than 5 percent a year.

McCarthy said that should protect homeowners from sharply higher taxes, especially when the market value of their house goes up while they still own it.

"Baloney," said Weaver, pointing to the tax rate portion of the formula that determines tax bills.

Nothing keeps those who set the rate from boosting it sharply if they want more revenues, and if city, county or district's assessed valuations don't go up enough to generate more.

Weaver is instead pushing something like California's Proposition 13. It would roll back home values to what they were before the real estate boom, and then limit actual tax increases to no more than 2 percent a year.

Weaver acknowledged she has had trouble getting the signatures for the measure, twice now, which is why it's not on the November ballot.

But she is trying again for 2014. And she sees Prop 117 as an effort to confuse voters into believing they really have done something to cap taxes.

McCarthy said the measure will protect homeowners.

He said when home values spiked last decade, about 150 cities, counties and other taxing jurisdictions never bothered to lower the tax rates. The result was a windfall for them and higher taxes for property owners.

That big jump, he said, could not occur if Prop 117 is in the Arizona Constitution.

McCarthy said he isn't worried tax rates will increase in times of property value deflation, even if that's legally possible.

some Lowered tax rate

As proof, he pointed out that most taxing jurisdictions lost taxable valuation as assessors went back and lowered the limited- and full-cash value on homes recently. Yet 11 of the 15 counties held their tax rate the same or actually reduced it.

"They were sensitive to increasing the tax rate," McCarthy said.

Weaver makes no secret that she believes government has too much money and can get by with less.

"The only way we're going to get taxes and spending under control is to limit how much the government can take from us and then have the government operate as we do in our own household," Weaver said. That means setting priorities, spending on the important things "and then if there's anything left over we'll do the things that aren't necessities."

McCarthy said that, if nothing else, approval of Proposition 117 will lead to better understanding of the tax system, once there are no longer two different values and different rules about when they can go up.

Copyright 2014 Arizona Daily Star. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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