Steller: Raytheon tax dispute no cause for alarm

2013-10-06T00:00:00Z 2013-10-06T20:21:58Z Steller: Raytheon tax dispute no cause for alarmTim Steller Arizona Daily Star Arizona Daily Star
October 06, 2013 12:00 am  • 

You can see why people would flinch from Pima County Assessor Bill Staples’ fight to collect more taxes from Raytheon Missile Systems.

Tucson’s job market is weak, and people are scared of anything that might hurt it more, even if the threat is illusory.

The stakes seem especially high because we’re talking about one of the biggest and best-paying employers in the area, with 10,300 full-time equivalent positions at the beginning of this year.

But a closer look at the conflict shows it’s probably not as threatening as it might appear.

Here’s how longtime local economic-development player Larry Hecker puts it: “What I see are two parties respectfully disagreeing on what I think is a relatively minor issue. In comparison to the other things that the county and community are doing to assist Raytheon in remaining and growing, I don’t see it as a big issue.”

The fracas goes back to the 2009-2010 tax years, when Staples’ office initially valued Raytheon’s property at an unheard-of $79 million. He has admitted that valuation was wrong, and the state Board of Equalization agreed, placing the value at $22.5 million.

Rather than leave it at that, Staples took the relatively unusual move of suing Raytheon in tax court, winning a valuation of Raytheon’s properties that added up to about $35 million per year. In terms of tax revenue, that meant about $571,000 over the two-year period. By comparison the county’s tax revenue in those two years approached $1 billion.

Staples won, but the additional tax money was relatively paltry.

Now, the same dynamic is playing out again: The assessor’s initial evaluation for the 2011-2012 period was about $40 million. Raytheon appealed and got a much lower valuation from the Board of Equalization, about $26 million total. Now Staples is preparing to sue.

Staples told the board, and later told me, it’s simply a question of fair valuation. He noted Arizona’s county assessors take an oath to “truly and fairly determine the valuation, without favor or partiality, of all the taxable property in said county at its full cash value.”

“The value of all property in Pima County needs to be based on standard appraisal techniques and methodology. It’s required of the job,” he said.

But you can see how politics could enter such a touchy case. In 2010, Raytheon chose to build a new missile plant in Huntsville, Ala., rather than Tucson, putting 300 new jobs there, in an area that offers Raytheon tax abatements as an incentive. One of the main reasons was that there was inadequate buffer space outside Raytheon’s properties.

The county has responded by creating an economic-development plan centered on Raytheon and Davis-Monthan Air Force Base. It has spent $6 million on land south of Raytheon in order to provide a buffer for the missile plant, and it has begun an $8 million project to move Hughes Access Road, the entry to Raytheon’s property at Tucson International Airport

Supervisors Chairman Ramon Valadez, a Democrat, and new Republican Supervisor Ally Miller both pointed to the apparent contradiction between spending money to create an area for aerospace industry growth around Raytheon while also suing the company over small change.

“I also look at the cost to the taxpayer for pursuing this and the negative publicity Pima County receives as a result of this,” Miller said via Facebook. “We are trying to portray that we are business friendly and we want more high-tech business. This doesn’t send a good message.”

So, the supervisors took their name off the first lawsuit in 2012, and last month they refused to approve separate funding for Staples to pursue the new case, insisting that he pay for it out of his own budget.

However, as Valadez put it: “The board disagrees with his direction but agrees with his right to do it.”

Tom Naifeh, a property-tax consultant at Sage Tax Group and former deputy Pima County assessor, said suits by Arizona assessors asking for a higher valuation of commercial properties are “extremely rare.” Filing them has been a peculiarity of Staples’ era as assessor, which began after he was elected in 2004.

Naifeh, too, said he thinks the suit sends a bad message to businesses considering locating here, especially because the dispute is over such a relatively small amount of taxes.

But you can flip the question around and ask why Raytheon, not the assessor, is quibbling over such a tiny amount of taxes. Raytheon does not own the land on which its facilities sit, so it is only taxed on the structures and equipment it owns. That amounts to a tax break.

The company is also rolling in money. Raytheon Missile Systems, the division based in Tucson, made $3.3 billion in sales in the first six months of the year. As a whole, the company’s net income for the first six months of the year was $976 million.

So this is a company that can afford to pay the taxes. Giving them a break because they’re big could be seen as unfair to smaller businesses.

“I think they have a fair situation, and that’s good, but we also have to protect the other taxpayers,” Supervisor Richard Elias told me.

It would be one thing if Pima County taxpayers weren’t spending good money to help Raytheon stay and grow. But it is, and that, as Hecker said, “sends a much stronger message than fighting over a relatively small tax assessment.”

Contact columnist Tim Steller at tsteller@azstarnet.com or 807-7789. On Twitter: @senyorreporter

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

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