PHOENIX — One area where greater Phoenix cities are cashing in is collecting taxes from rental properties.
Collections in Scottsdale and Phoenix are up above $1 million and in the hundreds of thousands of dollars in several other metro Phoenix cities at a time when construction and retails revenue is down in the dumps.
Cities are gearing up for even tougher enforcement. Cities are checking water bills against county real estate documents to see who may be renting.
Others are gaining information from home owner associations and neighbors who turn in landlords who own property that at one time may have been owner occupied.
"If they're paying rent, it's taxable," Mesa city tax administrator Roger Okin said. Mesa also recently reduced rental-property exemptions to one from two to increase potential revenues.
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At tax rates ranging from 1.5 to 2.5 percent, rental taxes can bring in more than $20 million a year each to Phoenix, Mesa and Scottsdale and $2 million to $12 million a year each for other metro Phoenix cities. An uncollected tax on a house in Phoenix that rents for $1,500 a month amounts to a $360 annual loss for the city.
With foreclosures and the real-estate downturn, "more people have to rent now," Phoenix tax administrator Tom Johnson said.
And it's not just apartments. Investors who bought houses intending to flip them for a profit became landlords stuck with real estate worth less than what they paid for it. Families who moved to a larger home or out of state for job relocations can't sell their former houses and are renting them. Homeowners who lost properties to foreclosures became renters. Boosting revenues
During the real-estate boom three years ago, Chandler started hiring student interns to check every property in the city, comparing mailing addresses of tax and water bills to parcel addresses. When suspected absentee owners are found, letters remind landlords of their tax obligations. If they don't pay, Chandler files liens against the property.
As the number of rental properties increases in a troubled real-estate market, Chandler is preparing to launch its third round of audits using updated county-property records. The city is sticking with the practice of going after several years of back taxes on longtime unreported rentals.
Lee Grafstrom, Chandler's tax audit supervisor, said as word spreads about the city's latest enforcement efforts, so do reports of unregistered rentals.
In these hard economic times, officials said collecting a few million dollars in back taxes could mean preservation of jobs and services.
"Every time we generate another $100,000 in revenue, it probably saves a job. We take a lot of pride in what we're doing," said Johnson. "The more we get everyone to pay their fair share, the more citizens benefit."
