Property-tax bill is vetoed by Napolitano

In her fifth veto of the legislative session, she said there is no need to do anything now. She said the levy, which was suspended in 2006, won't be reinstated until late next year, meaning there is time next session to consider the issue.

She balked, however, at questions about whether she would be willing to support repeal next year, or ever.

She said repeal remains a possibility as long as lawmakers enact budgets for the rest of this year and next that fund the things she believe are necessary.

"They should be balanced, should protect education, and should protect safety-net services because more and more people are needing them in this down economy," Napolitano said. "And it should invest for the future because Arizona has, in the long term, a very, very bright future."

The Democratic governor also chided lawmakers for approving a tax cut before there is a budget deal.

Senate Majority Leader Thayer Verschoor, R-Gilbert, said Napolitano is just trying to divert public attention from her action, which he said will mean a huge tax increase next year for Arizona businesses and homeowners.

"She's not interested in economic incentives," Verschoor said. "She's interested in expanding government. And I don't think it's what the people of Arizona want."

The veto sent business lobbyists and Republicans who support permanent repeal scurrying to figure out what to do next.

One option suggested by Glenn Hamer, president of the Arizona Chamber of Commerce and Industry, would be for lawmakers to try to cut a deal with the governor to give her some of what she wants in the current budget negotiations in exchange for signing the repeal.

That idea, however, was nixed by Senate Minority Leader Marsha Arzberger, D-Willcox. She said the state can't afford to forgo $250 million a year the levy will bring in when it is restored next year considering the anticipated $1.2 billion deficit this year and revenue shortfalls approaching $2 billion next year.

But Sen. Jorge Garcia, D-Tucson, acknowledged the governor may decide to cut her own deal, as she did in 2006 when she agreed to not only the suspension of the property tax but a 10 percent reduction in individual income tax rates. He said that was done "to the shafting of her Democratic caucus."

The other possibility would be for Republicans to try to put the issue on the November ballot, a move that bypasses the governor.

When the tax goes back into effect, it would mean about $95 more in taxes on a $250,000 home.

"They invest the $95 in roads, in other things that this state needs," said House Minority Leader Phil Lopes, D-Tucson. "And I think people understand that."

Figures prepared by Arizona Tax Research Association, a business lobbying group, show that half of the burden of a reinstated property tax would fall on homeowners. Another 35 percent would be borne by commercial and industrial users, with the balance split largely between rental properties and vacant and agricultural land.

Farrell Quinlan, who lobbies for the West Valley Chambers of Commerce Alliance, said there is another factor at work. Two separate groups are circulating initiative petitions to put strict constitutional caps on property taxes. Quinlan said they are playing off public frustration with property-tax bills that rose over the last few years as the value of homes increased, values that mean nothing until homeowners sell the property.

"There's a real danger that if the Legislature does not go forward and recognize the building property-tax revolt out there, there's going to be something on the ballot that's going to be infinitely worse," said Quinlan, whose groups also want permanent repeal.

The measures are modeled on California's Proposition 13, enacted in the 1970s. They would roll back property values and cap year-over-year increases.