Despite positive financial signs, the Pima County administrator says the county will need to raise property tax rates in the next fiscal year.
The county needs to raise rates by 12.3 cents per $100 of taxable assessed value, due in large part to cost shifts from the state, County Administrator Chuck Huckelberry wrote in an April 29 memo to the Board of Supervisors.
“In a year of improving taxable assessed values, the State has placed the County in a position where, despite reducing costs and increasing other revenues, we must raise our primary property tax rate,” Huckelberry wrote. “It is important the taxpayers are made aware of this shift in tax burden.”
Huckelberry proposed a $1.23 billion budget for fiscal year 2016-17, an increase of about $60 million, or 5.1 percent, over the fiscal year 2015-16 budget.
Property taxes fund 38 percent of the county’s annual expenditures. The rest of the budget is funded almost entirely by service charges, intergovernmental revenue and grants.
The state shifted $101 million to the county in the past two years — including nearly $19 million in costs to the county for 2016-17 — which accounts for 30 percent of the county’s primary property-tax rate, he wrote.
In March, the state said the county had to pay nearly $16 million in aid for public schools. The state shouldered that burden from 1980 to 2015 and the county is suing over the cost-shift.
That cost came on top of pre-existing shifts, Huckelberry said, such as $84 million to restore criminal defendants to competency in order for them to stand trial, confining sexually violent persons at the state hospital, and the indigent health program.
Huckelberry recommended increasing the primary property tax rate by 10.3 cents, making the rate $4.4907 per $100 of taxable assessed value. He also recommended raising the secondary property-tax rate for the Regional Flood Control District by two cents to address increased operating costs.
In the recommended budget, the county’s combined property-tax rates would rise to $6.0395 per $100 of taxable assessed value, excluding the fire district assistance tax, and generate $21 million more than the current fiscal year’s rate.
If approved by the Board of Supervisors, the recommended property tax increases would cost the owner of a home valued at $158,633, which the county considers the average taxable home value, $19.51 more each year. Of that, $16.34 would come from the primary property tax increase and $3.17 would come from the flood control district tax increase.
The increase in the primary property-tax rate would bring in $7.8 million, which would help fund costs associated with “the worst-case impact of the State budget to the county,” Huckelberry wrote, adding he likely will change his recommendations when the state approves its budget.
Huckelberry is reserving $12 million in a “property tax rate stabilization and compensation fund” in case the county supervisors do not approve the increase.
No salary increases were included in the recommended budget.
Other than the state cost-shifts and increases in employee benefit costs, the county is seeing some positive financial signs.
The county’s property tax base will increase by 2.58 percent in fiscal year 2016-17, the second increase in the last seven years.
In addition to property taxes, other sources of revenue are expected to rise by 4.7 percent next fiscal year, Huckelberry wrote.
Staff upped their expectations for payments from the Highway User Revenue Fund by $2.5 million for both the current fiscal year and fiscal year 2016-17.
The county’s general-fund revenues would be $570 million next fiscal year if the property-tax rate stayed the same, a 3.4 percent increase over the current fiscal year.
General-fund expenditures in 2016-17 are expected to be $42 million, or 7.2 percent, less than the current fiscal year.
Since the economic recession began eight years ago, the county government’s full-time equivalent workforce declined from 8,396 to 7,063.
Departments supported by the general fund saw 13.5 percent budget reductions in the last eight years, with the exception of the sheriff’s department, which had a 4.5 percent reduction.
Last year, the Board of Supervisors adopted an 11-cent increase in the primary property-tax rate, which was part of a 20-cent increase in the combined property-tax rate.
The Board of Supervisors will hold public budget hearings Tuesday, May 3, May 10, and May 17. The tentative budget is scheduled to be adopted May 24. A Truth in Taxation hearing is scheduled for June 21, the same day of the vote on the final budget.