Property values shock taxpayers

Posted on March 28, 2007 | Type: In the News
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As in years past, some disgruntled Cochise County taxpayers have been mystified this year by their increase in property value assessment, in light of the cooling real estate market. An anachronism of the valuation timetable causes this perceived problem, said Cochise County Assessor Philip Leiendecker. "It's a statewide statutory process and part of the problem here, really, is the valuation timetable placed by the legislature," the county assessor said. The 2008 valuation mailed out Feb. 28 is based on the market-value estimations from June 2005 to July 2006. "That period is when the big boom occurred," Leiendecker said. And those assessments will not be applied until next year's tax bills, he said.

"This has been constantly challenged by most assessors over the last five to eight years, but the Arizona Tax Research Association has pushed for this time schedule so taxing jurisdictions have the assessed values in time to get their assessments in the beginning of the year, instead of the middle of the year," Leiendecker said.

Until recent years, the cycle was annual and came out in September, Leiendecker said. Now there is a delayed effect. "People won't see these tax bills until 2008," he said.

Taxpayer reaction

Whetstone taxpayer Kenneth Wendt said it seems incongruous assessment happens every "two to five years. I think it's 'unreasonable,' but 'gross' is not a term I'd like to use," Wendt said.

The assessment he received this month showed an increase from last year of about $140,000, to the fiscal year 2008 assessment of $179,000. His property is 4.6 acres, on which his home measures about 3,200 square feet.

Wendt agrees with the county assessor, that this kind of problem is not limited to Cochise County.

Wendt is aware of the current "cooling" period as it relates to the last market boom and to his property's assessment.

"I am not necessarily opposed to the valuation on my property," he said. "But let's say the house across the way sells for $2 million because the buyer is stupid. It doesn't mean the rest of us should pay for another person's stupidity."

It is agreed the methodology of assessment could be improved. "Raise it reasonably each year - don't wait two or three years and then jack up some inordinate amount," Wendt said.

One of Wendt's neighbors, William Higgs, said his home was assessed with a full-cash value of $85,775, up from its prior assessment of $65,413.

"This is their guess because they don't come out and appraise anything," Higgs said. "Actually, mine is deteriorating, not going up."

Higgs' home was built in the late 1960s, a brick house of about 900 square feet. Since Higgs is older than 65, has lived in the house longer than three years and is single with an income of less than $29,900, Higgs said he wishes to exercise a "freeze option" to prevent his taxes from increasing.

"I will do that, and I may file to appeal the petition for review of valuation," Higgs said.

In last fall's election, two initiatives to address this delayed-reaction effect were proposed on the ballots, neither of which passed, Leiendecker said.

As a market economy steadily increases over time the current system works to the benefit of the taxpayer, Leiendecker said. But an exception happens when a big "boom" takes place followed by a cool-off period, he said.

"If the county didn't want to spend any more money, the valuations wouldn't matter because all they would have to do is lower the property tax rate," said Goldwater Institute economist Noah Clarke, of the Phoenix office.

That is not a far-fetched idea, said Pat Call of the Cochise County Board of Supervisors.

"Hopefully, all the taxing districts within the county are taking a look at trying to do that," Call said. "I expect local entities able to levy taxes would take a look at that, and try to give the taxpayers some relief."

The board of supervisors lowered the county tax rate last year, and Call said he wants that to happen again this year.

How taxes are levied

Government districts, school districts, emergency fire, police and municipal districts, and hospital districts are examples of entities which may levy taxes. All told, some 70 such districts exist in Cochise County, Leiendecker said.

Per $100 assessed valuation, an average of about $9.50 is paid in property taxes throughout Cochise County.

About 23 or 24 percent of the overall property taxes paid go to the county's coffers, Call said.

Cochise County taxes are relatively low - "It's a little higher than Maricopa County, and a little lower than Greenlee," Clarke said, reading from the Arizona Department of Revenue's annual report for 2006.

Clarke noted the lag in the assessment, on the heels of such a market boom as took place two and three years ago.

"Depending on how they (assessors) have done it, there's a lag. Even if it's flat now, that jump is not going to go away," Clarke said. "Your housing value would have to tank for you to get any relief, and you wouldn't be getting that savings for at least two years.

"That's the problem with these valuations, is once you get the boom then you're stuck up there," Clarke said. "Your houses are overvalued if you can't rent it out for what the mortgage rate is."

Then, people take their homes off the market or tend to rent rather than purchase.

In Arizona cities like Paradise Valley and Scottsdale, homeowners experience some of the worst effects of the situation, Clarke said.

"Tucson has one of the highest property taxes in the state, just for the city itself. They treat people pretty harshly," Clarke said.

State law provides truth-in-taxation rules "that force counties and cities to lower their tax rates with proportion to increased valuation," Clark said. Such limitations may be bypassed if a public hearing is scheduled for discussion of increasing expenditures, held per public meeting rules, without encountering a certain civic dissent, Clarke said.

"So, the hurdle to avoid truth in taxation is pretty low," Clarke said.

Asked if he had any ideas to streamline Arizona's tax code, Clarke considered our neighbors to the west.

In 1978, the state of California passed a ballot initiative called Proposition 13 limiting assessment increases at 2 percent annually. Also, the California law stipulation new valuation only be assessed when the house is selling, Clarke said. "It hasn't led to disaster; services have not been cut," Clarke said.

Another Arizona ballot initiative, much like California's Prop. 13, is "coming down the pike," Leiendecker said. "That's something that I think is coming from dissatisfaction with the system."

Such a new law, if Arizona voters did pass it, might prove beneficial only to the state's metropolitan hubs, not the less populated areas such as Cochise County, Call said.

One penny of property tax in Cochise County equals about $70,000 in tax revenue, while the same penny in Maricopa County brings in millions to its coffers, Call said.

With what are "behemoth"-sized governments and the gravity of their political interests, Call said state tax-law amendment would probably only benefit those metro counties, not Cochise.

Cochise County assessments were mailed Feb. 28, and taxpayers have 60 days from that date to appeal their assessments, Leiendecker said.

The assessor clarified, the assessor's office serves a technical function and has no authority to make a discretionary call about the tax rate.

"This is not a new problem," Clarke said.

Wendt added his analysis: "If you don't complain, they just keep raising them," Wendt said.

Gentry Braswell is a reporter at the Sierra Vista Herald/Biusbee Daily Review.

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