Assigned to FIN                                                                                                   FOR CAUCUS & FLOOR ACTION

ARIZONA STATE SENATE

Forty-seventh Legislature, Second Regular Session

AMENDED

FACT SHEET FOR S.C.R. 1025

property tax; valuation; increase limit

Purpose

            Subject to voter approval, reduces the amount that primary property values may increase each year, requires a city, town, county or community college district governing board to seek voter approval for an increase in the primary property tax levy and requires the Legislature to reduce the maximum property classification assessment ratios.

Background

            Arizona has two distinct types of property taxes: primary and secondary.  Primary property taxes are levied to pay for the maintenance and operation of a taxing jurisdiction.  Secondary property taxes are levied to pay for bond indebtedness, voter-approved budget overrides and special districts such as fire or sanitary districts.

            Secondary (full cash) values are unlimited in the amount that they increase each year since they fluctuate with the market. There is no limit on either the amount of taxes that may be assessed or on the growth rate of the assessed values. In contrast, the primary value is limited as to the amount it may increase each year. The primary value may increase by up to 10 percent of the previous year’s value, or 25 percent of the difference between the current year’s secondary value and previous year’s primary value, whichever is greater. In no event should the primary value exceed the secondary value.

            S.C.R. 1025 is likely to have a negative impact on the General Fund. First, under the school equalization formula, a lower net assessed value (NAV) produces a lower qualifying levy, but raises Basic State Aid by an equal amount.  Second, any NAV reduction in unorganized school districts and school districts that pay the minimum qualifying tax will also lower state revenues. 

Provisions

1. Limits the annual percentage that the primary value of locally assessed properties may increase to two percent of the previous year’s value.

2. Requires a county, city, town or community college district governing board that intends or anticipates an increased primary property tax levy, to seek voter approval.

3. Requires the Legislature to reduce then assessment ratios for all classes of property over a 20-year period.

4. Requires the Secretary of State to submit the proposition to the voters at the next general election.

5. Becomes effective if approved by the voters and on proclamation of the Governor.

Amendments Adopted by Committee

1. Requires a local taxing jurisdiction to seek voter approval to increase the primary property tax levy.

2. Requires the Legislature to reduce the maximum assessment ratios for property tax purposes.

Senate Action

FIN                 2/16/06     DPA     6-3-0

Prepared by Senate Research

February 17, 2006

SL/ac