Change in the assessment ratios for purposes of computing and levying secondary property taxes

The essentially identical Arizona House and Senate bills HB2250 and SB1114, respectively, set the assessment ratios for all classes of property at 10 percent of full cash value for purposes of computing and levying secondary property taxes (see the summary of the House Bill or the full text of the Senate bill).

The full or limited cash value of a property multiplied by the assessment ratio gives the assessed value. The assessed value of the property when multiplied by the tax rate gives the tax to be paid. The setting of the tax rate and other features of the Arizona property tax system are explained very compactly in a schematic and at slightly greater length in a text file, both from the Pima County Finance Department. These and other relevant files are found on the web page for the Pima County Arizona Adopted Budget Fiscal Year 2001/2002. The Arizona State Legislature web pages have the full text of Arizona Revised Statues Title 42 - Taxation.

At present there are nine classes of property with varied assessment ratio. The current assessment ratio for residential property is 10 percent, that for the principal classes of commercial property is 25 percent, and for agricultural property and vacant land, 16 percent.

Reducing the assessment ratio for commercial property to that for residential property leads to a 33 percent increase in the secondary property tax rate. For a representative residential property in Tucson, secondary property taxes are 1/4 of the total property tax. The 33 percent increase in secondary property tax rate that would follow passage of HB2250/SB1114 translates into an 8 percent increase in the tax paid by an owner of residential property.

The effect is five times greater for owners of historic residential property, for which the current assessment ratio is 5 percent. The increase in the tax bill would be 40 percent.

The effect of bills HB2250/SB1114 is to shift significantly the tax burden from owners of commercial property and agricultural or vacant land to owners of residential property.

The estimates given above of the effect of change in the assessment ratios are described in a pdf file, "Effect of differential change in assessment ratio".

The House Bill (HB2250) is far along with regard to legislative action: passed by the Ways and Means and Rules Committees and the Majority and Minority Caucuses; and retained on the calendar of the Committee of the Whole. No Senate committee (neither Finance nor Rules) has taken action on SB1114.

Neither the full text of the bills nor the summary descriptions state the effect on homeowners and renters (presuming that owners of rental residential property would pass on an increased tax to renters). The fiscal analysis requested by the Senate states, "This bill has no fiscal impact". This is true with regard to State and local budgets. Could one not hope for an honest statement of the impact on taxpayers, to the effect that the bills shift the tax burden more onto residential property owners?

There has been already a significant shift of the tax burden from owners of agricultural/vacant land onto residential owners. Comparing the 1998 and 1999 calculations of full cash value, the total valuation of agricultural/vacant land dropped by 34 percent, corresponding to a 7 percent decrease in its fraction of the full cash value of all property. Over the same period the valuation of residential property rose slightly and its fractional contribution increased by 8 percent. This increase translated directly into an increased tax bill for residential owners.

Home   |  Welcome   |  Top   |  Contact us   |  Site-Map

URL: http://urban-issues.com/Documents/Tax-assess-ratio.html
Last revised: May 28, 2002
John Rupley: rupley@u.arizona.edu