TAX RATES AND TAX BILLS
Questions You Never Thought You’d
Have to Answer
AASBO Bi-Monthly Meeting
November 9, 2011
Prepared by:
Judy Richardson, Vice President
602.794.4012
[email protected]
Current Property Tax Issues
 In
recent years, large changes in property values have
made tax bills less consistent


From year to year
Within a district – some taxpayers see increases while
others see decreases
 The
same principles were at work in the past, but
were not as noticeable


The changes in property values were not as great
The addition of new property in many districts tended
to reduce tax rates and tax bills
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Current Property Tax Issues
Even if property values have been stable in your area,
your district’s primary property taxes are affected by
statewide changes in property values
 The reasons for changes in school district tax bills can
be complex
 Most reporters don’t understand the system well enough
to explain it
 County assessors and treasurers often don’t explain the
changes correctly
 When taxpayers call their school district, they often start
with false assumptions and misinformation

Page 2
Typical Questions Asked This Year
 Why
did my taxes go up when my neighbor’s taxes
went down?
 Why did my school taxes go up? What are you doing
with all the extra money?
 Why did my taxes go up when the tax rate went
down?
 Why did the state aid subtraction (homeowner’s
rebate) go down? Why is it a different % than last
year?
Page 3
What Changed This Year?

Statewide Primary Assessed Valuation (PAV) decreased


Caused by large decreases in Maricopa and Pinal Counties
State Equalization (County) Tax Rate (SETR) and
Qualifying Tax Rate (QTR) both increased


To keep the total amount raised from existing property about
the same
To prevent the cost of state aid from increasing
QTR increase = $0.5770 (USD) / $0.2885 (ESD/UHSD)
 Combined SETR/QTR increase = $0.6465 (USD)
 19.5% rate increase
 Calculated to offset a 14.8% decline in statewide PAV

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Increases and Decreases

Note that PAV percentage decrease (14.8) and offsetting
tax rate percentage increase (19.5) don’t match


The % increase is always larger than the % decrease
Same principle with stocks:
If stock falls from $100 to $50, that is a 50% decline
 But $50 requires 100% increase to get back to $100


The bigger the percentages, the bigger the differential



5.0% decrease requires 5.3% increase
30% decrease requires 43% increase
50% decrease requires 100% increase
 Bigger drops in valuation cause bigger tax impacts
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Increases and Decreases
 Statewide
calculations only “work” at local level if
local or individual PAV change matches statewide
PAV change
 This year, residential PAV changes were
inconsistent within districts and across the state



Some were up
Some were about the same or down a little
Some were down a lot
 These
differences created differences in tax bills
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Examples of School District
Primary Property Tax Changes
Assume a state aid school district with a tax rate close
to the QTR
 Assume the primary tax rate increased by the amount of
the QTR increase (no other factors changed)
 USD example:
 FY 2011 =
$3.00
 QTR Increase =
+$0.58
 FY 2012 tax rate =
$3.58
 Percentage increase =
19.3%

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Example #1

If an individual property PAV declined by about 15% (the
same as the statewide decrease)
 The tax rate increase offset the PAV decrease and
kept district primary property taxes about the same
 These taxpayers called the school district because the
newspaper (or their intuition) told them their taxes would
go down if their property value dropped
 Your explanation:

Their decrease in value was offset by the tax rate increase
which was caused by the QTR increase
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Example #2

If the individual property PAV dropped 25% (more than the
statewide decrease)
 The primary property taxes went down because the tax
rate increase was not enough to offset the PAV decrease
 These taxpayers felt they got what they deserved and
didn’t call the school district
 Their tax cut did not reduce your total revenues
because it was offset by
Increased taxes on property whose value didn’t drop (or
didn’t drop as much)
 Increased state aid if your total District PAV dropped by
more than the statewide average

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Example #3

If the individual property PAV increased, stayed the same,
or only declined a little



Their district primary property tax bill went up
These taxpayers called the school district because they think you
increased your spending
Your explanation:



The district tax rate increased because of the QTR increase
Their value did not drop (enough) to offset the rate increase
The amount you can spend did not change – Their increased tax
was used to offset:
 a reduction in state aid (if the statewide PAV decrease was
greater than the district’s PAV decrease)
 tax cuts for other tax payers whose value dropped
Page 10
Other Factors Affecting Primary Tax Rates
In the previous examples, the district primary tax rate
was close to the QTR
 The percentages are different if the district tax rate is
not close to the QTR - for example:




If the previous district primary tax rate was $6.00, then a
$0.58 increase to $6.58 is only 9.7% increase
A homeowner’s PAV would only need to decline by 8.9%
to offset that increase
The critical number is the % increase in the district tax
rate caused by the QTR, not the % increase in the QTR
itself
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Other Factors Affecting Primary Tax Rates

Other district-specific factors compounded or
mitigated the effect of the QTR increase on the tax rate:
 An unusually low or high tax rate last year
 Unusually large or negative cash balance
State aid withholding or repayment
 Tax judgments or delinquent taxes


Changes in district wide PAV

For state aid districts, affects the tax rate for items
outside the RCL
Page 12
Other Factors Affecting Primary Tax Rates
 Non-state
aid districts are not affected by QTR
increase –


Their primary tax rates are calculated like secondary tax
rates
The tax rate will increase if the district PAV decreases
 Partial
state aid districts are a hybrid - their primary
tax rates are affected by both:
 The QTR
 Changes in their district total PAV
Page 13
Homeowners Rebate Changes




Homeowners rebate is a property tax reduction (also called
additional state aid)
Changes enacted in 2010 took effect this year
Formula changes reduced the amount of the rebate (for
state aid districts)
Items no longer included in rebate calculation:






Desegregation
TRCL/TSL difference
Small school adjustment
Interest on registered warrants or TANs
Excessive property tax valuation judgments
Career ladder QTR
Page 14
Homeowners Rebate Changes
Smaller subtraction increased the total bill (or total
primary property tax), not the line for school district
primary taxes
 Some taxpayers might have lost the rebate because it is
now limited to primary residences (no second homes)
 Not a law change, but some taxpayers might be at the
$600 limit



If their primary taxes increased, $600 would be a smaller
% of their primary tax bill
Homes valued at $425,000 or more are affected by the
$600 limit
Page 15
Secondary Property Taxes

Changes in secondary property taxes are easier to explain
because they are not affected by


Changes in statewide SAV
The homeowners rebate
The tax rate is determined by the amount of your
overrides and bond debt service and your SAV
 If the bond and override amounts are about the same
but your SAV decreases, then the rate must increase

Page 16
Examples of School District
Secondary Property Tax Changes
 Assume
that the amount levied for bond debt service
and overrides was about the same as the previous
year
 Assume the district’s total SAV decreased
 The district secondary tax rate was increased to
offset the SAV decrease
Page 17
Secondary Property Tax Example #1


If a taxpayer’s SAV decrease was about the same amount as
the district-wide SAV decrease
 Their secondary property tax bill was about the same as
last year
 They call the school district because they expected a
decrease
Your explanation:
 The amount levied is about the same as last year
 The tax rate had to be increased to account for the
district-wide SAV decrease, so it also offset their
decrease
Page 18
Secondary Property Tax Example #2
 If
a taxpayer’s SAV decrease was more than the
district-wide decrease



Their secondary property tax bill decreased
They did not call the district because they thought that
was what they deserved
Their tax cut did not reduce your total levy because it
was offset by tax increases for taxpayers whose value
didn’t drop (or didn’t drop as much)
Page 19
Secondary Property Tax Example #3

If a taxpayer’s SAV increased, stayed about the same,
or decreased less than the district-wide SAV decrease



Their secondary property tax bill increased
They called the district to find out what you are doing with the
extra money
Your explanation:




The total amount levied is about the same as last year
The tax rate had to be increased to account for the districtwide SAV decrease, so the higher rate caused higher taxes
Their increase offsets decreased revenues from taxpayers
whose values dropped
The good news is their property held its value!
Page 20
Summary
Don’t worry about trying to explain decreases in tax
bills – no one will ask
 Figuring out what caused an individual’s tax bill to
increase (or not decrease) is a combination of




The factors that caused the tax rate to change (or not)
The change in the value of the taxpayer’s property
The relationship between tax rate change and value change
Explaining this to the taxpayer is a challenge
 2012 could be similar to 2011 (except for the change in
homeowners rebate calculation)
 Good Luck!

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