Anyone who carefully studies this issue and is intellectually honest must come to the conclusion that the valuation limits proposed in Prop. 117 are bad for Arizona and for economic development.
Before we dismantle the Arizona property tax system and change our state Constitution, we must conduct a thorough and careful analysis of the impact the proposed valuation limits would have on our economy and our ability to fund local government.
We at the Arizona Association of Property Tax Analysts (AAPTA) are property tax professionals who have decades of experience with the Arizona property tax system. AAPTA agrees that the current system is complex, but we also agree that Prop. 117 is not the answer. While limitations on property tax valuations may negatively impact our industry, we stand in opposition to Prop. 117 primarily because AAPTA agrees with independent, authoritative studies and experts which say that property valuation limits are “bad public and economic policy.” If the goal is to reduce the property tax burden, valuation limits are clearly not the answer. They are merely gimmicks with significant negative impacts.
Negative consequences of Prop. 117
• It unfairly favors wealthy property owners and high-dollar real estate.
• It forces Arizona voters to change the state Constitution when it is not needed.
• It creates “windfall” for rapidly appreciating, high-growth areas that will far outpace the 5 percent value limit. It also creates a “windfall” for properties already on the tax rolls at only a fraction of their true value, with no remedy to fix it.
• It destroys “equity” when property valuation limits allow the favored class to be taxed at a fraction of their true value when the majority would be paying their fair share.
• It impairs bonding capacity and bond ratings.
Current limitations are sufficient
• This is not a valuation problem! Recent Department of Revenue sales ratio studies indicate that property values had median ratios of less than 84 percent of true value.
• Assessors are required by statute to specifically analyze the market and the individual property for any value increase over 15 percent.
• Google “property tax value limits” and check for yourself.
• “Property Tax Assessment Limits: Lessons From Thirty Years of Experience” by Lincoln Land Institute
• “Tax and Expenditure Limits (TEL’s)” subject guide by the International Association of Assessing Officers.
• “Four easy steps to a fiscal train wreck” from the Andrew Young School of Policy Studies, Georgia State University.
• “Surprise: An unintended consequence of assessment limitations” from the Lincoln Land Institute’s “Land Lines.”
These are only a few of the potentially devastating ramifications of valuation limits on real property values.
AAPTA cares deeply about being part of the solution to improve our property tax system. Our supporting independent data would strongly suggest that Prop. 117 is not the answer. That is the reason our tax professionals do not support Prop 117.
– Thomas Naifeh is a member of the Arizona Association of Property Tax Analysts.