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Pima, Pinal counties may have to hike tax rates for court to decide legality of budget provision

budget money dollar sign fight620Pima and Pinal counties may have to set their tax rates – and hike the levy on businesses and homeowners – before any court decides whether a provision in the state budget is legal.

That could add up to $45 a year in taxes for a $180,000 home in Pima County, and a yet-to-be determined amount in Pinal.

And whatever is borne by homeowners will hit businesses twice as hard because of the way they are assessed for tax purposes. So a $180,000 business could see a $90 annual increase.

The reason is that the Attorney General’s Office will not accede to a request by Pima County, which filed the suit, to have the Supreme Court decide – and quickly – whether counties can be forced to pick up education costs the state will not.

In fact, John Lopez, the state’s solicitor general, wants nearly another month before he even has to present his arguments to the high court.

A spokeswoman for his office said even then he may ask the justices to reject the county’s plea for them to provide a quick resolution. That could send the case to a trial judge for hearings. And whatever that person rules – after perhaps months – eventually would wind up back before the Supreme Court when whoever loses files an appeal.

That, in turn, creates the problem.

Arizona law requires counties to set their tax rates by Aug. 17. Pima County Administrator Charles Huckelberry said if there is no resolution to the case by then, he will have no choice but to advise the board of supervisors to add in the additional cash the state budget demands the county provide.

And Huckelberry said if the county has to absorb all of the $18.6 million, with none shared by the city of Tucson or Pima Community College District, that adds 25 cents to the county’s planned tax rate of $4.27.

In Pinal County, the only other one currently affected, the hit is estimated at $7.6 million.

The fight is over a provision in the budget designed to eliminate the current requirement for the state to make up the difference when the combined primary property tax rate in any area – including city, county, school and community college – exceeds $10 per $100 of assessed valuation. Instead, the budget says anything above that which is needed by the local school district needs to be absorbed by the other taxing entities.

In legal papers filed Monday, Joe Kanefield, Pima County’s attorney, argued to the Supreme Court the maneuver is illegal.

He said the law gives no clear guidance over how that excess is to be divided up. More problematic, Kanefield said, is it imposes a new tax on those who do not live in the school district that benefits and have no vote on who is elected to the school board.

He wants the justices to rule on the entire issue ahead of that Aug. 17 deadline.

In his response Wednesday, Lopez said the lawsuit “raises important issues of constitutional law involving complex taxation matters.” And he wants until July 3 to respond.

But Kristen Keogh, spokeswoman for the Attorney General’s Office, said Lopez could argue at the time that the high court had no jurisdiction to hear the case. And if the justices agree, there is no chance of meeting that deadline.

Huckelberry said the county will put out all the legal stops if it has to levy the tax because the case has to go to a trial court, raising all possible new arguments.

One relates to the fact that the Arizona Constitution requires a two-thirds vote of both the House and Senate for anything that increase state revenues, including not only a new or increased tax but also any change in how taxes are allocated. And the budget did not pass by that margin.

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