Property owners are worried about recent growth in property valuations. Experience tells them that increases in value will translate into increased property taxes next year.
County assessors often get the blame for tax increases, but they have a constitutional obligation to value property at its fair market value.
In addition to ensuring property is not overvalued, property taxpayers need to focus their attention on the other side of the equation: taxes levied by local governments.
One of the most significant drivers of recent property tax growth in Maricopa and Pima counties has been tax levies by school districts that have run afoul of federal civil rights laws.
State law allows school districts to levy unlimited property taxes in excess of their budget limits, for an unlimited amount of time and without voter approval, if the district has either a court order or an agreement with the U.S. Department of Education's Office for Civil Rights.
This exemption for budget and property tax limits may continue long after the court order has been lifted or the OCR agreement is no longer monitored.
Currently, 19 school districts utilize state law to levy taxes over their budget limit because they have a desegregation order or an OCR agreement. Specifically, only two districts are under court orders to desegregate: Tucson Unified and Phoenix Union. The remaining 17 districts are currently, or at least were at some point, under scrutiny by the OCR to remediate some claimed violation of civil rights.
In other words, if a school district is accused of violating some student's civil rights, they are rewarded with unlimited access to taxes on your property in perpetuity.
A 1990 special study by the auditor general found that "expenditures budgeted outside of the revenue control limits for desegregation programs are growing" and that "some costs categorized as desegregation expenditures do not appear to be related to desegregation orders and agreements."
During fiscal 1991, the year in which the auditor general's report was released, 10 districts levied $47.3 million under this provision. For fiscal 2002, 19 districts levied $193.8 million, a 309.7 percent climb over the 10-year period.
Despite the report's recommendations that the Legislature take a more active role in strengthening accountability for desegregation programs, lawmakers had accomplished very little until 2002, when the Legislature capped deseg/OCR levies for a two-year period. That cap expires this year.
According to the Legislature's budget office, if nothing is done to extend the cap on deseg/OCR levies, tax increases could reach $54 million statewide next year and $72 million the following year.
Deseg/OCR levies are unlimited budget overrides requiring no voter approval. In fact, some districts have used this taxation authority to compensate for the loss of revenue when overrides are rejected by voters, essentially saying to taxpayers, "You don't get to say no."
These levies have been driving a wedge into school district and taxpayer equity, widening the gap every year in a public school system that is required by the Arizona Constitution to be "general and uniform."
Disparities in tax burdens resulting from these desegregation levies can be severe, with some property owners paying tremendously higher tax rates than similarly valued property in an adjacent district.
There is now, however, an opportunity to respond to this serious property tax problem.
House Bill 2266, sponsored by state Rep. Steve Huffman, R-Tucson, puts into place reasonable reforms to deal with the authority these school districts have to levy unlimited property taxes.
This bill will cap desegregation and OCR property tax levies at their current level.
Any justifiable revenue increase for new or existing expenditures for such desegregation/OCR purposes will be subject to legislative appropriation.
Pass or fail, no other bill this session is likely to have a greater impact on your property taxes than HB 2266.