“Property tax in Arizona is a shell game. The property value doesn’t really predict how much tax you’re going to pay. The budget of the tax district does,” said Navajo County Assessor Cammy Darris.
Darris explained that for 2015 there is a new method being used to calculate property tax, which includes a cap on the amount the taxable property value can increase per year. The cap, however, does not necessarily limit how much taxes can be increased, since each taxing district sets the tax rate based on the total value of the properties within that district.
“They set their budget and then divide it by the property values to come up with the tax rate,” Darris said.
When property values decrease, the tax rate often increases to make up the difference, resulting in the average homeowner paying the same amount even if the property is not valued as high as the previous year.
In addition to shifting tax rates based on changing values, Darris explained that changes in the assessed value, which is a percentage of the full cash value, is likely to result in residential property owners paying a larger share in 2016. This is because the assessed value for commercial properties has been reduced. For residential properties, the assessed value is 10 percent of the full cash value. For commercial properties, it was 19 percent, but dropped to 18.5 percent this year and will go to 18 percent in 2016. This will likely result in a tax rate increase in many districts to make up for the one percent loss, unless those districts decrease their budgets.
“The question that needs to be asked is not what is the assessed value, but what did the district collect,” she said. “I can lower values, but the taxing jurisdiction can just collect more.”
Darris noted that there is a limit to the amount of property taxes Navajo County can collect. That limit is two percent over the previous year, plus new construction.
“The assessed value does not generate taxes, the budget is what does,” she said.
In regard to the new limits, Darris explained that property values cannot increase more than five percent per year for the purpose of taxation. For example, if a $100,000 residential property suddenly increases in value to $125,000, the county can only assess up to $105,000. The exception to the rule is new construction, which can increase a property’s taxable value by more than five percent.
Darris also noted that there is an appeals process available if a property owner does not believe the assessed value is accurate.
“The petition gives us a chance to look at each property individually,” she said. “It’s not to protest taxes, but to appeal the value of a property.”
