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Fire dist. officials worry Prop. 117 could be the end
Proponents tout its simplicity and stability
7/18/2012 12:08:00 PM
By Steve Ayers
VERDE VALLEY - In Proposition 117, the voters of Arizona will get a rare opportunity to simplify their property tax system.
But simplicity, at least for one group of taxing districts, may not translate to fairness.
The current law's complexity comes from the establishment of two valuations on all property, a full cash value and a limited cash value.
Prop 117 will simplify by taxing all properties at their limited cash value and impose a five percent limit on annual increases in value.
Currently all operations budgets for special taxing districts are levied against a district's full cash value. And while full cash values rose so dramatically over the two decades, some special taxing districts took advantage of the situation.
They boasted they were holding the line on taxes by keeping their annual tax rate steady, when in fact they were raising considerably more money because of the dramatic rise in their district's full cash value -- same percentage of the pie, but a larger pie.
One group gained a reputation for wholesale fleecing of the taxpayers -- fire districts. Although the abuses were limited to some high profile cases, the group as a whole got a black eye.
Legislation was passed limiting the tax rate they could impose to 3.25 percent. A stopgap measure recently passed will raise the limit to 3.75 percent for the next two years, but they remain capped, nevertheless.
With a levy rate cap in place and Prop 117's 5 percent increase limit on the limited assessed valuation in place, fire districts will find themselves squeezed from both sides of the tax equation if Prop. 117 passes.
Opponents feel it will spell the end for some districts that are already at the rate cap, and those that do survive will take a decade or more to recover their tax bases to levels that match their service requirements.
"The real world is not arbitrary and fire department budgets reflect our ability to provide exactly the kind of care our taxpayers need, exactly when they need it," says Simon Davis, president of the Arizona Fire District's Association.
"Passage of 117 will significantly inhibit our ability to continue to provide that kind of care in the future. The growth won't come back for a couple years, but when it does we will feel the impact of Prop. 117. It will hamper emergency services."
But proponents say the new law will be a benefit, bringing stability where there is volatility. They also feel that had fire districts used restraint in the past they wouldn't be suffering the withdrawal symptoms Prop. 117 would bring.
"The biggest struggle with local governments has more to do with sustaining operations. They grow with the expectation that the property tax base is going to be somewhat consistent. But with the volatility we have had, you don't know that, " says Kevin McCarthy with Arizona Tax research Association.
"If we had the opportunity to go back and reduce the budgets of many smaller fire districts, with Prop. 117's 5 percent increase limit in place, there may be one or two less firefighters, but they would have a lot more consistency and stability."
The possibility that some districts may fail, says McCarthy, is a question that bears discussion.
"A lot of their growing expenditures are just to keep their head above water on their retirement fund payments. For some districts it's in excess of 30 percent of their payroll. Coming out of all this someone needs to ask the question how viable some fire district's are, going forward," McCarthy notes.
The Arizona Assessors' Association supports the bill because of its simplicity. But their support is not unanimous, according to Yavapai County Assessor Pam Pearsall.
"From our point of view, we like anything that simplifies," she says, "but I'm not sure how the individual taxing districts are going to feel about it. It's one of those instances where the law simplifies things, but its effects are complicated."
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