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I think this is the second or third article of a series of articles on property taxes.
The first article is out of sequence and follows this article. In this article it sounds like the state of Arizona made it very easy for special interest groups to create special taxing districts. And of course once those special taxing districts are created it is very easy for the special interest groups that created them to use them to shake people down for taxes the special interest group wants. Taxation Vexation: Special districts often lead to wildly disparate tax bills among neighbors By Michelle Ye Hee Lee The Republic | azcentral.com Wed Jun 19, 2013 7:32 AM Arizona’s patchwork of special taxing districts took shape more than three decades ago as local governments looked for ways around property-tax limits without incurring voter wrath. Today, that system is convoluted, inconsistently regulated and often mystifies taxpayers. Its effects can make or break homeowners, whose property-tax bills often include a one-two punch of levies for local government services and special-district items ranging from street lights to irrigation. Local governments are allowed by state law to create these districts, but they generally operate outside public consciousness. Nearly nine out of 10 Maricopa County homeowners pay taxes to at least one of the nearly 1,450 active special districts in the county. The special-district setup, which is not uncommon nationwide, obscures the lines of accountability, making it hard for homeowners to know exactly who imposed the taxes, to whom they are paid, how much goes toward what, or how to challenge them. No single local or state government agency is charged with scrutinizing or auditing the flow of taxpayer money into these districts. Equally confounding is the way special-district taxes affect each homeowner differently. Because of district boundaries, one resident unknowingly may pay hundreds of dollars more or less than a neighbor down the block, even as both pay taxes toward the same school district, municipality and county. The effect is additional taxpayer frustration over Maricopa County’s property-tax system, which has vexed homeowners over the past five years as tax bills for most people failed to drop at the same pace as their home values. From 2008 to 2012, overall property taxes declined 16 percent on average while property values plummeted 49 percent, according to an Arizona Republic analysis of county tax and property records. Maricopa County has nearly 1,450 active special taxing districts, not including 56 school districts. The school-district taxes make up the largest portion of a homeowner’s property-tax bill. Taxes for schools, cities and counties are calculated based on the limited cash value of properties. Special districts levy secondary property taxes, which are calculated based on the full cash value of properties. Individual Maricopa County homeowners who owed special-district taxes paid between 56 cents and $10,426 to these districts in 2012, an Arizona Republic analysis found. More than 146,000 homeowners paid no special-district taxes at all, while nearly 800 others paid taxes to six different special districts. In extreme cases, special taxing districts can compose up to half of a homeowner’s bill — and not all districts have a limit on the amount they can charge taxpayers. In 2012, Maricopa County’s special taxing districts took in nearly $71 million in property taxes, though they generally are a small part of an average tax bill. Each district’s taxing model varies, as well. Some districts tax based on property values, others based on a property owner’s use of services that the districts are designed to provide. The districts are created by various methods, few of which are obvious to taxpayers. And they are inconsistently regulated. “Special districts are, by definition, a government,” said Stephen Slivinski, a Goldwater Institute senior economist who has been studying the districts and is preparing a policy report about them. “Not all of them are required to have the same amount of accountability or transparency as the more traditional forms of government are,” he said. “Yet they have a lot of the same functions as those governments — they’re providing services. They’re taxing. They’re spending. They’re issuing debt.” These districts essentially act as financing mechanisms for residents to tax themselves for a range of services, including irrigation-water delivery, street lighting, road and community-park maintenance, fire protection, power and pest control. The majority of districts are created by residents within specific geographic areas. Special-district boundaries are drawn on a case-by-case basis. Neighbors on the same block could have varying bills because they may live in slightly different districts. The Republic’s analysis showed that neighbors within a square mile who have comparable home values and are taxed by the same school, municipal and county jurisdictions can have hundreds of dollars in discrepancies in their tax bills because of special-district charges. Gilbert homeowner Michael Odermatt, for example, paid $587.98 in property taxes last year to an improvement district. A mile away, another Gilbert resident whose home has the same assessed value — but who did not live in the same improvement district as Odermatt — paid $39.84 in special-district taxes. Odermatt had no idea his neighbors were not paying the same taxes. He was not aware special districts were levying taxes on his home. He has noticed that plants, landscaping and parks in his subdivision are well-maintained. But he said he would rather not pay special-district taxes. “I pay enough taxes to ... Gilbert that they should maintain their own city,” Odermatt said. “It’s public property, (the public’s) property taxes, and you should maintain those properties for everybody to enjoy. ... There shouldn’t be another line item. Just because you can segregate it as another line item doesn’t mean that you should.” Arizona has one of the highest rates of overlap among special districts, Slivinski said. These districts began to crop up across the country in the 1970s, and their growth coincided with another trend: states and localities enacting tax and expenditure limits on local governments. Most of these new districts were not covered by those limits. “Once counties and cities began to realize that they can spend more money in their general fund if they just offloaded certain functions from their original budgets to these special districts, (which) were generally less accounted for, less transparent,” Slivinski said, “(local governments found) they can just free up some space in the budget that were under these caps.” For example, a city may allow a new development to finance infrastructure like roads or street lighting by issuing bonds that are paid off by special-district taxes. The taxes do not count against the city’s tax limit, and the cost does not come out of the developer’s pocket. It takes decades for the districts to dissolve, if ever. That means most Arizona homeowners will be paying some portion of their tax bill to special districts for as long as 25 to 30 years, when bonds to finance infrastructure are paid off in full. All it typically takes to form a special district is agreement from 50 percent plus one of residents within district boundaries. The exception is a community-facilities district, a specific mechanism allowing a real-estate developer to build infrastructure like roads or public parks for future residents of a development. Developers work with municipal governments to set up a system in which future landowners within these districts pay incremental property taxes that offset the cost of building things like roadways or storm drains in their community. Because there are no residents in community-facilities districts when they are formed, only the agreement between the developer and a municipal government is needed to form the district. Residents who move into the district must agree to be taxed when they move in. Bill Kirschner, a Marley Park homeowner in Surprise, paid $607.50 in taxes to the Marley Park Community Facilities District last year, plus $97 in taxes to two other special districts. A mile away, another Surprise homeowner, whose property is not in Marley Park, paid $69.32 in special-district taxes. Kirschner said his special-district taxes in Marley Park are significant. But he anticipated that when he bought a home there, and the infrastructure his taxes finance directly benefits the neighborhood and his family. “If it was a problem for me, I could have moved someplace else,” said Kirschner, a commercial banker. “What we loved about Marley Park was the sense of community. The community association takes an active role.” Karrin Taylor, executive vice president of Scottsdale-based DMB Associates, which runs Marley Park, said DMB is “very meticulous” about notifying residents of all costs associated with living in their communities. Taylor said residents can express their approval or rejection of district taxes by deciding whether to live in the community and pay the taxes, she said. “We do additional layers of disclosure just because a better informed buyer is a better, long-term resident,” Taylor said. Inconsistent regulation There are various ways to create special districts, and the same goes for overseeing them — which results in vastly decentralized regulation. A lengthy Arizona statute governs how special districts are formed and authorized to levy taxes. Several municipal, county and state agencies are statutorily involved in aspects of the formation, taxation and regulation of these districts. In practice, it is a roundabout process to track exactly how each district formed and who maintains paperwork to monitor the flow of tax revenues in and out. There is no master regulatory agency, although several county agencies are responsible for compiling the amounts levied by special districts each year. The districts are governed by boards of directors made up of district residents. Directors are elected to the boards based on statutory guidelines. Officials from various county, municipal and state governments point to district boards as separately elected bodies that control their own finances and governance. It is unclear how much involvement directors have in running districts. It is also unclear how many residents know the boards exist or who serves on them. Community-facilities districts are linked to the city or town in which the properties are located. Their governing bodies tend to be the city or town councils of the jurisdictions in which they operate. Their meeting materials are posted through the municipal public-notice process. But not all special taxing districts have public-meeting notices, meeting minutes or agendas required of their governing bodies. Community-facilities districts are more closely monitored than most special districts. That may be because state statutes give a lot of authority to them, said Kevin McCarthy, president of the Arizona Tax Research Association. “They can do a lot. They can do everything short of declaring war on Mexico,” McCarthy said. Each special taxing district is required to file paperwork through one of a variety of government entities, but there is no one clearinghouse. For example, 1,299 street-lighting improvement districts levied taxes in 2012. Of them, 267 are county districts and 1,032 are municipal districts. Each district’s documentation is maintained by its respective municipal government. Once districts are formed, their levies are tracked by the county finance department, which publishes a levy book every year. The County Treasurer’s Office acts as a banker for special districts, opening accounts for them and entering their collections and distributions, Treasurer Charles “Hos” Hoskins said. For municipal street-lighting districts, for example, the County Treasurer’s Office collects taxes, deposits them in the municipal government’s account and the municipal government oversees the spending of the taxes, he said. Documents that were recorded through city or county clerks’ offices showed annual financial reports submitted by the boards. But no Arizona government entity has statutory responsibility to audit all special taxing districts, not even the Arizona Auditor General’s Office. “The only commonality across special districts is, there is nothing in common,” McCarthy said. “They’re each different. They’re each crafted and put into state statute in order to provide some service that is not provided by county government or city government.” The level of oversight for special districts varies. Arizona statutes set different requirements for the frequency and type of financial reports that districts must file based on their annual budgets. Some larger districts must submit financial reports conducted by independent certified public accountants. Smaller districts can send handwritten reports of the year’s revenues and expenditures, with no supporting documents. Most special districts are required to send copies of their financial reports to more than one office. Generally, districts must send a copy of their completed audit or financial review to the county Board of Supervisors or the county treasurer. Some send copies to the Auditor General’s Office or to their municipal governments. However, by most accounts of officials who receive financial audits, their responsibility is not to check the validity of the reports or to enforce the law. They simply keep track of their submission. Who governs? Methods of governing special districts vary widely, putting the onus on taxpayers to figure out who is setting and collecting special district taxes. That isn’t always easy. Some districts are overseen by local elective governing bodies such as a City Council. Others are independently run by boards of directors composed of residents elected by more than half of their neighbors within district boundaries. But district directors do not all operate under the same public expectations as the average local elected governing body. While it is incumbent on property owners to find who their elected district leaders are, it is not immediately clear to taxpayers which districts they are paying, let alone who runs them. Take the case of Steve Coker, a Phoenix homeowner who pays his taxes through an escrow account that manages his mortgage. Coker paid $201.20 in 2012 to Sun View Estates Irrigation Water Delivery District No. 55. “It’s easier for people to not pay as close attention if their taxes are being paid through an escrow account,” Coker said. “I don’t think it’s as noticeable.” Coker’s Phoenix home is his primary residence. He moved there in early 2011. The Sun View Estates district meets regularly, and he knows to contact it if he has any questions about his taxes. He lives in a tight-knit neighborhood where neighbors share concerns, but he has not heard concerns about irrigation-district charges. State law allows residents or the county Board of Supervisors to sue to block district levies. However, the board clerk could not recall any lawsuit filed by the board against special districts in her two decades there. The County Attorney’s Office is not involved in the districts’ legal proceedings, either. A spokesman for the office said that special districts are required to hire their own counsel and representation for legal matters and that the county attorney’s role generally is to help set up the districts. “A cynic might say it was kind of designed that way purposefully,” said Slivinski, of the Goldwater Institute. “At the very least, even if you’re trying to be transparent, there’s only so much you can do to get people cognizant about this. You have so many layers of government. There aren’t enough hours in a day, often, to make sure you’re monitoring all of these.” The vast majority of special-district elections are conducted by the districts, not through the county Elections Department. Fire districts, the Central Arizona Water Conservation District, the Maricopa County Special Health Care District and the Fountain Hills Sanitary District hold elections through the county. Other special districts maintain their own list of electors and mostly use paper ballots, county Elections Director Karen Osborne said. In some counties, special districts hold elections with the help of their assessor or the cities. But that is not the case in Maricopa County, said Kristi Passarelli, county Elections Department campaign finance and jurisdictional manager. The contact phone number for each district is available on every homeowner’s bill. But some of the districts’ phone numbers are connected to individual households, and it can be difficult to track people down. Information on special districts is not readily available to the public, as other governmental taxing districts’ information may be. “From a policy standpoint, if you want people to be paying attention to what their government is doing, you’ve frustrated that end by breaking the link between the homeowner/voter and government that’s taxing their property,” McCarthy said. Dennis Hoffman, economics professor at Arizona State University’s W.P. Carey School of Business, said it is the obligation of both the government and homeowners to strive for a transparent special-district system. Lawmakers and special-district leaders need to be clear in showing each homeowner how much he is being taxed, which services he is receiving, and how much he is paying in relation to others receiving similar services, Hoffman said. In turn, voters need to speak up about special-district taxes if they want to dispute or support them. The system relies on the involvement of citizens to hold special districts accountable, he said. “If you put more effort into showing people what they’re getting for what they’re paying,” Hoffman said, “going forward, you’re going to move to a level of government that is more palatable.” Republic reporters Ronald J. Hansen and Catherine Reagor contributed to this article.
Taxation Vexation: About the seriesSourceTaxation Vexation: About the series The Republic | azcentral.com Mon Jun 17, 2013 2:46 PM Reporters Ronald J. Hansen, Catherine Reagor and Michelle Ye Hee Lee set out to answer a common question among homeowners: Why haven’t property-tax bills fallen like property values? The Republic acquired five years of data on residential property-tax values kept by the county assessor, and five years of bills kept by the county treasurer. There are approximately 1.2 million single-family properties in the county, meaning that between both sources and all years, about 10 million records needed to be analyzed. Hansen used database-management software to break down the figures. Reporter Rob O’Dell helped map residential properties to plot disparities over time and geography. Reagor and Lee went through years of correspondence from homeowners befuddled by the county’s property-tax system. They contacted others whose complex bills were identified by The Republic’s data analysis. As part of the three-month project, the reporters interviewed tax experts and public officials. “We have a confusing system,” then-Maricopa County Assessor Keith Russell told them. He and others acknowledged that while it was designed to be both decentralized and fair, the system is largely misunderstood.
Taxation Vexation: Phoenix-area home values went down; property taxes stayed up By Ronald J. Hansen and Catherine Reagor The Republic | azcentral.com Mon Jun 17, 2013 10:55 AM During the epic housing crash, property values fell by almost 50 percent in Maricopa County. Did property taxes fall a similar amount? Not by a long shot. As homeowners clung to the idea that lower tax bills would be one small consolation of the bust, schools and cities and fire districts and hundreds of other government entities stared down their own financial crises in the five years from 2008 to 2012. With property valuations in general dropping by double-digit percentages each year, equally less taxpayer money would be collected. But demands for education, city services and fire protection for essentially the same number of residents weren’t abating. School boards, city councils and other government entities, scrambling to avoid the full effects of the property-value crash, wielded their power to raise tax rates to collect more money. The rising tax rates created a vexing disconnect between values and taxes for all property owners, commercial and residential. For homeowners, the frustration was felt with every payment of every tax bill, even though Maricopa County easily had the lowest residential property taxes among the nation’s 20 most populous counties in a national Tax Foundation survey. Every year, many property owners expected to receive the bill that would drop in lockstep with their falling property value. For most people, that bill never came. County residential-property values declined, on average, three times faster than tax bills between 2008 and 2012, according to an Arizona Republic analysis of county data. Among 970,000 residential properties that were on the tax rolls in those five years, overall property taxes declined 16 percent on average, according to The Republic’s analysis of county tax and property records. Property values plummeted 49 percent over the same period. This trend generally applied to most houses in the county. But another factor plays into each homeowner’s tax bill: the region’s decentralized tax system, created in the 1980s to allow each taxing body to manage its own costs and to make growing areas essentially pay for their own infrastructure. Individual tax bills varied wildly — even within adjacent neighborhoods — lending a maddeningly random quality to the system. With a patchwork of school districts, municipalities and more than 1,000 special taxing districts across the county, even houses with identical values could have tax bills that vary by more than 300 percent, according to The Republic’s analysis. For example, owners of a house assessed at $150,000 in Cave Creek owed $1,005 in taxes in 2012; owners of a house in Laveen with the same assessed value owed $2,361. Owners of a Scottsdale house assessed at $300,000 owed $1,831 in taxes; owners of a Glendale house with the same assessed value owed $4,504. View property-tax comparisons “During the past few years, many metro Phoenix homeowners have been opening their property-tax bills and thinking, ‘What the hell?’” said Mark Stapp, executive director of Real Estate Development at the W.P. Carey School of Business at Arizona State University. “Their home’s value has dropped. But their taxes haven’t because local governments have to raise money, even when home prices are down.” For nearly 150,000 homeowners, tax bills were higher in 2012 than they were in 2008. More than 7,000 homeowners saw their bill rise every year in that span, according to The Republic’s analysis of county records. At the same time, small pockets of homeowners saw their bills drop almost in step with the decline in their valuations. Cave Creek homeowners had among the lowest tax burdens. Because of higher tax rates, homeowners saw their bills rise in Phoenix’s posh Biltmore area, in swaths of southeast Mesa, in the area surrounding Arizona State University in Tempe, in Ahwatukee Foothills’ newer neighborhoods, in new communities in Surprise and in golf-course communities in north Scottsdale. Homeowners in lower-income areas often felt the sting of higher school tax rates as values fell and perennially cash-strapped districts raised their assessments. By the end of the recession, residents of the relatively low-income Roosevelt Elementary School District in south Phoenix paid one of the higher school tax rates in the Valley. Kevin McCarthy, president of the Arizona Tax Research Association, said widespread apathy about tax policy, from city budgets to school bonding issues, has helped create a system in which few people connect their voting decisions to their pocketbook. “Your property taxes aren’t simply based on the value of your property. They’re based on the budgets of the many jurisdictions that tax your property, and they’re also based on voter activity,” said McCarthy, a lobbyist for commercial-property owners and an expert on the state’s property-tax system. Property-tax bills are composed of two dozen different categories, some of which can include multiple taxing entities levying taxes annually. School taxes for elementary, secondary and community colleges make up more than two-thirds of an average property owner’s tax bill, according to Maricopa County officials. In many — but hardly all — cases, school taxes are the main reason for higher-than-expected bills as districts raised rates to counter the drop in property values. And voters in many districts added to their school taxes by approving overrides — measures that raised extra cash for classroom operations — and construction bonds. For other homeowners, special taxing districts can be the reason behind their higher-than-expected taxes. Homeowners, often on the region’s fringes, live in newer communities where the developer established special districts to pay for roads, fire protection, water, lights and other services. Homeowners in long-established areas may be part of irrigation or improvement districts they may barely be aware of. Taxes from those districts boost homeowners’ property bills, creating tax gaps between them and others nearby who aren’t in those districts. Unlike city boundaries or neighborhood signs that help visualize communities for the public, there are no obvious markers for taxing districts. One neighborhood may have multiple tax overrides and bonds to pay for each year, while homeowners less than a mile away belong to separate school districts and pay different special taxes. It’s rarely the type of detail most prospective buyers check before closing on a home. Special district tax comparisons While some frustrated homeowners may view the system as a conspiracy to suck more money from their pockets, it may be more fairly viewed as the bill for a la carte government. If roads or lighting or school-spending increases were desired, those in the area, not the broader population, were saddled with the tax expense. Every year, the county treasurer sends out bills based on tax rates set every summer by every taxing district. Few people challenge the system. Perhaps one reason for that: Compared with California or New Jersey or Connecticut, taxes here are relatively low. The Tax Foundation, a Washington-based nonpartisan tax-research organization, analyzed nationwide Census Bureau data on property taxes between 2005 and 2009. Maricopa County’s median property tax in that span was $1,346, slightly less than Pima County in Arizona and 849th highest in the nation. In property taxes as a percentage of household income, the county ranked 1,351 out of about 2,900 counties examined by the Tax Foundation; in property taxes as a percentage of the median home value, it ranked 2,140. In Scottsdale: Retiree feels bite of system’s disparity Retiree Jim Stafford, a Scottsdale homeowner on a fixed income, says his taxes increased 22 percent last year for a variety of reasons, including higher city, county and school levies. “While I fully appreciate and value county services, it would appear a more realistic budget model might be in order for county government to address wild increases year over year,” Stafford said. “My home continues to drop in value, which increases the pain.” The beginning: An effort to deal with growth. The simple math of property taxes, and the system created to manage growth, are two keys to understanding tax trends in Maricopa County. Two numbers are multiplied to create the tax bill: a house’s assessed value, and the tax rate for each of the many taxing districts in which a house is located. Tax rates, not the property’s assessed value, are by far the most important figures in determining final bills. Across the country, property-tax systems vary. In a few states, including California and South Carolina, property taxes are set by the state. In others, such as Arizona, Georgia and Texas, property taxes are set by county. Maricopa County’s current decentralized property-tax system was created in the 1980s to modernize education funding and cope with the state’s rapid population growth. Property-tax bills can include two dozen different categories of taxing districts, from schools to water to community facilities districts to specialized categories such as lighting and irrigation. A typical homeowner’s bill has more than a dozen taxing entities levying taxes annually. That localization means costs often are funneled directly to those who are using the services instead of spreading them citywide, countywide or statewide. The impact of education taxes, and taxes tied to development, can create profound disparities between tax bills. Built into the decentralized system is the ability to adjust tax rates as needed to provide enough cash for these services regardless of property valuations, McCarthy said. In the boom years of the past decade, tax rates often were lowered to reflect the growing base of property owners and the rising value of their houses. In Madison district: School taxes a burden The valuation on Tom Rich’s North-Central Phoenix home has dropped 29 percent since 2008. But with eight different school taxes, overrides and bonds, his taxes had jumped 22 percent by 2012, adding $1,037 to his bill. “This is price gouging. A monopoly by our local governments, and I have no choice (but) to pay,” said Rich, who paid $5,700 in property taxes last year, about $4,300, or 75 percent of it, for schools. He lives in the Madison Elementary School District. Almost $1,900 of his taxes went to Madison, and almost $2,000 went to Phoenix Union High School District taxes, bonds and overrides. The balance of his school taxes went to the Maricopa County Community College District. He doesn’t have children but said he doesn’t mind paying school taxes. “I just question all the overrides and bond interest,” Rich said. “I could vote no on the overrides, but they would still go through. It’s become ludicrous.” It could be worse. Across the street, the tax bill for Rich’s neighbor jumped 53 percent, or $1,580, in the five-year period. Jay Mann, a spokesman for the Madison district, said its budgets have fallen from $6,800 per pupil in 2007-08 to $6,090 in 2011-12, in part because state funding — another casualty of the recession — was scaled back. The district, he said, has tried to preserve a quality education for its diverse student needs, whether that involved assisting low-income families or high-tech job training for future workers. “For us, it’s largely been preservation of what we were doing,” Mann said. That task has been difficult, he said, with higher energy costs and reduced state funds for capital needs. The cost of education: In many school districts, the combined tax rates have gone up nearly every year since the recession began. And education, by far, accounts for the largest chunk of property-tax bills. Between 2008 and 2012, primary taxes earmarked for elementary, high school and community college accounted for 48 percent of tax bills, according to state treasurer records. Add in voter-approved bonding issues and overrides that allow specific school districts to boost per-pupil funding, and education costs were responsible for, on average, 73 percent of a property-tax bill in 2012, according to The Republic’s analysis. In 2012, some voters reached their limits. Nearly half the bond and override measures in 28 districts failed in November. School budgets are tied more to enrollment than real estate. Each district’s budget is a mix of federal, state and local tax dollars. What the state and Washington don’t cover comes from local homeowners. Tax rates for operations in districts such as Creighton and Kyrene Elementary and Mesa Unified went up three successive years beginning in 2010. Tax rates for bonds and overrides went up four years in a row in districts such as Madison and Roosevelt Elementary and Dysart Unified. “With school bonds and overrides, there’s no mechanism that those taxes go down when the values go down,” said McCarthy. “It matters little if bonded debt was based on an overly optimistic view of taxpayer growth because bonds that have been sold need to be paid back.” Dysart’s school tax rates, including bonds and overrides, have climbed almost 33 percent since 2008. “We were stunned with a 16 percent increase in our taxes during 2012,” said Surprise homeowner Brad Whitman. “The increase came in spite of a drastically reduced assessed value on our home. Many of us are just paying too much to schools.” Whitman’s house’s value dropped from $205,000 in 2010 to $174,000 in 2012. About $1,400 of his $1,990 tax bill went to the Dysart school district. Whitman also owed nearly $225 to three special tax districts. In north-central Phoenix: Irrigation taxes Raymond Santoyas, 85, who lives on Northern Avenue in north-central Phoenix, paid more than $1,000 in special-district taxes last year. Across the street, his neighbor paid $7. The disparity is due to the boundary of the Berridge Ridge irrigation district. Santoyas is in it; his neighbor isn’t. “It doesn’t make sense. My property bill keeps going up, but my values aren’t,” Santoyas said. “I am mad, but what can I do about it?” Santoyas is allotted about 2 hours and 15 minutes to open the water valve and flood his property each year. His home is much smaller than his neighbor’s, but his yard is bigger. “I have about one-sixth of an acre,” he said. “I don’t understand the irrigation tax because I pay a water bill.” The irrigation district, set up to flood yards a few times a year, is separate from what he pays for city of Phoenix water. Thousands of special districts: While education usually tops the property-tax expenses, special districts can double the final bill for some homeowners. Countywide, there are more than 1,000 of these districts, which collect taxes for services confined to the areas that need them. The services range from fire protection to street lighting to water services. Districts are created on a case-by-case basis by residents or a real-estate developer and essentially act as financing mechanisms for residents to pay taxes for a range of services in their own geographic area. Once authorized, these entities are inconsistently regulated. Some of the district’s governing boards file elaborate, audited annual reports; others file single-page, handwritten summaries of their activities. There is no indication anyone in local, county or state government routinely reviews these documents. “Most developers come in and create special districts, sell out the communities and then give the debt to the city to bond. No one really regulates special districts,” said Charles Hoskins, Maricopa County treasurer. “A homeowner’s first step to checking out why they are being billed by a special district is to call that district.” If special-district activities generally go unnoticed, their impact on property-tax bills is not. Consider the example of two homeowners two houses apart in the Agua Fria Ranch subdivision of Youngtown. In 2004, nearly identical-sized homes were built on identical-sized lots. In 2012, one of the houses was assessed at $80,200. The other was assessed at $80,600. Despite the similarities, one property’s tax bill was $1,523 and the other’s was $1,923. The main reason for the disparity is a special district called the Central Arizona Groundwater Replenishment District. One of the homes was taxed $89 for the year from that district. The other was taxed $355. Most other houses nearly the same size, built the same year and on the same block — with swimming pools — had bills below $100 from the special district. The owners of the house with the high water bill, who bought it in December, declined to comment on the bill. Central Arizona Groundwater collects money from homeowners to buy water and recharge groundwater and taxes homeowners based on usage. More than 1,000 subdivisions in the southwest and southeast Valley are part of this special district, which was created in the mid-1990s. The district is currently trying to raise its rates 4 percent. How to read your property tax bill (p. 1) Confused about how to interpret your property tax bill? Click the above for a quick primer. In the southeast Valley: Costly fire service Real-estate developer and investor Michael Pollack is savvy to the Arizona property-tax system. He has successfully appealed valuations on several of his neighborhood shopping centers. “One of the concerns I have is that property taxes went up when values went down,” he said. “Now, what’s going to happen as property values go up again?” On his Chandler home, Pollack has paid $73,000 in special-district taxes since 2006, the most in Maricopa County in that time. About one-quarter of his annual property-tax bill goes to the Sun Lakes Volunteer Fire Department. Pollack’s house, valued at more than $3 million, is one of the area’s most expensive, so he must pay much more to the special district than many other homeowners in the community, with houses valued at $300,000. “I haven’t gone deep into research on the fire districts,” Pollack said. “If you live in the county or a city, you would think fire services would be paid for. However, there are areas throughout the Valley that have very different fire-protection situations. It doesn’t seem equitable.” Lots of moving parts. Homeowners wanting to have a true influence on the size of their tax bill would have to attend a half-dozen or more tax-rate-setting meetings and successfully make their case to their particular school boards, the county supervisors and to any special districts in which they may live as well. They also can appeal their home’s valuation, but the tax rates they pay influence their final bill the most — a fact recognized by Keith Russell, the former Maricopa County assessor, who resigned this month to become East Mesa justice of the peace. In recent years, the County Assessor’s Office began valuing houses 10 to 20 percent below market value in an effort to save people the time and money of appealing, he said. Typically, fewer than 5,000 residential homeowners appeal their assessments each year in a county with more than 1 million parcels. Fewer than 1,000 receive a changed valuation. Fewer than 2,500 Maricopa County homeowners appealed last year, and fewer than 500 were successful. “A homeowner only saves about a penny in taxes for every $1 they get knocked off their valuation,” Russell said. “Some homeowners go to small-claims court and pay almost $150 to appeal their valuations and end up losing money.” In Willo: Fed up Daisy Delaney owns a home in the historic Willo District in central Phoenix. Though her $358,000 house was built to look historic, it doesn’t carry the designation because it was built in the early 1990s. The historic designation matters because it cuts tax bills in half. Her tax bill climbed $600 last year to $5,305, largely because of school taxes aimed at improving central Phoenix schools, including nearby Kenilworth Elementary. Down the block from Delaney, a neighbor with a house valued at $30,000 more than hers pays about $3,000 in property taxes because it’s designated as historic. “Why aren’t there groups of homeowners getting together to protest these tax increases?” Delaney said. “I have found it impossible to negotiate taxes or assessments in the past. I come from New Mexico, and there, at least, homeowners could get some consideration. “I am trying to sell just because my taxes are so high,” she said. Includes information from Republic reporter Michelle Ye Hee Lee and data analysis by Republic reporter Rob O’Dell. Technical assistance by Republic data reporter Ryan Konig.
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