Dear Members,

Thank you for your support for HB 2130, the Residential Property; Homesite bill we passed out of COW on Thursday.  The measure is on the Third Read calendar TODAY.  Here is a brief explanation of why we need this bill since there may be some misunderstanding about the bill by some members who supported this effort last year (53-2 and 24-5 on final passage).
It corrects a little known tax policy that has been in use for years...namely the practice in some counties of assessing residential property over one acre as vacant land even when it is used only for residential purposes.  The tax difference is substantial – 10% as opposed to 16%.
The bill will help solve two problems:

1)     Due to the higher property assessments caused by the recent housing boom, current large lot residential property owners are realizing the full impact of the 16% tax rate.  The bill will help keep people who are retired or on fixed-incomes from having to sell their property in order to pay the taxes.

2)    Because people are forced to sell their land to pay the taxes, development is occuring in urban areas where preserving open space would be preferable.  The bill will preserve open spaces in urban areas.

Why is this happening? 
Property tax policy has always been based upon current use - but a loosely worded Dept. of Revenue guideline infers that only up to one acre is needed (typical) as a residence.  This is an interpretation of the law which needs statutory clarification.  This bill clarifies how many acres residential zoned property may be lawfully claimed at the residential tax rate - up to10 acres and up to 40 if zoning allows, the property is not used for any other purpose or if legal restrictions or topographical conditions prevent subdivisions. 

Currently, many rural counties allow up to 40 acres because of water or other legal restrictions preventing subdivisions, but this gives little comfort to a residential property owner residing in a county that interprets the residential property guideline as up to only one acre.  The disparity creates confusion and is patently unfair.  In addition to solving the disparity, we drafted the bill with the exceptions up to 40 acres so that what is working in other counties is not impacted.

Will the change reduce tax revenues to local governments?  
NO.   The change will affect about 5,000 parcels in Maricopa County, spreading out the tax differential to around 1.5 million parcels - a negligible fiscal impact to residents.  Plus, the fiscal note estimates there may be about a $600,000 impact to the general fund in 2010 because of the homeowners rebate provisions – also a minimal budget impact.  County Supervisors, who manage budgets, have not expressed opposition to this measure because it will not affect their revenues in the least.

Were the county assessors part of this discussion?
YES.   Over the past two years I have had numerous conversations with the assessors in person, by telephone and e-mail.  They have been kept informed of the issue, had opportunities to weigh in and been part of the entire process.  The assessors have had significant input in the final bill language.
One concern which was brought up in committee was the number of appeals that might result from differing interpretations of "physical conditions" – an issue that was not raised last year.  First, of the approximately 5,000 parcels over 10 acres allowable under the bill that might possibly initiate an appeal will be substantially reduced since most parcels in Maricopa County are less than 10 acres and will not be a factor.  Therefore, the number of appeals should actually decrease as a result of this change. But in an effort to alleviate this concern, the floor amendment defines the term and additional clarifications are also possible under DOR rules in the future. 

Why did the Governor veto the bill and have her concerns been addressed?
The original bill last year morphed into a version which removed the upper limit on the number of acres over ten which may be taxed as residential.  We addressed this by capping the limit to 40, with the exceptions mentioned earlier.  Governor Napolitano’s veto letter indicated her support for the initial version of the measure, so her stated concerns have been addressed.
Thank you for your consideration and for your support on HB 2130. Your constituents will thank you!

Sincerely,
Nancy Barto