After surge of assessor appeals, bill would cap tax court decisions

In the wake of an unprecedented number of appeals to state tax court by the Pima County assessor, legislation that would cap rulings in such cases is progressing in the Legislature.

Versions introduced in the state House and Senate would not allow the court’s decisions on full cash values to exceed the amount “initially determined by the county assessor and appealed by the taxpayer,” according to the text of the legislation.

Last November, a tax court judge ruled there is no bar against assessors seeking higher valuations than those initially set by their office. Also, those sued by the assessor face legal fees that can be substantial.

The measure was approved by the Senate finance committee 5-2 last week.

In 2017, Pima County Assessor Bill Staples, who opposes the bill, filed more than 40 appeals of decisions by the State Board of Equalization, which roughly equals the number of cases his office had previously filed since his election in 2004. As written, the bill would retroactively apply to suits filed after Dec. 31, 2016.

While not used for property tax purposes, full cash values set a ceiling for limited cash values, which are used to calculate all county primary and secondary property taxes and whose annual increases are capped by state law.

In the Senate and House the bill is sponsored by Republicans Sen. Warren Petersen of Gilbert and Rep. Todd Clodfelter of Tucson.

“Imagine having the assessor coming after you and filing a lawsuit,” Petersen said at the start of last week’s finance committee hearing. “This bill is about preventing government from being punitive.”

Domingos Santos, a backer of the measure and attorney for several clients involved in cases that would be impacted by the bill if signed, said the legislation would give defendants certainty that there is only so high their full cash values could go and also decrease the likelihood that state assessors pursue such cases in the first place.

“The hope would be that the assessor would weigh the costs and benefits of filing that type of lawsuit,” he said, adding that they can come with substantial costs for the county as a whole.

For property owners being sued, Domingos said of the intended impacts of the bill, they could simply decide to not fight it — thus avoiding legal costs and other expenses — and rest easy that any tax court decision could not be greater than the original notice they received from the assessor.

Staples, who testified in opposition at the hearing, said current constitutional provisions protect taxpayers from wild swings in property tax burdens by capping annual increases in taxable limited cash values at 5 percent, even if full cash values rise more substantially.

“What (the bill) does is it’s seeking to grant relief that already exists,” Staples said.

Staples did not respond to a request for comment on how the bill — if signed into law — would affect his office’s handling of Board of Equalization appeals, among other questions.

Properties that had undergone substantial improvements or construction could see sizable increases in taxable values, but there are only a handful of such properties involved in the suits his office filed in 2017, Staples said during his testimony, referencing so-called Rule B calculations.

Back to homepage

Subscriber Login

Keep reading with a digital access subscription.

Subscribe now

“For Rule B folks, the property tax implication are substantial,” said Santos, who is representing such a client, according to court documents.

Maricopa County Assessor Paul Petersen said Santos’ interest in the bill is “obvious.”

“I think that he’s trying to correct a problem for his clients,” he added.

Santos, who told the Star he first brought up the issue to the legislation’s sponsors, disputes his interest in the bill stems from his involvement in several potentially impacted cases. Instead, his interest comes from his experience in private practice as a tax attorney, working as a deputy Maricopa County attorney and serving as a governor-appointed member of the Arizona State Board of Equalization.

“To the extent that any of my clients would benefit from this, it would merely be by virtue of being taxpayers,” he said in response to Petersen’s comments. “I do work with a lot of taxpayers, but my involvement in this effort has been to correct a wrong in our tax law.”

Several of the defendants in ongoing cases offered to settle at the original assessor-established full cash value and were rebuffed by the assessor, according to a Dec. 8 letter from Pima County Administrator Chuck Huckelberry to Staples. In that same letter, Huckelberry said he had also been told the assessor’s approach to the suits was essentially forcing some defendants to hire attorneys.

“Pima County has a team of attorneys on staff to represent your office, yet taxpayers, who are not in the business of tax litigation, must find and hire private attorneys just to wait for your new appraisal,” Huckelberry wrote.

The county is likely to take a neutral position on the legislation, Huckelberry later told the Star, as it normally does when the issue involves disputes between taxpayers and a county agency.

“This office is attempting to minimize the legal expenses of the property owners,” Staples wrote in a response to Huckelberry obtained by the Star. “It is true we require a response to our complaint, requiring the defendant to retain an attorney. This requirement allows for the production of documents necessary for the completion of our appraisal report. Once the appraisal report is completed, it will be made available to the property owner. This office will settle the case at the appraised value.”

Legal costs for those being sued by Staples can be substantial. One defendant — parking-lot operator Leon Woodward — told the Star he had already spent $20,000 on his dispute with Staples and is expecting additional bills.

“These lawsuits are meant to scare people,” Woodward said at the hearing.

Costs for the assessor can also be sizable. For his case against the Hacienda del Sol resort, his office hired an out-of-state appraiser for $30,000. Late last year, the assessor hired another appraiser for $20,000 to handle university-area properties involved in two additional cases, according to a copy of the contract.

As written, the Arizona Association of Assessing Officers is opposed to the legislation. Among the organization’s concerns are possible impacts to state assessors’ ability to modify original notices of value with supplemental notices and notices of proposed correction, according to Paul Petersen, the association’s president. With an amendment adequately addressing those concerns, “I personally would be placated,” he said.

Santos passed along the text of a proposed amendment that would clarify that the the bill applies to “every way an assessor can notice a real estate value,” and does not apply to values that have been frozen because of previous successful appeals.