Pima County property tax rate to decrease slightly in 2023 fiscal year

As Pima County readies to adopt its budget for the next fiscal year, it’s discussing the annual property tax rate it will charge to feed much of the budget’s expenses.

The property tax rate under the proposed budget for fiscal year 2023 will decrease by 13 cents, but the overall levy the county will collect is anticipated to increase by more than $9 million, mainly due to higher home valuations.

County Administrator Jan Lesher is recommending the county’s combined property tax rate decrease slightly from $5.1952 per $100 of taxable net assessed value to $5.062 next fiscal year. That’s expected to bring in more than $510 million in overall property tax levies.

The rates would cause the primary county property taxes on a $100,000 home to be $387.64, compared to $376.98 currently. The combined county rate would be $506.52, compared to $519.62 currently.

The rates the board adopts will only apply to the property taxes Pima County levies and not other taxing authorities such as local school and fire districts. The county’s property taxes are composed of a primary tax that goes into the general fund and three secondary taxes for libraries, debt services and flood control.

Lesher is proposing a $1.9 billion budget for fiscal year 2023, and the combined property tax rate will fund 26% of that, according to the recommended budget.

It will be the eighth time in 10 years the property tax base has increased in the county. New development, rising housing prices and valuations contribute to that rising tax base.

There were 5,104 new home permits in 2021, a nearly 18% increase over the previous tax year, according to the Pima County Assessor’s office, which is responsible for assigning values to properties.

The net assessed value, or determined valuation of properties the county used to calculate property taxes, is $10.1 billion for the next fiscal year, a 4.5% increase over the current year, according to the proposed budget.

Pima County Assessor Suzanne Droubie said an increasing tax base should lower an individual’s share of the cost.

“As (the tax base) gets bigger your taxes will actually shrink a little bit,” she said. “We need to cover the county budget, and the value of your property determines your share of that budget that you’re responsible for paying. I look at it as like a big pie, and everybody has a slice … the more people and the more properties you add, the smaller everybody’s slice technically gets.”

The board of supervisors will adopt property tax rates in August. The county will send out property tax bills in September based on the notice of valuation county residents received for their properties in February 2021.

But Droubie said it’s hard to say what those bills will look like. Property assessments residents received in February were based on 2021 valuations.

“There’s a lot of things going on right now that are affecting the overall county budget and because of that, trying to predict what people’s taxes are going to do is really hard,” she said. “Seeing what’s going on with the (residential home) sales prices out there, those sales are what we use to value properties at the county assessor’s office. So as those sales numbers go up, so does your value here.”

However, a constitutional amendment passed by Arizona’s voters in 2012 that sets a 5% cap on the increase of net assessed value the county can tax year to year “goes a very long way toward managing how much that tax bill can increase,” Droubie said.

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State statute also requires taxing authorities to alert the public when the property tax rate will be greater than what the statute considers “neutral:” the previous year’s levy plus additions to the tax base from new construction. The county’s proposed primary property tax rate levy is about $10.8 million higher than the neutral rate.

According to Lesher, reaching the state-defined “neutral” rate will be difficult for the county as long as it has its PAYGO program in place.

The PAYGO program was adopted by the board in 2019 and funds capital infrastructure projects through property taxes instead of bonds that rack up debt.

However, the primary property tax rates aren’t proposed to increase. Lesher said revenues have been greater than expected this year, leaving the balance of fiscal year 2022’s general fund at about $137.8 million, $92 million higher than expected.

Instead of raising the primary property tax rate to continue funding the program, the county can utilize those excess funds.

“If we were to simply take next year by itself and look at the exact formula that’s the policy from the board to implement PAYGO, we would have to actually increase the primary tax rate by a couple of cents. And we just didn’t want to do that,” Lesher said.

Pima County is known for its high property tax rates compared to other counties in Arizona. Supervisor Steve Christy often hears these concerns and wants the proposed rates to drop more “without negatively impacting the PAYGO program,” perhaps by cutting funds elsewhere.

“I firmly believe that there’s still more room for the property tax rate to be set at a lower level than just the 13-cent reduction that is being proposed,” he said. “There’s a lot of recommendations being made — $5.5 million dollars to expand the Pima County Health Department. Issues of that nature certainly should be analyzed when it comes to property tax rates and the PAYGO program.”

While the primary tax is proposed to remain the same, the library’s secondary tax will increase by a penny in preparation for long-term funding of the Pima Early Education Program that provides preschool classes to 3-5-year-olds from low-income families.

Another expense the county is anticipating this year is an estimated $105.5 million in costs the state is shifting over to counties. That includes $53 million for the Arizona Long Term Care System and $20 million for salaries at the superior and juvenile courts. The total costs the state will make the county foot the bill for won’t be known until the Legislature adopts its final budget.

The board adopted a policy in August 2021 to pass those increased costs onto taxpayers. But Lesher said that policy won’t go into place quite yet. Other funding sources, such as this year’s general fund balance, will be used instead.

“We were looking at maybe eight to 10 cents or more that someone’s tax bill could go up to accommodate that state cost shift,” she said. “Ultimately, the board agreed that that’s not good policy at this point and we can wait to implement it.”

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