With only three months left in the fiscal year, Pima County officials may need to come up with an extra $7.4 million in the budget.
The extra cost comes from a March 15 decision by the state Property Tax Oversight Commission to put $15.8 million in tax liability on Pima County this fiscal year, County Administrator Chuck Huckelberry wrote to the Board of Supervisors in a memo Thursday.
The liability comes from a 2015 law that requires local jurisdictions to come up with the funds to cover property taxes that exceed 1 percent of the property’s value. The state covered the overage amount for more than three decades prior to the 2015 law change.
The county filed a lawsuit against the state over the 2015 law in Maricopa County Superior Court and set aside $8.4 million in this year’s budget to cover its share of the added cost, Huckelberry wrote.
But the commission decided to hold Pima County accountable for the full $15.8 million, rather than split it among the city of Tucson, Pima Community College and the Tucson Unified School District, Huckelberry wrote.
The commission did not meet until March 15, Huckelberry wrote.
“We believe the PTOC decision was likely predetermined and is inappropriate and not within required administrative and statutory procedures,” Huckelberry wrote. “Hence, we are now exploring legal remedies in response to this action.”
If the combined residential property tax rates of overlapping taxing authorities in a county exceed $10 per $100 of assessed value, state law sets a cap to prevent the property owner from paying more than 1 percent of the full cash value of the property.
This occurs in parts of Pima County where the combined tax rates for Pima County, TUSD, the city of Tucson and PCC exceed $12.60 per $100 of assessed value.
Before, the state would make up the difference to the school district.
However, the new rules require Pima County to divert a portion of its primary property tax collections to TUSD to make up the difference.
A Department of Revenue spokesman said he could not comment on the commission’s decision due to the ongoing litigation with the county.
In an interview with the Star, Huckelberry said the commission “invented rules to basically isolate Pima County and make us pay the entire amount.”
He said he is hoping a Maricopa County Superior Court judge will make a decision before the end of the fiscal year in June.
If the court rules in Pima County’s favor, “We won’t be paying anything,” he said.
If not, the county will have to look at making cuts this fiscal year or raising taxes next fiscal year.
The county has not yet received a billing notice from the commission, Huckelberry said.
The “unfortunate” decision will further burden county taxpayers and schoolchildren, said Supervisor Ray Carroll.
“I think it’s trouble,” he said.
The cuts, if necessary, likely would hit unmandated services such as parks and libraries, “the things people like the county to do,” Supervisor Sharon Bronson said.
The county should look at its legal options to combat the commission’s decision, which is “illegal and outside its purview,” Bronson said.
“Certainly, it’s going to affect every taxpayer in Pima County and as such is inequitable,” Bronson said, noting residents who do not live within TUSD’s boundaries would have to make up the difference in tax revenue for TUSD.
“Essentially, that’s taxation without representation,” she said.
The county government cut 1,000 employees in recent years and is “pretty much bare bones,” said Supervisor Richard Elías.
The commission’s decision was “obviously a politically motivated punishment directed at Pima County,” Elías said, citing the state’s objection to the county’s bond election last year and disagreement over how to spend highway user funds.
“They continue to eat away at our tax base and abscond with it to other jurisdictions of the state,” Elías said.
The decision is the latest example of the “unconscionable” shift of costs to local governments by the state, Bronson said.
“I think we need to elect members of the Legislature who understand their roles, their duties and responsibilities. Apparently, this Legislature does not,” she said.
