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taxes

By Hollace Lyon 

Hollace Lyon (submitted photo)

You’ve probably heard about the recent increase in secondary property tax rates in Maricopa as a result of the Legislature’s change to desegregation-related school funding. There’s been a lot of good talk about the merits of the funding, but I’d like to talk about process and priorities.

I believe real fiscal responsibility means not only protecting taxpayer dollars, but actually providing taxpayers what they are paying for, and that’s been a chronic problem with our Legislature. Yes, we should care whether the deseg dollars are being spent wisely, but we should also care that all students have an opportunity for equity and access. To that end, I’d rather see our Legislature stop encouraging the siphoning away of over $1 billion in vouchers and private school tax credits with no accountability, instead of chasing down $200 million state-wide in desegregation funds. How about taking a serious look at the almost $14 billion in annual tax giveaways increased every year since the 1990s, now nearly 1.5 times the state budget.

Don’t get me wrong, I believe there are legitimate reasons for tax incentives. But those incentives should deliver a return on investment— a principle that should guide our expenditure of all precious taxpayer dollars.

Instead, Senator Steve Smith decries desegregation funds as “unfair to taxpayers.” What is “unfair to taxpayers” is diverting the funding they pay to improve schools and roads, not fixing those schools and roads, and then forcing the counties and cities to raise more taxes to actually get it done. Prop. 301 inflation funding and Highway User Revenue Fund (HURF) monies are just two examples. Another is the Legislature’s “funneling of $25 million away from our 911 center fund” and, you guessed it, forcing funding responsibility down to localities. You’re now paying twice for the same service.  Maricopa Councilwoman Nancy Smith noted recently, “I have a big concern with the common practice that our legislators have of balancing the budget on the backs of cities and counties,” when she was talking about yet another example.

Rather than looking for more ways to cut funding to our district schools, state lawmakers ought to be finding ways to provide them stable, dedicated funding. After all, one of their primary constitutional responsibilities is to “provide for the establishment and maintenance of a general and uniform public school system” across the state. Yes, they must also balance the budget. But they have many tools at their disposal without continually shifting costs down onto the backs of our small businesses and citizens, the ones who ultimately end up paying for it.

Imagine if instead of dictating from on high, our state lawmakers believed in collaborating with schools districts, cities, and counties. Imagine, if they did their jobs without concern for who got the credit.  Imagine…then vote with that end in mind.  Rewarding their behavior just emboldens it.  Send them the signal that it’s time for a new approach.

Hollace Lyon is a Democrat candidate for LD11 House of Representatives.

 

Submitted by Rep. Mark Finchem

Mark Finchem (submitted photo)

On Aug. 15, a news release was circulated by the City of Maricopa that claimed, “The Arizona Legislature Increased your Taxes,” going on to say, “the Arizona Legislature passed and the Governor signed Senate Bill 1529, which significantly changed school funding in selected districts across the state.” At least the press release got that part right, but a significant element of the truth was conspicuously missing.

For decades school districts have received “Desegregation supplemental funding” from both local property taxes (by way of the Primary Property Tax) and from the State General Fund. SB 1529, moved the desegregation supplemental funding from the Primary Property Tax load, to the Secondary Property Tax load, making those school districts who have been collecting Desegregation supplemental funding from the state, accountable for the use of the money to school district residents affected.

When the Legislature first began supplementing local school districts with gap-funding it was an arrangement to ease the strain on local budgets caused by the taxpayer approved 1 percent Property Tax Cap, and the arrangement was to be temporary. Over the years, the urgency to solve segregation was replaced with a sense of entitlement continuation, even though the money was intended to end segregation. In the case of MUSD, the only reason the State has funded desegregation is to address Maricopa’s property tax collection, that is over the 1 percent tax cap. Those school districts that are not over the 1 percent Property Tax Cap, and are under an OCR order to desegregate have never received money from the State, (Phoenix Union is an example). This a problem because the Pinal County and City of Maricopa governmental bodies have made it a problem with their spending habits.

During the 2016 Legislative Session, LD-11 Representatives Vince Leach and Mark Finchem asked about questions generated by the State Auditor General posed to then MUSD School Superintendent Steve Chestnut, “Where is $1,000,000 annually sent to MUSD going; what are you spending it on since after all of these years you have not achieved ‘unitary status’ (desegregation?” His response was short and illustrative of the condition of financial management in many school districts. He simply said, “I don’t know.” In fact, the Superintendent had to check with the Office of Civil Rights to find out how the money was supposed to be spent.

If desegregation has not ended, one is left to ask the tough question, why not? Is it a lack of political will? Or is it that desegregation has been achieved, but the school districts want to keep the tap open and taxpayer money flowing without accountability?

The News Release [also] claims, “The State Legislature passed a law that instituted a secondary property tax without putting it to a vote of those affected, which we believe is illegal and unconstitutional.” This is not a new tax, it is a tax moved from on funding source to another, putting the responsibility for funding on the community that uses the school system, and not other communities that do not have a segregation compliance problem with the U.S. Department of Justice (DOJ), Office of Civil Rights (OCR).

The truth is that with SB 1529, Arizona’s poorer, rural counties are no longer be asked to pay for the inability of allegedly segregated school districts to achieve desegregation, called “unitary status’ by the DOJ, OCR. It is important to emphasize, the money has been set aside for the highly specific purpose of desegregation. And while the News Release claims, “The responsibility for this new tax lies with the State Legislature and the Governor,” the real responsibility lies with the body that spends the money, not with the one that provides the funding.

The salient question for the residents of the City of Maricopa to ask is, “Why has MUSD desegregation not been achieved, is it because of a lack of political will to make the changes needed to desegregate?” Could it be that desegregation has already been achieved and the money is now redirected to another use? Or is it just shear incompetence on behalf of those who are supposed to be stewards of the public funds?

SB 1529 has corrected an inequity, namely taxation without representation. Arizona City residents don’t want to pay MUSD taxes for desegregation when they have precious few dollars for their own children education. It is indeed curious that the Board of Supervisors should have been told by their staff that not all the Desegregation Districts have a 1-percent cap tax problem, and that no state money flows to them thru the supplement, but only to those districts that are evading the vote of the voters that came from SB 1080, a vote to limit taxation on property to 1 percent.

Might it have something to do with the county rate of 3.75 percent (among the highest in the state) and the City of Maricopa at 5 percent (very high if not the highest city rate), leaving only 1.25 percent for CAC and MUSD to fight over?  We, of course, know they don’t–so all collectively go over the 1 percent cap-leaving the shortage for the rest of the state taxpayers to make up.  And the State gets the blame because local taxing jurisdictions can’t or won’t curtail spending?

The time has come for residents of the district to hold their locally elected school board officials, City and even County elected officials accountable for what they are doing with the tax dollars that they have been entrusted with.

Additional information can be found at http://www.arizonatax.org/sites/default/files/publications/position_papers/deseg_handout_1.pdf


Mark Finchem, a Republican, represents LD 11 in the Arizona House of Representatives.

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The City of Maricopa issued a statement that lashed out against state lawmakers this week, blaming the Legislature and Gov. Doug Ducey for tax increases expected to show up on the next property tax bill for Maricopa homeowners.

The raise in secondary property taxes in Maricopa will cost approximately $45 per $100,000 of assessed home value, according to a City Hall press release published Aug. 15.

The release was published on behalf of the City of Maricopa, Pinal County and Maricopa Unified School District, said City Manager Rick Horst.

What does the tax do?

The local tax pays for desegregation funding utilized by MUSD to hire qualified teachers, implement extra support for English Language Learners and other programming.

Nearly 20 Arizona school districts receive this money to aid in compliance with an order from the U.S. Department of Education Office for Civil Rights to remediate alleged or proven racial discrimination, according to statute.

MUSD has received desegregation funding since approximately the late 1990s, according to one school official.

The new law shifts the cost burden, previously assigned to taxpayers statewide, to homeowners who live in school districts that receive desegregation dollars.

It’s an issue complicated by Arizona’s complex tax system that mandates a 1 percent property tax cap. The state used to backfill those funds cut off by the cap. Now it’s up to resident homeowners.

Local pushback against the tax

The city says the shift in responsibility is unlawful because voters didn’t get a say.

Nancy Smith (City of Maricopa photo)

“The state Legislature passed a law that instituted a secondary property tax without putting it to a vote of those affected, which we believe is illegal and unconstitutional,” the press release stated.

Mayor Christian Price deferred comment on the subject to Councilmember Nancy Smith.

Smith said Pinal County, the City of Maricopa and Arizona school districts, including MUSD, will analyze the possibilities of legal options to appeal the tax.

Other alternative solutions include restructuring school funding and more dialogue with state legislators.

“We simply ask our state Legislature to come to the table with us to increase communication and allow us to help solve complex issues,” Smith said.

Smith has been a vocal critic of the Legislature, which, she said, often balances its budget “on the backs of towns, cities, counties,” and now school districts.

Smith said those decisions by the state force local governments to determine how to adapt increased costs passed down to them, often taking the form of tax increases.

“We believe it is disingenuous when we hear statements that indicate that our state budget has been passed without raising taxes, when in truth a portion of their budget has been passed to local governments,” Smith said.

The Pinal County Board of Supervisors approved the tax unanimously during a special meeting Wednesday – with some reluctance. 

 “I join with my fellow electeds in the City of Maricopa and Maricopa Unified School District as far as protesting this particular new tax,” said Supervisor Anthony Smith, husband of Nancy Smith. 

State lawmakers double down on tax legality

Senate Bill 1529, signed by Ducey and passed by the Legislature in May, alleges secondary property taxes “levied pursuant to this subsection do not require voter approval.”

State Rep. Mark Finchem (LD 11) maintained the tax’s legality in an opinion piece sent to InMaricopa Thursday.

Mark Finchem (submitted photo)

“This is not a new tax, it is a tax moved from one funding source to another, putting the responsibility for funding on the community that uses the school system, and not other communities that do not have a segregation compliance problem with the U.S. Department of Justice Office of Civil Rights,” Finchem wrote.

Desegregation funding has long been a thorn in many state lawmakers’ sides, with previous, unsuccessful efforts to alleviate the state’s funding portion in the past.

“This issue was on the table long before the now very successful 20×2020 was finalized,” said Rep. Vince Leach (LD 11) regarding Ducey’s teacher salary-raise plan included in this year’s state budget.

Leach suggested lowering local government spending and tax rates to fix the problem.

Sen. Steve Smith

State Sen. Steve Smith (LD 11) questioned how districts spend the money and whether those funds are necessary.

Smith said a solution to the tax debacle is simple: Strike out desegregation funding.

“It’s a bad tax that the local level should eliminate and get rid of it altogether,” Smith said.

MUSD: Desegregation funds crucial to success for every student

Superintendent Tracey Lopeman

District officials said the funding keeps classroom sizes manageable, provides

programming that aids in closing student achievement gaps and is necessary for teaching positions that primarily serve English Language Learners.

The district receives approximately $1.29 million annually in desegregation monies that fund the salaries of about 25 teachers throughout nine schools, according to Superintendent Tracey Lopeman.

“It would be devastating if we lost that funding,” Lopeman said.

Sales tax set to be implemented April 1

The RTA plans are aimed at widening State Route 347 and establishing an east-west corridor.

Pinal County and the Regional Transportation Authority filed a legal response Monday to an injunction request filed by the Goldwater Institute over a transportation sales tax.

The tax and the transportation infrastructure improvements it is meant to fund (Props 416/417) were approved by county voters in November. The Goldwater Institute, a conservative thinktank based in Phoenix, filed suit in December against the county, the RTA and the Arizona Department of Revenue. Plaintiffs are listed as Arizona Restaurant Association, county resident Harold Vangilder and On Sight Shooting owner Dan Neidig.

The suit [read it here] challenges the legality of the tax and also claims it exceeds the county’s authority “by creating a new tax classification.”

“The problem is the tax is so complicated and confusing that nobody really knows what is taxed and how,” Timothy Sandefur, Goldwater vice president, said at the time.

After the defendants filed a response in January, the plaintiffs asked the court for a preliminary injunction, hoping to stop the implementation of the tax on April 1. They said collecting the tax while the suit is still being decided would cause irreparable injury and hardship. [Read the motion here.]

The case is in Maricopa County Superior Court in front of Judge Chris Whitten.

In responding to Goldwater’s motion, the defendants called the claims of voter confusion “apparitional.” The response [read it here] also stated the plaintiffs failed to meet the requirements for injunction.

“This lawsuit is nothing more than a post-election attack by those who failed to convince voters to oppose the transportation tax at the election,” Board of Supervisors Chairman Todd House stated. “The voters spoke clearly about the need for improved transportation infrastructure in the Pinal region last November while also expressing their willingness to pay an additional sales tax that amounts to about $7.33 per month per household.”

There is continuing uncertainty over the legal ramifications if the court does not grant the preliminary injunction to halt the start of tax collection on April 1 but Whitten later rules against the RTA. The county cannot proceed with RTA plans until the case is settled.


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Home values are on the rise in Maricopa, signaling more revenue gains for the city despite lower property taxes.

The Maricopa City Council passed the 2017-18 operating budget June 20, and among its revenue items the city has indicated an increase of more than $400,000 dollars in property tax revenue despite effective rates actually shrinking.

The primary property tax rate of 4.7845 percent ($4.7845 per $100 of assessed value) will remain the same, according to budget documents, while the secondary property tax rate will fall from 1.69 percent to 1.40 percent ($1.40 per $100 of assessed value).

This positive assessment, City of Maricopa Finance Director Brenda Hasler said, is a result of rising home values.

“Due to increased property values, the overall amount the City is proposing to collect will increase,” Hassler said.

According to the Pinal County Assessor’s office, the primary property tax is to be used for “basic maintenance and operation of a county, city or school.”

Secondary property taxes are used to pay for “bonded indebtedness of a local jurisdiction, voter approved overrides of tax limits, and taxes levied by special taxing districts.”

For Maricopa, the excess primary property tax revenue will be spent primarily on public safety, City Manager Gregory Rose said. This is largely due to the fact that fire and police make up the largest budgetary expenditures and not because the city has a mandate to spend it on specific services.

“All of the funding that will be received for property taxes will be used for general services,” Rose said. “So, they won’t be dedicated to one specific department, although public safety makes up about 61 percent of the budget.”

Those general services, Rose added, include the addition of several positions to the police and fire departments as well as positions in the accounting and permitting departments at City Hall.

For the previous fiscal year (2016-17), the city took in $10,992,790 from primary property taxes and $3,732,776 in secondary property taxes for a combined total property tax revenue of $14,725,566.

In 2017-18 the city has budgeted for revenue of $11,704,000 from primary property taxes and $3,426,003 from secondary property taxes for a combined collection of $15,130,003.

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It’s budget season, a time of changes, but those changes won’t include a hike in local property tax rates.

The City of Maricopa’s primary tax rate will remain at 4.7845. With this week’s tentative budget adoption, the Pinal County rate is expected to stay at 3.8699. But that doesn’t mean more money won’t be rolling in.

In fact, Maricopa expects to collect 4.2 percent more in its levy. 

“The tax rate for property owners in the City of Maricopa will remain the same,” said Maricopa Finance Director Brenda Hasler. “Due to increased property values, the overall amount the City is proposing to collect will increase.”

During the current fiscal year, Maricopa’s tax levy was $10.99 million. With the new fiscal year, that levy will be around $11.7 million. Primary property taxes on a $100,000 home will increase from $459.30 to $478.45.

The city will have a mandated Truth in Taxation Public Hearing on the primary property tax rate June 20 at 7 p.m. at City Hall.

Meanwhile, the county’s budget has decreased by $3.6 million. About 49 percent of the Pinal County general fund comes from property taxes. In the county budget, 60 percent of all revenue goes to the Sheriff’s Office, the County Attorney’s Office and the courts.

The tentative budget totals $406 million.

Of property tax that is collected by Pinal County, about 25 percent goes to the county. The rest goes to school districts, Central Arizona College, municipalities and other taxing entities.

“What we are doing is putting a ceiling on our final budget,” Assistant County Manager Leo Lew said.  “The total budget number cannot go up from here.  But there is some flexibility to be able to reallocate money and shift money around if we need to before adoption of the final budget.”

Lew also stated that Pinal County saw a 3.2 percent growth in new construction valuation, a slight increase in existing property valuation and excise tax collections. 

The Board of Supervisors will vote on the final budget on July 12, with the adoption of the tax levy rates coming on Aug. 21. 

By Jim Chaston

1.    Congress has gotten serious about correct Employee vs. Independent Contractors classification and increased penalties drastically. Penalties can be more than 100 percent of payments for misclassified employees. Listen to a tax professional, not other business associates and friends. Classification is based on behavioral control, financial control and a relationship test; NOT a written contract.

2.    Identity Theft is a huge issue. Congress changed the deadlines for filing W-2s and 1099s up to Jan. 31 instead of Feb. 28. This is so the IRS can match W-2s and 1099s to tax returns before they issue refunds.  Refunds were delayed until Feb. 15 this year because of fraudulent returns and identity theft.

3.    The annual required election to expense repairs and small equipment – Repairs and Small Equipment Regulation – has increased from $500 to $2,500 with election on tax return.

4.    Section 179 Depreciation is $500,000 for 2016.

5.    You can still get a tax credit for implementing a retirement plan in your company for up to 50 percent of the cost of implementation.

James A. Chaston CPA


This column appears in the March issue of InMaricopa.

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“The tax rate for property owners in the City of Maricopa will remain the same,” explains City of Maricopa Finance Director Brenda Hasler. “Due to increased property values the overall amount the City is proposing to collect will increase.”

The fiscal year 2015-16 property tax rate was $4.7845 per $100 of net assessed value which resulted in a primary tax levy of $10,522,453.  For fiscal year 2016-17, the City of Maricopa is maintaining the property tax rate at $4.7845 per $100 of net assessed value. However, due to the increase in the net assessed value of residential property within the City of Maricopa, the total primary tax levy will increase to $10,998,701, a 2.4 percent increase from the 2015-16 fiscal year.

The Truth in Taxation Public Hearing is scheduled for Tuesday, June 21, 2016 at City Hall at 39700 W. Civic Center Plaza Maricopa AZ, 85138 at 7 p.m. A copy of the City’s tentative budget is available for review at the front desk of City Hall and the Maricopa Public Library located at 41600 W. Smith-Enke Road Building #10 Maricopa, AZ 85138, and on the City’s Financial Services homepage at www.maricopa-az.gov.

This proposed increase is exclusive of increased primary property taxes received from new construction. The increase is also exclusive of any changes that may occur from property tax levies for voter approved bonded indebtedness or budget and tax overrides.