House of Representatives

HB 2131

unsolicited loans; interest prohibition

Sponsors: Representative May

X	Committee on Ways and Means REVISED
	Caucus and COW
	As Passed the House

HB 2131 provides a definition of “unsolicited loans” and it prohibits that unsolicited loans charge interest. The proposed strike-everything amendment phases in one assessment ratio for all classes of property at ten per cent of the full cash value for secondary property taxes approved by voters after December 31, 2001.

History of proposed strike-everything amendment

Currently, property in Arizona is divided into different property classes for taxation purposes, with some classes of property having higher assessment ratios than others. These ratios apply to both primary property taxes, which are used to fund the general operations of counties, cities and school districts, and secondary property taxes, which are used to pay for voter-approved bonds. The table below illustrates the property classification system and applicable assessment ratios for both primary and secondary assessments:

Class	Property Description	Assessment Ratio
Class 1 Class 2 Class 3 Class 4 Class 5 Class 6 Class 7 Class 8 Class 9	Mines, utilities, most commercial Agricultural, golf courses Residential Rental property, care facilities Railroads, flight property Historic, military reuse, enterprise zones Commercial/commercial historic Rental/commercial historic Improvements on government property	25% 16% 10% 10% formula 5% 25% generally 10% generally 1%

Arizona is one of approximately nine states using a property classification system for taxes. Other states typically use a single assessment ratio to calculate property taxes and no other state has two sets of values. The proposed strike-everything amendment for HB 2131 phases in a single assessment ratio for secondary property taxes. By the year 2016, all property is assessed at ten percent. The single assessment ratio applies only to obligations that voters approve after December 31, 2001.

The impact to political subdivisions varies depending on the distribution of the different classes of property in each district. However, this would not affect any existing bonds or overrides that were approved prior to December 31, 2001. In the future, each jurisdiction will have to take into account the variation of their district’s property to determine future impacts.

Provisions of proposed strike-everything amendment

· Establishes a new Local Secondary Debt valuation for the purposes of determining secondary property taxes for bonds and other long-term debt obligations that voters authorize after December 31, 2001.

· The Local Secondary Debt valuation applies to school districts, community college districts, cities, towns and counties.

· The Local Secondary Debt valuation does NOT apply for purposes of computing the constitutional debt limits.

· Provides a schedule to phase in the single assessment ratio for the Local Secondary Debt valuation. (See chart)

Tax Year	Class 1 com/ind	Class 2 Agricul/ Vacant land	Class 3 owner-occupied residential	Class 4 rental residential	Class 5 RR/ Flight property	Class 6 Historic/”zones”	Class 7* com/ind historic	Class 8* rental/ com. Historic	Class 9 poss. interest
2001	25%	16%	10%	10%	Formula	5%	25%/ 1%	10%/ 1%	1%
2002	24%	16%	10%	10%	Formula	5%	24%/ 1%	10%/ 1%	1%
2003	23%	16%	10%	10%	Formula	5%	23%/ 1%	10% 1%	1%
2004	22%	16%	10%	10%	Formula	5%	22%/ 1%	10% 1%	1%
2005	21%	15.5%	10%	10%	Formula	5%	21%/ 1%	10% 1%	1%
2006	20%	15%	10%	10%	Formula	5%	20%/ 1%	10%/ 1%	1%
2007	19%	14.5%	10%	10%	Formula	5.5%	19%/ 1%	10%/ 1%	1%
2008	18%	14%	10%	10%	Formula	6%	18%/ 2%	10%/ 2%	2%
2009	17%	13.5%	10%	10%	Formula	6.5%	17%/ 3%	10%/ 3%	3%
2010	16%	13%	10%	10%	Formula	7%	16%/ 4%	10% 4%	4%
2011	15%	12.5%	10%	10%	Formula	7.5%	15%/ 5%	10%/ 5%	5%
2012	14%	12%	10%	10%	Formula	8%	14%/ 6%	10%/ 6%	6%
2013	13%	11.5%	10%	10%	Formula	8.5%	13%/ 7%	10%/ 7%	7%
2014	12%	11%	10%	10%	Formula	9%	12%/ 8%	10%/ 8%	8%
2015	11%	10.5%	10%	10%	Formula	9.5%	11%/ 9%	10%/ 9%	9%
2016	10%	10%	10%	10%	Formula	10%	10%/ 10%	10%/ 10%	10%

NOTES:

Class 5: Property in this class consists of railroad and flight properties. The assessment ratio is determined annually by DOR by using a formula that takes into account the assessment ratios for other commercial and industrial property in class 1, class 6 and personal property in class 2. By 2016, the formula should determine their assessed value at 10%, similar to other properties used in the formula.

*Class 7 and 8 have a different assessment ratio for the property and improvements to the property. These classes are historic properties, which have an assessment ratio that is the same for similar properties. However, improvements to these properties are currently assessed at 1% for up to ten years. (This encourages preservation and renovation of historic properties.) After ten years, the assessment ratio is the same for the property and the improvement. The first number on the chart shows the assessment ratio for the property and the second number shows the assessment ratio for the improvements. Improvements done in a particular tax year retains the assessment ratio determined in that tax year for up to ten years.

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45th Legislature

First Regular Session 3 March 5, 2001

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