Assigned to FIN & K-12                                                                                                                  FOR COMMITTEE

ARIZONA STATE SENATE

Forty-seventh Legislature, Second Regular Session

FACT SHEET FOR S.B. 1206

schools; maximum property tax rate

Purpose

            Establishes a maximum primary property tax rate that school districts can impose.

Background

The Tax Reform for Arizona Citizens Committee (TRACC) was established to examine the current tax structure, focus on short-term problems and provide recommendations that can be immediately implemented to improve the state’s competitiveness (Laws 2002, Chapter 289).  One of the recommendations included in TRACC’s final report was a proposal to cap the primary property tax rate of any school district that has 50 percent or more of the homeowners at the constitutionally-prescribed 1 percent cap of the property’s limited value and the primary tax rate is 150 percent of the qualifying tax rate (QTR) set by the Legislature.

The Legislature set the QTR for FY 2005-2006 at $3.618 for unified districts, $1.8090 for nonunified districts and $0.4358 for the county equalization rate. Using the formula established in this legislation, if this proposal were in place this year, the maximum primary property tax rate would apply to any school district where 50 percent of its homeowner property is at the 1 percent cap and its primary property school tax rate exceeds $5.427 (unified district) or $2.7135 (nonunified district). The following 19 school districts meet this criteria: Ash Creek Elementary, Ash Fork Unified, Bowie Unified, Colorado City Elementary, Combs Elementary, Eloy Elementary, Empire Elementary, Hayden-Winkelman Unified, Isaac Elementary, Mammoth/San Manuel Unified,  Maricopa Unified, McNeal Elementary, Paloma Elementary, Picacho Elementary, Red Rock Elementary, San Simon Unified, Santa Cruz Valley Union, Toltec Elementary and Tucson Unified.

S.B. 1206 could result in potential cost saving to the state General Fund associated with the state subsidies of primary property taxes over the 1 percent cap and homeowner’s rebate program.

Provisions

1. Prohibits a school district governing board from fixing, levying or assessing a primary property tax rate higher than the current year’s rate if the district meets both of the following criteria:

a) the total primary property taxes levied for all taxing jurisdictions results in at least 50 percent of the homeowners exceeding the 1 percent constitutional cap.

b) the primary property tax rate exceeds 150 percent of the QTR.

2. Requires the Property Tax Oversight Commission to annually determine the affected school districts and notify those districts and the appropriate county school superintendent and county board of supervisors by December 31.

3. Becomes effective on the general effective date.

Prepared by Senate Research

January 23, 2006

SL/jas