iation Prepared for: Arizona Fire June 2015 Prepared by: COB3961

Transcription

1 Arizona Fire District Associ iation Impact of Prope erty Tax Limits 2015 Update and Policy Issue Review Prepared for: Arizona Fire District Association June 2015 Prepared by: 7505 East 6 th Avenue, Suite 100 Scottsdale, Arizona COB3961

2 TABLE OF CONTENTS 1.0 Introduction and Summary Background and Tax Rates Real Estate Conditions Fire District Net Assessed Value Forecasts Fire Districts and Property Taxes 10 TOC COB3962

3 1.0 Introduction and Summary was retained by the Arizona Fire District Association (AFDA) to review property tax data and provide an analysis of the impact of property tax limits. The initial forecast was completed in 2014 and this review represents an update that is based on current trends in economic conditions. In addition to updating select fire district revenue forecasts, the AFDA requested an opinion regardingg the potential for enactment of new tax law provisions that may easee reported overly restricted fire districtt budgets. Illustrations of tax rates versus tax payments in select districts is also included. Summary The most recent recession and implosion of the reall estate markets, both commercial and residential, highlighted the need to reexamine state taxx policy in multiple areas. The specific characteristics of the 2008 recession (i.e. impacting real estate disproportionately) has brought more attention to government entities that rely on property taxes as a singular or majority source of revenues. This is the case with the state s fire districts. There are multiple things to consider when discussing any tax reform as it relates to a particular taxing jurisdiction. Constrained revenues could indeed cause fiscal problems if budgets are already operating in a lean and efficient manner, and if changes to the revenue stream could not have been anticipated. If a government entity did not exercise fiscal restraint when times were more favorable, a portion of any fiscal crisis could be self-induced. These instances are more difficult to prove one way or another. Some issues can be examined though. Much of the discussion regarding fire district fundingg has focused on the property tax rate. However, the property tax rate does not actually illustrate how much a taxing entity will receive. Rather, it is the combination of both property tax rate and property value that determines the tax liability for each property owner. Based on dollar value of tax liability, the districts that were reviewed do not show an escalating burden on local residents. Furthermore, it can be shown that future tax limits combined with a weak economic forecast could cause some fiscal issues to be realized in the short term. Identifying the extent legislation is required related to reported burdens on fire district budgets is less straightforward. There indeed will be constraints on certain fire districts based on the current funding formula, and based on legislation to limit the extent property values grow moving forward. However, the data presented for this analysis was not uniform in terms of fiscal problems being identified. Thesee issues willl likely vary by district. It was also beyond the scope of this analysis to perform a comprehensive analysis of district budgets to identify: 1) which districts exercised the above referenced fiscal restraint during more robust economic times, 2) which districts exercised restraint in budgeting but are being impacted by external factors, and 3) which districts were less fiscally sound in their practices during the last decade. Holding funding all else constant, there does appear to be a consistent trend of the districts receiving less under current law as compared to two years ago. However, there are not uniform 1 COB3963

4 conditions pertaining to all districts reaching their cap on what they can charge through property taxes. Some districts have the flexibility to adjust rates, while others may be more limited, even in the short term. If conditions were more uniform across all districts, then proper policy may ultimately be recommended in the form of broad based legislation, perhaps even addressing the fundamental benefits and flaws of revenues being tied to such a narrow portion of the economy. Since the fiscal condition of each district can vary at the present time, policy related to local control over a smaller sub-region would be considered more efficient. This lends to the argument of local voters approving or rejecting tax increases in their sub region only. This is primarily a short term solution. In this case, the districts would need to not only present the findings included in this report (i. e. revenue issues) but would also need to provide a convincing argument that budgets didn t inflate disproportionately to needs during the pre-2008 period. The discussion of a longer term solution appears to be warranted, but will require additional analysis and participation by all interested stakeholders. It has been reported that the Legislature passed along for the Governor s signature a bill that establishes a Rural Fire District Study Committee. It is recommended that the study committee be comprised of individuals of varying opinion on this issue, and that the issue of past spending practices be explored further. The remainder of this report provides the requested fiscal analysis of future revenue collections, some perspective into the issue of tax rates versus tax bills, and a listing of district rates and what ones have reached their rate cap. 2 COB3964

5 2.0 Background and Tax Rates There are 156 fire districts throughout Arizona providingg fire, emergency medical and associated emergency services to over 1 million residents statewide. Forty two (42) fire districts provide emergency ambulance transportt services as authorizedd by the Arizona Department of Health Services (ADHS). 1 Each fire district is a separate political subdivision of the state and, therefore, subject to state statutes and other governmental codes 2. The AFDAA serves as a single source to represent Arizona s fire districts in regulatory, financial and associated matters including the ongoing education of elected officials and fire district staff in governance and administration. As part of this representation, the AFDA has expressed concern regarding the various limits placed on revenue growth within the fire districts. While several districts are in the process of an effort to expand revenue sources or to help offset the loss of tax revenue, the AFDA believes the current limitations, when taken collectively; preclude fire districts from maintaining fire and emergency medical service delivery at levels necessary to protect life and property. The limitations include: The cap on tax levy limit growth; The tax rate cap; The voter mandated property value limitation (Proposition 117). Each of the three limitations (tax rate cap, levy and valuation) listed above were legislatively or voter mandated at different points in time. Each limitation individually has the effect of limiting revenues. Implemented on a cumulative basis these revenue limitations prevent fire districts from funding essential services on a year-over-year basis. The AFDA attributes these funding restrictions to significantly diminishing fire and emergency medical services statewide. AFDA further believes thesee funding restrictions will continue to diminish fire and emergency medical service delivery in future years. Assessed property values play a major role in the revenue generation for fire districts. Historically, Arizona fire districts have levied their taxes based on secondary assessed values. Secondary assessed values are also known as full cash values (FCV)) and are based on the market value of the property. Primary assessed values, on the other hand, are known as limited property values (LPV) and until recently were limited in growth by the previous year s limited value increased by 10%, or 25% of the differencee between the current year s FCV and the previous year s LPV. This changed with the recent passage of Proposition 117. All taxing jurisdictions (including fire districts) will now be required to levy their taxes on the LPV value whichh has been further limited to 5% growth over the previous year s LPV. Proposition 117 also limits the annual growth of LPV for all locally assessed property too 5%. Unfortunately, the effects of Prop 117 are exacerbated by the fact that the law indexed values to a point in time when values were at or near the bottom of the market (see chart on page 7).. 1 Ambulance transport service is authorized by ADHS pursuant to Arizona Revised Statute (ARS) Title 36 2 Fire districts are authorized and operate primarily pursuant to ARSS Title 48 3 COB3965

6 While values that will be impacted by Prop 117 were assessed fiscall year 2013, effects of the bill will not be realized until tax year 2015 (fiscal year 2016 begins July 1, 2015). This is because market values are assessed in a given fiscal year and then go through an appeal process prior to budgets being set by taxing jurisdictions. Collections, therefore, lag market valuations by three years. Indeed, values that are currently being assessed in fiscal year 2013 (through June 2013) will go through the described process and taxes will bee collected on those values in fiscal year The bill takes effect with valuations that were sent out March 1, This equates to Tax Year 2015, or fiscal year 2016 in terms of collections for the fire districts. SAMPLE TAX TIMELINE Market conditions assessed Notice of valution mailed Appeal process completed Values mailed to jurisd ictions Budget set by jurisdictions Tax Year Fiscal year collections (Due October 1 & March 1) FY 13 March 1, 2014 October 15, 2014 February 1, 2015 August 1, FY 16 Proposition 117 alone will have a negative impact on the revenue generation abilities of the fire districts. However, in addition to limits on assessed value growth, there are existing limits already established. In 2009, SB1421 was passed thatt set a levy limit on fire districts in the amount of 8% over the prior year s actual levy. On top of this levy limit, fire districts are restricted to a maximum tax rate of $3.25 per $100 of assessed value 3. Below is the language describing these limitations on growth. The board, based on the budget submitted byy the district, shall levy, in addition to any tax levied as provided in section , a tax not to exceed three dollars twenty-five cents per one hundred dollars of f assessed valuation, or the amount of the levy in the preceding tax year multiplied by 1.08, whichever levy is less. As the table on the following page illustrates, there are a significant number of fire districts across the state that have already reached the 3.25 maximum cap. A total of 43 districts are currently capped from their property tax funding source. This represents approximately 27% of all fire districts across the state. These districts serve many thousands of rural Arizona residents and visitors. 3 Maximumm tax rate cap set at 3.25 in 2005; Laws 2005, chapter 179, HB COB3966

7 Apache Alpine Concho Ganado Greer Nutrioso Puerco Valley Vernon Cochise Babocomari Bowie Elfrida Fry Naco Palominas P.B.W. Pirtleville Pomerene St. David San Jose San Simon Sunnyside Sunsites - Pearce Whetstone Coconino Blue Ridge Flagstaff Ranch Forest Lakes Estates Greenhaven Highlands Junipine Kaibab Estates West Lockett Ranch Mormon Lake Pinewood Rate Coconino (cont.) Ponderosa Sherwood Forest Estates Summit The Woods Tusayan Westwood Estates Gila Beaver Valley Canyonn Christopher - Kohl's East Verde Park Gisela Valley Hellsgate Houston Mesa Pine - Strawberry Pleasant Valley Round Valley / Oxbow Tonto Basin Tri-City / Central Heights Whispering Pines Graham Central-Jackson Heights Fort Thomas Pima Rural Safford Rural Greenlee Duncann Rural La Paz Bouse Buckskin Ehrenberg McMulle en Valley Parker Quartzsite Arizona Fire Districts by County 2014 Property Tax Rates Rate Maricopa Rate Mohave (cont.) Rate Pinal Rate Aguila Pinion Pine Arizona City Buckeye Valley Volunteer Yucca Dudleyville Chandler County Island Circle City/ y/morristown Clearwaterr Hills Daisy Mountain Gilbert County Island Goldfield Ranch Harquahalaa Valley Laveen Meadows QC County Island Rio Verde Scottsdale County Island Sun City Sun City West Sun Lakes Tempe County Island Tonopah Valley Wickenburg (Maricopa) Wittmann Volunteer Mohave Beaver Dam-Littlefield Bullhead City Colorado City Desert Hills Fort Mohave Mesa Golden Shores Golden Valley Grapevine Mesa Lake Mohave Ranchos Mohave Valley N. Arizona Consolidated Oatman Pine Lake Navajo Clay Springs-Pinedale Heber/Overgaard Joseph City Lakeside Linden McLaws Road Pinetop Show Low Sun Valley Volunteer White Mountain Lake Woodruff Pima Arivaca Avra Valley Corona de Tucson Drexel Heights Green Valley Hidden Valley Mescal-J Mt. Lemmon Volunteer Mountain Vista Northwest Fire Rescue Picture Rocks Rincon Valley Sabino Vista Tanque Verde Valley Three Points Tucson CC Estates Why Eloy Golder Ranch Mammoth Oracle Queen Valley San Manuel Stanfield Superstition Thunderbird Santa Cruz Nogales Suburban Rio Rico Sonoita-Elgin Tubac Yavapai Ash Fork Black Canyon City Camp Verde Central Yavapai Chino Valley Clarkdale Congress Crown King Groom Creek Mayer Montezuma-Rimrock Peeples Valley Sedona Seligman Verde Valley Williamson Valley Yarnell COB3967

8 3.0 Real Estate Conditions The conditions within the local real estate market have been less straightforward to understand, at least through the beginning of However, a brieff explanationn of what is happening in the economy will clarify a few points. The state has historically led the nation in times of recession and expansion in most of the major economicc categories, including job creation and population growth. This changed during the last economicc downturn and some have surmised that the state has a broken economy. This is not accurate. The key to understanding what will happenn in the future is to understand what is happening at the present time. If there is a cohesive story, and if current conditions are primarily being impacted by transitory influences, then it is possible to remain optimistic about the future. To begin with, the local labor market may be in better shape than is presently being discussed. For example, as of the first part of 2015, the state was still only 75% recovered in terms of job gains (as compared to the peak prior to the recession). Even with only modest job growth projected for 2015 and 2016, full employment recovery will occur in the early part of Similarly, while the population flows into the state are about half of normal, the state still ranked 6 th in the nation during the prior year. The issue of slow population flows from one state to another is not unique to Arizona as many have speculated. The state is still projected to remain in the top ten nationally in terms of job and population growth for the remainderr of the decade. Given the above, this does not mean that the real estate market will realize full recovery within a year. In fact, the issues negatively impacting the real estate market will not fully unwind until closer to the end of the current decade. This includes issues related to people securing mortgages for single family homes and a return to normal vacancy rates within commercial properties. The state s single family market willl return to more normall conditions as people save enough for a down payment, raise their credit scores, become more gainfully employed, wait out the required period after a foreclosure, etc. This will be aided by job growth. Commercial properties will also begin to see more normal vacancy rates as the employment conditions improve. Job gains at the national level are entering a period thatt is consistent with a typical expansion period. As previously noted, Arizona will begin to see improvementt shortly as well. The primary conclusion is that the state is still has a positive future but thatt some economic issues must work themselves out before the real estate sub-sectors fully recovery. This means property values willl continue to lag behind what would be considered normal for the local economies for two or three more years. 6 COB3968

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10 4.0 Fire District Net Assessed Value Forecasts The following charts provide an illustration of the impact that Proposition 117 will have on Fire District net assessed values. Historically, the fire districts have levied property taxes off of the secondary assessed value. This value is more in line with current trends and not limited in value growth. However, as described above, all locally assessed property in Arizona will be levied off the primary assessed value, which will be limited to 5% growth starting in Tax Year In tax year 2014, market values (assessed in fiscal year 2012) once again began to grow after plummeting during the real estate recession. Indeed, inn many areas, market values are growing at rates greater than 10% each year. When Proposition 117 takes effect in tax year 2015, the 5% limit on primary assessed value will createe a gap that does not correct itself in our five-year forecast time horizon. Keep in mind, not all fire districts will follow the trend displayed in the chart. And, each fire district will have additional considerations (such as their residential versus commercial property mix or the percentage of new growth). Similarly, counties with less dramatic growth during the real estate bubble and, therefore, not currently experiencing double digit growth in residential prices will be less impacted by primary assessed value limits in the near term. 8 COB3970

11 To illustrate the potential loss of revenues based on the various limits imposed, the following table displays the Daisy Mountain Fire District forecast. The first section of the table provides both the secondary and primary net assessed values through fiscall year The maximum allowable levy is then calculated for both the secondaryy and the primary assessed values based on the various limitations. Overall, the Daisy Mountain Fire District is projected to lose $1.7 million in allowable tax levy in the first year that Proposition 117 becomes law. This impact would grow to $2.5 million in tax year Daisy Mountain Fire District Impact of Levy Limits, Rate Caps and Limitations Placed on Values Souce: Maricopa County Assessor's Office; Elliott D. Pollack & company NET ASSESSED VALUE FORECASTS TAX YEAR FISCAL YEAR Secondary Net Assessed Values Primary Net Assessed Values CALCULATIONS FOR MAXIMUM ALLOWABLE LEVY: Maximum Allowable Levy (8% growth cap) FORECASTS FY15 FY16 FY17 FY18 FY19 PROP 117 IN AFFECT $349,745,384 $419,393,337 $464,653,174 $505,996,220 $540,260,092 N/A $351,959,992 $373,055,574 $396,723,409 $421,691,569 $11,940,411 $12,895,644 $13,927,296 $15,041,479 $16,244,798 Secondary Maximum Allowab ble Levy (3.25 rate cap) $11,366,725 $13,630,283 $15,101,228 $16,444,877 $17,558,453 Primary Maximum Allowable Levy (3.25 rate cap) Allowable Tax Levy N/A $11,438,700 $12,124,306 $12,893,511 $13,704,976 $11,366,725 $11,438,700 $12,124,306 $12,893,511 $13,704,976 Potential loss of revenue Prop 117 less 8% growth rate cap: ($1,456,944) ($1,802,989) ($2,147,968) ($2,539,822) 9 COB3971

12 5.0 Fire Districts and Property Taxes The value of property is assessed each year by either county assessors or the Arizona Department of Revenue. Various taxing entities such as school l districts, municipalities, counties, fire districts and others set their rates according to their budget and the total net assessed values within their district which creates the final property tax liability to be collected. The assessment ratio, which is based on land use type and currently ranges from 1% to 20% of assessed value, is applied to calculate tax liability as follows: ASSESSED VALUE * ASSESSMENT RATIO EXEMPTIONS = NET ASSESSED VALUE NET ASSESSED VALUE / 100 * PROPERTY TAX RATE = TAX LIABILITY Through various interviews with fire districts across the state, many (currently 43 districts) expressed that they have already reached the maximum allowable levy and that the drop in assessed values alone from the past recession have significantly constrained budgets. The result from these budget restrictions is that fire and emergency medicall service delivery have been reduced. Most fire districts must now simply create an annual budget based upon statutory limits without regard for considering the resourcess necessary to maintain adequate fire and emergency medical services for their respective communities. Fire districts have a multitude of fixed long-term costs which continue to grow irrespective of the limitations placed on revenues (e.g. salaries, health care benefits, pensions, utilities, fuel costs, ongoing maintenance and capital expenditures). These cost drivers continually outpace the allowable revenue available under the current legislativee and voter mandated revenue limitations. The result is an ongoing reduction of fire and emergencyy medical service levels statewide. 5.1 Budgeting Implications Fire districts have a multitude of expenditure cost drivers which are out of the direct control of each agency. The percentage increases in these expenses outstrips the ability of districts to increase revenue given their revenue constraints. Over time, employers will experience increases in employee health care costs. In addition, fire departments have no way to predict how much fuel they will consume in any particular fiscal year, nor do they have any control over the increase in fuel costs. These significant cost increases on expense items that fire districts cannot control, coupled with reductions in revenue, have fiscal stability implications. According to interviews conducted, faced with these budget issues, fire districts will begin too reduce services. This means crew sizes will be reduced and additional fire stations could close. The anticipated reduction in crew size will also have an effect on the ability to fight fires. Fire department operating procedures require 10 COB3972

13 there to be four fire fighters on scene in order to undertake any interior fire suppression. In the absence of four fire fighters these procedures limit firefighting to standing offf and suppressing the fire entirely from the exterior. Over the past several years fire departments have evolved into emergency medical service providers and many fire fighters are trained as paramedics. Cost increases plus revenue constraints means departments may have to reduce paramedic availability from today s 24/7 365 standard. Paramedic skills are readily transferable from employer to employer. The challenging financial environment for fire districts likely means firee districts will suffer continuing losses of these highly trained employees who will migrate to departments able to offer better compensation. Thesee personnel losses mean districts will lose the investment they have already made in training dollars in employees but they will havee to invest again in training to replace the personnel that have moved on. Municipalitie es, which have a variety of revenuee streams, already regard fire districts as the training department for their most skilled employees 5.2 Analysis of Actual Property Tax Paid Per Household Much of the discussion regarding fire district fundingg has focused on the property tax rate. However, the property tax rate does not actually illustrate how much a taxing entity will receive. Rather, it is the combination of both property tax rate and property value that determines the tax liability for each property owner. Reviewing property tax rates alone could lead to misinformed conclusions on the issue of funding and capping rates. By combining the two sets of data, the actual dollar value paid by each household or business can be viewed and the issue more clearly illustrated. This section provides a historical trend of property taxx rates and the estimated property taxes paid per household for fire service. The analysis was performed on several fire districts located throughout the state. Sun City West The Sun City West Fire Districtt is located in the northwest region of unincorporated Maricopa County. The district serves nearly 45,000 residents inn Sun City West and surrounding areas. Sun City West Fire District is responsible for 35 square miles of service area. The district provides fire suppression, paramedic services, ambulance transport, rescue services, disaster planning and hazardous materials response. In addition to emergency services, wellness programs, firefighter training, educational programss for adults and children, firefighter sponsorship education, and participation in local community eventss are all part of the District s significant non-emergency role in the community. The following chart plots the historical tax rate and estimated average tax bill for fire service in the Sun City West Fire District. During normal economic times of the mid-2000s, the Sun City 11 COB3973

14 West Fire District maintained a constant property tax rate of $2.41 per $1000 of net assessed value. As property values increased, the rate declined sharply to $ Shortly thereafter, severe declines in property values initiated increases to the property tax rate to offset lower property values. As the following chart illustrates, homeownerss have paid nearly the same amount on average over the last seven years all while the property tax rate has increased by nearly 75% from $1.67 to the current rate of $2.92. Thus, it is the combined effect of property tax rates and property values thatt determine the final property tax bill for property owners. In this case, increasing rates only allowed revenue to remain unchanged. Sun City West Fire District Property Tax History Fire District Property Tax Rate $3.50 $3.000 $2.50 $2.000 $1.50 $1.000 $0.500 $2.41 $2.41 $480 $452 $1.67 $289 $1.76 $359 $2.26 $1.97 $341 $333 $2.43 $2.72 $345 $354 $2.92 $2.92 $358 $360 $800 $700 $600 $500 $400 $300 $200 $100 Estimated Fire District Tax Paid Per Household Estimated Tax Paid Tax Rate Montezuma Rimrock The Montezuma Rimrock Fire District is located approximately 100 miles north of Phoenix, Arizona. The Fire District serves the communities of McGuireville, Rimrock, and Lake Montezuma. The total service area covers approximatelyy 54 square miles. Montezuma Rimrock Fire District has a combination off 12 full-time firefighters and 12 reserve firefighters who provide professional emergency services 24 hourss a day, 7 days a week. The District provides fire suppression, wildfire response,, emergency medical services, rescue services as well as hazardous materials response. 12 COB3974

15 During normal economic times of the early 2000s, the Montezuma Rimrock Fire District maintained a constant property tax rate of $2.24 per $ 100 of net assessed value. As property values increased, the rate declined to $2.16. Shortly thereafter, sharp declines in property values triggered increases to the property tax rate to try to maintain required funding. As the following chart illustrates, homeowners were paying more in years that the tax rate was the lowest than in years that the property tax rate sharply increased. This fire district is currently allowed an override exception to the $3.25 property tax rate cap currently in place for all Arizona fire districts, yet the latest estimated bill for homeowners is still less than bills from four to seven years earlier. Montezuma Rimrock Fire District Property Tax History Fire District Property Tax Rate $5.000 $4.50 $4.000 $3.50 $3.000 $2.50 $2.000 $1.50 $1.000 $2.24 $2.24 $2.26 $342 $268 $2.16 $2.17 $331 $283 $2.61 $235 $2.60 $3.25 $219 $222 $3.98 $267 $4.69 $1,000 $900 $800 $700 $600 $500 $400 $300 $200 Estimated Fire District Tax Paid Per Household $0.500 $ Estimated Tax Paid (Avg) Tax Rate Camp Verde The Camp Verde Fire District is located 90 miles north of Phoenix Arizona in the Verde Valley. The district serves the more than 10,500 residents of thee Town of Camp Verdee and surrounding area and provides similar services to the Yavapai-Apa ache Nation. The district provides fire suppression, paramedic services, ambulance transport, rescue services and hazardous materials response. Camp Verde Fire District is a combination department with 24 full-time firefighters and numerous reserve firefighters who work twenty-four hour shifts, responding to a first due area of 27 square miles. 13 COB3975

16 Similar to the Montezuma Rimrock District, the Camp Verde Fire District maintained a constant property tax rate of $2.25 per $100 of net assessed valuee from tax years 2005 through As property values increased, the rate declined to $2.05. Shortly thereafter, sharp declines in property values prompted increases to the property tax rate to try to maintain required funding. As the following chart demonstrates, homeowners have not seen higher bills from the increased property tax rate. To the contrary, property tax bills have never been lower due to the declines in property values. In this instance, the fire district has reached its statutorily mandated cap of $3.25 and is additionally restricted by Proposition 117 ass discussed in the previous section. Camp Verdee Fire District Property Tax History Fire District Property Tax Rate $3.50 $3.000 $2.50 $2.000 $1.50 $1.000 $0.500 $2.25 $2.25 $2.25 $381 $300 $2.05 $2.05 $357 $322 $2.20 $224 $2.45 $258 $2.85 $283 $3.25 $3.25 $300 $1,000 $900 $800 $700 $600 $500 $400 $300 $200 $100 Estimated Fire District Tax Paid Per Household Estimated Tax Paid (Avg) Tax Rate Mayer The Mayer Fire Department is located approximately 70 miles north of Phoenix, Arizona in Yavapai County. The department provides fire suppression, paramedic services, ambulance transport, rescue services and wildfire response. The Mayer Fire Department appears to operate at or near the cap in most operating years that data is available. Only when property values rose significantly weree rates allowed to drop below the state mandated cap of $3.25 per $100 of net assessed value. Due to the lack of flexibility with the rate, it is expected and confirmed that household property tax bills for fire and emergency services has been volatile. Average tax bills have ranged from a low of $195 to a 14 COB3976

17 high of $372. Currently, tax bills are at historic lows with an average estimated tax bill of $221. This is down nearly 41% from the peak in 2009 and nearr levels reported in 2006, eight years ago. Mayer Fire District Property Tax History Fire District Property Tax Rate $3.50 $3.000 $2.50 $2.000 $1.50 $1.000 $0.500 $3.25 $195 $3.25 $3.25 $266 $211 $3.10 $3.10 $3.10 $372 $333 $297 $3.10 $271 $3.10 $226 $3.25 $3.25 $228 $221 $500 $450 $400 $350 $300 $250 $200 $150 $100 $50 Estimated Fire District Tax Paid Per Household Estimated Tax Paid Tax Rate Green Valley The Green Valley Fire District is located in unincorporated Pima County, 20 miles south of Tucson in southern Arizona. The district serves the more than 50,000 constituents in Green Valley and part of the Town of Sahuarita. The district provides fire suppression, paramedic services, rescue services and hazardous materials response. In addition to emergency services, pest removal, smoke detector checks, educational programs for adults and children, the Fire Corps program, CERT training and participation in local community events are all part of the District ss significant non-emergency role in the community. Green Valley Fire District is responsible for 45 square miles of service area. The district operates out of 4 stations which cover both commercial and residential areas. The following chart plots the historical tax rate and estimated average tax bill for fire service in the Green Valley Fire District. Ten years ago, the Green Valley Fire District reported property tax rate of $1.75 per $100 of net assessed value. At peak valuations, the average homeowner paid approximately $400 per year for fire service. Bills then began to decline significantly, despite increases in the property tax rate, eventually declining to a low of $276 per household in 15 COB3977

18 2011. With a rate currently set at $2.28 (30% higher than the rate in 2006), the average bill will still be lower than what was reported for 2008 when the rate was only $1.85. Green Valley Fire District Property Tax History Fire District Property Tax Rate $2.50 $2.000 $1.50 $1.000 $0.500 $1.75 $1.75 $1.80 $401 $394 $277 $1.85 $352 $1.90 $1.90 $333 $302 $1.90 $276 $2.04 $292 $2.21 $325 $2.28 $344 $600 $500 $400 $300 $200 $100 Estimated Fire District Tax Paid Per Household Estimated Tax Paid Tax Rate Bullhead City Bullhead City Fire Department is located in northern Arizona in Mohave County, approximately 230 miles northwest of Phoenix, Arizona. The Fire District serves the City of Bullhead City out of five fire stations. The total service area covers approximately 54 square miles. Bullhead City Fire Department employs approximately 111 members (including reserves) in the areas of prevention, suppression, training, EMS, administration, and support services. Bullhead Fire Department illustrates an excellent example of shifting property tax rates to achieve a desired level of funding. Over the last ten years, the property tax rate changed annually, which would lead an observer of the rate only to conclude that revenuee would fluctuate significantly year to year. However, as the following chart shows,, revenue has been relatively steady over this time period. The rate declined as property values increased, then rose as property values began to fall. Currently, the Bullhead City Fire Department is levying a property tax rate of $2.96, still below the mandated cap rate. During the period, with rates fluctuating from a low of $1.75 to its current high of $2.96, average homeowner tax liability has ranged 16 COB3978

19 from an estimated average of household is estimated at $ Bullhead City $192 to $264. Currently the expected average tax bill per This represents a 9% decline from average bills experienced in Fire District Property Tax History Fire District Property Tax Rate $3.50 $3.000 $2.50 $2.000 $1.50 $1.000 $0.500 $2.35 $2.25 $2.24 $202 $208 $216 $2.33 $1.79 $1.75 $264 $258 $192 $2.59 $2.85 $230 $224 $2.84 $229 $2.96 $241 $600 $500 $400 $300 $200 $100 Estimated Fire District Tax Paid Per Household Estimated Tax Paid Tax Rate 5.3 Conclusion Property taxes are derived from the total value of properties in each district. So, under normal economicc conditions in Arizona where property values increased 3-4% each year on average, the funding of district expenses could reasonably be satisfied with a property tax that is capped at a suitable rate. However, property values plummeted during the Great Recession and began affecting assessed values once the changes in values were recorded on the property tax rolls. Due to the fact thatt the decline in property values had no impact on the need for fire and ambulance services, the only measure available to attempt to maintain service levels was an increase in property tax rates in many districts. Again, as the preceding charts illustrated, an increase in property tax rates does not necessarily cause a homeowner s tax bill to increase because the rate is applied to the assessed value of their property. 17 COB3979