AZ Prop 117 IPT Luncheon Presentation 7.15.16

1

Prop 117 – Two Years Later…easy as (Prop) 1 – 2 – 3

WWW.MFPOER.COMMarvin F. Poer and Company 2

Arizona’s Dual Value System

• FCV (Full Cash Value)– Constitutionally required to reflect market value– Value basis for secondary taxes which fund voter approved

bonds and overrides, and special taxing district budgets

• LPV (Limited Property Value)– Growth limited to 10% over the previous year or 25% of the

difference between the current year’s FCV and the previous year’s LPV, whichever is greater

– The LPV cannot exceed the FCV– Primary taxes are levied against the LPV to support local

government budgets

2


Proposition 117• Proposition 117 approved by Arizona voters November

2012. Effective calendar year 2014, it first impacted 2015 property tax assessments.

• FCV is synonymous with market value and can change dramatically year to year while the LPV cannot increase more than 5% per year. The LPV cannot exceed the FCV, as before.

• Property taxes are now computed based solely on the LPV.


Can an Owner Protest Values?• Property taxes are based on the LPV, however the

property FCV is the appealable assessment. This is because the FCV represents market value.

• Due to Proposition 117, there are certain instances where a successful appeal will not impact property taxes, specifically, when the FCV exceeds the LPV and the market value is well above the LPV.


Proposition 117 – Example #1

Owner’s Opinion of Value $190,000

If the property owner wins the appeal…• The new FCV will be reduced to $190,000. • The LPV will also be reduced to $190,000, since the LPV cannot

exceed the FCV. • Tax liability is based on the LPV, and would be reduced in this case.

$200,000FCV $190,000

LPV $195,000 $190,000


Proposition 117 – Example #2

Owner’s Opinion of Value $180,000

If the property owner wins the appeal…• If the owner is successful in reducing the FCV to $180,000, it will

not be low enough to impact the LPV. • The LPV will remain $175,000 and yield NO reduction in taxable

value since the FCV is no longer used to calculate property taxes.

$200,000FCV $180,000

LPV $175,000 $175,000


Proposition 117 - Apartments

FCV LPV PARCELS FCV CHG LPV CHG

2014 $13,295,024,010 $11,232,393,724 11,877

2015 $15,772,810,717 $11,843,451,445 11,725 18.64% 5.44%

2016 $17,702,838,189 $12,441,092,824 11,650 12.24% 5.05%

2017 $21,551,005,408 $13,801,574,529 11,675 21.74% 10.94%


Proposition 117 - Hotels


2014 $2,715,750,544 $2,684,925,284 982

2015 $2,967,955,185 $2,801,600,144 990 9.29% 4.35%

2016 $3,345,959,202 $2,878,756,767 985 12.74% 2.75%

2017 $4,192,557,683 $3,072,135,439 987 25.30% 6.72%


Proposition 117 - Commercial


2014 $14,598,797,007 $14,361,947,128 22,566

2015 $16,017,485,231 $15,173,665,363 22,782 9.72% 5.65%

2016 $17,988,879,976 $15,248,454,228 22,360 12.31% 0.49%

2017 $20,481,215,361 $16,510,503,871 22,676 13.85% 8.28%


Proposition 117 - Office


2014 $9,752,657,465 $9,414,344,669 9,861

2015 $10,783,950,089 $9,418,576,745 9,639 10.57% 0.04%

2016 $12,282,412,581 $9,883,169,928 9,543 13.90% 4.93%

2017 $13,532,944,534 $10,575,735,458 9,624 10.18% 7.01%


Proposition 117 - Industrial


2014 $11,071,097,084 $10,836,080,709 10,613

2015 $13,412,853,646 $11,523,011,598 11,521 21.15% 6.34%

2016 $16,050,161,088 $11,858,626,577 11,463 19.66% 2.91%

2017 $18,436,799,010 $12,983,271,229 11,605 14.87% 9.48%


Prop 117 – Single Family Residential


2014 $154,390,347,437 $147,381,573,412 723,957

2015 $190,534,589,574 $156,645,593,117 725,095 23.41% 6.29%

2016 $216,105,637,617 $175,001,568,276 841,278 13.42% 11.72%

2017 $226,578,237,561 $185,912,338,300 842,534 4.85% 6.23%


Proposition 117 - Totals


2014 $205,823,673,547 $195,911,264,926 779,856

2015 $249,489,644,442 $207,405,898,412 781,752 21.22% 5.87%

2016 $216,105,637,617 $175,001,568,276 897,278 13.42% 9.60%

2017 $304,772,759,557 $242,855,558,826 899,101 7.51% 6.84%


Pillar / The Catherine Townhomes COMP


Pillar / The Catherine Townhomes Assessment


Pillar / The Catherine Townhomes Taxes


Pillar / The Catherine Townhomes Summary

• Sold on October 1, 2015 for $95,750,000

• Assessment at next lien date (January 1, 2016)

– FCV $67,902,500 (~71% of purchase price)

– LPV $59,605,119 (~62% of purchase price)

• 2015 Property Taxes Paid $732,949.98 (~0.8% of purchase price)


Proposition 117 AnalysisFCV Increase LPV Inrease

Apartments 62.10% 22.87%

Hotels 54.38% 14.42%

Commercial 40.29% 14.96%

Office 38.76% 12.34%

Industrial 66.53% 19.82%

Single Family 46.76% 26.14%


“Market” / “Taxable” Spread

1 2 3 40.00

50,000,000,000.00

100,000,000,000.00

150,000,000,000.00

200,000,000,000.00

250,000,000,000.00

300,000,000,000.00

350,000,000,000.00

YearFCVLPV


Proposition 123• The Arizona Education Finance Amendment, Proposition 123 was

on the May 17, 2016, ballot in Arizona as a legislatively referred constitutional amendment.

• The measure was designed to increase education funding by $3.5 billion over the course of 10 years by allocating money from the general fund and increasing annual distributions of the state land trust permanent funds to education.[2][3] – A "yes" vote was a vote in favor of devoting $3.5 billion of the general

fund and state land trust fund toward education.

– A "no" vote was a vote to keep the current education funding levels from the land trust fund.

https://ballotpedia.org/Arizona_Education_Finance_Amendment,_Proposition_123_(May_2016)#cite_note-analysis-2

https://ballotpedia.org/Arizona_Education_Finance_Amendment,_Proposition_123_(May_2016)#cite_note-hnews-3


the end

Documents

AZ Prop 117 IPT Luncheon Presentation 7.15.16