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1 MEMORANDUM To: David B. Roderique, Interim City Manager From: William Kauppi, Chief Financial Officer Date: May 20, 2025 Subject: Truth in Taxation (TNT) The Arizona Constitution, beginning with the 1980 tax year, divided property tax levies into a primary property tax levy and a secondary property tax levy. A secondary property tax may only be levied to pay the principal and interest charges on voter approved General Obligation bonds/loans. The primary property tax levy is for all other purposes. The primary property tax levy is limited to an increase of 2% over the previous year’s allowable levy (base levy being the FY 79-80 levy, if the community had a primary property tax levy in FY 79-80) plus an increased dollar amount due to a net gain in property not taxed the previous year. The Arizona State Legislature in 2006 enacted HB 2876 which changed the primary property tax levy’s legal limit calculation. The FY 06-07 legal levy was limited to the lesser of a 2% increase over the prior years levy, or the Arizona Constitutional legal limit. Further, in November 2006, the voters elected to reset the “base year” from which the legal limit is calculated from FY 79-80 to FY 05-06. Any city or town which wants to initiate a primary property tax must submit the proposed amount to be raised from the tax to the voters at an election to be held on the third Tuesday in May. The amount approved by the voters will constitute the base on which future limitations on levies will be determined. If the voters approve the levy, the city or town council may levy the tax in the fiscal year immediately following the election. The cities or towns currently have no authority to override the limit once it is established. The Property Tax Oversight Commission was formed in 1988 to review the primary property tax levy limitations of each city, town, county and community college district in the State. The county assessor is required to transmit and certify to the Property Tax 2 Oversight Commission and the city or town council, the values necessary to calculate the levy limit. Those values are to be transmitted on or before February 10 of the tax year. Each city or town is required to notify the Property Tax Oversight Commission in writing within ten days of its agreement or disagreement with the final levy limit. After adoption of the levy, the Property Tax Oversight Commission will review the primary property tax levy to determine the adequacy of compliance. The Arizona State Legislature, in a 1996 special session on property taxes, approved the Truth in Taxation (TNT) legislation requiring cities to hold a public hearing, publish a notice of that hearing, and have a roll call vote if the city’s proposed primary property tax levy, excluding amounts attributable to new construction, is greater than the property tax levied the year before. The TNT provision does not change the Arizona Constitution’s legal levy limit. TNT requires the above stated Council actions, if cities or towns wish to adopt the Arizona Constitutional primary property tax levy limit. The City Of Buckeye, as part of its FY 25-26 budget, proposes to levy a primary property tax equal to the amount authorized by the Arizona State Constitution. The proposed levy amount is $326,794 greater than the TNT amount (see attached Truth in Taxation Analysis). The proposed levy amount for a $100,000 home is $160 and is less than the current amount of $161.