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City Council Report Date: July 20, 2026 To: City Council Through: Michael Kennington, Deputy City Manager/Chief Financial Officer From: Mark Hute, Treasurer Subject: Fiscal Year 2026-27 Secondary Property Tax Levy Purpose The purpose of this report is to provide information on the proposed City secondary property tax levy on taxable property for fiscal year (FY) 2026-27. Levy Rate $46,392,887 $0.8500 per $100 of taxable value Highlights • The rate decreased by 1.0% from the prior year. • The annual cost to the median homeowner would be $166, an increase of $6. • The $46.4 million levy is an increase of 4.6% due to the increase in taxable property values. The table below compares the proposed City of Mesa levy for FY 2026-27 with the prior year. Secondary Property Tax Levy and Rate: FY 2025-26 to FY 2026-27 FY25/26 FY26/27 Proposed $ Change % Change Taxable Property Value $5.2 billion $5.5 billion + $0.3 billion + 5.6% Tax Rate (per $100 of taxable property value) $0.8582 $0.8500 - $0.0082 - 1.0% Tax Levy (rounded) $44.3 million $46.4 million + $2.1 million + 4.6% Annual Cost to Median Homeowner $160 $166 + $6 + 3.6% 2 History of Tax Rate and Levy The chart below shows the City’s recent and proposed secondary property tax rate and levy. History of Tax Rate and Levy FY 2026-27 Proposed Tax Levy • The proposed levy fully funds general obligation debt service due in FY 2026- 27. • $330 million in bonds authorized in the following elections have yet to be issued: o 2020 (transportation) o 2022 (public safety) o 2024 (parks and culture, public safety) • The levy is projected to increase in future years as the remaining authorized bonds are issued. Projects Funded by Property Tax Levy Since 2008, ballot language for general obligation bond election questions approved by Mesa voters has stated that the issuance of the bonds would result in a property tax increase sufficient to pay the annual debt service on the bonds. The proposed FY 2026-27 property tax levy pays for debt payments for bond elections authorized by voters since 2008. $0.00 $0.20 $0.40 $0.60 $0.80 $1.00 $1.20 $0 $5 $10 $15 $20 $25 $30 $35 $40 $45 $50 21/22 22/23 23/24 24/25 25/26 26/27 Proposed Tax Rate Tax Levy (Millions) Fiscal Year Tax Levy (left axis) Tax Rate (right axis) 3 Background Property Values Arizona property owners pay property tax in proportion to the value (ad valorem) of property. The property value used for property tax each year is based on market values from two to three years prior to allow time for review and appeal. The property values used for FY 2026-27 are based on valuations from mid-2023 to mid-2025. Each property in Arizona is given two values: • Full Cash Value (FCV) – based on market value (a percentage of comparable sale value) • Limited Property Value (LPV) – used for property tax purposes, the value may increase up to 5% from the prior year but this value cannot exceed full cash value (FCV) The use of limited property value (LPV) for property tax purposes is intended to moderate the short-term impact of rapid property value increases. The chart below shows both the full cash value (FCV) and limited property values (LPV) in Mesa for the past decade. Total Property Value by Fiscal Year (City of Mesa) The FY 2026-27 full cash value (FCV) of all property in the City increased by 7.2%. $0 $20 $40 $60 $80 $100 $120 17/18 18/19 19/20 20/21 21/22 22/23 23/24 24/25 25/26 26/27 Billions Fiscal Year Limited Property Value* Full Cash Value *Used to calculate taxable value 4 FY 2026-27 Median Residential Property Values (City of Mesa) Property Value Median Value Description Full Cash Value (FCV) $375,700 a percentage of comparable sale value Limited Property Value (LPV) $194,975 used to calculate taxable value (may increase up to 5% each year but cannot exceed FCV) Taxable Property Limited property value (LPV) is the starting value used to determine the taxable value of a property. An assessment ratio, based on property classification, is applied to a limited property value (LPV) to determine a property’s “assessed value” (AV). The assessment ratios for the three largest property classes are shown below. Assessment Ratios for Largest Property Classifications Property Classification Assessment Ratio Residential 10% Commercial 15.5% Agricultural 15% Exempt property (not-for-profit, governmental, etc.) is netted (subtracted) out of the assessed value (AV), resulting in a property’s “net assessed value” (NAV). Net assessed value (NAV) derived from limited property value (LPV) is the taxable value. See the taxable property value calculation below. Taxable Property Value Calculation Limited Property Value (LPV) x Assessment Ratio (10% for residential) = Assessed Value (AV) – Exemptions = Net Assessed Value (NAV) → The taxable value of property in Mesa is shown for recent fiscal years below. 5 Taxable Values by Fiscal Year (City of Mesa) New Property New property added to the tax rolls (construction of houses, buildings, and equipment, and annexation of unincorporated areas) increases the tax base. Spreading the tax levy across a larger tax base results in a lower tax rate. Taxable Values: FY2025-26 to FY2026-27 (City of Mesa) $ Change % Change Appreciation of Existing Property + $189 million + 3.7% New Property + $103 million + 1.9% Total + $292 million + 5.6% Discussion Property Tax Calculation A property’s taxable value is provided annually by the Maricopa County Assessor’s Office. The property tax rate is set by the City as a dollar amount per $100 of taxable value. The property tax levy is the dollar amount of property tax owed and is calculated as shown below: taxable property value * tax rate = tax levy $3.0 $3.3 $3.5 $3.7 $4.0 $4.2 $4.5 $4.9 $5.2 $5.5 $0.0 $1.0 $2.0 $3.0 $4.0 $5.0 $6.0 17/18 18/19 19/20 20/21 21/22 22/23 23/24 24/25 25/26 26/27 Billions Fiscal Year 6 Alternatives The Council may levy a secondary property tax amount and rate other than as proposed. A change to the proposed levy and rate would necessitate: • restructuring of planned debt issuances, and/or • payment of debt service from the General Fund, which would draw down reserves or require spending reductions in other services paid for by the General Fund (police, fire/medical, library, parks, etc.). Fiscal Impact Secondary property tax levy revenue contributes to maintenance of the City’s fiscal stability. Adopting the proposed secondary property tax levy and rate would allow the City to meet its general obligation debt service obligations as planned.