VERDE VALLEY - "It doesn't look like a tax increase at the state level, but it does up here," said Kirk Waddle, business manager for Mingus Union High School.
Waddle is referring to a recent move by the state legislature to raise the qualifying tax rate (QTR) of school districts. The move by the state will reduce the money the state gives districts for equalization. But the move also will likely - for many school districts - increase the primary property tax rates for taxpayers in school districts.
Verde Valley school district business managers and finance directors met with the Verde Independent Monday morning at Mingus Union High School. The purpose of the meeting was to explain how the higher QTR imposed on districts by the state might raise individual taxpayer's primary rates without any control by those districts.
Attending the meeting were Waddle, MUHS; David Snyder, Cottonwood-Oak Creek School District; Janet Leuer, Camp Verde School District, Lynn Leonard, Beaver Creek School; and Kristy Aston, Clarkdale-Jerome School.
Equalization is a system the state has used for years to balance out the funds available to school districts with lower assessed property valuations than other districts with higher valuations. For example, all five of the districts mentioned receive equalization payments from the state. Sedona-Oak Creek School District does not receive equalization because of that district's high property valuation.
"QTR is a factor set by the state," said Aston. "It's basically where the tax rates start."
Waddle explained that, "If the QTR increases, the property tax will increase."
"It's shifting the burden from the state to the taxpayer," Leonard said.
Snyder explained that the levy amount is the amount local taxpayers pay, and equalization is what the state pays.
By raising the QTR, the state will pay less money for equalization. Equalization still exists, but the state is forcing local districts to pay some of what the state used to pay. Waddle said the state is still collecting the same amount but is not sharing the same amount back with education.
The state increased QTR by 25 percent across the board for all school districts.
In a letter of explanation to the C-OC Governing Board, Snyder spells out how this all works for school districts.
"The increase in the tax rate is solely a result of changes in the Qualifying Tax Rate, and the reduction of the assessed property values of the district," Snyder stated. "The district cannot apply any variables to establishing the tax rate; the district sets the tax rate each year to provide the cash needed to operate the budget set by the state, no more, no less."
Snyder explained that the state increased the QTR, which establishes the amount the state pays (equalization) and the amount local taxpayers pay (Levy). "A higher QTR results in the state paying less, and the local taxpayer paying more," Snyder stated.
The Verde Valley districts do not know yet how the higher QTR will affect individual taxpayers. That won't be known until the tax bills are sent to taxpayers in September. But all of the districts know how much their tax rates have increased for fiscal year 2012.
Cottonwood-Oak Creek's primary tax rate increased 21 percent; Camp Verde's went up 19 percent; Mingus Union's is up 28 percent; Beaver Creek raised its primary rate by 23 percent; and Clarkdale-Jerome's rate went up 30 percent.
Because the assessed valuation in all of the districts went down, it isn't automatic that the increase in individual property taxes will match up with the increase in the primary tax levy.
Snyder made a comparison to explain how this will likely work.
"...A homeowner whose property value remains at $100,000 would have an increase of $36 per year (in the C-OC district)," Snyder explained. "If the homeowner's assessed value decreases 20 percent like the overall assessed value of the district, that homeowner would probably not see any change in the property tax."