Arguments against the Gilbert Public Schools’ bond and override questions on this fall’s ballot have largely relied on voting against a tax increase during difficult economic times.
But if the measures are defeated, residents likely will not see much of a change in their property tax bill, at least for a while.
That is because the district still is paying off previously voter-authorized bonds and its 15% maintenance and operations override still has another year on it before it begins to sunset.
Yet if the measures pass, residents likewise will not see a spike in their bill, either. In fact, it might be no increase at all or a very minimal one.
The differences to one household, in fact, may be less than what it costs to put one sign for or against the ballot measures, whatever the outcome.
The answer as to why comes in the complex intricacies of both school finance and county property taxes.
Property taxes
Arizona has relatively low property tax rates, with the average effective tax rate in the state at 0.51%, well below the 0.99% national average, according to smartasset.com
Part of that comes from the way Arizona figures its rates. For a property owner, your real property could be said to have three values: market value, full cash value and limited property value.
For the purposes of this story, the Gilbert Independent looked at the tax bill of a home in GPS boundaries that sold last month for $530,000, about the median for the area. The market value, therefore, would be $530,000.
However, Arizona does not figure property taxes off market value, but rather full cash value. While FCV is meant to reflect market value, it is derived not from hard data like sales. Rather, it is prescribed by statute.
That statute finds FCV as the property’s original cost multiplied by a “valuation factor” as found in an Arizona Department of Revenue Property Manual.
For our example home, the Maricopa County Assessor’s Office placed the full cash value for 2023 at $330,700. But the property tax is not figured from that amount.
Instead, it comes from the “limited property value,” also figured by a statutory formula. Arizonans in 2012 passed Proposition 117, which created the category of limited property value and capped annual growth in that figure at 5%.
That protected property owners from huge spikes in property taxes at times when property values exploded. Since Arizona property values have mostly gone up more than 5% per year, the growth in full cash value has far outpaced limited property value, which mostly keeps going up at 5% per year.
Our example property home’s limited property value was assessed at $174,912.
There is one dilution to what you’re taxed, an assessment ratio. For residential property, that ratio is 10%. Commercial is 17.5%; agricultural, nonprofit and “other” are at 15%. The resulting figure is the number upon which the property owner is taxed.
For our example property, because it is the primary residence of the property owner, the ratio is 10%, bringing the assessed value to $17,491.
The last step is figuring the tax, which is the assessed value multiplied by the tax rate. The rate is actually per $100 of assessed value, so there’s more division before multiplying.
The net result is that whatever the rate is, the assessed value for a homeowner is likely to go up 5% per year. If the rate remains steady, the tax owed is likely to go up 5%, too. If the tax rate is cut, the tax owed may still go up if it’s not enough to offset the increase in assessed value.
Gilbert Town Council in June cut the town’s secondary property tax rate from $0.99 per $100 in assessed value to $0.98 — a shade over 1%. But most property owners will still see a 5% increase in assessed value, so they will still pay more overall in property taxes.
GPS bond
The state of Arizona has a formula to figure “District Additional Assistance,” which funds a school district’s unrestricted capital budget. It also allows school districts to raise additional money for specific needs by selling capital bonds if voters in the school district approve of it.
The bonds are paid back by a secondary property tax assessment on district property owners.
(The state funds charter schools’ capital needs, through a formula for “Charter Additional Assistance,” at a higher rate than public districts specifically because charters have no access to levy a tax to pay back bonds.)
GPS previously got voter approval on bonds in 2015 for $98 million and 2019 for $100 million. Those bonds have been sold and the proceeds used on capital projects throughout the district. The secondary property tax rate to pay the bonds off is currently at $1.0399 per $100 assessed value.
On our example home, then, our homeowner’s property taxes on the bond were figured at $181.90 for 2023.
Here’s the tricky part. If voters turn down the bond, the district will still be paying back the old bonds, and initially it’s still going to be at about $1.04 per $100 assessed value. Over time, it will decline until the bonds are fully paid back, but assessed values will continue to go up, so the homeowner may feel no change for several years.
If voters approve the bond, the district plans to time the sale of bonds against the interest rate market and increased bonding capacity so that the rate is never more than $1.04 per $100 assessed value. If they succeed in that endeavor, as they have in the past, the amount owed may only go up the same 5% of their property values — or less than that if the values don’t go up that much.
In the case of our example property, if the rate is maintained at $1.04 per $100 in assessed value and the assessment goes up 5%, the amount owed would go up about $9.10 next year. If that property owner has a mortgage payment with an escrow account to pay insurance and taxes, the payment would go up at most about 76 cents per month as a result of the GPS bonds.
The district plans to use the money on critical facility upgrades, school security, safety communications and a little for bus replacement. Without the bonds, the district will be limited in its maintenance work and likely will have to defer all but the most urgent needs.
GPS override
The state also has a formula to figure a “revenue control limit” on school districts’ maintenance and operations budget. That’s the budget that pays for day-to-day operating expenses of the district, including most salaries.
But districts can go to their voters to ask for up to an additional 15% over the revenue control limit over seven years. Again, that’s paid for by a secondary property tax assessment on district property owners.
There is a caveat on that 15% over seven years. It begins to sunset in year six as the amount is reduced by a third each year until it is gone.
Gilbert Public Schools is in year four of its current 15% override. That is why it is going out now for a renewal. If voters turn it down, the district has the chance to go out one more time before the sunset period hits.
The money from an override goes into the same bucket as all M&O money, but GPS used the additional override money on funding teacher salaries, limiting class sizes and hiring additional counselors. The district plans to continue using the money to maintain staff salaries, limit class sizes and to hire safety and security personnel, including social workers, mental-health counselors and campus security guards.
As to the effect on the taxpayer, the effect of increases is more muted than the bonds because the district is limited to raising just the additional 15% over the revenue control limit. That limit goes up and down every year depending on what happens with the Legislature.
As a result, the money from the override has gone up about $4 million over the past five years — an average of about $800,000 per year.
Additionally, the assessed value in the district overall goes up more than 5% because while most existing properties will go up that much, new property also comes on to the tax rolls. Thus the increase gets spread out much more. Another outcome is the tax rate tends to fluctuate more than with the bond, but still not dramatically.
For our example property, the homeowner’s secondary property taxes attributable to the override went up $4.26 from 2022 to 2023 — about 35.5 cents per month on a mortgage payment.
The effect would be more dramatic if the override were not to be renewed in either of the next two years because the drop-off would be over a shorter period of time than with the bonds.
If the override money was completely eliminated, the homeowner with a mortgage may be paying about $17 less per month on their mortgage (but some of that may be offset by whatever other tax or insurance increases there may be).
That steep fiscal cliff, however, would mean the district would have to implement some dramatic budget measures to compensate for those losses. That could include larger class sizes, salary freezes and perhaps even layoffs depending on staff attrition.
Ballots must be mailed back by Nov. 1 or dropped off by Nov. 7 to be counted.
Tom Blodgett can be reached by email at tblodgett@iniusa.org or follow him @sp_blodgett on X. We would like to invite our readers to submit their civil comments, pro or con, on this issue. Email AZOpinions@iniusa.org.
Meet Tom Tom Blodgett joined Independent Newsmedia, Inc., USA, in 2022, when the company acquired Community Impact Newspaper's Phoenix-area properties. Raised in Arizona, he has spent more than 35 years in journalism in the state.
Community: He has served as an instructional professional in the Walter Cronkite School of Journalism and Mass Communication since 2005, and is editorial adviser to The State Press, the university's independent student media outlet. He also is director of operations for an 18U girls fastpitch softball team from Gilbert.
Education: Arizona State University with a BS in Journalism.
Random Fact: He lived in Belgium during his freshman year of high school.
Hobbies: Tweeting enthusiastically about ASU softball (season-ticket holder) and grumpily about other local sports (pessimistic fan).
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