Arizona Tax Research Association report

Arizona taxpayers and voters will decide the size of future property tax bills when they go to the polls Nov. 8. Forty-four school districts are asking approval to sell general obligation bonds, exceed maintenance and operation (M&O) budget limits, and exceed capital outlay budget limits. In total, there are 51 separate tax questions on the ballots in the 44 districts.

ATRA calculated the impacts of the school tax questions from the publicity pamphlets that school districts are required to mail to each registered voter and the aggregate statewide impact of the bond and override questions is approximately $1.9 billion.

The general obligation bond requests of 14 districts will, if approved, cost taxpayers an estimated $1.2 billion dollars in debt service over the next 20 to 30 years to pay off $777 million in bonds. The total cost of the M&O and capital outlay overrides over the next seven years are estimated at $691 million. Taxpayers in 13 of the districts are back at the ballot this year after turning down bond or override requests last November.

General Obligation Bond Elections

There are 14 districts seeking approval of a total of $777 million in general obligation bonds. Arizona school districts are statutorily limited (referred to as class B debt) in the amount of debt they can incur based on the secondary net assessed value (SNAV) of the district. Unified districts are limited to 10 percent of SNAV and elementary and high school districts are limited to 5% of SNAV.

Current law does not limit district bond requests to the available capacity under the debt limit. Eight of the districts are making requests for debt financings that exceed the districts current statutory debt limits even before considering any existing debt outstanding. When existing class B debt is included, 11 of the district bond requests are well above their debt limits.

Glendale Elementary's request of $28.3 million is almost twice its statutory debt ceiling of $15.6 million.

Similarly, Sunnyside Unified in Pima County, with a statutory debt limit of $45.6 million, is asking voters for $88 million in bonds.

A key provision in the calculation of the estimated tax rate for bond and override elections are the estimates of future net assessed valuation (NAV) growth. Arizona law requires those estimates to come from the Department of Revenue or the county assessors.

Because declining valuations in most school districts are putting upward pressure on bond and override tax rates, many appeared to have understated the tax rate impacts of the various bond and override tax levies through high NAV estimates. ATRA found some districts unable to explain the source for their NAV estimates.

The numbers

Glendale Elementary School District

Current bond levy: $2,657,931

2011 tax rate: 0.8494

Bond request: $28,285,000

Total bond cost: $38,830,000

Estimated tax rate: 0.6868

Current debt limit: $15,646,031

Glendale Union High School District

Current bond levy: $6,962,023

2011 tax rate: 0.4249

Bond request: $80,000,000

Total bond cost: $121,969,692

Estimated tax rate: 0.3033

Current debt limit: $81,928,273