Youngtown, AZ – Fact Sheet
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For the past year the Town Council has been researching options for the town’s future. The Mayor and Council want to take a proactive approach to creating a sustainable community.
These are the options identified to date. The Council would like to know what you think about these options and which you are most likely to support. Also, please let the Council know if you have any other ideas or suggestions.
What is a Primary Property Tax?
Arizona has a two-tiered property tax system. Primary (ad valorem) property taxes are not restricted in their use and may be used to pay for government operations. Secondary property taxes are restricted to pay for bonds and similar obligations that may fund construction of public facilities and infrastructure. The Maricopa County Assessor establishes a full-cash value for a property. A residential full-cash value is typically about 85 percent of the home’s market value. The assessed value, which is 10 percent of the full-cash value, is the number used to determine property taxes.
Currently, the Town of Youngtown (the “Town”) does not assess a primary property tax. Property taxes assessed on Town residents are assessed by Maricopa County, school districts and special districts that are separate from the Town government. Revenues received from the State “revenue sharing” funds are very limited due to the Town’s low population and the Town does not have any local control over the allocation of those funds. For two years the Arizona legislature has been engaged in “sweeping” funds from various state agencies and has threatened to reduce or eliminate revenue sharing with the municipalities. The Town receives revenues from sales taxes that do not and will not meet the increasing costs to adequately serve the expanded service needs of the Town.
Under Arizona law, an initial primary property tax may not be assessed unless a majority of the Town’s qualified electors voting at an election authorizes the Town to impose the tax. The next possible date for an election seeking voter approval to impose a primary (ad valorem) property tax is May 15, 2012.
Monies raised by a primary property tax would be used to fund the operation of the Town. Each property owner should refer to his/her annual property tax statement issued by the Maricopa County Treasurer or his/her property tax bill to determine the Maricopa County Assessor’s primary assessed value. That information will enable a property owner to determine the estimated annual and monthly tax cost that would result from the implementation of the primary property tax.
What are the Limitations on Primary Property Tax Assessments?
No primary property taxes may be collected in any tax year in excess of one percent of the full cash valuation of the subject residential property. (Such limitation does not apply to any secondary property tax levy for indebtedness including that hereinafter described.) Primary property taxes levied on all types of property by counties, cities, towns and community college districts are limited to a maximum increase of two percent over the prior year’s levy plus any amount directly attributable to new construction and acquisition. The two percent limit does not apply to school districts.
Is There Relief from a Primary Property Tax for Certain Property Owners?
There are various forms of property tax relief available under Arizona state law. First, there is an exemption for widows, widowers and totally disabled persons. For qualified people, the exemption has the effect of reducing the assessed value of the real property by up to $3,000 with a corresponding reduction in property tax. Second, there is a program of tax deferral. Under the deferral program, payment of property taxes is not required until the real property is sold or the person dies or the property becomes income producing. Third, qualified individuals are granted a property tax freeze under Proposition 104 which Arizona voters passed in 2000. A qualified individual should inquire about applying for an exemption, freeze or deferral through the Maricopa County Assessor’s Office.
May a Primary Property Tax Election be Called by the Voters?
The Town Council has not passed a resolution calling for an election relating to the establishment of an initial primary property tax. A person or organization wishing to file an initiative petition to hold an election regarding whether Town property owners should pay a primary property tax may do so, but must follow strict Arizona laws regarding initiative petitions and elections.
A person or organization wishing to file an initiative petition must file an application with the Town Clerk on a form provided by the Secretary of State setting forth:
Name or, if an organization, its name and the names and titles of its officers.
Intention to circulate and file a petition.
A description of no more than 100 words of the principal provisions of the measure.
Text of initiative measure in no less than 8 point type.
Request for issuance of an official number to appear on all the petitions.
The Town Clerk will then issue an official number to the applicants. This number must appear on the lower right hand corner of both sides of the petition signature sheets. The Town Clerk must also give the applicant a pamphlet, prepared by the Secretary of State’s office, containing the laws governing initiative and referendum and the rules adopted by the Secretary of State regarding the same. The Town Clerk must also furnish the applicant with a Statement of Organization and a $500 Threshold Exemption Statement form with a notice stating that one of these forms must be filed before valid signatures can be collected.
After the petitions are returned, the Town Clerk immediately issues an initial receipt. That receipt can be an estimate of the number of sheets and signatures filed and does not indicate that the measure has qualified for the ballot. After the receipt is issued no additional petitions may be filed. The Town Clerk must, within fifteen days after the filing of an initiative petition and issuance of receipt, conduct an initial review.
If the total number of signatures for verification equals or exceeds the minimum required, the Town Clerk must randomly select 5% of the signatures for verification by the Maricopa County Recorder. (The Town must pay the Maricopa County Recorder for counting the signatures at a maximum rate of fifty cents per signature.) Within ten days thereafter the Maricopa County Recorder will return the documents to the Town Clerk with its certification. Within forty-eight hours thereafter the Town Clerk will determine the total number of valid signatures and, if the minimum number of signatures has been achieved, the Town Clerk issues a receipt and notifies the Mayor that there are adequate signatures to place the measure on the ballot.
What are the Timing Requirements for an Initiative to Call an Election Proposing a Primary Property Tax for the Town?
The next possible date for an election seeking voter approval to impose a primary property tax is May 15, 2012. The Town must accept an initiative petition not less than 120 days before the election, or January 16, 2012.
Who May Vote in an Election Proposing a Primary Property Tax for the Town?
A person is entitled to vote in an election regarding the imposition of an initial primary property tax on Town property owners if the individual has resided in a precinct in the boundaries of the Town for 29 days preceding the election, who is qualified to register to vote as provided in A.R.S. § 16-101 et seq. and whose registration has been received by the Elections Department of Maricopa County, Arizona prior to midnight of the 29th day preceding the date of the Election. Accordingly, the last day to register for the Election would be April 16, 2012.
If sufficient signatures on an initiative petition are filed, the Town’s qualified electors will be asked to vote on the following question: “Should the Town should be authorized to raise a specified amount, identified in the initiative petitions, by primary property taxes?” If passed, this amount will be the base for determining levy limitations for the Town for subsequent years. It is estimated that, should the proposition pass voter approval at a May 15, 2012 special election, the property tax would be levied and collected beginning in October 2012.
What are the Other Legal Options Available to the Town if a Primary Property Tax is Not Assessed and the Town is Unable to Generate Sufficient Revenues from Other Sources?
Arizona law allows the Town to disincorporate upon petition of two-thirds of the qualified electors in the Town if the procedures outlined in Arizona law are followed. Specifically, if the Maricopa County Board of Supervisors is presented with a petition of two-thirds of the qualified electors residing within the Town, within 60 days it must either: (1) disincorporate the Town and appoint a trustee with authority to “wind up” the affairs of the Town, including selling and conveying the Town’s property, real and personal, paying Town debts and placing any surplus monies in the Maricopa County Treasury and to be used “for the benefit of the inhabitants of the disincorporated” Town; or (2) call for an election for the purpose of deciding for or against the disincorporation of the Town.
In the event the County Board of Supervisors calls an election on the question of whether to disincorporate, the election must take place within 180 days after the petition is filed (except that no disincorporation election may be called within twelve months from a previous disincorporate vote for the same city/town). If a majority of the qualified electors voting thereon votes for disincorporation, the Maricopa County Board of Supervisors (“Board”) must declare the Town disincorporated. At that time, the Board will appoint a trustee to “wind up” the affairs of the Town.
Any indebtedness and obligations of, issued by, or on behalf of the Town does not immediately become Maricopa County’s indebtedness or obligations after disincorporation. Maricopa County is responsible as a trustee to insure that all obligations and debts of the Town are paid. Rather, the trustee must pay the Town’s indebtedness and obligations as follows: (1) the appointed trustee will annually estimate an amount to be levied as a tax on all taxable property in the disincorporated Town to pay the indebtedness or obligations; (2) on or before June 30, Maricopa County must levy, as secondary taxes, the amount necessary to satisfy the indebtedness or obligations; and (3) the annual levy will continue until all indebtedness and obligations of the disincorporated Town are satisfied. Notably, a disincorporated city or town continues as a political subdivision until all of the debts and obligations of the city or town are satisfied. The trustee, therefore, may operate the facilities of the disincorporated Town until such facilities are sold or otherwise disposed of as determined by the Maricopa County Board of Supervisors.
Territory located within the Town may be de-annexed to another city or town, pursuant to A.R.S. § 9-471.02, as long as the de-annexed territory is contiguous to the city or town that annexes the territory. In the case of territory de-annexation, the Town Council shall, by ordinance, set forth the legal description of the territory and declare the de-annexation of the territory contingent upon the fulfillment of the conditions of A.R.S. § 9-471.02. Those conditions are:
1. The city or town that intends to annex the territory must also pass an ordinance with a legal description showing the land it intends to annex, subject to fulfillment of the conditions of A.R.S. § 9-471.02.
2. Both ordinances must be filed with the Maricopa County Board of Supervisors, who then sets a hearing date of not less than thirty (30), nor more than sixty (60), days from the date the ordinance is filed. The Board must then notify the governing body of the city or town, and the city or town that intends to annex the property, of the hearing date at least thirty (30) days prior to the date.
3. The Town must notify the owner of any real property within the territory to be de-annexed at least twenty (20) days before the hearing by the Board. Such notification shall specify that the area is to be de-annexed and annexed to another city or town, and that such property shall continue to be subject to any tax lawfully assessed against it for the purpose of paying any indebtedness lawfully contracted by the Town while the property was within the Town’s corporate limits.
4. That letter must also notify the property owner that he/she may protest the action to the Board, by letter, prior to the hearing or in person at the hearing. If property owners of fifty-one percent (51%) or more of the land area of the territory to be de-annexed protest the action, then the Board must deny de-annexation.
5. The Board, upon determining that the requirements of A.R.S. § 9-471.02 have been satisfied, and after the public hearing and rejection of any protests, must then order that the territory be de-annexed from the Town and that the same territory be annexed to another city or town as specified in the two ordinances.
Arizona law states that the land that is de-annexed and annexed is not exempt from paying taxes assessed by the Town while such land was within Town limits. Therefore, the land is liable for any unpaid taxes even after it is de-annexed. Therefore, if the Town levies a tax for the purpose of paying indebtedness before the de-annexation is completed, or any part thereof and interest thereon, the Town has the authority to levy a tax on the de-annexed land at the same rate and for the same purpose.
Chapter 9 of the Federal Bankruptcy Code provides for reorganization of municipalities to resolve municipal debts. Chapter 9 cases are rare. The purpose of Chapter 9 is to provide a financially-distressed municipality protection from its creditors while it develops and negotiates a plan for adjusting its debts. Reorganization of municipality debts is typically accomplished either by extending debt maturities, reducing the amount of principal or interest, or refinancing the debt by obtaining a new loan.
Although similar to other chapters in some respects, Chapter 9 is significantly different because the law does not allow for liquidation of the municipality assets and distribution of the proceeds to creditors. The functions of the bankruptcy court in Chapter 9 cases, therefore, are generally limited to approving the reorganization petition (if the debtor is eligible), confirming a plan of debt adjustment, and ensuring implementation of the plan.
The Town may also reduce the level and number of services it offers to Town residents. Services such as the library, park and street maintenance, and may be reduced from current and past levels in the event the Town is unable to fund these projects.
E. Dip Into the Town’s Savings Account
Currently, the balance of the General Fund LGIP, which is the Town’s savings account, is $1.7 million. Ten years ago that balance was $2.1 million. From 2002 to 2006, the Town drew funds from this savings account to meet expenses, reducing the balance to $764,000 at the end of the Fiscal Year 2005/2006. From Fiscal Year 2006/2007 forward, the Town deposited money back into the savings account through: (1) deposits for reinvested interest earned; (2) tax audit payments (collecting past-due sales taxes); (3) Agua Fria Ranch CFD O&M that was transferred to the savings; and AZ Municipal Risk Pool annual dividends received. The Town has proposed spending $583,103 from the Town’s savings account to balance the budget for Fiscal Year 2011/2012. This amount was the shortfall of expenses over revenues projected for the fiscal year.
Contact Us: • Town of Youngtown • 12030 Clubhouse Square • Youngtown, AZ 85363 • 623.933.8286
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