Tax increment financing in Arizona

              .iT as I~crementF inancing
in
P ~ e p a r e d by
A l a n E. M a g u i ~ e , State Deputy treasure^
&
Kevin B. DeMenna, S e n a t e Economist
TABLE OF CONTENTS
INTRODUCTION AND BACKGROUND . . . . . . . . . . . . . . . .
SUMMARY OF TAX INCREMENT FINANCING . . . . . . . . . . . .
SUMMARY OF THE ARIZONA PROPERTY TAX SYSTEM . . . . . . . .
SUMMARY OF THE ARIZONA EDUCATION FINANCE SYSTEM . . . . . .
THE RELATIONSHIP BETWEEN TAX INCREMENT FINANCING
AND THE ARIZONA PROPERTY TAX SYSTEM . . . . . . . . . . 11
THE RELATIONSHIP BETWEEN TAX INCREMENT FINANCING
AND THE ARIZONA EDUCATION FINANCE SYSTEM . . . . . . . 15
OTHER ASPECTS OF TAX INCREMENT FINANCING . . . . . . . . . . 17
CONCLUSIONS . . . . . . . . . . . . . . . . . . . . . . e . ' 18
APPENDICES...... . . . . . . . . . . . . . . a s . 19
TAX INCREMENT FINANCING IN ARIZONA
INTRODUCTION & BACKGROUND
The purpose o f t h i s paper i s t o provide general i n f o r m a t i o n concerning
tax increment f i n a n c i n g and some o f t h e p o t e n t i a l e f f e c t s o f i t s irnplementa-t
i o n i n the s t a t e o f Arizona. Tax increment finaancing i s a r e v i t a l i z a t i o n
f i n a n c i n g technique t h a t received s u b s t a n t i a l a t t e n t i o n during the 1986 l e g -
i s l a t i ve session.
This paper i s being presented t o the Study Commission on Methods o f
Revi t a l i zat ion Fi nanci ng, which was created by Chapter 274, Laws o f 1986.
The commi ssion i s charged w i t h evaluating a1 t e r n a t i v e f i n a n c i n g techniques
t h a t might be u t i l i z e d i n r e v i t 3 1 i z i n g b l i g h t e d and economically depressed
areas and t h e p o t e n t i a l impact o f such techniques on the various t a x i n g -
e n t i t i e s w i t h the state.
I n order t o p r o p e r l y analyze the impacts o f tax increment f i n a n c i n g as
it might be implemented i n Arizona, it i s h e l p f u l t o review how i t 3perates,
i t s h i s t o r i c a l development and A r i z o n a ' s p r o p e r t y tax system, i n c l u d i n g t h e
f i n a n c i n g o f elementary and secondary education.
The s t a t u t o r y a u t h o r i z a t i o n f o r t a x increment f i n a n c i n g i n Arizona was
o r i g i n a l l y enacted i n 1977. The governing board o f m u n i c i p a l i t i e s were
authorized t o create "redevelopment d i s t r i c t s " . A u t h o r i z a t i o n was a1 so pro-vided
f o r the c o l l e c t i o n and segregation o f the " t a x increment" associated
w i t h p r o p e r t y taxes imposed by e x i s t i n g pol i t i c a l subdivisions. A d d i t i o n -
a l l y , the issuance o f " p r o p e r t y tax increment bonds", which are secured by a
pledge o f " t a x increment" c o l l e c t i o n s , were authorized.
I n October o f 1977, the C i t y o f Tucson attempted t o issue " t a x i n c r e -
ment bonds". The Attorney Genera1 refused t o c e r t i f y the bonds and the C i t y
o f Tucson sought t o force such c e r t i f i c a t i o n i n t h e c o u r t s . Both the t r i a l
Court and the Court o f Appeals declared the bond issue t o be i n v a l i d and the
tax increment f i n a n c i n g s t a t u t e s t o be u n c o n s t i t u t i o n a l under A r t i c l e V I I ,
Section 13 o f the Arizona C o n s t i t u t i o n . As a r e s u l t o f t h i s c o u r t decision,
tax increment f i n a n c i n g has received 1 i t t l e a t t e n t i o n i n Arizona during t h e
i n t e r v e n i ng years.
During those years, however, s u b s t a n t i a l changes have been made t o t h e
Arizona property tax system. I n 1980 a comprehensive syste!n o f reforms was
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passed by the L e g i s l a t u r e , r e f e r r e d t o the voters of the s t a t e , and enacted
i n t o the Arizona C o n s t i t u t i o n . These reforms d e a l t w i t h a v a r i e t y o f prop-e
r t y tax issues i n c l u d i n g the computation of the maximum permi ssi b l e tax
l e v y by counties, c i t i e s and community c o l l e g e d i s t r i c t s , as well as mecha-nisms
f o r l i m i t i n g the annual growth i n assessed valuation of i n d i v i d u a l
p r o p e r t i e s .
D i r e c t l y r e l a t e d t o the property tax reforms enacted i n 1980 i s the
education financing system w i t h i n Arizona. That system i s l a r g e l y dependent
on and i n t e g r a l l y r e l a t e d t o the Arizona property tax system.
The education finance system w i t h i n Arizona was i n i t i a l l y enacted i n
the mid 19701s, s u b s t a n t i a l l y revised i n 1980, and has been subject t o l e g -
i s l a t i v e adjustments since then. Expenditures o f the elementary and second-ary
schools are c o n t r o l l e d through s t a t e imposed formulas and are financed
by means o f a " q u a l i f y i n g " l o c a l p r o p e r t y t a x e f f o r t supplemented by equal-i
z a t i o n assistance from the s t a t e . The b a s i c p r o p e r t y tax mechanisms o f the
system have remained unchanged since 1980.
I n the 1986 1 egi s l a t i v e session, s u b s t a n t i a l i n t e r e s t i n tax increment
f i n a n c i n g developed once again. This resulted from the continuing i n t e r e s t
i n f i n d i ng workable mechanisms t o finance t h e r e v i t a l i z a t i o n o f c e r t a i n
areas o f the s t a t e . A Senate Concurrent Resolution was introduced t o amend
the Arizona C o n s t i t u t i o n t o conform various facets o f the e x i s t i n g property
tax system t o aspects of the tax increment financing mechani sm.
The primary purpose o f t h i s report i s t o provide a cursory review o f
tax increment financing ( w i t h p a r t i c u l a r a t t e n t i o n t o the 1977 enactments)
and the impact o f i t s implementation i n Arizona w i t h i n the context of the
Arizcna property tax system and the education fifiance systerr: i n Arizona.
This w i 11 be done through the use of a number o f simp1 i f i e d examples. The
examples used are not intended t o represent any e x i s t i n g o r proposed rede-velopment
d i s t r i c t s o r p o l i t i c a l subdivisions.
I n a d d i t i o n t o these issues, a number o f other important questions and
concerns i nvol v i ng tax increment f i n a n c i ng must be addressed p r i o r t o any
implementation o f such a system i n Arizona. However, the l i m i t e d scope of
t h i s r e p o r t prevents an a p p r o p r i a t e d i s c u s s i o n o f these issues here.
SUMMARY OF TAX INCREMENT FINANCING
Tax increment financing provides a mechani sm for determi n i ng and c o l -
1 e c t i n g the "property tax increment" w i t h i n "redevel opment project. areas",
f r e q u e n t l y designated as redevelopment d i s t r i c t s . Simply stated, any prop-e
r t y taxes l e v i e d and c o l l e c t e d on the increased assessed value o f property
Page 3
located w i t h i n a redevelopment d i s t r i c t i s segregated f o r expenditure on
p r o j e c t s w i t h i n t h a t d i s t r i c t . Other e x i s t i n g property t a x i n g j u r i s d i c t i o n s
r e c e i v e o n l y the property taxes generated from t h a t amount of the assessed
value o f property w i t h i n the redevelopment d i s t r i c t as o f the date o f the
c r e a t i o n or designation o f the area. Thus, the amount of taxable value sub-j
e c t t o t a x a t i o n by the e x i s t i n g property t a x i n g j u r i s d i c t i o n s i s "frozen"
f o r the length o f time the redevelopment d i s t r i c t e x i s t s . Any property
taxes c o l l e c t e d as a r e s u l t of the "increments" (increases) t o the assessed
value of the area are diverted f o r the redevelopment d i s t r i c t .
This segregation o f property t a x c o l l e c t i o n s i n t u r n provides a flow o f
revenue t o the redevelopment d i s t r i c t t o be used i n accordance w i t h an
adopted redevelopment plan. Further, those revenues can used t o secure
bonds or other indebtedness issued t o carry out purposes outlined i n the
redevelopment plan.
Tax i ncrement financing provides a system f o r generating property t a x
revenues from increases i n property values t h a t r e s u l t , a t l e a s t p a r t i a l l y ,
from the redevelopment p r o j e c t s t h a t are financed by bonds secured by the
property taxes c o l l e c t e d on the increased value, Thus, the property taxes
c o l l e c t e d on the increases i n value, which r e s u l t , i n some p a r t , from the
redevelopment p r o j e c t s , are used t o secure and r e t i re the bonds issued t o
finance those same p r o j e c t s . I n theory, those b e n e f i t t i n g from the p r o j e c t s
pay the taxes used t o finance t h e p r o j e c t s .
The tax increment financing system established by Chapter 139, Laws o f
1977 i s very s i m i l a r t o t h a t described above and the systems enacted i n a
v a r i e t y o f other states. However, many o f t h e o t h e r states u t i l i z i n g tax
increment financing do not r e l y on a p r o p e r t y t a x and education finance sys-tem
s i m i l a r t o t h a t contained w i t h i n t h e Arizona C o n s t i t u t i o n and Revised
Statutes.
Section 36-1488.01, as added by Chapter 139, provided f o r creation o f a
redevelopment d i s t r i c t and the c o l l e c t i o n and segregation o f the "tax i n c r e -
ment". Section 36-1481, also added by Chapter 139, provided f o r the issu-ance
o f bonds t o be repaid from the revenues generated through the tax
increment financing system. That section also s p e c i f i e d t h a t the bonds are
not o b l i g a t i o n s o f the issuing m u n i c i p a l i t y ; are not general o b l i g a t i o n s o r
general debt o f the m u n i c i p a l i t y ; and t h e r e f o r e , need not be approved a t an
e l e c t i o n held pursuant t o A r t i c l e V I I , Section 13 o f the Arizona Constitu-t
i o n .
I n October o f 1977, s h o r t l y a f t e r the enactment o f Chapter 139, the
C i t y o f Tucson sought t o issue $1.5 m i l l i o n worth o f tax increment bonds f o r
the Pueblo West Redevelopment P r o j e c t . I n accordance w i t h Section 36-1484,
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A.R.S., the issue was submitted t o the Attorney General for c e r t i f i c a t i o n .
The Attorney General refused t o c e r t i f y the bonds arguing t h a t they were i n
v i o l a t i o n o f A r t i c l e V I I , Section 13 of the Arizona C o n s t i t u t i o n . Tucson
sought j u d i c i a l review o f the decision of the Attorney General r e q u e s t i n g a
special order d i r e c t i n g the Attorney General t o c e r t i f y the bonds so t h a t
they could be issued. The t r i a l court and the Court o f Appeals o f Arizona,
O i v i s i o n I 1 agreed w i t h the opinion of the Attorney General s t a t i n g t h a t
the issuance of tax increment finance bonds without an e l e c t i o n was a v i o l a -
t i o n of A r t i c l e V I I , Section 13 o f the C o n s t i t u t i o n .
The reasoning o f the court i n reaching i t s decision i s o f some i n t e r e s t
because o f the d i s t i n c t i o n s drawn by the court. The court found t h a t ,
because the source of revenue securing repayment o f the bonds was an ad v a l -
orem p r o p e r t y t a x , which i s a "general tax" o f the c i t y , the bonds were i n
f a c t debt o f the c i t y r e q u i r i n g an e l e c t i o n under the C o n s t i t u t i o n . Addi-t
f o n a l l y , the court found t h a t the tax increment financing scheme set f o r t h
i n Section 36-1488.01 was u n c o n s t i t u t i o n a l under the same section. As a
r e s u l t of t h i s f i n d i n g the Court o f Appeals, as had the t r i a l court, refused
any f u r t h e r review o f the statutes because o f t h i s o v e r r i d i n g c o n s t i t u t i o n a l -
flaw.
I n 1986, a proposed amendment t o the Arizona Constitution, i n the form
o f Senate Concurrent Resolution 1010, was introduced i n the Arizona Legi s l a -
t u r e . The r e s o l u t i o n would have amended the Arizona C o n s t i t u t i o n , and was
intended t o address a v a r i e t y o f issues w i t h i n the Chapter 139 tax increment
financing system, which was held t o be u n c o n s t i t u t i o n a l . The i n t r o d u c t i o n
o f t h i s r e s o l u t i o n caused the debate t h a t surrounded tax increment financing
during the l a t e 1970's t o be rekindled.
S p e c i f i c a l l y , SCR 1010 would have added a Section 22 t o a r t i c l e I X o f
t h e Arizona C o n s t i t u t i o n . That section would have d i r e c t l y authorized the
1 egi s l ature t o enact s t a t u t e s p r o v i d i n g f o r t h e e x e r c i s e o f tax i ncrement
financing powers by c i t i e s and towns i n the state.
SCR 1010 also would have amended the c o n s t i t u t i o n t o authorize the
issuance o f tax increment financing bonds, provide t h a t such bonds were not
debt under the provision o f A r t i c l e I X , Section 8, and specify t h a t t h e
bonds did not require e l e c t o r a l approval pursuant t o A r t i c l e V I I , Section
13. F i n a l l y , the SCR proposed t h a t tax increment property t a x c o l l e c t i o n s
and expenditures be outside o f the expenditure 1 i m i t a t i ons imposed on 1 ocal
governments pursuant t o A r t i c l e I X , Section 20 o f the Arizona C o n s t i t u t i o n .
SCR 1010 was not passed by t h e L e g i s l a t u r e d u r i n g i t s 1986 session and
the remainder o f t h i s report w i l l review tax increment financing as it was
structured by Chapter 139, Laws o f 1977.
Tax increment financing was o r i g i n a l l y developed i n . the 1950's as a
technique f o r i d e n t i f y i n g and segregating p r o p e r t y t a x revenues t h a t could
be dedicated t o the financing o f redevelopment p r o j e c t s w i t h i n c i t i e s . It
i s important t o remember the h i s t o r i c a l context t h a t c o n t r i b u t e d t o the
development o f t h i s financing mechanism. The 1950's were a p e r i o d o f r e l a -
t i v e l y stable property values during which s i g n i f i c a n t increases i n taxable
value (assessed value) r e s u l t e d p r i m a r i l y from the c o n s t r u c t i o n o f new prop-e
r t y r a t h e r than i n f l a t i o n a r y pressures on e x i s t i n g property. The l e v e l of
property t a x a t i o n and the associated property tax rates were moderate com-pared
t o recent experiences. Final l y , property taxes represented the p r i -
mary source o f revenue f o r l o c a l governments throughout the country.
The use of tax increment finance increased s t e a d i l y u n t i l the mid-
1970's. P a r t i c u l a r l y during the 1970's, tax increment f i n a n c i n g was a very
popular technique f o r generating revenues t o finance urban redevelopment. It
was used e x t e n s i v e l y i n m<nT o f the major c i t i e s i n the State o f C a l i f o r n i a .
However, the operation o f tax increment financing i n the 1970's produced a
number o f r e s u l t s s u b s t a n t i a l l y d i f f e r e n t than those i n i t i a l l y envi sioned -
when it was developed two decades years e a r l i e r . The 1970's were a period
o f s u b s t a n t i a l , continued i n f l a t i o n i n property values. This d i f f e r e n c e
between the 1970's and the 1950's was responsible f o r much o f the change i n
the impact o f tax increment financing. I n f l a t i o n a r y increases i n property
values g r e a t l y exaggerated the impact o f tax increment financing both from
the perspective o f the redevelopment d i s t r i c t s and the e x i s t i n g property
t a x i n g j u r f s d i c t i o n s .
As a r e s u l t o f some o f adverse impacts o f tax increment financing and
i t s o f t e n over zealous u t i l i z a t i o n , t h e technique f e l l i n t o general d i repute
during the l a t e 1970's and the e a r l y p a r t o f t h i s decade.
SUMMARY OF THE ARIZONA PROPERTY TAX SYSTEM
I n 1980, a comprehensive reform o f the Arizona property t a x system was
enacted i n t o the Arizona C o n s t i t u t i o n . The reforms d e a l t w i t h v i r t u a l l y
every aspect o f the property tax system. Further, the system was developed
i n conjunction w i t h a s u b s t a n t i a l r e v i s i o n t o the system f o r financing e l e -
mentary and secondary schools i n Arizona. This j o i n t development was essen-t
i a l i n l i g h t o f the h i s t o r i c dependence o f Arizona school d i s t r i c t s on the
p r o p e r t y t a x .
The 1980 property tax reforms established a system o f l i m i t a t i o n s on
the amount o f property taxes t h a t could be imposed by counties, c i t i e s ,
towns and community college d i s t r i c t s . (School d i s t r i c t property tax c o l -
1 ections are e f f e c t i v e l y 1 i m i ted through the education finance system and
Page 6
4
special d i s t r i c t property tax c o l l e c t i o n s are 1 oosely c o n t r o l l e d through a
s e r i e s o f t a x r a t e and/or budget l i m i t a t i o n s . ) Thus, the o n l y unregulated
p r o p e r t y t a x a f t e r 1980 was t h e s t a t e p r o p e r t y t a x , which f a l l s d i r e c t l y
under t h e c o n t r o l o f the State L e g i s l a t u r e .
The 1980 reforms were designed t o p r o t e c t p r o p e r t y taxpayers from con-t
i n u a l l y i n c r e a s i n g property taxes and provide g r e a t e r p r e d i c t a b i l i t y o f
f u t u r e t a x 1 i a b i l i t y . During the 19701s, property taxes on i n d i v i d u a l prop-e
r t i e s tended t o increase commensurate w i t h increases i n t h e taxable value
o f the p r o p e r t i e s . Most increases i n taxable value were a t t r i b u t a b l e t o
i n f l a t i o n a r y pressures and market pressures w i t h i n t h e s t a t e . The r e l u c -
tance o f p r o p e r t y t a x dependent governments t o reduce t a x r a t e s r e s u l t e d i n
annual i ncreases i n p r o p e r t y t a x 1 i abi 1 iti es .
To address the problem o f c o n t i n u a l l y i n c r e a s i n g p r o p e r t y taxes, a sys-tem
o f " l e v y l i m i t a t i o n s " was enacted. These l i m i t a t i o n s , found i n A r t i c l e
I X , Section 18 o f the Arizona C o n s t i t u t i o n , e f f e c t i v e l y e l iminated the
annual i ncreases i n property t a x 1 i abi 1 i t y r e s u l t i n g from i ncreases i n prop-e
r t y values. Simply s t a t e d , t h e l e v y l i m i t s f o r c e a t a x i n g j u r i s d i c t i o n t o
reduce i t s -property t a x r a t e t o o f f s e t -i n f l a t i o n a r y increases i r ~t h e t a x a b l e
(assessed) value o f p r o p e r t y w i t h i n t h e j u r i s d i c t i o n . Therefore, the j u r i s-d
i c t i o n receives the same amount o f property taxes each year regardless of
increases i n the assessed value. Two s p e c i f i c exceptions e x i s t t o t h i s
simple r u l e . F i r s t , t h e o v e r a l l c o l l e c t i o n s o f a j u r i s d i c t i o n are allowed
t o increase by two per cent each year. Second, the t o t a l c o l l e c t i o n s o f a
j u r i s d i c t i o n are allowed t o increase by an amount equal t o the taxes t h a t
are imposed and c o l l e c t e d on newly constructed and p r e v i o u s l y untaxed prop-e
r t y . Thus, the l i m i t a t i o n i s f r e q u e n t l y r e f e r r e d t o as "the two per cent
p l u s new p r o p e r t y l e v y l i m i t " .
The 1980 l e v y l i m i t a t i o n s have two primary e f f e c t s . The f i r s t e f f e c t
i s t o p r o t e c t taxpayers from i n c r e a s i n g property t a x b i l l s . On average,
t a x p a y e r s ' l i m i t e d property taxes increased by two per cent each year. The
second i s t o l i m i t the t o t a l c o l l e c t i o n s a v a i l a b l e t o finance government
operations.
The l e v y 1 i m i t a t i o n s have e f f e c t i v e l y c o n t r o l led increases i n p r o p e r t y
taxes p a i d b y i n d i v i d u a l taxpayers i n the i n t e r v e n i n g years. The l i m i t a -
t i o n s on p r o p e r t y t a x c o l l e c t i o n s have also constrained t h e growth of gov-ernment
and r e s u l t e d i n a s h i f t o f re1 iance from p r o p e r t y t a x revenues t o
other a v a i l a b l e sources ( i f any).
It i s important t o note t h a t the l e v y l i m i t a t i o n system enacted i n
1980, w h i l e p r o t e c t i n g taxpayers from i n c r e a s i n g p r o p e r t y t a x 1 i abi 1 i t i e s ,
does not d r a s t i c a l l y l i m i t growth i n assessed v a l u a t i o n f o r t a x purposes as
Page 7
occurred i n C a l i f o r n i a f o l l o w i n 5 the passage of Proposition 13.
Since 1980, the t o t a l assessed value of property i n Arizona has c o n t i -
nued t o grow as a r e s u l t o f two underlying causes. The f i r s t of these i s the
c o n s t r u c t i o n of new property as the population and economy o f t h e s t a t e con-t
i n u e t o grow. The second cause of increased assessed v a l u a t i o n has been
continued market pressure (demand) f o r e x i s t i n g p r o p e r t i e s . Based on c u r r e n t
population and economic p r o j e c t i o n s f o r t h e next several decades, t h e r e i s
no reason t o b e l i e v e t h a t e i t h e r of these two underlying pressures on prop-e
r t y values i s l i k e l y t o disappear.
The examples t h a t f o l l o w are intended t o simply i l l u s t r a t e the oper-a
t i o n o f the property ' t a x l e v y 1 i m i t a t i o n s as contained i n the Arizona Con-s
t i t u t i o n . I n a l l cases the i n i t i a l tax r a t e i s assumed t o be $2.00; the
t o t a l assessed value i n the f i r s t year i s $ 1,000,000; and t h e r e f o r e the
t o t a l p r o p e r t y t a x l e v y i s $20,000.
TOTAL TOTAL G M T H VALUE OF
TAX ASSESSED TAX TAX I H NEn
Y--EAR V--ALUE --RATE -C-OL-L-EC-T IO NS C-- C LLECTIONS PROPERTIES
1 $1.000.000 $2.00 $20.000
2 $1.060.000 $2.04 $20.100 2.30% $0
3 $1.C00.000 $2.08 $20.808 2.002 $ Q
4 $l.OOO.COfl $2.12 $21.224 2.C35 $0
5 $1.000.000 $2.16 $21.649 2.00% $0
TOTAL KSESSED VALUE INCLUDES:
NO INFLATIWARY GROllTH
NO NEW C(XISTRUCTI0N
TOTAL TAX TOTAL
TAX ASSESSED RATE TAX
YUR VALUE COLLECTIOXS -- - --
1 51.000.000 $2.CO $20. 000
2 $1.100.COO $1.85 520.400
3 $1,210.000 $1.72 $20.808
4 $1.331.000 $1.59 $21,224
5 $1,464,100 $1.48 $2! .649
TOTAL ASSESSED VALUE INCLUDES:
10 9 INFLATIOMRY GmTH
NO NRI C3)(STRUCT!Ei
GROnTH VALUE OF
IN NEn
CC'LLECTIfflS PWPESTI ES
2. COO s 0
2.00% $ 0
2.039 SO
2.00% $0
Page 8
-*'EXAMPLE THREE - ! l ! N ~ ? ~ C I I O U
TOTAL TAX TOTAL 6ROKlH VALUE OF
TAX ASSESSED RATE TAX IN NEW
"-EAR VA---L-U E - COLLECTIONS- C-- OLL-ECT IMS P--R-O PERT IE S
1 Sl.GO0.0~0 $2.00 $20. COO
2 $:.ICC.COO $2.04 $22.440 12-20% $100.000
3 Si.200.000 $2.08 S24.97C 11.27% $lOO.COO
4 $1.300.000 $2.12 $27.59! 10.53% $100.000
5 $1.400.000 $2.16 $30.308 9.85% $lOO,COC
TOTAL ASSESSED VALUE 1NCLL;CES:
NO INFLATIONARY GRWTH
$100,000 N M ONSTRUCTICS
--- --------
=-EXAMPLE FOUR - INFUTIDN AND CONSTRUCTIONZZU'
TOTAL TAX TOTAL
TAX ASSESSEE RATE TAX
YEAR VALUE COLLECTIONS -- --- ---- -- --------
1 $1.000.000 S2.OC $20.000
2 $1,2CO.C00 $1.85 $22.255
3 $1.!20.000 $1.72 $24.419
4 $1.662.900 $1.59 $26,502
5 $1.928.200 $1.48 $28.511
TOTAL ASSESSED VALUE INCLUDES:
10 % INFLATIONARY GROKTH
$100,000 UEH CWSiiKICTIOH
GROWTH VALUE OF
IN UM
COLLECTIONS ?ROPERTIE% ---- ------ -
I n the f i r s t exarnplc, t h e r e i s assumed t o be no growth i n t o t a l
assessed value. As shown the p r o p e r t y t a x c o l l e c t i o n s grow by two per cent
per year (and the t a x r a t e g r a d u a l l y i n c r e a s e s ) .
I n the second example, assessed values experience 10% i n f l a t i o n per
y e a r . P r o p e r t y t a x c o l l e c t i o n s t i l l grow by o n l y two per cent per year, how-e
v e r , t h e t a x r a t e i s forced down each year as p r o p e r t y values continue t o
grow.
I n t h e t h i r d example, t o t a l assessed value i s increased due t o new con-s
t r u c t i o n o f $100,000 per year (and no i n f l a t i o n a r y i n c r e a s e s ) . T h i s t i m e
p r o p e r t y t a x c o l l e c t i o n s increase by more than two p e r c e n t p e r y e a r . Note
t h a t t h e t a x r a t e s are equal t o the r a t e s i n the f i r s t example where no
growth occurred. The increased p r o p e r t y t a x c o l l e c t i o n s a r e d e r i v e d f r o m
taxes c o l l e c t e d on new p r o p e r t i e s subject t o t a x a t the same r a t e as pre-v
i ously e x i s t i n g p r o p e r t i e s .
Page 9
I n the f o u r t h example, both pressures on assessed value arc? i l l u s -
t r a t e d . T o t a l assessed value i s increased due t o i n f l a t i o n and new construc-t
i o n . Once again, the tax r a t e i s reduced t o o f f s e t the i n f l a t i o n a r y
increases i n property values (as i n example two) and the t o t a l t a x c o l l e c -
t i o n s increase due t o the new c o n s t r u c t i o n (as i n example t h r e e ) .
H o p e f u l l y , these examples w i l l also prove useful i n e x p l a i n i n g t h e
impact o f t a x increment f i n a n c i n g below.
SUMMARY OF THE ARIZONA EDUCATION FINANCE SYSTEM
I n t e g r a l l y r e l a t e d t o the Arizona property t a x system i s the system o f
f i n a n c i n g elementary and secondary education w i t h i n ~ r i z o n a . s i m p l y stated,
school d i s t r i c t s determine an authorized '"budget l e v e l " based on v a r i o u s
budget c r i t e r i a (student population, etc.) and expenditure categories. The
d i s t r i c t s are then, i n e f f e c t , required t o l e v y a " q u a l i f y i n g " p r o p e r t y t a x
as t h e i r " l o c a l e f f o r t " towards t h e f i n a n c i n g o f l o c a l education. The
"qua1 i f y i n g " " l o c a l e f f o r t " i s determined by a p p l y i n g a s t a t u t o r i l y estab- *
l i s h e d t a x r a t e ( t h e q u a l i f y i n g t a x r a t e ) t o the taxable value w i t h i n a
school d i s t r i c t .
The s t a t e , through equal i z a t i o n a i d , t h e n p r o v i d e s s u f f i c i e n t money t o
close t h e gap between t h e l e v e l o f the " l o c a l e f f o r t " p r o p e r t y taxes and t h e
authorized budget l e v e l o f t h e d i s t r i c t .
This system provides an adequate ( a u t h o r i z e d ) 1 eve1 o f a v a i l a b l e reve-nues
f o r a l l students i n a l l d i s t r i c t s regardless o f the amount o f t a x a b l e
p r o p e r t y i n the d i s t r i c t . I n other words, i n those d i s t r i c t s w i t h substan-t
i a l l e v e l s o f t a x a b l e assessed value a g r e a t e r percentage c f the d i s t r i c t ' s
t o t a l budget i s financed using " l o c a l " property taxes and a l e s s e r percent-age
i s f i n a n c e d t h r o u g h e q u a l i z a t i o n a i d . I n a low assessed value d i s t r i c t ,
more o f the d i s t r i c t ' s budget w i l l come from e q u a l i z a t i o n assistance and
l e s s from l o c a l property taxes. Taxpayers' property t a x 1 i a b i l i t y t o t h e
d i s t r i c t i s thereby 1 i m i t e d .
Thus, t h e education f i n a n c i n g system l i m i t s a t a x p a y e r ' s p r o p e r t y t a x
l i a b i l i t y t o school d i s t r i c t s t o approximately t h e l e v e l o f the q u a l i f y i n g
t a x r a t e m u l t i p l i e d by the t a x p a y e r ' s assessed value. However, u n l i k e j u r i s -
d i c t i o n s bound by the c o n s t i t u t i o n a l l e v y l i m i t s the d i s t r i c t ' s t a x r a t e i s
not n e c e s s a r i l y reduced t o o f f s e t i n f l a t i onary increases i n p r o p e r t y values .
The f o l lowing example i 1 l u s t r a t e s the re1 a t i o n s h i p between 1 ocal prop-e
r t y taxes, assessed values and " e q u a l i z a t i o n assistance" i n the f i n a n c i n g
o f school d i s t r i c t s i n Arizona. The d i s t r i c t i s assumed t o have an " a u t h o r -
ized budget l e v e l of $30,000 and assessed value o f $500,000 i n the f i r s t
year; and an i n i t i a l " q u a l i f y i n g " and actual tax r a t e o f $4.12.
-"ENCATION FINANCE W P L E * * * * =
DISTRICT DISTRICT DISTRICT
BUDGET ASSESSED TAX
Y--EAR ---L-I-K I T ---V-- -A-L-U E ----R ATE
1 $30.000 $500.000 $4.12
2 $32.400 $540.000 $4.12
3 $34,992 $583.200 $4.12
4 $37,791 $629.856 $4.12
5 $40.815 $680.244 $4.12
ASSUMPTIONS:
8% G R W h IN BUDGET AND RCL = E L
8% GROWTH I N VALUE
TOTAL TOTAL
TAX EWALIZATIGN
OLLECTI(#JS ASSISTANCE --
$20.600 $9,400
$22.248 $10.152
$24,028 $10.964
$25.950 $11,841
$28.026 $12.789
I n t h e example above, given the d i s t r i c t ' s authorized budget l e v e l , t h e
amount o f " e q u a l i z a t i o n assistance" i s computed by m u l t i p l y i n g the d i s -
t r i c t ' s " q u a l i f y i n g " tax rate, $4.12 (and actual t a x r a t e i n t h i s example) by
the d i s t r i c t ' s assessed value, $500,000. The resul t i n 9 "qua1 i f y i n g levy"
($20,600 i n the f i r s t year, $28,026 i n the f i f t h year) i s subtracted from
the d i s t r i c t budget and t h e d i f f e r e n c e i s the amount o f e q u a l i z a t i o n a s s i s -
tance ($9,400 i n the f i r s t year, $12,789 i n the f i f t h year).
Several d i f f e r e n c e s between t h i s example and the e a r l i e r tax l i m i t
examples bear p a r t i c u l a r n o t i c e . F i r s t , note t h a t t h e t a x r a t e remains con-s
t a n t throughout the f i v e years and the d i s t r i c t ' s t a x c o l l e c t i o n s increase
commensurate w i t h the growth o f assessed value -- u n l i k e the e a r l i e r
examples where t h e t a x r a t e declined as values increased and t h e tax c o l l e c -
t i o n s remained r e l a t i v e l y constant. Second, the " e q u a l i z a t i o n assistance"
mechanism assures the avai 1 abi 1 i t y of s u f f i c i e n t revenue t o reach the
authorized budget l e v e l . No such assurance e x i s t s f o r most o f the j u r i sdi c-t
i o n s subject t o t h e c o n s t i t u t i o n a l l e v y l i m i t s .
Page 11
THE RELATIONSHIP BETWEEN TAX INCREMENT FINANCING AND THE ARIZONA
PROPERTY TAX SYSTEM
As discussed above, a number of p r o p e r t y t a x i n g j u r i s d i c t i o n s i n A r i -
zona a r e s u b j e c t t o c o n s t i t u t i o n a l l y imposed l e v y l i m i t a t i o n s . Due t o t h e
c o n s t i t u t i o n a l s t a t u s o f these l e v y l i m i t s , the computation o f the maximum
permi s s i b l e 1 evy must occur without regard f o r the existence o f redevelop-ment
d i s t r i c t s .
The amount of revenue generated by t h e t a x increment f i n a n c i n g system
i s a d i r e c t f u n c t i o n o f the growth i n assessed v a l u a t i o n w i t h i n the redevel-opment
area and the l e v e l o f p r o p e r t y t a x r a t e s e s t a b l i s h e d f o r the various
j u r i s d i c t i o n s overlapping t h a t area. As mentioned above, the amount o f
taxes c o l l e c t e d on t h e increased v a l u a t i o n are no l o n g e r r e c e i v e d by t h e
t a x i n g j u r i s d i c t i o n but are i n s t e a d t r a n s f e r r e d t o the t a x increment f i nan-cing
d i s t r i c t f o r the designated p r o j e c t s . As a r e s u l t o f the 1980 p r o p e r t y
tax reforms, the impact o f t a x increment f i n a n c i n g on a j u r i s d i c t i o n s u b j e c t
t o the l e v y l i m i t a t i o n w i l l vary depending upon the cause o f the increased-assessed
v a l u a t i o n .
Because o f t h e p r o v i s i o n s o f the l e v y l i m i t a t i o n , the p e r m i s s i b l e
amount o f p r o p e r t y t a x c o l l e c t i o n s authorized i n t h e C o n s t i t u t i o n f o r a
j u r i s d i c t i o n subject t o the l e v y l i m i t a t i o n w i l l increase by the amount o f
taxes c o l l e c t e d from the new p r o p e r t y ( i n a d d i t i o n t o t h e two per cent
annual growth). However, t a x increment f i n a n c i n g r e q u i r e s t h a t those t a x
c o l l e c t i o n s be used t o finance redevelopment p r o j e c t s and n o t p a i d t o t h e
j u r i s d i c t i o n s imposing the t a x r a t e . T h i s means t h a t t h e increased revenue
t h a t would otherwise be received by the t a x i n g j u r i s d i c t i o n i s instead d i v -
erted t o the redevel opment p r o j e c t s .
A1 t e r n a t i v e l y , increases i n assessed v a l u a t i o n t h a t are the r e s u l t o f
the increased market value o f e x i s t i n g p r o p e r t i e s do not generate a d d i t i o n a l
property t a x revenues f o r those j u r i s d i c t i o n s subject t o the 1 evy l i m i t.
Increases i n assessed v a l u a t i o n due t o changes i n market v a l u e a r e o f f s e t by
a r e d u c t i o n i n t h e t a x r a t e o f those j u r i s d i c t i o n s subject t o the l e v y l i m i -
t a t i o n . The p r o p e r t y t a x c o l l e c t i o n s o f the j u r i s d i c t i o n remain the same
even though assessed v a l u a t i o n s are i n c r e a s i n g ( t e m p o r a r i l y i g n o r i n g t h e
a1 lowable two per cent increase). However, the property taxes generated by
applying the t a x r a t e o f the j u r i s d i c t i o n against the increased assessed
v a l u a t i o n , w i t h i n the redevelopment d i s t r i c t , must be d i v e r t e d t o redevelop-ment.
These l o s t revenues cannot be made up under t h e p r o v i s i o n s o f t h e
l e v y l i m i t a t i o n and t h e r e f o r e t h e o t h e r t a x i n g j u r i s d i c t i o n s w i l l experience
an actual loss i n revenues when compared t o p r i o r years.
Page 12
The examples t h a t f o l l o w simply i l l u s t r a t e the operation o f tax i n c r e -
ment f i n a n c i n g i n conjunction w i t h the property tax 1 evy 1 i m i t a t i o n s con-tained
i n the Arizona C o n s t i t u t i o n . I n a l l cases the i n i t i a l tax r a t e i s
assumed t o be $6 ($2 each for the county, for the c i t y , and f o r the cornrnu-n
i t y c o l l e g e ) ; t h e t o t a l assessed value i n the f i r s t year i s $1,000,000; and
t h e r e f o r e t h e t o t a l property t a x l e v y i s $60,000. Further, a redevelopment
d i s t r i c t i s assumed t o be created i n the second year w i t h an i n i t i a l
assessed v a l u a t i o n o f $50,000.
TOTAL COMBINED TOTAL
TAX ASSESSED TAX TAX
Y--E--A--R-- V--A---L-U--E-- --R--A--T-E- C----O--L--L-E--C---T--IO--N---S-
1 $1.000.000 $6.00 $60,000
2 $1,000.000 $6.12 $61,200
3 $1,000.000 $6.24 $62,424
4 $1,000.000 $6.37 $63.672
5 $1.000.000 $6.49 $64,946
TOTAL ASSESSED VALUE INCLUDES:
NO INFLATIONARY GROWTH
NO NEW CONSTRUCTION
GROWTH TAX ] T I F REMAINING !
I N INCREMENT 1 TAX TAX 1
COLLECTIONS A.V. COLLECTIONS COLLECTIONS I ---------------------- -------- I-------------- ------- ----------- ___ !
I 1
2.00% $50.000 I $0 $6i,200 I
2.00% $50.000 1 $0 $62.1241
2.00% $50.000 1 $0 $63,572 1
2.00% $50.000 1 $0 $64.966 1
IUUWRE ?W - INFLATION ONLYm**
TOTAL COMBINED TOTAL GROWTH TAX I TIF REMAINING I
TAX ASSESSED TAX TAX I N INCREMENT I TAX TAX 1
YEAR VALUE RATE COLLECTIONS COLLECTIONS A.V. I COLLECTIONS COLLECTICNS i -------- ---------- -------- ---------------------- ---------------------- -------- I============== =----==I !
1 $l.OCO,OOO $6.00 $60,@00 I I
2 $1,100.000 $5.56 $61,200 2.00% $50,000 1 $0 $61.2301
3 $1.210.000 $5.16 $62.424 2.00% $55,000 1 $258 $62.:66 I
4 $1.331.000 $4.78 $63,672 2.00% $60.500 I $502 $63.:70 !
5 $1.46C.100 $4.44 $64,946 2.00% $66.550 1 $734 $64.2!2 I
TOTAL ASSESSED VALUE INCLUDES: ........................
10 % INFLATIONARY GROWTH
NO NEW CONSTRUCTION
'f*aMAIIPLE THREE - CWSTRUCTION ONLY-*
TOTAL COMBINED TOTAL GROWTH TAX I T I F REMAINING I
TAX ASSESSED TAX TAX I N INCREMENT I TAX TAX
YEAR VALUE RATE COLLECTIONS COLLECTIONS A.V. lCOLLECTIONS COLLECTIONS ! --- -- -- - -- --- - -- -- -------- ---------------------- ---------------------- -------- I=========== =========== !
1 SI,OOO.OOO $6.00 $60.000 ! i
2 $1.100.000 $6.12 $67.320 12.20% $50,000 I $0 $67.320 1
3 $1.200,000 $6.24 $74,909 11.275 $55,000 I $312 $74.597 1
4 $1,300,000 $6.37 $82.774 !0.50% $60.000 I $637 $82,137 I
5 $1,400,000 $6.49 $90.924 9.85% $65,000 I $974 $89.950 I
TOTAL ASSESSED VALUE INCLUDES: ........................
NO INFLATIONARY GROHTH
$100.000 NEW CONSTRUCTION EACH YEAR ($5,000 !N T I F A.V.)
-- ... .
Page 13
*xxxxEXPYP?E c009 - IhFLATICN AND CONSi2UC:ION"xxx
TOTAL COMBINED TOTAL GROWTH TAX I :IF REMAlhING I
TAX ASSESSED TAX TAX I N INCREMENT 1 TAX T EcX I
Y--E--A--R-- V--A--L--U--E-- --R--A--T--E C----O--L--L-E--*-C--T--I-O---N--S C----O--L--L-E---C--T--IO--N--S-- A--.--V--.-- ICOLLEC:!OHS COLLECYIONS I !===5======= =========== I
' $1,000.000 $6.00 $60.000 I 1
2 f1.200.CGO $5.56 $66.764 11.27% $50,000 I SO $56,764 1
3 $1,420.C00 $5.16 $73,258 9.736 $60.000 1 $516 1'2.742 1
4 $1,662,000 $4.78 $79,507 8.53% $71,000 I $1.005 $78.502 !
5 $1.928.200 $4.44 $85.533 7.58% $ 8 3 . 1 0 0 1 $1.468 $ 2 A . G 6 5 I
TOTAL ASSESSED VALUE INCLUDES: ........................
10 % INFLATICNARY GROWTH
$ 1 0 0 . 0 0 0 N E W ~ S T R U C T I O N EACH YEAR ($S.OOOOFNEHCOliSTRUCTIOH IN T 1 F A . V . )
I n the f i r s t example, there i s assumed t o be no growth i n t o t a l
assessed value. As shown, the t o t a l property t a x c o l l e c t i o n s grow by 2% per
year. There are no tax increment c o l l e c t i o n s because the assessed valuation
o f the redevelopment d i s t r i c t ( t a x increment A.V.) does not increase above
the base amount.
-
I n the second example, assessed values experience 10% i n f l a t i o n per
year. Property tax c o l l e c t i o n s , i n t o t a l , s t i l i grow by only 2% per year;
the t a x r a t e i s forced down each year; and some tax increment c o l l e c t i o n s
occur. Because o f t h e r e d u c t i o n i n t h e t a x r a t e ( r e s u l t i n g from the i n f l a -
t i o n a r y growth i n assessed v a l u a t i o n ) , the tax increment c o l l e c t i o n s
d i r e c t l y correspond t o losses i n t h e property tax c o l l e c t i o n s t h a t would
otherwise be received by t h e e x i s t i n g t a x i n g j u r i s d i c t i o n s . I n t h i s
example, the $734 o f tax increment c o l l e c t i o n s i n the f i f t h year represents
the d i f f e r e n c e between the $64,946 received by the j u r i s d i c t i o n s i n the
f i r s t example and the $64,212 received i n the second example.
I n the t h i r d example, t o t a l assessed values increase due t o new con-s
t r u c t i o n of $100,000 per year ($5,000 o f which occurs i n the redevelopment
d i s t r i c t ) and no i n f l a t i o n a r y increases. This time, t o t a l property tax c o l -
l e c t i o n s increase by more than 2% per year and tax increment c o l l e c t i o n s
occur. The $974 i n tax increment c o l l e c t i o n s i n the f i f t h year i s a t t r i b u t -
able t o new c o n s t r u c t i o n w i t h i n t h e redevelopment d i s t r i c t j u s t as the
growth i n the remaining t a x c o l l e c t i o n s i s a t t r i b u t a b l e t o new c o n s t r u c t i o n
outside o f the d i s t r i c t . It i s important t o note t h a t t h e t a x rates i n t h i s
example are equal t o the tax r a t e s i n the f i r s t example where no growth
occurred. A1 so, the tax increment c o l l e c t i o n s are augmented as a r e s u l t of
the gradual growth i n t h e t a x r a t e . T h i s i s because the "incremental v a l -
ues" are subject t o tax a t the same r a t e as on other p r o p e r t i e s .
Page 14
I n t h e f o u r t h example, both pressures on assessed value are i l l u s -
t r a t e d . Total assessed value i s increased due t o i n f l a t i o n and new con-s
t r u c t i o n . Once again, the tax r a t e i s reduced t o o f f s e t the i n f l a t i o n a r y
increases i n property value (as i n Example 2) and the t o t a l tax c o l l e c t i o n s
increase due t o the new c o n s t r u c t i o n (as i n Example 3). These combined
forces r e s u l t i n the greatest amount of tax increment c o l l e c t i o n s as both
i n f l a t i o n and new c o n s t r u c t i o n compound the amount o f increases i n value
w i t h i n the redevelopment d i s t r i c t . Note that the tax rates are reduced i n
t h i s example, as i n the second example, as a r e s u l t o f the i n f l a t i o n a r y
increases i n property values. This i s the reason t h a t the t o t a l tax i n c r e -
ment c o l l e c t i o n s do not equal the sum of the tax increment c o l l e c t i o n s due
t o i n f l a t i o n i n the second example and construction i n the t h i r d example.
The reduction i n the tax r a t e (as the r e s u l t o f the i n f l a t i o n a r y increases)
o f f s e t s some o f the gain due t o the new construction.
- These examples help t o i l l u s t r a t e one o f the basic c o n f l i c t s between
tax i ncrement financing and the Arizona property tax system. While
i ncresses i n assessed valuation a t t r i b u t a b l e t o new c o n s t r u c t i o n r e s u l t i n
increased property tax c o l l e c t i o n s , increases i n assessed valuation t h a t -
resu! t f roin i n f l a t i o n a r y pressures d~ not r e s u l t i n i ncreased property tax
c o l l ections. Therefore, any i n f l a t i o n a r y growth i n assessed valuations
w i t h i n a redevelopment d i s t r i c t w i l l necessarily r e s u l t i n , not a d i v e r s i o n
o f increased property t a x revenues, b u t r a t h e r a d i v e r s i o n o f e x i s t i n g prop-e
r t y t a x revenues away from e x i s t i n g property t a x i n g j u r i sdi c t i o n s t o the
redevelopment projects, I n other words, every do1 l a r avai 1 able f o r the
financing o f redevelopment p r o j e c t s i s a d o l l a r reduction experienced by the
other t a x i n g j u r i s d i c t i o n s . The greater the r a t e o f i n f l a t i o n and the
longer t h e term o f the program the more extreme t h e e f f e c t .
I n summary, j u r i s d i c t i o n s subject t o the levy l i m i t a t i o n w i l l be
deprived o f increases i n property tax c o l l e c t i o n s t h a t would occur as the
r e s u l t o f the a d d i t i o n o f new property t o the tax r o l l s and w i l l experience
an a c t u a l r e d u c t i o n i n property tax c o l l e c t i o n s i n those instances where
assessed valuations increase as a r e s u l t o f increases i n market value.
: It i s also important t o note t h a t the m a j o r i t y o f j u r i s d i c t i o n s receiv-i
n g property taxes have no control over the creation, size o r scope o f rede-velopment
p r o j e c t areas.
F i n a l l y , it i s also important t o note that the impact o f these property
tax c o l l e c t i o n t r a n s f e r s w i l l be p a r t i c u l a r l y acute i n the case o f county
governments. This i s because counties are p a r t i c u l a r l y dependent upon the
property tax as a primary source of revenue and have l i m i t e d access t o
a l t e r n a t i v e revenue sources.
Page 15
THE RELATIONSHIP BETWEEN TAX INCREMENT FINANCING AND THE ARIZONA
EDUCATION FINANCE SYSTEM
As discussed above, the f i n a n c i n g of elementary and secondary education
w i t h i n Arizona i s i n t e g r a l l y r e l a t e d t o the p r o p e r t y t a x . The amount of
"equal i zation assistance" provided t o i n d i v i d u a l school d i s t r i c t s i s a
d i r e c t f u n c t i o n o f the amount o f assessed value w i t h i n the d i s t r i c t . Fur-t
h e r , school d i s t r i c t s use l o c a l property taxes t o fund a s i g n i f i c a n t por-t
i o n o f t h e i r budgets.
Tax increment f i n a n c i n g d i v e r t s the property taxes c o l l e c t e d from a
p o r t i o n o f t h e assessed v a l u a t i o n w i t h i n a redevelopment d i s t r i c t , which
would otherwise be subject t o t a x a t i o n by. a school d i s t r i c t . Thus, there i s
a c o n f l i c t between the e x i s t i n g t a x increment f i n a n c i n g s t a t u t e s and the
e x i s t i n g education finance system i n Arizona. The imp1 ementation o f tax
i nirernent f i n a n c i n g i n Arizona would necessitate conformi ng changes be made
t o one or both o f the systems. Depending upon the conforming changes, the
impact of tax increment f i n a n c i n g on the school finance system would d i f f e r . -
The implementation o f a t a x increment financing system w i l l r e s u l t i n a
l o s s o f property taxes t h a t would otherwise be received by school d i s t r i c t s
t h a t overlay the redevelopment d i s t r i c t . The amount o f p r o p e r t y tax c o l l e c -
t i o n s d i v e r t e d t o the redevelopment p r o j e c t s must be made up through one of
two a l t e r n a t i v e s . E i t h e r a school d i s t r i c t must r a i s e i t s l o c a l p r o p e r t y
t a x r a t e t o make up f o r t h e d i v e r t e d c o l l e c t i o n s o r t h e s t a t e must provide
a d d i t i o n a l equal i z a t i o n assistance t o rep1 ace t h e d i v e r t e d c o l l ections.
The f o l l o w i n g t h r e e c h a r t s i l l u s t r a t e the e f f e c t o f these two a l t e r n a -
t i v e s on the h y p o t h e t i c a l d i s t r i c t used, e a r l i e r 1:n t h i s r e p o r t , t o i l l u s -
t r a t e the operation o f the education f i n a n c e system.
*-*EDUCATION FINANCE EXACIPLEfU**
DISTRICT DISTRICT DISTRICT
BUDGET ASSESSED TAX
Y--EAR --L I M I T ---V-A--L-U-E -----R- A-T E
1 $30,000 $500.000 $4.12
2 $32.400 $540,000 $4.12
3 $34.992 $583,200 $4.12
4 $37.791 $629.856 $4.12
5 $40.815 $680.244 $4.12
W H P T I O N S :
8% GROKM I N BUDGET AN0 K L = DSL
8% GROWTH I N VALUE
TAX i T I F
INCRERENT I TAX
VALUE I COLLECTIONS --- -
!
$25.000 1 $ 0
$27.000 I $82
$29,160 ( $171
$31,493 I $268 -
DISTRICT !
TAX I
COUECTICElS I
I
Page 16
-EDUCATION FINANCE EXAWPLE - INCREASED TAX RATESX"*' ----------
DISTRICT DISTRICT DISTRICT TAX T I F DISTRICT I
BUDGET ASSESSED TAX INCREMENT ! TAX TAX I
Y---E AR ----L-- I~- IT ---V---A -LU- E - ----R--A TE --V-AL-U E II C---O-L--L-E CTIONS C-OLLECTIC-IXS I!.
1 $30.000 $500,000 $4.12 I $20.600 I
2 $32,400 $540,000 $4.12 $25.000 1 $0 $22.248 !
3 $34.992 $583.200 $4.13 $27.000 ! $83 $24.028 1
4 $37.791 $629.856 $4.15 $29.160 I $173 $25.950 1
5 $40.815 $680.244 $4.16 $31.493 1 $270 $28.026 t
m u n P T I o t i s : ------
8% GROHH I N BUDGET AND RCL = E L
8% GROWTH I N VALUE -- ------
-EDUCATION FINANCE MAnPLE - INCREASED EMAL. ASST.*- -
DISTRICT DISTRICT DISTRICT TAX I TIF DISTRICT I
BUDGET ASSESSED TAX INCREMENT 1 TAX TAX I
YEAR L I M I T VALUE RATE VALUE COLLECTIONS COLLECTIONS i
--- -- ------ ---- - I -- -- !
1 $30.000 S50G.100 $4.12 ! $20,500 1
2 $22.400 $540.030 $4.12 $25.000) $ 0 $22.248 i
3 $34,992 $583,200 $4.12 $27.000 ! $82 $23.945 !
4 $37.791 $629.856 $4.12 $29.160 1 $171 $25.779 !
5 $40,815 $680.244 $4.12 $31.493 1 $268 $27,759
ASSUMPTIONS: ----------
8g GROKM I N BUDGET AND RCL = E L
8% GROWTH IN VALUE
I n t h e f i r s t example if the i o c a l school d i s t r i c t tax r a t e i s allowed
t o increase as i n the f i r s t example, it w i l l increase from $4.12 i n the
f i r s t year t o $4.16 i n the f i f t h year. This t r a n s l a t e s t o increased prop-e
r t y t a x e s b e i n g p a i d by a l l taxpayers w i t h i n the school d i s t r i c t , i n c l u d i n g
those r e s i d i n g outside o f the redevelopment d i s t r i c t . D i s t r i c t tax c o l l e c -
t i o n s are increased by $267 ($28,026 - $27,759) i n the f i f t h year. I n addi-t
i o n , it i s important t o note t h a t t h e t a x r a t e increase compounds the tax
increment c o l l e c t i o n s up t o $270 i n the f i f t h year from $268.
The second t a b l e il l u s t r a t e s t h e other a1 t e r n a t i v e mechanism avai 1 able
t o replace the d i v e r t e d tax increment c o l l e c t i o n s . I f the school d i s t r i c t
tax r a t e i s held constant at $4.12 ( o n l y t h e "frozen" assessed value w i t h i n
the redevelopment d i s t r i c t i s u t i l i z e d i n the computation o f the " q u a l i f y i n g
l o c a l l e v y " and t h e l e v y o f l o c a l d i s t r i c t p r o p e r t y t a x e s ) , the operation of
t h e t a x increment system w i l l r e s u l t i n an increase i n e q u a l i z a t i o n a s s i s -
tance o f $268 i n the f i f t h year. T h i s a d d i t i o n a l e q u a l i z a t i o n assistance
Page 17
would most l i k e l y have t o come from increased s t a t e general fund appropria-t
i o n s f o r education assistance.
The t a x increment f i n a n c i ng system t h a t e x i s t s i n Cal i f o r n i a speci f i-c
a l l y provides f o r t h e s t a t e t o make up f o r any loss i n property tax c o l l e c -
t i o n s o f school d i s t r i c t s through increased e q u a l i z a t i o n assistance.
For the purposes o f t h i s analysis, it i s most important t o note t h a t
the same amount o f revenue w i l l have t o be made up i n e i t h e r instance i f
school d i s t r i c t s are t o maintain t h e i r expenditures at the same l e v e l as i n
the absence of the redevelopment d i s t r i c t .
OTHER ASPECTS OF TAX INCREMENT FINANCING
I n a d d i t i o n t o the issues discussed above, a number o f other important
questions and concerns i nvol v i ng tax increment f i nanci ng must be addressed
p r i o r t o any implementation of any such system i n Arizona. Some o f these
include:
The d i v e r s i o n o f "tax increment" property taxes c o u l d i n c l u d e those
a t t r i b u t a b l e t o "secondary", as well as, "primary" tax rates. The d i v e r s i o n
o f secondary property taxes, which are often pledged t o secure and finance
general obl i gat ion bond i ssues, mi ght impai r exi s t i n g bond contracts and
could endanger the repayment o f outstanding bond issues. Further, t h e i s s u -
ance o f new general o b l i g a t i o n bonds, w i t h t h e i r accompanying new tax rates,
would cause t a x increment c o l l e c t i o n s t o increase s u b s t a n t i a l l y .
Tax i ncrement c o l l ect i ons mi ght be s u r p r i s i n g l y unpredictable. The 1 ack
o f predi c t a b i 1 i t y could occur because other j u r i sdi c t i ons determi ne the t a x
rates used t o c a l c u l a t e the "increment", and through voter a u t h o r i z a t i o n may
impose a d d i t i o n a l taxes t h a t may e f f e c t the "increment". A1 t e r n a t i v e l y ,
substanti a1 i ncreases i n the market values o f properties 1 ocated outside the
redevelopment d i s t r i c t , but w i t h i n the boundaries o f property taxing j u r i s-d
i c t i o n s t h a t overlay the d i s t r i c t , w i l l r e s u l t i n decreased tax rates f o r
those j u r i s d i c t i o n s subject t o levy l i m i t s . The lower tax rates may r e s u l t
i n l ower " i ncremental " col 1 ect i ons .
Federal t a x reform may also d i r e c t l y a f f e c t the t a x s t a t u s o f the
i n t e r e s t on "tax incrementu bonds.
Page 18
CONCLUSIONS
A t the time o f i t s i n i t i a l development, tax increment financing was c l e a r l y
an e f f e c t i v e mechani sm f o r generating revenues t o support redevelopment p r o j e c t s
w i t h i n a redevelopment area. However, it was developed several decades ago i n an
envi ronment s u b s t a n t i a l l y d i f f e r e n t from t h a t which e x i s t s i n Arizona today. It
was a time when the property tax system was subject t o s i g n i f i c a n t l y fewer
r e s t r i c t i o n s and c o n t r o l s and when property values f o r tax purposes were s i g n i f i -
c a n t l y l e s s v o l a t i l e than they have been i n recent years.
Clearly, tax increment f i n a n c i n g does not e a s i l y mesh w i t h the Arizona prop-e
r t y t a x system as it has e x i s t e d since the enactment o f the 1980 reforms. I f
implemented w i t h i n the e x i s t i n g t a x system, it w i l l undoubtedly r e s u l t i n sub-s
t a n t i a l s h i f t s o f revenues between e x i s t i n g property t a x i n g j u r i s d i c t i o n s and
the redevelopment d i s t r i c t . Further, depending upon the r e s o l u t i o n o f a v a r i e t y
o f p o l i c y issues t h a t must be addressed before it can be implemented, it may
r e s u l t i n s h i f t s i n the tax burden from property taxpayers t o other types o f tax-payers.
Although not discussed i n d e t a i l i n t h i s r e p o r t , it i s generally accepted
t h a t t a x increment financing has been the subject o f various abuses i n other
states. Many o f these abuses undoubtedly r e s u l t from operation o f the system i n
an environment s u b s t a n t i a l l y d i f f e r e n t from t h a t f o r which it was o r i g i n a l l y
designed .
The implementation o f a t a x increment financing system i n Arizona would have
the e f f e c t o f r a d i c a l l y changing t h e p r i o r i t y o f access t o property taxes w i t h i n
our state. Currently, a1 1 p o l i t i c a l j u r i s d i c t i o n s , authorized t o l e v y property
taxes, have equal access t o t h e a v a i l a b l e taxable value o f property w i t h i n t h e i r
boundaries. The leve! o f t a x a t i o n i s r e s t r i c t e d through a v a r i e t y o f l i m i t a t i o n s
e i t h e r c o n s t i t u t i o n a l o r s t a t u t o r y , which d i f f e r depending upon the p a r t i c u l a r
character o f the t a x i n g j u r i s d i c t i o n . However, i n a1 1 instances, the implementa-t
i o n o f a t a x increment f i n a n c i n g system would c l e a r l y place the highest p r i o r i t y
f o r access t o property t a x revenues under the control o f those bodies c r e a t i n g
and operating redevelopment d i s t r i c t s .
This s h i f t i n the p r i o r i t y of access t o the property tax i n Arizona c l e a r l y
delineates the p u b l i c p o l i c y decision t h a t must be made when considering the
p o t e n t i a l implementation of tax increment financing . The p r i n c i p a l issue t h a t
must be addressed p r i o r t o the implementation o f a tax increment financing scheme
i s the r e l a t i v e m e r i t and the re1 a t i v e p r i o r i t y o f redevelopment p r o j e c t s w i t h i n
Arizona c i t i e s vis-a-vis the f i n a n c i n g of general c i t y operation, counties, com-muni
ty col 1 eges, primary and secondary education, and u l t i m a t e l y s t a t e govern-ment.
Page 19
APPENDIX 1
CHAPTER 139, 33RD LEGISLATURE, SECOND REGULAR SESSION
SUPERIOR COURT IN THAT COUNTY. REQUIRE ONE OR mRE HEARINGS OR
ENCES AT m l c H THE PARTIES HUST ATTENO IN ORDER TO FURTHER TI{E puRmS;s
OF ~ 1ARsTIC LE. THE COURT l44Y ALSO GRANT EXEWTIWS FROM SUCH A L~
MD )cIv(oATORYR ULE I F TO DO OTHERWISE WOULD CAUSE UNDUE HARDSHIP.
~ c c . 16. T i t l e 25, c h a p t e r 3, Arfzona Revised S t a t u t e s , i;
ara~nded bv dddfno a new a r t i c l e 4. t o read:
25-341. Abbm a t i o n o f a l l e n a t i o n o f a f f e c t t i n a c t i o n
THE COWN LAW~CAUSE OF ACTION FOR ALIENAT [ON m~~~~
ABOLISHED.
of Arizona
7g.thlrd ~ e g t r l a t u r e
k g v l a r Session
rm
CHAPTER 139
SEMTE BILL 1300
A)( ACT
m r 1TO~ PU BLIC HEALTH AND SAFETY; PRESCRIBING NATURE OF OBLIGATION AND SOURCES
PAWENT FOR REOEVELOWEHT BONDS; PROVIOING FOR TAX INCREHEKl FIIiANCING
REDEYELOfWEN'l PROJECTS; PROVIDING FOR THE ALLOCATION OF TAXES; PRO-YIDIN6
FOR PLEDGE OF HONIES ALLOUITEO TO WNICIPALITIES FOR PAWENT OF
PRlfCIPAL AND lNTEREST ON REOEVELOPHENT PROJECT LOANS. ADVANCES OR
IIDEBTEDNESS; PRESCRIIING CONTENTS OF REDEVELOPMENT PLANS; PROVIDING FOR
SPECIAL TAX INtRD4EKl FUNDS AND PAYMENT INTO SUCH NMOS; PROVIDIIIPI FOR
THE TIU.nS!lIllAL OF CERTIFlCATlOH AND DESCRI PTION OF LAN0 WITHIN REDEVELOP-IENT
RNECT AN0 OTHER WCUHENTS TO COUNTY ASSESSOR, CLERK OF BOARD OF
COUILIZATION, OEPARTHENT OF REVENUE AND OTHER ASSESSING OFFICER; PROVIDING
FOR TPANWITTAL OF STATEMENT PERTAINING TO ALLOCATION OF TAXES TO AFFECTED
T U l f f i AGENCIES; PROVIOING FOR ABSTRACT OF TAX AN0 ASSESYIENT ROLL; PRO-VIDIffi
FOR CERTAIN EXPIRATION; PROVIOIHG FOR CERTAIN DELAYED REPEAL:
MHDING SECTION 36-1481. A R I Z W REVISED STATUTES; AJ4ENOING TITLE 36.
OUPER 12, ARTICLE 3, ARIZONA REVISED STATUTES, BY ADDING SECTION 36-
1488.01; MENDING SECTION 36-1481, ARIZONA REVISE0 STATUTES, AS MENDED
THIS K T , EFFECTIVE FROM AND AfTER JULY I . 1979. AllO REPEALING SECTION
36-1488.01, AS ADDED BY THIS ACT. EFFECTIVE FROM AH0 AFTER JULY 1. 1979.
1 k It n a c t c d by t h e L q i s l a t u r ~o f t h e S t a t e of A r l r o n a :
1 S u t i o n 1. S e c t i o n 36-1481, A r l z o n a Revised S t a t u t e s , 1s r ~ n d w !
1 to Mad:
4 36-1481. Issuance o f bonds
I A. A a u n i c i p r l i t y may i s s u e bonds # m - t h - b e - t k r I n I t s
6 d l v r t t i o n to f i n a n c e t h e u n d e r t a k i n g o f any r e d e v e l o p e n t p r o j e c t under
a r t i c l e , f n c l u d t n g t h e p y m s n t o f p r i n c i p a l and i n t e r e s t upon any
1 *Vancts f o r surveys and p l a n s f o r r e d r v r l o p n e n t p r o j u t s , and my a l s o
9 (W@ M f u n d i n g bonds f o r t h e paynent o r r t t l r m n t o f such bonds
V@vfously ISSby UIt. .s~uch bonds s k i 1 k m d c payable, as t o b o t h
'1 prlnclP41 and i n t e r e s t . s o l e l y frorr th Incorn, proceeds, revenues and
'1 Of the m u n l c i p r l i c y . INCLUDING TAX INCRMENT FUNDS RECEIVED PUR-
'I'1 und@rTuOk l~nEpC aTInOdII c3a6r-r1y4i8n8g.0 o1,u t dofe rrl vr deedv ferloomp wonrt h perlodj einc t cso unnnduetri ot hnl ws i t h i t s
S.B.
*ether or not they am financed I n *hole or i n Part *Ith the
pmcwds of such bonds, but payment of such bonds, both as t o princfpal
md interest. may be further or exclusively secured by a pledga of my
l o a t grant or contributlon from the federal w v r m n t o r O t k r sourn,
4,. ,. r-.i-d o-f. a-n 3. redevelomnt pmjeCts o f the r m n i c i p a l i t y undertaken undtr
this a r t i c l e and by a mortgage o f any o f such r a d e v e l o ~ pt m j c c t ~ .
0. 1% BONDS AN0 OTHER OBLIGATIOWS OF THE l4JNICIPNITy ISSUE0
PURSUANT TO SI;BSECTION A OF THIS SECTION A E MOT A GENERAL O B L I M T I W OR
gNERAL DEBT OF THE WNICIPALITY, THE STATE OR ANY OF ITS W L I T I C A L SUB-DIVISIONS.
AH0 tlEITHER THE W N I C I P N I T Y . THE SIATE. MoR ANY OF ITS
POLITICAL SUBOIVISIONS ARE GENERALLY LIABLE FOR THEM. NOR In AMY EVENT
WALL THE BONDS OR OBLIGATIONS GIVE RISE TO A GENEW OBLIMTION OR
LIABILITY OF THE WNICIPALITY. THE STATE OR M Y OF ITS W L I T I C A L SUB-DIVISIONS,
OR A CHARGE AGAINST THEIR GENERAL CREDIT OR TAXING WYERS,
OR BE PAYABLE FROH Any FUNDS OR PROPERTIES OTHER THAN THOSE NNOS OR
PROPERTIES SPECIFILALLY OESCRIBEO I N SUBSECII(X( A OF THIS SECTION AN0
THOSE BONDS LHO OBLIGATIONS W I L L SO 5lATE OW THEIR FACE. Bonds Issued
vl&r this section shall not constitute an tndebtednoss u i t h l n tha man4
"n,# -., r-n", n.-.t.l.t ,-r-tl-m.-..l .-. o-r. ~- -t- -r-t - u t o&b~t I f m i t a t i o n or m s t r i c t i o n .
issued under the provisions of this a r t l c l o are declared t o h i s t u r d for
m n s e n t i r l publtc md g o v e m n t r l purpose, and rogethor with i n t o m s t
thereon md incam theretrcsl. shall b e x q t e d fm a l l t a r s .
C. Bands issued under this sectton shall b authorized by msolu-tion
of the local governing body, w y be Issued I n one or nore series,
shall bear such date or dates. k payable upon &rand or M t U m a t ruch
time or times. bear interest at such rate or rates, be i n such denmninatim
or dcnainations, be i n such f o m e i t h e r coupon or rcgistemd. carry such
c ~ v s r s i o no r registration PI-lvllegcs, have such rank or priority. be
axecut-a-d i n such manner. be wyablo I n such medlun of pa-nt. It such
place or places, and be.subjhci to such terns of mdewtlon. with or
without p r a i w . as provided by th resoluttoo or t r u s t indantura or
m r t g q e issued pursuant thamt.0.
0. Such bonds may k sold at not less than par a t publlc sales
held aftor notica piblistmd once rt least U n days p r i o r t o the sale In
a newspapor h v i n q r g o n r r l c i r c u l a t i o n i n the 11-81 of opemtlon and i n
such othor r d i u m of publlcatioo rs the u n i c i p a l i t y & t e d t ' I e ~ . O r U Y
h rxchrngad for other bonds on the basis of par, but such bonds mY be
sold to the fe&ral governrnt at p r l v r t o sale at not less than par. uld.
if loss thM a l l of tho authorized principal w u n t o f Such bonds
sold to the feden1 govenwmt, the balance m y te sold a t private sale
It not less than p r r at m l n t a r a s t t o the municipality of mt t o exct.d
thr intercst cost to the u n i c i p r l i t y of the portton o f the bonds sold
to thr fedoral g o v o m n t .
E. If any of tho public o f f i c i a l s of the u n i c i p a l i t y AoSe s f m -
tu-s r p p a r on my bonds or coupons issuod mder thls a r t l c l o coaso to
Such o f f i c i r l c before d o l i v r r y of the bonds, t h e i r signatumS shall
M v r r t h r l o s ta v r l l d knd s u f f i c t c n t for a11 prrposts tho S a m 1s If *
o f f k f ~ l sha d r a i n e d i n o f f l c e u n t i l &lfvery. Any p r o v l ~oif ~
Ch. 139
the contrary notwithstanding, bonds Issued plrsuant to this a r t i c l e
mil ba f u l l y negotiable.
F. I n any action o r proceedings involving the v a l i d i t y or enforce-a
i l i t y of any bond Issued under thls a r t i c l e or the security therr#er
FOR SUCH BOND. the r e c i t a t i o n i n substance i n the bond that it h s k e n
lssued by the ~ n i c i w l l t yI n connection with a m&velopmnt project
shall be conclusive proof that the bond was issued f o r ruch purposo and
such project shall be conclustvely deemd t o have k e n planned, located
and ~ r r i e odu t i n accordance with the purposes and provisions of this
," .rticlc.
11 6. NEITHER THE KM)ERS OF THE Q)VERNING BOOY OF A W N I C I P N I T Y OR
11 A COmISSION NOR hNY PERSONS EXECUTING THE BOWS ARE LIABLE PERSONALLY OW
Ir TIQ BONGS BY REMM( OF THEIR ISSUAIICF. - . . - - - - - -
14 h c . 2. T i t l e 36. chapter 12. article 3. Artzona Rovisrd Strtutos,
15 fa mndod by addlna section 36-1488-. 0-1 .. . t-o - m. -a -d - :.
16 36-148801 Fro rt tu incrernnt. m h v e l o n t l r n s
17 A. IN &I; S&.~IJNLBS nt~U ) N + F ~ ZEC UIRCS. - - - - . . -
18 1. 'TAXES' INCLUDES ALL LEVIES ON AN AD .. -- .
1) EU PROPERTY, PERSOW PWPERTY OR OTHER PROPERTY W
-m - mg WCN LEVIES BY THE CO~STIMION . O-R. S TANTES O-.F ...-- - ....- .
11 2. "TAXING CGENCY" ~EANS~CAITYI.~ YIN CLUDING CHARTER CITY. TM,
22 CWNTY OR SCHOOL DISTRICT. INCLUOING COmON SCHOOL OISTRICTS W I F I E D
13 SCHOOL OISTRICTS. HIGH SWOOC DISTRICTS AND C..W N T T Y i-l-l- -I -FC-; n- .lac~-nnlrrc-ira .
24 B. ANY RE~KVELOWNT P L M~AY-& TAIN A PROPERTY TAX INCREMENT
PROYISION UHOER WICH TAXES. I F ANY. LEVIED UPOll TAXABLE PWERTY IN A
26 REDEVELOPKEN1 PROJECT EACH YEAR BY OR FOR THE BENEFIT OF ANY TAXING AGEKY
27 AFTER THE DATE THE LOCAL Q)VERIIING BOOY APPROVES THE REDEVELOPMENT PLAN.
t( IRCLUDIHG ANY AnENOMENTS TO WCH PLAN. INCOWORATING PROPERTY TAX INCRL-t)
)cU(T PROVISIONS. SHAL-L- -BE- n--~-v r w nkc FfUlrU%. - 7 - - I. TWIT PORTION OF THE TAXES W.I W-- --Y-O.U LD BE PROWCED BY THE RATE
AT WICH THE TAX I S LEVIEO EACH YEAR BY OR FOR EACH TAXING AGENCY UPON
THE ASSESSED VALUE OF THE TAX&-W E PROPERN I N THE REDEVELOPMENT PROJECT
M SHWN UPON THE ASSESSMENT AND TAX ROLL USED IN c o n t i E c r m w I r H THE
TLUTION OF SUCH PROPERTY BY WCH TAXIN6 AGENCY. LAST EQUALIZED PRIOR TO
M( MTE ON WICH THE LOCAL BDVEWIHG BOOY APPROVE0 THE RECEVELOPMNT
PUW. SHALL BE ALLOCATED CHD WEN COLLECTED SHALL BE PAID INTO THE FUNDS
OF THE RESPECTIVE TAXING AGENCIES AS TAXES BY OR FOR THE TAXING AGENCIES
MI ML OTHER PROPERTY ARE PAIO. FOR THE PURPOSE OF KLOCATING TAXES
LEVIED BY OR FOR ANY TAXING AGENCY OR AGENCIES M I C H 010 NOT IHCLUOE THE
TERITORY I N A REDEVELOPMENT PROJECT ON THE M T E OF APPROVAL OF THE
~EUVELOPNENT PLAN BY THE LOCAL GOVERNING BODY. BUT TO WICH SUCH TERRITORY
MS BEEN ANNEXED OR OTHEWISE INCLUDED AFTER SUCH MTE, THE ASSESSMENT AN0
TAX ROLL OF TllE COUNTY LAX1 EQUALIZED W WCH MTE Y U L L BE USE0 IN
UTEl\nINlNG THE ASSESSED VALUATION OF THE T ~ L PEROP ERTY IN THE PROJECT
WCH MTE.
w" m m2W. LTHLAT B E PAOLRLTOIOCNA TEODF ATHHE0 WLEEVINE DW LTLAEXCETSE OEA SCHHA YLEL ARB E IN PAEIOXC EINSTSO O AF SWPHE CIAL
@ * OF THE IUNICIPALITY m PAY mi PRINCIPAL r ANO INTEREST a LOANS. m I E S MVANCEO TO OR ANY IHOEBTEWESS, INWRREO BY SUCH WHICIPALITY TO
lCE OR REFIMNCE, I N H O L E OR I N PART. SUCH REDEVELOPMENT PROJECT.
j s MD UNTIL THE TOTAL ASjESSEO VALUATION OF THE T A W L E PROPERTY
EVELO~ENT PROJECT EXCEEDS THE TOTAL ASSESSEO VALUE OF THE TAXABLE
ERTY IN SUCH PROJECT AS SHOWN BY THE LAST EWALIZED ASSESSMENT WD
~ L RLE~ EWETOO IN PARAGRAPH 1 OF THIS SUBSECTION M L OF THE TAXES
ED COLLECTED UPON THE TAXABLE PROPEI(TY I N SUCH REDEVELOPMENT
:a SHALL aE PAID INTO THE FUNOS OF THE RCSPl CTIVE TAXING AGENCIES.
~ C I I LOPHS, ADVANCES AND INOEBTEDHESS, IF iWy. INTEREST THE^^
WEN PAID, ALL HONIES THEKAFIER RECEIV'.O FROn TAXES WON THE TUU~;~
ERTY I N SUCH REDEVELOPMENT PRWECT SHALL RE PAID INTO THE FUNDS OF
ECTIVE TAXING AGENCIES AS TAXES on ALL OTHER PROPERTY ARE PAID.
C. IN ANY EDEVELOPHEKT PLAN GR I N THE PROCEEDINGS FOR THE AOVWCE
OR HAKING OF LOANS, OR THE INCURRING OF ANY INOEBTEONESS, ~y
#JN~CIPALITY TO FINANCE OR REFINANCE. I N MIOLE OR I N PART. THE RED€-
WENT PROJECT, THE PORTION OF TAXES M E f l I O I l E o I N SUBSECTION B, PARA-H
2 OF THIS SECTION W Y BE IRREVOCABLY PLEDGED FOR THE PAYMENT OF
PRINCIPAL OF AYD INTEREST ON SUCH LOANS. ADVANCES, OR INOEBTEMIESS.
0. I F A REDEVELOPWENT PLAN CONTAINS A PROVISION REGARDING PROP-T
k l INCREMENTS AS PEWITTED BY SUBSECTION B OF THIS SECTION. THE
VELORIENT P L M SHALL ALSO CONTAIN THE FOLLOWING PROVISIONS:
1. A L I n I T A r I o n ON THE LENGTH OF TIME FOR WICH TAX INCREMEHT
NUES MAY BE COLLECTEO AND ALLOCATED FOR REDFVELOPMENT.
2. A LIHITATIOH ON THE PRINCIPAL AIlWHT OF BONDED INDEBTEWESS 7 0
H TAX INCREMENTS ARE PLEDGED W I C M CAN BE OIITSTANOING AT ANY ONE
FOR THE REC€VELOPHEtiT PROJECT.
E. THE WNICIPALITY MY ADOPT PROPERTY TAX INCREMENT P u o v I s I o n s
PART OF A REDEVELOPMNT PLAN EITHER AT THE TIME OF ADOPTION OF A
Y.F I OPNEHT PLAN, OR THERLAFIER AS AN M N D I I E H T TO A REDEVELOPIEKT VHETIIER SUCH PLAN HAS K E N OR IS APPROVED BEFORE OR AFTER ME DATE
SECTION B E C W S W. I F PROPERTY TAX INCRWENT PROVISIONS ARE MOED
ODIFIED BY AN AHEMORNT TO A REOEVELOPMNT R A N . WETHER SUCH REDE-
"'KT R A N I S NNPTEO BEFORE OR AFTER THE DATE THIS S E C T I W BECOHES
'' ~ P S TE WALIZED ASSESSHEHT AND TAX ROLL R E F E ~ E DTO IN suesfcrrw
'"4V-W 1 OF THIS SECTIW W I C H SHALL BE USE0 TO DETERMINE THE
TION Of TAXES AS PROVIED I N SUBSECTION B WALL BE THE ASSESSNNT M D
RCIL LAST EQUALIZED PRIOR TO THE APPWVAL OF THE REKVELOPMENT RAW
HE LOCAL GOVERNING BOOY. WEN SUCH APPWVAL UAS FIRST GIVEN MD PRIOR
nY m N M E M l OF SUCH PLAN.
F. T l i C PORTION OF TAXES SPECIFIED BY SUBSECTICM 0. PARA6RAPH 2 OF
SECTIOH WALL NOT BE ALLOCATED AN0 PAID FOR THE FIRST T I M UNTIL THE
MilCH BEGIHS MTER THE NOVEWER 1 NEXT RKLOVING THE APPROVAL By
L O W U)VEWING BWY OF A REDEVELOWEKT RM WITH PROPERTY TAX
MEKT PROVISIONS. OR OF LUENDC(ENTS ADDING SUCH PWVISIOHS TO A
VELOWHT PLM. SUCH TCJES WILL BE ALLOCATED An0 PAID ONLY I F THE
N6 REWIRED BY SUBSECTION I OF THIS SECTICfI HAS BEEN WE.
6. IF A IVNICIPALITY PREPARES A REOEVELOMNT PLAJI WICH F R C V I N S
OI'fISION OF TAXES M PEWITTED BY THIS SECIIM(. OR PREPARES AJ4
WENT TO SUCH REDEVELOPEKT PLAW W I C H SO PROVIDES, I N A D D I T I W To
Ch. 139
MY OTHER NOTICE AH0 HEARING REGUIRMEMS ESTABLISHED I N SECTION 36-1479.
MJNICIPALITY SHALL TRANYIIT TO THE MVrRNING BODY OF EACH TAXIffi
W YWH ICH LEVIES TAXES UPON ANY PROPERTI I N THE PROJECT AREA. AN0 W I C H
vr110B E AFFECTED BY A D I V I S I O N OF PROPERTY TAX. I- N. .C- .R. -F M .- F. N. .T -t ., .A . C- O- .P Y. O- F. T.H , .F-
=EuiY TAX -INCREMENT PROV~SIOHS AND-A-STATEMEKT TVAT IF THE PRWIS IONS
ME AOOPTED TO P E W I T SUCH A D I V I S I O N OF TAX REVENUES. PROPERTY TMES
P F ~ ~ L T I HFGR On INCREASES I N VALUATION ABOVE THE ASSESSED VAL-UE- A S. S-HO.W
;-:HE U S 1 EQUALIZED ASSESSMENT AND TAX ROLL KAY BE LOCATED FOR REDE- ; ~ L O P ~ E HPTU RPOSES, RATHER THAN BEING PAID INTO THE TREASURY OF THE T A X I K
K;EKY. THE W N I C I P A L I T Y SHALL TRANSHIT SUCH DOCUMENTS BY REGISTERED M I L
AT LEAST THIRTY M Y S PRIOR TO THE DATE SET FOR PUBLIC HEARING REWIRED BY 1; SECTION 36-1479 ON THE REDEVELOPHENT PLAN OR AnENWENT TO SUCH PLAII.
H. ALL FUNOS RECEIVED BY A MUNICIPALITY FRW THE c w n T r TREASURER If AS ITS PORTION OF TAXES DESCRIBE0 I N SUBSECTION 0, PARAGPARi 2 OF THIS
SECTION SHALL BE DEPOSITED I N A SPECIAL TAX INCREMENT FUND W I C H SWILL BE
HEU) SEPARATELY FRW ALL OTHER FUNDS HELO BY THE MUNICIPALITY. PAYHENT
17 OT SUCH FUNOS BY THE COUNTY TREASURER SHALL BE M D E I N THE W E MANNER AS
11 PAYMENT OF OTHER AD VALORW COLLECTIONS I S M D E TO C I T I E S M O TOWS PRE-I
( SCRIBED BY SECTION 42-47.
I. AFTER THE ADOPTION BY A LOCAL GOVERNING BODY OF A REDEVELORIENT
PU)( WITH PROPERTY TAX IHCRENNT PROVISIONS, OR THE AWENOnENT OF SUCH A
RU( TO INCLUDE SUCH PROVISIONS, OR THE MENWENT OF A PLAN CONTAINING
SUCH PROVISIONS TO ALTER THE PROJECT BOUNDARIES. THL CLERK OF THE W N I C I -
PALITY SHALL FILE wIni ME ASSESSOR AND CLERK OF THE BOARO OF EWALIZA-TlON
I N THE COUNTY I N W I C H THE REDEVELOPWENT PROJECT I S LOCATED AN0
UlTH THE DEPARMENT Of REVENUE, CERTIFICATION THAT SUCH ACTION HAS
OEM TAKEN AND A M P OR P U T IHDICATING THE BOUNOARIES OF THE PROJECT AREA.
W H WCUMEHTS SHALL ALSO BE TRANSMITTED TO THE OFFICER OR OFFICERS PER-FORnING
THE FUNCTIONS OF ASSESSOR FOR M Y T A X I f f i AGENCIES W I C H . I N
LEVYIHC OR COLLECTING I T S TAXES, 00 NUT USE THE COUNTY MSESSMENT ROLL
01 00 HOT COLLECT I T S TAXES THROUGH THE COUNTY AM7 TO M E GOVERMING BODY
OF UCH OF THE T A X I f f i AGENCIES WHICH LEVIES TAXES U M N ANY PROPERTY I N
THf PROJECT AREA. THE DOCWEKTS REQUIRED I N THIS SUBSECTION SHALL BE
W Y I I T T E D TO THE APPROPRIATE AGENCIES WITHIN THIRTY M I S . BUT 114 NO
WENT LATER THAN THE )(WEWBER 1 PRECEDIN6 THE TAX YEAR FOR WHICH TAXES
& TO BE DIVIDED AS PROVIDED HEREIN.
J. THE ABSTRACT OF THE TAX AJIO ASSESSMENT R a L PREPARED BY ME
QmK OF THE CUJNTY BOARD OF E~WLIUTION PURSUANT TO SECTION 42-248 SWLL
THE VALUATION OF TAXABLE PROPERTY WHICH I S LOUTED I N A REDEVELOWENT
)RaJECT hREA FOR W I C H PROPERTY TAX I K R M E N T PROVISIONS HAVE BEEN ADOPTED,
WALL INDICATE THAT SUCH PROPERTY I S WITHIN THE BlWNMRIES OF A REDE-VROR(
EMT PROJECT.
1. THE GOVERNIM BODY OF A W N I C I P A L I T Y M4Y CREATE A REOEVELOP-KWT
OISTRlCT FINANCED OR PARTIALLY FINANCED BY PROPERTY TAX INCREMENT
FIIU)K~ffPiI JRSUANT TO THE PROVISlOHS OF M I S SECTION. EXCEPT THAT SUCH
OISTRICT MY HOT:
1. c O N T A I ~ W E THAN FIVE PER CENT OF M E TOTAL ASSESSED VALUATION
OF THE WNICIPALITY. FOR THE PURPOSES OF THIS PARAGREIPH THE FIVE PER
S.B. 1300 Ch. 139
1 CENT LlMlTATlON SHALL BE COHPUTED BY TOTALING ME ASSESSEO VALUATION OF
2 EACH SUCH PROJECT AS OF THE DATE OF INITIAL APPROVAL OF SUCH PROJECT.
3 2, INCLUDE WITHIN TSE TAX IHCREUENTAL FINANCING WRTION OF THE
A PLAN PROVISIONS FOR ME CONSTRUCTION, ALTEWTION OR REPAIR OF PUBLIC
5 BUILDINGS.
6 L. W;N ESTABLlSHlNG A DISTRICT PURSUANT TO THIS SECTIOW, THE
7 GOVERNING BODY jF A WHICIPALITY MUST FINO THAT SUCH DISTRICT MILL PRO-
8 VIDE FOR SLUM CLEARANCE OR BLIGHT REDUCTIONS AND CONTAIN PRNECTS WIlICH
g MILL INCREASE ME ECOIIWIC VITALITY OF ME DISTRICT AND ME WMICIPALITY.
1. 0- Scc. 3. S u t i o n 36-1481, Arizona Revised Strtutes. as annded by
11 section 1 of this act, i s amended to read:
36-1481. lssuance of bonds
A. A municipality m y issue bonds i n i t s discretion to finance
the undertaking of any redevelopncnt project under t h i s a r t i c l e , includ-ing
the payment of principal and interest upon any advances f o r surveys
and plans far redevelopment projects. and m y also issue mfunding bonds
f o r the payment or retirement of such bonds previously issued by it.
Such bonds shall be made payable. as to both principal and intarest,
solely fran the income, proceeds, revenues and funds of the municipalityr-
+ n e i u d + n y - t a r - + n e m n t - f u n d s - ~ t e + v e d - p u ? s u a ~ t - ~ ~ - ~ ~ t 4 ~ ~ -d~e-- ~ 4 8 8 t ~ ?
rived fran or held i n connection with i t s undertaking and o r r y i n g out
of redevelopment projects under t h l s a r t i c l e , whether or not they are
financed i n whole or i n p a r t w i t h the procnds of such bonds. but pament
of such bonds, both as to principal and interest. m y be further or ex-c
l u r i v a l y secured by a pledge of any loan. grant or contribution frm the
federal governmnt or other source. i n aid of any redevelopaant projects
of the municipaltty undertaken under t h l s a r t i c l e and by 1 partgage Of
any of such redevelopnent projects.
8. ~he-hnd~-and-ethe~-eb+4yak4ena-ef-ihe-~114e4pa~4by-490ued
~ ? ~ u e n e - t e - s u b s e r b + e n - A - e f - b h + ¶ - a ~ t 4 e n - a ? e - ~ i - a - y e n e ? b * - ~ b i ~ y ~ t 4 e n - e ~
y r r r e r e 4 - d e b t - a f - t h e - 1 ~ n 4 ~ 4 p a i + t y ~ - t h e - s ~ t e - e ? - a n y - e ~ - ~ 4 s - ~ + ~ t 4 e l + - ~ ~ b -
d+v+~+ensl-and-ne4ther-the-wn4e4pa~4tyl-the-sba~e~-ne?-an~-~~-~t8-p~~~~-
+aa4-subd+v4s+en~-are-yene~a~t~-t+abte-fe?-ihm,-ne?-4n-eny-event-sk~t
t h e - b e ~ 4 s - e r - e b 4 + ~ a t + e n # - y + v e - ~ ~ e e - t e - a - y e n e ? a + - e b ~ 4 y a t 4 e ~ - ~ ? - ~ 4 ~ b 4 ~ ~ t ~
e#-~k-~n+e+pat+kyl-~he-sbate-e?-any-e#-+ts-pe~4t4ea~-au~4v~¶~en¶~-@?
a-eharye-a~e+nat-the+~-yene~at-e~ed+t-e~-~a~4ny-pme?~~-e?-k-payab*e
f r m - a a y - f u n d r - e r - p n F e ? t + e ~ - e ~ h e ? - ~ h a n - t k $ e - f u n d ~ - e ? - p ~ p ~ ? ~ ~ ~ ~ - ~ p ~ ~ ~ ~ -
+ e a + t y - d c ~ e r + b e d - + n - s u b s e e t + e n - ~ - e # - t h + ~ - s e e t 4 e n - a n d - t k ~ e - ~ n d ~ - ~ ~
b 4 y a t + e ~ - h a - s e - s e - e n - t ? - a e Bonds lssued under t h i s sec-t
i o n shall not constitute m indebtedness within the meaning of any
constitutional or statutory debt l i n t t a t i o n or r e s t r i c t i o n . Bonds issued
under the provisions of this a r t i c l e are declared to b-z issued f o r an
essential publlc and governnantal purpose. and together with i n t e r e s t
thereon end incant therqfran. s h l l be exmpted from a l l taxes.
C. Bonds issued under this section shall be authorized by
resolution of the local governing body, way k issued i n one or m r e
srrlss, shall bear such date or dates, be payable upon dcmand or mature
at such ttme or tines, bear i n t e r e s t at such r a t e o r rates, be I n such
Ch. 139
&nomination or denominations, be I n such form e i t h e r coupon or rrpisteted.
carry such conversion or registration privileges, have such rank or
priority, be executed i n such manner, be payable i n such medim o f
paynmt, at such place or places. and bc subject to such ten- o f
redemption, d t h or without premium. as pmvided by the resolution or
t r u s t indenture or mortgage lssued pursuant thereto.
0. Such bonds mry be sold at not less than par at public sales
held a f t e r notice published once at least ten days p r i o r to the sale i n
a newspaper having a general c i r c u l a t i o n i n the area of operation and i n
such other medim of publication as the nwnlcipality determines, or u y
be exchanged for other bonds on the basts of par. but such bonds may be
sold to the federal government at private sale at not less than par, and.
i f less than a l l of the authorized principal amount o f such bonds are
sold to the federal g o v e m n t , the balance may be sold at private sale
at not less than par at an i n t c n s t to the nwnlcipality of not t o exceed
the interest cost to the municipality of the portton of the bonds sold
to the federal goverraent.
E. If any of the public o f f i c i a l s of the m n l c i p a l i t y whose
signatures appear cm any bonds or coupons issued under this a r t i c l e
cease to be such o f f i c i a l s before &livery of the bonds, t h e i r s i g ~ t u m s
shall nevertheless k v a l i d md s u f f i c i e n t f o r a11 purposes the same as
if the o f f i c i a l s h d mmtned i n o f f i c e u n t i l delivery. Any provision
of law to the contrary notwithstanding, bonds issuod pursuant t o t h l s
a r t i c l e shall be f u l l y negotiable.
F. In any action or proceedings involving the v e l i d l t y or
enforceability of any bond lssued under t h l s a r t i c l e or the security
f o r such bond. the r e c i t a t i o n i n substance i n the bond that it has been
fssued by the a u n l c i p a l l t y i n connection with r redevelopment p r o j u t
shall be conclusive proof that tha bond w s issued f o r such purpose and
such proJect shall be conclusively &mod to have been planned. located
urd carried out I n accordance with the purposes and provisions o f t h i s
a r t l c l e .
Arizona Revised Statutes, i s repealed
affective fra and a f t e r Julv 1.. 1979. . . - . - -
B. Upon repeal of i e c t i o n 36-1188.01, Arizona Revised Statutes.
the authorization of a n u n i c i p r l i t y to issue bonds to be secured by tax
increment funds pursuant to thls act and the authorization t o pay the
principal and intorest on such bonds from t r x i n c m n t fmds roceived
Pursuant to t h i s act shall t o m i r u t * .
Sec. 5. Effective d t a s
A. T h pruvfslons of s u t i o n 3 of this a c t s h a l l k c a e f f e c t i v e
from and a f t e r Julv 1.. 1979.
B. Except-a; provided by subsection A o f t h i s section, the pro-viaions
of this act shall k c m effective as provided by law.
Approved by the Governor - May 31, 1977
Filed In3he Office of the Secretary of State - May 31, 1977
663
APPENDIX 2
C I T Y OF TUCSON V. ROBERT K. CORBIN
ATTORNEY GENERAL OF STATE OF ARIZONA
623 P.2d 1239
CITY OF TUCSON v. CORBIN
CIIC as 128 Ark63 (App)
s3
(31 Adverting to the facts of the present ting tire chains on the car at the time of the
m, the appellant was clearly In close accident Accordingly. and as a matter of
to the automobile at the time of law, we hold that a t the time of the acci-the
accident. The more difficult question is dent. appellant's activities were in such
~ h e t h earp pellant's activity was an integral close proximity to the car and so related to
part of the occupancy and use of the \.chi- its operation and use as to be an integral
cle. This determination turns on whether part of her occupancy and use of the car.
appellant was participating in the activity She was themfore uupn" the car
of putting tire chains on the car at the time the meaning of the policy provision,
of the accident. No question appears as to
Since we do not find any dispute on fac-the
necesity or the desirability of putting tual issues and in view of our interpretation
the chains on the car in furtherance of its
legitimate use and operation. It is true
of the meaning of the subject language in
that, a t the time of the accident, appellant the policy, the judgment of the trial court is
was waiting to perform specific physical reversed and the case remanded with in-assistance,
but the record does not suggest structions to enter judgment that coverage
any inconsistent activity or abandonment of is available to appellant under the unin-purpcxre.
While her preceding photopaphic s u r d motorist provisions of appellee's lia-activities
could not be said to be a part of bility policy and that appellee is obligated
the tire chaining effort, appellant had put to proceed with arbitration.
the camera away and had been expressly
summoned to the rear of the vehicle by
Santa Maria to assist him in fastening the
chains to :he left mar tire. The record
dearly indicates that appellant w a ~sta nd-ing
two or t h m feet from the rear cf the
car waiting to fulfill her function in this
process and had been so standing for a
period of one minute or less to five minutes
at the time the accident occurrc-d.
. Appellee contends that even if appellant
intended to assist Santa Maria in the chain-ing
operation, intention alone is insufficient
to create coverage. In this regard, appelle
cites Testone v. =illstate insurance Co, su-pra;
h'ew dmsterdam Casualty Co. v.
Frorner, 75 A 2 645 (D.C.19SO); and Lau-tenschleger
v. ?a~al Indemnity Co.. 15 S.C.
App. 579, 190 S.E.2d 406 (1972). While we
agree with the proposition that intention
alone would be insufficient, the oprative
facts here clearly indicate that not only had
the appellant actually been actively partici-pating
in the overall tire chaining project.
but a h that her location at the time of the
accident wm nntrolled by the necessity of
her continued psrticipation. Therefore. this
is not a case o! mere intention.
We do not within the four mrnen of
the record befox the trial coun u p n the
parties' croatirn~tiona for summan judg-ment
a disputable factual h u e in r e e d LO
appellant's parucipation in the t i u k of put-
Judgment is reversed and remanded with
instructions.
OGG, P. J., and JACOBSON. J., concur.
623 P.2d 1239
The-CITY OF TUCSON. a municipal
corporation. PIJntiff/Appelknf
v.
Robert K. CORBIN. Attorney Genera! of
the State of Arizoru.
Defendant!Appe:iee.
and
County of Pima, a body politic; Tucson
Unified School District No. 1; and Pima
County Community College District
R u l Puties in InteresWAppellees.
2 CA-CW 3626.
Court of Appeals of Arizona.
Division 2
k.1 7, 1980.
Rehearing Denied Jan. 21, 1981.
Review Denied Feb. 11, 1981.
Municipality brought action against At-torney
General and three other taxing au-
E-4 128 ARIZONA REPORTS
thonties. requesting special order directing
Attorney General to certify tax increment
b n d s issued by municipality for redevelop-ment
projects under state slum clearance
and development law. The Superior
Court. Pima County. Cause No. 176308,
Jam, C. Carruth. J.. held that the tax
increment financing scheme was unconsti-tutional,
and municipality appealed. The
Court of Appeals, Hathaway. C. J.. held
that the property tax increment provisions
were uncoristitutional under state constitu-tional
provision requiring that questions
u p n bond issues or special assessments be
submittad to the vote of affected real prop
4. hlunicipal Corporations -410(1).
918(1)
Under state constitutional article re-quiring
that quesfions upon bond issues or
special assessments be submitted to vote of
real property tsx payers of political subdivi-sions
affected by such questior.. the electors
of the affected district shall 'be given a
voice in accepting or rejecting a proposed
expenditure which ultimately pledges their
district's general taxing power; an election
is required even if the proposed incmase in
indebtedness would not violate const~tution-a1
debt limitations. A.R.S.Const. Art 7,
$ 13.
eny tax payers.
O'Connor, Cavanagh, Anderson. West-over,
Killingsworth & Bahears, P. A by M.
E. Rake. Jr. and Larry L. Smith. Phoenix,
1. "dunicipal Corporations -906
A mucicipality is not affected by a
b n d issue or special asessment wnen it in
no way incurs !iabi:i:y for payment.
2. Municipal Corporations -854(1),
918(1)
Municipal revenue bonds or obligations
payable out of a special fund separate from
the city's general funds do not require an
elxtion before they may be issued. and are
no: sffecr& by constitutional restrictions
on municipa! indebdnes.~. A.R.S.Const.
Art. 7. g 13.
for plaintiff/appellant.
Robert K. Corbin, Atty. Gen. by Charles -
S. Pierson, Asst. Atty. Gen., Phcerrix, for
defendanUapp1iee.
Stephen D. Neely, Pima County Atty. by
Rose Silver, Deputy County Atty., Tucrron,
for real party in intemt/appellee, Rma
County.
DeConcini, hicDonald, Brarnmer, Yetwin
& Lacy, P. C. by J. Wm. Brarnmer. Jr..
Tucson, for real party in interest/appellee.
Tucson Unified School District No. 1.
Stoliin & JYE~SSP.. C. by Ronald J. Sbl-kin.
Tucson. ior rea! party in interest/ag
pellee, Pima County Community College
3. Municipal Corporrtions 6 9 0 7 District.
State's property tax increment scheme
cnder the slum clarance and redevelop OPINION
ment law urtu unconstitutional under con- . -
sr~rutional provision requiring that ques- HATKAWAY, Chief Judge.
:.dns upon bond &ua or speciaI assf=- In this appeal. we rn faced with the
r e n t s be submitted the vote of affected question of the constitutionality of Anto-
~ sprlop erty tax payers. since tax incre- na.3 property UX increment financing
n r n t provisions allowed pledge of proceeds scheme under the slum clearance and rede-iroma
d taxation pay off munic- velopment law, .J.R.S. h.3 61371, e t w.
1?3l property tsx increment bonds, and Our legislaturn has defined a method of
>.nee an election was required even if p r ~ - redevelopment of slum or blighted area
;used i n m w in indebtedness would not within municipalities. After a finding of
\lolate constitutional debt limibtions. ncccvsity h a btvn made by the gov-
.t.R.S. 5 315-1471 et 9.A:.R.S .Const. Art. erning body, a slum clearance anc d e v e l -
7 , 5 13. opment commission may be formed to prv-
CITY OF TUCSON v. CORBIN
Cite 8s 128 Arlz. SJ (App.)
pare a redevelopment plan.' A municipali- project area.2 Redevelopment projects may
ty is given broad powers of eminent domain be financed by municipal bonds, and, since
and disposal of property in a redevelopment 1977, by property tax increment bonds?
1. A.R.S. Secs. 36-1473. 36-1476. 36-1479. B. Any redevelopment plan may contain a
property tax increment provision under
2. A.R.S. Secs. 36-1478. 36-1480. whlch taxes. if any, levled upon taxable prop
3. A.R.S. Sec. 36-1481 provides in pan: erty in a redevelopment project area each
"Issuance of bonds year by or for the benefit of any taxing agen-
A. A municipality may issue bonds in its cy after the date the local governing body
discretion to finance the undertaking of any approves the redevelopment plan. including
redevelopment project under this article. in- any amendments to such plan, incorporating
cluding the payment of principal and interest property tax increment provis~ons. shall be
upon any advances for surveys and plans for divided as follows:
redevelopment projects, and may also issue . 1. That portion of the taxes which would
refunding bonds for the payment or retire- be produced. taking into account any credit
ment of such bonds previously issued by it. or rebate against such tax levy or reduction
Such bonds shall be made payable, as to both in taxes to be collected, by the rate at which
principal and interest. solely from the in- the tax is levied each year by or for each
- come. proceeds. revenues and funds of the taxing agency upon the assessed value of the
municipality, including tax increment funds taxable property in the redevelopment
recelved pursuant to Sec. 361488.01, derived project area as shown upon the assessment
from or held in connection with its undertak- and tax roll used in connection with the taxa-ing
and carrying out of redevelopment tion of such property by such taxing agency.
projects under this article, . . . last equalized prior to the date on which the
B. The bonds and other obligations of the local governing body approved the redevelop
municipality issued pursuant to subsection A merit plan, shall be allocated and when
of this section are not a general obligation or lected shall be paid into the bds of the
general debt of the municipality, the state or respective agencies as taxes by or for
tahney mofu nitisc ippoalliittiyc,a lt hseu bsdtiavties.i onnos,r aanndy n eofi thietrs tphaeid t.a xiFngo r atgheen cpieusr poons ea llo of thalel-rt ing taxarees political subdivisions are generally liable for
them, nor in any event shall the bonds or levied by or for any taxing agency or agen-obligations
give rise to a general obligation or cies which did not include the territory in a
liability of the municipality, the state or any redevelopment project area on the date of
of its political suMvisions. or a charge approval of the redevelopment plan by the
against their general credit or taxing powers. local governing body, but to which such teni-or
be payable from any funds or properties has been annexed Or Otherwise
other than those funds or properties specifi- such date, the assessment and tax
cauy described in subsection A of this -ion of the county last equalized on such date
and those bonds and obligations shall so shall be used in determining the assessed
state on their face. Bonds issued under this valuation of the taxable property in the
section shall not constitute an indebtedness project area on such date.
within the meaning of any constitutional or 2. That portion of the levied taxes each
statutory debt limitation or restriction. year in excess of such amount shall be all*
Bonds issued under the provisions of this cated and when collected shall be paid into a
article are declared to be issued for an essen- special fund of the municipality to pay the
tial public and governmental purpose, and principal of and interest on loans. monies
together with interest thereon and income advanced to or any indebtedness. incurred by
therefrom. shall be exempted from all taxes." such municipality to finance or refinance, in
whole or in part. such redevelopment project
"Property tax increment: redevelopment Unless and until the total assessed valuation
plans of the taxable property in a redevelopment
A. In this section. unless the context other- project area exceeds the total assessed value
wise requires: of the taxable property in such project area
1. Taxes' includes all levies on an ad va- as shown by the last equalized assessment
lorem basis on land, real property. personal and tax roll referred to in paragraph 1 of this
property or other property not otherwise ex- subsection all of the taxes levied and collect-empted
from such levies by the constitution ed upon the taxable property ~n such redevel-or
statutes of this state. opment project area shall be paid into the
2. Taxing agency' means any city, includ- funds of the respective taxing agencies.
ing charter city, town, county or school dis- When such loans. advances and indebted-trict,
including common school districts, uni- ness, if any. and interest thereon. have been '
fied school districts. high school distncts and pald, all monies thereafter received from tax-community
college districts. es upon the taxable property in such redevel-
86 128 ARIZONA REPORTS
The concept of tax increment financing
originated in California in the early 1950's.'
As a result of increasing difficulties in se-curing
federal funding for redevelopment
projects, use of this financing technique has
increased, particularly over the last 10
years. Arizona's statutes are very similar
to those of many other states which have
adopted tax increment financing. These
statutes do not require voter approval prior
to issuance of tax increment bonds.
In a typical project utilizing tax incre-ment
financing, the redeveloping municipal-ity
finances its activities by issuing bonds to
be repaid from future tax increments for
the duration of the project. The assessed
valuation of the property within the rede-velopment
area is determined as of a partic-ular
date. This is referred to as the "frozen
base value" or "base year assessed value."
After the bonds are sold and redevelopment
occurs, the assessed valuation of the project
property generally rises, which results in
additional ad valorem tax revenues from
that area The difference in revenues re-ceived
before and after the redevelopment,
the "tax increment," is paid into a special
fund and applied to repayment of the tax
increment bonds. Only revenues above and
beyond what would have been collected
from the property owners under the base
year assessed valuation are diverted into
the repayment fund. When the bonds are
fully repaid from the captured increments,
the allocation to the special fund termin~tes
and the full taxes are disbumed to the
respective taxing authorities?
opment project area shall be pud into the
funds of the respective tudng agencles as
tkxes on all other property ue pud"
4. Cal.Huith & Safety Code Sec. 33670 (West
1973).
5. "Thfs o v d pmceu provides local govern-menu
with a flexible funding source for redc
velopment activity that avoids much of the
red-tape and delay usocrated wth grant pro-grams.
Ln some states. TIF [tax Increment
f i ~ n a n g d] so avo^& the constraints of vot-er
approval and municipal borrowng or debt
llmtatloru. However. these advantages In
administrative flexibility and circumventrng
local politid pressure creates greater poten-tial
for abuse by &velopment offic~als.p ar-
In October 1977, the Tucson City Council
adopted Resolution No. 10347, authorizing
the issuance of $1.5 million of tax increment
bonds for the Pueblo West Redevelopment
Project. Pursuant to A.R.S. Sec. 36-1484,
the proposal was submitted to the attorney
general for certification. The attorney
general refused to certify the bonds, stating
that "the bonds authorized by the City for
issue would not be issued in accordance
with the Constitution and laws of the State
of Arizona." The attorney general listed 12
reasons for his conclusion.
The city then filed the instant action
against the attorney general and the three
other taxing authorities affected,' request
ing a special order directing the attorney
general to certify that the Pueblo West tax
increment bonds could be issued. The trial
court ruled that the bonds were invalid and
that the tax increment statutes adopted by
the legislature were unconstitutional as cre-ating
a debt without an election in violation
of Ariz.Const. art. 7, Sez 13, as well as
creating a "new tax" in violation of sections
3, 6 and 9 of article 9 and section 13 of
article 4, part 2 To facilitate appeal, the
trial court ruled in favor of the attorney
general on all the remaining issues.
Ariz.Const. art. 7, Sec. 13 provides:
"Submission of questions upon bond is-sues
or special assessments
Questions upon bond issues or special as-sessments
shall be submitted to the vote
of real property tax payers, who shall
also in all respects be qualified electom of
this State, and of the political subdivi-sions
thereof affected by such question."
titularly when projects appear economically
feasible without such public assistance.
(Footnotes omtted)" Dakdson, "Tax Incre-ment
Finanung as a Tool for Cornmwty
Redevelopment." 56 U.Dct.J.Urb.L 4Q5. 408
(1978). See also. Note. "Urbm Redevelop
rnent: Utilizaoon of T u Increment Financ-ing."
19 Washburn LJ. 536 (1980).
6. Appellees Pima County. Tucson Unified
School District No. 1 and Pima County Com-munity
College Distnct took no acuve part m
the case below and have filed no answmng
briefs ;n this coun. All thm pama have
agreed to abide by the decrsron of ths wun on
the briefs subrmtted.
The
issuanc*
consti::.
fects" ::
provisiq r
[l* 21
munici~
or spec
incurs i
v. Will.
For thi:
obligati
separat,
not req
issued. .
al restr
Guthrie
P.3d 65.5
increme -
revenue
ed in W-the
tax:
such bor
obligatic
and "sr..
within t
statutor-
Further
are plac
bonds a:
taken b~
the incre
ing fmr:
redeveir
under tr.
al fund:
event $2;
ever co.
low anc
valorem
propert!
are that
in the f
value of
in the f::
[3] x
cital tha
stitute L
Const. a:
transact:
CITY OF TUCSON v. CORBIN
Cllc as 128 Ark 83 ( A m )
87 (
The question before us is whether the called. City of Phoenix v. Phoenix Civic
issuance of property tax increment bonds Auditorium & Convention Center Ass'n. 99
a debt of the city which "af- Ariz. 270, 408 P.2d 818 (1965), reh. 100 Ariz.
fects" it, requiring an election under this 101, 412 P.2d 43 (1966). The Phoenix Civic
Auditorium opinions are particularly in-
[I, 21 It has long been established that a structive on the issue before us. In that
municipality is not affected by a bond issue case, a lease-back agreement under which
or special assessment when it in no way the City of Phoenix was to condemn land
incurs liability for payment. City of Globe and lease it to a nonprofit association.
v. Willis, 16 Ariz. 378, 146 P. 544 (1915). which would construct a civic center and
For this reason, municipal revenue bonds or rent the land back to the city, was held to
obligations payable out of a special fund create a debt upon the city exceeding the
separate from the city's general funds do constitutional debt limitation. The su-not
require an election before they may be preme court stated that the issuance of
issued, and are not affected by constitution- bonds which are not payable from general
a1 restrictions on municipal indebtedness. funds but solely from revenues of an inde-
Guthrie v. City of Mesa, 47 336, 56 pendent revenue-producing -t or utility
P.2d 655 (1936). The city contends that tax dws not constitute a debt of the municipali-increment
bonds into the category ty, but that the lease-back terms amounted
revenue or special fund obligations describ- to a purchase agreement which made
ed in Willis and Guthrie. It points out that general taxing power of the the real
the tax increment statutes provide that for the debts.w On rehearing, the
such bonds not give rise to a general court held that if the lease was amended to
obligation or liability of the municipality provide that the proceeds of ad
and "shall not constitute sn indebtedness taxes could not be subjected to papent of
within the meaning of any constitutional or rent, the lease would not violate the A r b
statutory debt limitation or restriction." na Constitution.
Further, the city argues, the tax increments
are in a special fund to pay off the The key constitutional infirmity in A&
bonds and that the only obligation under- "a's tax k r e m e n t statutes is that they
taken by the city is to collect and pay over allow the pledge of proceeds from ad v a l e
the incremental tax revenues, if any, result- rem taxation to pay off municipal property
ing from any increased valuation within the tax increment bonds. Even though the in-redeve!
opment project area. We agree that cremental tax revenues are placed into a
under the statutory scheme the city's gener- special fund, the "special fund" doctrine of
a1 funds would not be liable even in the City of Globe v. Willis, supra, arid Guthrie
event that no incremental tax revenues are v. City of Mesa, supra, does not remove
ever collected. The parties stipulated be- these bonds from the category of obliga-low
and it appeam uncontradicted that ad tions which must be approved by the vote=
valorem taxation presently affects the under our constitution. Our supreme court
property in question, that the probabilities has addressed the special fund doctrine by
are that such taxation will continue to exist quoting at length from a Washington Su-in
the future, and that the fair market preme Court opinion, State ex rel. Wash-value
of the property will probably increase ington State Finance Committee v. Martin,
in the future. 62 Wash.= 645, 384 P.2d 833 (1963):
[3] Notwithstanding the legislature's re- " 'That the special fund doctrine is a use-cital
that tax increment bonds do not con- ful and valid tool of government is appar-stitute
a debt within the meaning of Ariz. ent when one thinks of all of the institu-
Const. art. 7, See. 13, we must look to the tions and devices of government s u p
transaction for what i t is, and not what it is ported by it. But the true test of its
7. A.R.S. Sec. 3&1481(B). See footnote 3. su-pra.
88 128 ARIZONA REPORTS
application here is not what comes out of
the fund, but what goes into it. If the
revenues in it derive exclusively from the
operation of the device or organ of
government financed by the fund, as in
the case of a toll bridge, or the operation
of the State Liquor Control Board, or
from sales or leases of publicly owned
lands, any securities issued solely upon
the credit of the fund are not debts of the
state, but debts of the fund only. But if
the state undertakes or agrees to provide
any part of the fund from any general
tax, be it excise or ad valorem, then secu-rities
issued upon the credit of the fund
are likewise issued upon the credit of the
state and are in tNth debts of the state.
Hence, we must take care that the em-ployment
of peripheral doctrines do not
lead us away from the main point of the
case. What is a debt of the State of
Washington? Any obligation which must
in law be paid from any taxes levied
generally is, we think, a debt of the state.
It matters little whether the tax be ad
valorem or an excise.'
* 0
We agree with the Washington court that
where the bonds are payable only from a
con~titutionallya uthorized fund, which is
separate and distinct from the State's
general revenues, the bonds thus funded
are obligations of the special fund and
not of the state." Arizona State High-way
Commission v. Nelson, 105 Ariz. 76,
So, 459 P2d 509, 513 (1969).
See also, Tucson Transit Authority, Inc. v.
Nelson, 107 Ariz 246, 485 P.2d 816 (1971).
Despite the presumption in favor of the
constitutionality of a legislative enactment
and our duty to view any attack in favor of
the validity of the statute, New Times, Inc.
v. Arizona Baud of Regenh, 110 Ariz. 367,
519 P2d 169 (1Y74), we are constrained to
hold that the provisions of our slum clear-ance
and redevelopment law which autho-rize
tax increment financing in its current
form are unconstitutional as violative of
ArizConst. art. 7, Sec 13. The Supreme
Court of Kentucky reached the same result
in Miller v. Covington Development A u-thorit-
v. 539 S.W.2d 1 (Ky.1976), stating that
ad valorem taxes cannot be put in the "spe-cial
fund" category, and that any obligation
payable from ad valorem taxes is a debt
The Supreme Court of Iowa, while holding
that state's tax increment statutes constitu-tional
on due process and other grounds,
also held that property tax increment bonds
must be treated as a municipal debt obliga-tion:
"The purpose of Sec. 3 [Iowa's constitu-tional
debt limitation, similar to Ariz
Const. art. 9, § 81, as indicated by the
special assessment and revenue bond
cases, is to prevent the general taxes of a
political subdivision from becoming over-burdened
by obligations. The taxes
which will be used to pay the proposed
urban renewal bonds and interest will be
general taxes. This is not a case of a
special assessment tax which wss never
intended to be used, and could not be
used, to meet other expenses of the city.
Nor is this a case where the bonds rn to
be paid from the operating revenues of a
municipal enterprise which generates in-come.
such as a power plant
Ultimately the 'credit' of a city is its
power to levy general taxes. When it
pledges all or part of that power, it
pledges its credit and in a realistic sense
incurs an obligation. We think the bonds
must realistically be treated as a debt for
the purposes of Sec. 3.
Clearly the urban renewal bonds would
constitute a constitutional debt if they
were payable from the general revenues
of the city without limitation. We think
the result is not different because Sec
403.19 canes out a certain portion of a
city's general revenues and limits the lia-bility
of the city to those revenues. If
the result were otherwise, a city could
divide its general revenues into several
special funds, each with a bond issue re-stricted
to recourse against its own
fund-and thus commit large portions of
the city's revenues without regard to Sec
3. The constitutional debt limitation
could thus be virtually nullified." Rich-ards
v. City of Muscatine, 237 N.W.2d 48.
64 (Iowa 1975)
141 We
election mi.
electon of
given a VOIL
proposed ex
pledges their
er. An elec
proposed incr
violate con
Ackerman rf.
(1952); see .
Corp., 540 P.:
J., dissentinF
We have
statutes of or
case law inte
find no autho
conclusion. T
- have not k
grounds in th.
is significanr
state which i:
nancing, an:
such financ!
tion provision
The trial cc
stant bond is-.
ment financir,
k.36 -1481
tional under A
do not addre
raised by cour
survive this
Affirmed.
HOWARD c
STATE v. ROBLES
Cltc u 128 Arlt (IS (Am)
89
[4] We perceive another reason why an 623 P.2d 1245
must be held in this instance. The The STATE of Arizona, Appelkt,
electom of the affected district shall be v.
given a voice in accepting or rejecting a
ororx>sed expenditure which ultimatelv
John ROBLES, Appellant.
r .
pledges their district's general taxing pow- No. 2 CA-CR 1998-2.
er. An election is required even if the Court of Appeals of Arizona,
proposed increase in indebtedness would not Division 2.
violate constitutional debt limitations.
Ackerman v. Boyd, 74 Ariz. 77, 244 P.2d 351 Dec. 23, 1980.
(1952); see also, Tn;be v. Salt Lake City Rehearing Denied Jan. 14, 1981.
Corp., 540 P.2d 499 (Utah 1975) (Henriod, C. Review Denied Feb. 3, 1981.
J., dissenting).
We have reviewed the tax increment
statutes of other jurisdictions together with
case law interpreting these provisions and
find no authority which dictates a different
conclusion. The majority of these statutes
have not been attacked on constitutional
grounds in their respective jurisdictions. It
is significant to note that California, the
state which first adopted tax increment fi-nancing,
amended its constitution to allow
such financing in the face of its debt limita-tion
provisions. Cal.Const. art. 16, Sec. 16.
The trial court correctly declared the in-stant
bond issue invalid and the tax incre-ment
financing scheme set forth in A.R.S.
Sea. 36-1481 and 3&1488.01 unconstitu- -
tional under Ariz.Const. art. 7, Sec. 13. We
do not address the additional objections
raised by coensel since the statutes do not
survive this initial constitutional barrier.
Defendant was convicted in the Superi-or
Court, Gila County, Cause No. 6797-A,
Lloyd Fernandez, J., of aggravated assault
and he appealed. The Court of Appeals.
Hathaway, C. J., held that: (1) jury was
properly instructed to consider effect of
voluntary intoxication upon defendant, and
(2) trial court was properly permitted to
use, as factors in aggravation, fact that
there was a threatened infliction of serious
injury, and that there was a dangerous
instrument or deadly weapon involved.
Affirmed.
1. Criminal Law -774
In prosecution for aggravated assault,
jury was properly instructed to consider
effect of voluntary intoxication upon de-fendant.
A.R.S. $5 13-105. subd. 5, 13-503,
13-1203, SUM. A, par. 2, 13-1204, sub& A,
Affirmed. par. 2
2. Criminal Law -9862(1)
HOWARD and RICHMOND, JJ., concur. Trial court, in sentencing for aggrava-ted
assault, properly used as factors in ag-gravation
that there was threatened inflic-tion
of serious injury and that there was a
dangerous instrument or deadly weapon in-volved.
A.RS. $5 13-105, subd. 5, 13-503,
13-1203, subd. A, par. 2, 13-1204, subd. A,
par. 2.
Robert K. Corbin. Atty. Gen. by William
J. Schafer, 111, and Georgia B. Ellexson,
Asst. Attys. Gen., Phoenix, for appellee.
Sevrin J. Huselid, Globe, for appellant
APPENDIX 3
SENATE CONCURRENT RESOLUTION 1010
REFERENCE TITLE: tax i ncrernent financing
STATE OF ARIZONA
37th LEGISLATURE
2nd Regular Session
S E N A T E Referred on February 5, 1986
L
S.C.R. 1010
Introduced
February 4, 1986
*
Rul es
Government
Finance
Introduced by Senator Lunn
A CONCURRENT RESOLUTION
PROPOSING AN AMENDMENT TO THE CONSTITUTION OF ARIZONA RELATING TO PUBLIC DBT,
REVENUE, AND TAXATION; PROVIDING FOR TAX INCREMENT FINANCING PLANS IN
CITIES AND TOWNS; PRESCR IBING PROCEDURES, CONDITIONS AND LIMITATIONS;
PROVIDING FOR SONDS AND OTHER EVIDENCES CF INDEBTEDNESS; PROVIDING FOR
EXEWTION FROM DBT, LEVY AND EXPENDITURE LIMITATIONS; PROVIDING FOR
EXEMPTION FROM ELECTION REQUIREMENT FOR BONDS, AND AMENDING ARTICLE IX,
CONSTITUTION OF ARIZONA, BY ADDING SECTION 22.
Be i t resolved by the Senate of the State o f Arizona, the House of
Represent a t i ves concurri ng:
1. The following amendment of a r t i c l e IX, Constitution of Arizona,
by addirig section 22, is proposed to becune valid when approved by a
rnajori t y of the qua1 i f i ed el ectors voti ng thereon and upon procl m a t i on of
the aovernor: 4 22. Tax increment financing
SECTION 22. A. THE LEGISLATLRE MY PROVIDE FOR THE
EXERCISE BY CITIES AND TOWNS OF TAX INCREMENT FINANCING POWERS
AUHORIZED BY THIS SECTION AND MAY ENACT LAWS TO AUTHORIZE AND
REGULATE SUCH FINANCING, INCLUDING ANNEXATION AND OTHER
TERRITORIAL ADJUSTMENTS.
B. A CITY OR TOWN WY ADOPT TAX INCREMENT FINANCING
PLANS TO APPLY TO REDEVELOPMENT AREAS AS DEFINED BY LAW WITHIN
ITS BOUNDARIES. A PLAN MY ALLOCATE TO THE CITY OR TOWN ilLL OR
PART OF THE PROPERTY TAXES LIMITED UNDER SECTION 18 OF THIS
ARTICLE WHIG4 ARE LEVIED BY THIS STATE OR ANY TAXING
JURISDICTION ON PROPEXTY IN A TAX INCREMENT FINANCING PROJECT
AREA AND ATTRIBUTABLE TO INCFiEASES IN THE ASSESSED VALUATION
OF THE PROPERTY ABOVE THE LIMITED ASSESSED VALUE OF T3E
PROPEXTY 1!4 A SASE YE,4R. THE 3PSE YEAR S'it4LL NOT BE ANY YE.AR
BEFORE THE YEAR IN WHICH THE PLAN IS ADOPTED. IF THERE IS NO
INCREASE IN THE LIMITED ASSESSED VALUE UNDER SECTION 18 OF
T H I S ARTICLE OF THE PROPERTY IN THE TAX INCREMENT FINANCING
PROJECT AREA ABOVE THE TOTAL LIMITED A S S E S S E 3 VALUE Fg!? THE
BASE YEA2, NO AMOUNT MAY BE ALLOCATED TO A CITY OR TOWN AS TAX
INCREMENT MONIES. PROPERTY TAXES LIMITED UNDER SECTION 18 OF
T H I S ARTICLE WHICH ARE ALLOCATED TO A CITY OR TOWN BY A TAX
INCREMENT FINANCING PLAN, WHEN COLLECTED, SHALL BE PAID TO THE
RESPECTIVE CITY OR TOWN. ALL OTHER TAXES, WHEN COLLECTED,
SHALL BE PAID TO THE RESPECTIVE TAXING JURISDICTION WHICH
LEVIED THE TAXES. AT SUCH TIME AS ALL COSTS AND EXPENSES
INCURRED IN CONNECTION WITH A PLAN HAVE BEEN PAID, NO FURTHER
TAX INCREMENT FINANCING ALLOCATION RELATING TO THAT P U N M Y
BE M4DE.
C. A TAX INCREMENT FINANCING PL4N W Y PROVIDE FOR
ISSUING BONDS OR OTHER OBLIGATIONS TO FINANCE OR REFINANCE ALL
OR PART OF A TAX INCREMENT FINANCING PLAN AND PROVIDE FOR THE
IRREVOCABLE PLEDGE OF TAX INCREMENT MONIES TO PAY THE DEBT
OBLIGATIONS AND FOR USING THE MONIES FOR DIRECT PAYMENT OF
P U N OBLIGATIONS. TAX INCREMENT MONIES PAID DIRECTLY OR FROM
BONDS OR FROM OTHER DEET SOURCES M4Y BE EXPENDED BY C I T I E S AND
TOWNS FOR CAPITAL EXPENSES, LAND ASSEMBLAGE, ADMINISTRATIVE
EXPENSES DIRECTLY RELATED TO A REDEVELOPMENT PROJECT, EXPENSES
INCURRED IN CONNECTION WITH AUTHORIZING AND ISSUING BONDS OR
WITH INCURRING OTHER DEBT OBLIGATIONS AND SUCH OTHER PURPOSES
AS THE LEGISLATURE AUTHORIZES.
D. TAX INCREMENT MONIES ALLOCATED BY A TAX INCREMENT
FINANCING PLAN SHALL BE EXCLUDED IN COMPUTING A C I T Y ' S OR
TOWN'S LIMITATION ON AD VALOREX TAXATION PURSUANT TO SECTION
19 OF MIS ARTICLE.
E. THE EXPENDITURE LIMITATION PRESCRIBED BY SECTION 20
OF T H I S ARTICLE DOES NOT APPLY TO THE ALLOCATION, PAYMENT OR
EXPENDITURE OF TAX INCREMENT MONIES.
F . BONDS ISSUED OR OBLIGATIONS INCURRED PURSUANT TO A
TAX INCREMENT FINANCING PLAN:
1. DO NOT CONSTITUTE AN INDEBTEDNESS FOR PURPOSES OF
THE DEBT LIMITATIONS PRESCRIBED BY SECTION 8 OF T H I S ARTICLE.
2. ARE NOT SUBJECT TO SUBMISSION TO A VOTE OF QUALIFIED
ELECTORS PURSUANT TO ARTICLE V I I , SECTION 13, BUT T H I S
PARAGRAPH DOES NOT P R O E I B I T THE GOVERNING BODY OF A CiTY OR
TOWN FROM S U B M I 7 l I N G ANY QUESTION RELATING TO ISSUING SUCH
BONDS TO A VOTE OF THE QUALIFIED ELECTORS OF THE CITY CR TOWN.
2. T h e p r o p o s e d a m e n d m e n t ( a o p r o v e d by a m a j o r i t y of t h e m e m b e r s
elected to e a c h h o u s e of t h e l e g i s l a t u r e , a n d e n t e r e d u p o n t h e r e s p e c t i v e
j o u r n a l s t h e r e o f , t o g e t h e r w i t h t h e ayes a n d n a y s t h e r e o n ) s h a l l be by t h e
secretary of state s u b m i t t e d t o t h e q u a l i f i e d electors a t t h e n e x t r e g u l a r
g e n e r a l e l e c t i o n , or a t a special e l e c t i o n called for t h a t p u r p o s e , as
p r o v i d e d by article XXI, C o n s t i t u t i o n of A r i z o n a .
For Caucus d Floor Aczion
-, - , .+.+ --1 - *. If
( ] l i ~ r C o m n i t r e e o n ~ '; :-y- .r. i/ 1s passed by the Senate
FACT SHEET FOR S.C.R. 1010
Tax increment financing
S.C.R. 1010 proposes a constitutional amendment to authorize the use of
tax increment financing by cities and towns.
Tax increment financing is a mechanism which allocates a portion of
property tax revenues within the tax increment financing district to pay
the costs of development of the area within the district. That portion of
property taxes designated for the district is determined by establishing a -
base year in which property values are frozen for existing taxing jurisdic-tions
and any revenue resulting from valuation increases. above that base is
allocated to the district. Under S.C.R. 1010 only primary property values
are to be frozen.
S.C.R. 1010 allows for the issuance of bonds or other obligations which
are to be paid from tax increment revenues. The bonds issued under the tax
increments plan are exempt from the limitations on the bonded indebtedness
of cities and towns. The S.C.R. also specifies that tax increment revenues
are exempt from the levy and expenditure limits established in the
constitution.
Prepared by Senate Staff
March 3, 1986