The 2018 state legislative session that adjourned on May 4 was productive for Arizona’s commercial real estate industry as BOMA Greater Phoenix had a 5-0 record on bills on which it took a position.
The biggest joint victory for BOMA was a grand compromise on GPLET reform. A unanimous deal was struck between developers, cities, and tax watchdogs on the long-term retention of the 8-year property tax abatement and narrowing the application in the future to a capped land mass contained in a Central Business District (CBD) within a city.
HB2126 passed almost unanimously and was signed into law by Gov. Doug Ducey on April 17.
“BOMA provided lead testimony when this bill was heard in committee and participated in stakeholder negotiations led by Representative Vince Leach of Oro Valley throughout the fall and winter,” said Tim Lawless, Executive Director of BOMA Greater Phoenix. “The Arizona Multihousing Association, a key coalition partner with us, also played an instrumental role in advancing the compromise by proposing land mass percentage boundaries for a CBD rather than dwelling on subjective ‘slum’ and ‘blight’ definitions in the eyes of the beholder.”
Lawless said another victory for BOMA was on the education front with the passage of SB1390 which extended the soon expiring .6 percent state sales tax rate for K-12 education (originally Prop 301 passed in 2000) in order to get more resources of every dollar expended into the classroom. That bill was signed into law on March 26.
“BOMA/CREED were the only two commercial real estate groups to register in favor of the legislation,” Lawless said. “The fact that BOMA played a constructive role in getting more state resources into K-12 gives our industry credibility to be at the negotiation table as calls to raise taxes next year will only get louder and we need this seat to protect our industry and keep our economy growing.”
The third major victory for BOMA was support for reform of the property tax appeals system which now prohibits a tax court from making a ruling where the property tax assessment for a home or business can exceed what the county assessor was originally seeking. HB2385 was signed into law with an emergency clause on March 23.
BOMA also had a major victory by amending the archaic prime contracting law for MRRA especially as it relates to the tax treatment of alterations and improvements. SB1409 was originally written to exclusively benefit the cities and general/subcontractors at the expense of commercial real estate owners as it would have raised taxes on owners $50 million per year.
“AMA and BOMA fought this tax increase windfall and we struck a fairer compromise where the changes in TPT tax law will either be revenue neutral or a slight tax cut for owners,” Lawless said. “At the same time, it provides clarity and more simple compliance on alterations/improvements for general and subcontractors.”
This bill was passed the last night of session by wide margins and awaits the governor’s signature.
BOMA also shared a victory with the AMA on the last night of session by successfully opposing a major tax break proposed for selected elderly homeowners who would have their property tax rates slashed in half (10 percent assessment ratio reduced to 5 percent) at the expense of businesses who would bear the cost shift implications.
“Not only was this potentially a violation of the state constitution’s ‘uniformity clause’ of taxation, it would have established a poor precedent,” Lawless said.
The bill, SB1268, died with 11 votes in favor and 45 opposed and is now a good litmus test for future tax shift bills.
“Property tax shifts are a major impediment to solving the main economic development challenge facing Arizona in growing high wage jobs,” Lawless said. “The primary coalition of BOMA/CREED/AMA/ATRA along with the Arizona Chamber, NAIOP and Valley Partnership on selected issues was a very effective team in looking out for the bottom line this past legislative session and should continue next session as well.”
