Of the 10 issues identified by the NAIOP-AZ Board as top priorities, nine were resolved successfully at the State Legislature this session.
In a nutshell, we were able to stave off three property tax shifts to commercial real estate while advancing changes to two bills that protect taxpayer petition and disclosure rights and improve the property tax process. We also advanced two bills to the finish line where cities were poised to enact ordinances contrary to the smooth operations of business. Below is a synopsis of the bill number, short description, our position, and how the legislation ultimately fared in priority order. Most importantly, our Board was pleased Prop 123 was approved by the people in mid May as a way to infuse more resources into schools without raising taxes.
1. HB2130: Environmental Energy Usage Reporting in Commercial Buildings and City Preemption. (SUPPORT) This was re passage of the bill to bar cities from enacting energy usage requirements on landlords of commercial buildings or face misdemeanors and fines for non-compliance (SB1241) due to litigation brought by Tempe Councilwoman Lauren Kuby who objected to cities also being pre-empted from banning plastic bag usage in grocery stores in the same bill. NAIOP-AZ joined with numerous other trade associations and we provided lead testimony. Signed into law by the governor March 14, 2016.
2. SB1487: Shared Revenue Penalties for Cities that Flout State Laws. (SUPPORT) This bill was strongly supported by the Governor and the Senate President and was run as further leverage in passing HB2130 and saving us litigation costs due to the Kuby lawsuit. Signed into law by the governor March 17, 2016.
3. HB2440: Election Requirements for Municipal Improvement Property Tax Districts. (SUPPORT) This bill requires that municipal improvement taxing districts must obtain more than 50% support of property owners before proceeding with taxing authority. We provided key supporting testimony in Senate and championed support at the Arizona Chamber. Signed into law by the governor March 11, 2016.
4. SB1402: Class 6 Property Tax Treatment for Grand Canyon University and other For-Profit Higher Ed Institutions. (OPPOSE) This bill would significantly lower the tax bills of for-profit higher education entities and be a tax shift and therefore increase to our members. DO NOT EXPECT IT TO PASS as bill is stuck in House Rules at press time due to opposition from Realtors Assn. and Arizona Tax Research Assn. (ATRA).
5. HB2065/SB1519: Vision Screening in Schools. (SUPPORT) This bill positions NAIOP-AZ to support K-12 reform issues that have a high ROI to taxpayer by significantly improving student academic performance. NAIOP-AZ provided lead testimony in multiple committees. BILL DIED IN SENATE after passing the House with a bi-partisan vote of 45-13 due to amendments to take DHS out of an administrative oversight role.
6. SB1504: Donation Drop Boxes Required to Gain Private Property Owner Consent. (SUPPORT) We were part of a large coalition led by Goodwill Industries and supported by ICSC to protect private property rights of retail owners. Our contract lobbying firm, Veridus, was the lead. Signed into law by the governor March 24, 2016.
7. SB1306: County Impact Fee Reform Procedures. (SUPPORT) Bill mimics the impact fee reforms we enacted for cities a number of years ago led by the Home Builders. Signed into law by the governor May 18, 2016.
8. HB2693: Sales Tax Expansion and Income Tax Reduction. (MONITOR/OPPOSE) Bill did not receive a hearing and is therefore dead. We were concerned that a sales tax expansion could include commercial lease sales that would chill transactions. BILL DIED/NOT HEARD.
9. HB2538: Municipal Bonds and Property Tax Levies. (OPPOSED INITIALLY/NOW NEUTRAL) Original bill allowed cities to stockpile and over collect debt reserve funds levied on secondary property taxes which is not good for our members as the process lacks transparency and increases taxes. We provided slip of opposition in Senate and then ATRA got an amendment on Senate floor that requires more clarity when bonds are “defeased” or paid earlier than scheduled. Signed into law with favorable amendment by the governor May 18, 2016.
10. No Bill Number. Coyotes Arena/Hotel Sales Tax Increment Financing (TIF). (OPPOSED) A secret bill was drafted to place the Coyotes Arena in either Tempe, Phoenix, or Mesa that included a hotel and ancillary retail development that would receive unfair treatment through the recapture of sales tax revenue through TIF to help underwrite a bond sale. Given that we have at least six members who are planning to build hotels in Tempe alone, we are opposed to the State providing favorable tax treatment to both the hotel and retail but not necessarily the arena only. Given our opposition and from others, BILL DIED/NOT HEARD.
Our NAIOP-AZ Board was also gratified that Prop 123 passed on the May 17th special election ballot that will inject $3.5B more into K-12 schools over the next ten years from State Land Trust proceeds. Our organization was one of the top funders in favor of the proposition and supported the measure primarily because it was a way to provide more resources for schools without also raising general taxes.
In regards to next session, we are already planning to advocate a further reduction in the property tax assessment ratio used to calculate property taxes which is currently at 18% for all businesses. This burden is 1.8 times the property tax rate paid by homeowners. This move towards greater equity for all types of property owners will help us attract and grow more high wage jobs for the state and we will ameliorate the tax shift to homeowners by again toggling the homeowners rebate as we successfully did more than a decade ago when we first brought the assessment ratio from 25 percent to 20 percent and then more recently from that amount to now 18 percent for all businesses.
Tim Lawless is president at NAIOP-AZ.