You should receive your 2014 property assessments about the time this edition of the PRT hits the streets. Surprised at the assessed value of your property? Puzzled because your assessment went down but your taxes went up? Frustrated by a big jump in the assessed value of your raw land? Well, here’s the scoop.

Your property taxes are determined by the tax rates adopted annually by the County Board of Supervisors multiplied by the value of your property as determined by the County Assessor. The January PRT carried a story on tax rates; this article is about the assessment piece of the puzzle. Over the last couple of years, property assessments have been dropping. At the same time, tax rates have been increasing to cover the costs of public services. If they don’t get you one way, they’ll get you another!

Property Value

Santa Cruz County Assessor Felipe Fuentes is an elected official responsible for determining the value of your property for tax purposes. Like all other county assessors, he operates under laws passed by the Arizona State Legislature. The basis of the property assessment is a comparison of the value of your property with that of similar properties in your local market area. Property reviews are done on a three-year cycle. Homes are assessed on a cost basis: the Assessor’s Office determines the exterior square footage, considers the design and materials costs, and applies a market adjustment to estimate the full cash value. The market adjustment takes into account the average value of properties in the local area. According to Fuentes, it’s often about “location, location, location.” If your house is in Sonoita or Tubac, it probably will be assessed at a higher value than a comparable property in Rio Rico or Patagonia. Or, if your house is on the Mesa or in the Rail X Estates, it may be valued higher than the same house in “downtown” Patagonia.

Of course, there are complicating factors. The most troublesome is timing. The 2014 assessment you just received is applicable to your 2015 property taxes. That assessment was based on property reviews done, on average, 18 months ago. This lag may or may not work in your favor for a given year, depending on whether the real estate market is moving up or down. Also, if you make major improvements that increase the value of your property, you may not see the impact on your assessment until one to three years later (depending on when your property is reviewed by the Assessor’s staff).

Another complication involves the state’s use of two property valuation measures—the full cash value and the limited cash value. Full cash value is the market value, updated every three years. It is used when computing property tax for voter-approved initiatives (like our Community College District). Limited cash value is computed using a state formula that defines the portion of the full cash value. It is used to determine property taxes that support general government services, such as police, courts, public health, and public education. By state law, the limited cash value can never exceed the full cash value. Our limited cash values in Santa Cruz County currently average 98% of full cash values.

Mobile/manufactured homes are valued differently, using the factory list price and a depreciation factor set by the state. If you own the land under your mobile/manufactured home, you can complete an Affidavit of Affixture, surrender your title, and have your home moved to the Real Property Assessment Roll. If you do not own the land, the home will be taxed as personal property.

The valuation of raw (also called vacant or undeveloped) land uses a market comparison based on costs, just like homes. However, the assessment process is more difficult because there are often few comparable properties in the local market area. Other land is classified as agricultural and assessed differently, using a formula based on the income generation of the property. In general, agricultural land’s assessed value is significantly less than raw land, so resulting tax bills will be lower.

Agriculture and Grazing

The Assessor determines whether a property qualifies as agricultural land on the basis of a complex set of regulations contained in the state Department of Revenue’s Agricultural Property Manual. Basically, the land must be at least 20 acres and be owned and/or leased for a legitimate agricultural business that operates successfully three out of every five years. The most common, and occasionally controversial, agricultural use in Santa Cruz County is grazing. To qualify, the land must have sufficient carrying capacity for livestock and must make a significant contribution to the overall ranching business of the landowner or lessee.

Pablo Ramos, Chief Deputy County Assessor for Santa Cruz County, described the state regulations as having “lots of loopholes” that allow landowners to secure the agricultural designation without contributing significantly to a legitimate business (the “rent a cow” strategy). Conversely, a number of property owners believe that the Assessor’s Office unfairly denies applications for agricultural status. In addition, owners of raw land may be surprised by a major jump in their property assessment several years after purchase. In many of these cases, the County Assessor removed their property from the agricultural designation when it was subdivided from a large ranch and sold for development. Because the County Assessor’s Office visits 25% of all the agricultural properties every year, it could be as many as four years before this change in assessment appears.

Inequitable Taxation?

Not surprisingly, not all property owners in Santa Cruz County believe that their assessments are fair and equitable. Are some property owners paying too little and some too much? A number of Sonoita residents have complained that they are carrying more than their share of the tax burden because the County Assessor has valued their properties higher to compensate for lower property values in other parts of the county. Others complain that too much land is inaccurately classified as agricultural, shifting more of the tax burden to residential property owners. No property owner agreed to be quoted on the record for fear of retribution in future property assessments.

So what if you don’t agree with the County Assessor’s valuation of your property? Fuentes strongly encourages property owners to call his office (520-375-8030) with any questions or complaints about their assessment. You can request an informal review of your property at any time during the year. If an error is found, a correction will be ordered that will impact your assessment in the next calendar year. There is also a formal Appeals Process available to property owners within 60 days of the release of annual assessments. The deadline for initiating appeals of 2014 assessments is April 29, 2014.

Ramos noted that in the last few years the number of appeals has dropped significantly in Santa Cruz County. This is probably because property assessments have been dropping in response to the depressed economy. He also said the majority of appeals are denied. You may be the exception, but know that the odds are not in your favor if you appeal.