June—2008

Assessor Budgets in Times of Economic Strife (The Real Meaning of Supply and Demand)

By Joe Wehrle, Yuma County Assessor

Mission Statement The mission of the IAAO is to promote innovation and excel-lence in property ap-praisal and property tax policy and administra-tion through profes-sional development, education, research and technical assistance.

Inside this issue:

Assessor Budgets in Times of Economic

1

ACIAAO Chapter Meeting Presentation Review

3

Editorial Section—Analog-to-Digital Tele-vision Broadcasting

4

Executive Board Meeting Minutes

6

Arizona’s Proposition 13: Should We Learn a Lesson from California?

8

July General Member-ship Meeting & Lunch-eon Announcement

10

Membership Form

11

Volume 2 - Issue 4

During my 31 years in the Assessor’s Of-fice I cannot remember, ever, having the Board of Supervisors declare that we were fiscally solvent and not in some form of economic crunch. When I was preparing the 1977-78 budget, it was announced that the County was facing a huge fiscal impact with the changes that had been made that year to the indigent health care system. I remember that we were looking at a $1 million cost for providing indigent health care services that was going to come directly out of the County General Fund and impact all of the departments. Since that time AHCCS has taken over much of the cost of indigent medical ser-vices, but Yuma County still spends over $9 million annually on the persons that do not qualify for the program.

Every year it seems that there is some other new mandate from the State or the Federal Government that consumes the amount of funds available for the Sheriff, or Recorder, or any of the other General Fund departments to fulfill their statutory duties. I have never been able to figure out why these programs receive priority over the established ones.

As we all know this current fiscal year, the State and most Counties over estimated the amount of revenue they were going to receive. The estimates were largely based upon the history of sales taxes paid by contractors on new construction. With the downturn in the new home market, the tax revenues were never realized and therefore it has been necessary for the state and local governments to either dip into their reserves, or trim their spending,

or some of both in order to stay in bal-ance. This next fiscal year looks to be a continuation budget with very few ex-panded programs.

In speaking with my fellow assessors at our last meeting, I found out that I was not alone in having a larger demand for services than I have a supply of budget authority to use. There has been less new home construction, but there has been an increase in re-models, add-ons, etc. Addi-tionally, Yuma County is now in a com-mercial new construction phase. Our workload has not decreased; it has only shifted from one type of property to an-other.

Despite this activity, our budget officers still are demanding that we cut our spending to assist the County through this economic slump. I think that most of the assessors in Arizona are team players and are quite willing to step up to the plate. However, the cost of taking one for the team might ultimately lose the game. In this analogy we have all seen what the effect has been on the rest of the State when Maricopa County Assessor’s Office did not have the sufficient amount of re-sources to ensure that property was timely enrolled.

While it seems it should be the obvious choice, cutting the Assessor budget is not the wisest thing to do during a slump in the real estate market. It is during this time that we get to “catch up” on a lot of the properties that have been underval-ued due to unreported or unpermitted improvements.

Continued on pg 3

A C I A A O

A r i z o n a C h a p t e r O f T h e I n t e r n a t i o n a l A s s o c i a t i o n o f A s s e s s i n g O f f i c e r s

Connecting Property Tax Professionals

Page 2

On May 5th, 2008 the local Arizona IAAO Chapter held a meeting at “1130 The Res-taurant” at the Arizona Center in Down-town Phoenix. Tim Boncoskey (ACIAAO president) announced the exciting news to everyone who were in attendance that the Maricopa County Assessor’s Office and the ACIAAO had formally committed to co-sponsoring the 2008 Arizona Tax Conference in Flagstaff in early fall. Tim gave a short PowerPoint presentation about the Conference and that there would be more information leading up to this awesome event, so stay tuned.

Next, Teresa Hamilton of Maricopa County Personal Property Audit Division introduced the guest speaker, William R. Fisher, Managing Consultant for Paradigm Tax Group, LLC. Mr. Fisher represents the television broadcasting industry and his presentation was on the Digital TV transition that is set to take place Febru-ary 17th, 2009. This transition will have a great impact on the television broadcast-ing industry. It is a federally mandated transition from analog to digital TV trans-mission and will affect the public, and especially the television broadcasting in-dustry.

He then described how approximately 15% of the population would be affected by the current transition, and that the affected people were those who used roof top TV antennas (or rabbit-ears) to pick up the transmission over the air waves. People that subscribe to cable or satellite TV will not be affected by the transition as the transmissions are already broad-cast digitally. Mr. Fisher further related that people who use antennas have an option in 2008 to apply for up to two $40 coupons per household for converter boxes from a federal government coupon program. The coupons will probably not cover the entire costs of the converter boxes. More information is available at https://www.dtv2009.gov/.

Mr. Fisher presented interesting facts re-garding the history of broadcast technol-

ogy. He spoke of the first analog signal broadcast as early as 1870. He explained how black and white TV’s had only 525 lines of resolution and of the changes to color TV in 1953, and the historically sig-nificant first video tape machines in 1956.

This was all very interesting and informa-tive from Mr. Fisher, but what did it have to do with Assessment and Appraisal? Mr. Fisher began explaining his opinions on how this analog-to-digital transition has affected the TV stations personal property valuation (and other users of this broadcast equipment technology). He first explained how this was a federal regulation, and that the broadcast com-panies had no choice but to comply and endure extreme economic impact. He stated that both types of transmissions had to be maintained during the transi-tion period at considerable expense. Next, Mr. Fisher spoke of the obsoles-cence to the previous equipment and how $42 million in usable assets had been turned into $215,000 in salvage prod-ucts. He also mentioned the relatively small market for broadcast equipment, and how in many cases there were dis-posal fees involved for the toxic equip-ment. Finally, Mr. Fisher made his case that current technologies were changing rapidly, and that current obsolescence and depreciation schedules needed to be re-evaluated. He felt that with a common sense approach by both sides, that a rea-sonable consensus could be attained.

Mr. Fisher gave an informative presenta-tion, from both practical and business standpoints. He used humor and history to keep listeners involved, and was a very good speaker. Sandie Savage, ACIAAO Treasurer, gave the conclusion and thanked Mr. Fisher, as we all wish to do, for an interesting and educating after-noon.

The following Editorial gives another perspective of the topic.¤

ACIAAO Chapter Meeting Presentation Review (5-20-08) By Joe Walters

“A message came back from the great be-yond, there's fifty-seven channels and nothin' on”

Bruce Springsteen

Wm (Bill) Fisher Managing Consultant Paradigm Tax Group,

LLC

Speaker

A Non-Profit Education and Research Association

During the months of November 2007 through May 2008, my office canvassed about two square miles and added $58 million in additional Full Cash Value to the rolls. Most of this was residential property and the value increases were less that the amount needed to kick in a Rule B calculation, however many of these properties’ Limited Property Value was equal to their Full Cash Value. So far, we have added $5.8 million in assessed value and that calculates to about a 0.4% in-crease to the Secondary roll.

At the rate my review team is working, they should be able to increase the roll by 1% for 2010. Based upon the 2008 pro-posed tax rates, they are generating $416,000 in revenue for the County, (not

to mention the school districts) that will force a reduction in the Primary and Sec-ondary tax rates. My total General Fund budget is about $1.9 million. So, the ef-forts of 3.5 FTE’s (11% of staff) produce annual revenue to the County that amount to about 22% of my budget. Not a bad return on investment.

As we all know, the economy runs in cy-cles. We have seen the real estate market rise and fall before. Arizona has always done a fairly good job of keeping the sup-ply of homes in line with the demand. From what I have observed, Arizona as-sessor offices have done tremendously well balancing the demand for services to the resources available to them.¤

Assessor Budgets in Times of Economic Strife (cont’d from page 1) By Joe Wehrle

Page 3

Volume 2 - Issue 4

Congratulations to Leighann Coates in CAMA!

Leighann won the drawing for the Reno

Conference registration fees!

Thanks to everyone who

participated. Leighann is pictured

here with her ‘Little Man’, Dante

Congratulatio

ns! Congratulations!

74th Annual

International IAAO

Conference

Reno, Nevada

September 7-10,

2008

“Reaching New Heights in

Professional Assessment”

Committed to Education

DID YOU KNOW? The IAAO has developed and implemented a program of professional designations intended to increase the professional competence of assessment personnel through education and are as follows:

Assessment Administration Specialist (AAS) Personal Property Specialist (PPS)

Certified Assessment Evaluator (CAE) Residential Evaluation Specialist (RES)

Cadastral Mapping Specialist (CMS)

Residential Evaluation Specialist (RES)

For more information or a candidacy application, please contact the Assistant Director of Professional Development, IAAO.

Page 4

Volume 2 - Issue 4

Arizona Association of Assessing Officers

&

2008 Property Tax Conference

Oct. 1 – Oct. 4, 2008

Little America

Flagstaff, Arizona

Present the

Committed to Education

What’s New?

Notice anything new about this month’s newsletter? If not, here’s a hint: The IAAO has a newly designed 75th Anniversary Logo, and the Arizona Chapter has provided a sponsorship to help celebrate the big event throughout the coming year. Part of the activities associated with the cele-bration include the making of a commemorative book which will be given to all members. This memorial resource will provide a rich historical refer-ence and will help define the role of assessors now and in the future. The IAAO is requesting any relevant historical material for inclusion in the Commemorative publication such as: • Photographs of Local Chapter activities

• Significant educational or professional accomplishments/designations

• Relationship with IAAO

• Memorabilia including old publications, newsletters, pictures, articles, etc.

Please submit any items you may want considered for publication to your local chapter. Email Sandie Savage at savages@mail.maricopa.gov for sub-mission instructions.

Page 5

First of all I must say that I was very pleased that the topic of the May meet-ing related to personal property, the area of my entry into the wonderful world of property valuation, and always my favorite subject. Even better, the turnout for the meeting was great, and filled the room. And last but not least, there was food, another favorite of mine!

The topic is highly relevant to today’s business community, a question of what to do when “big brother” intrudes, particularly in the case of television sta-tions which are required by federal mandate to convert from analog broad-cast to digital. The Federal government requires all TV stations to broadcast their programming over the air, and has also set a timetable requiring the stations to shift from broadcasting an analog signal to a digital signal. The problem is, most of us (including me) don’t receive our TV signals over the air, but from a cable provider, requiring a significant investment by the stations in equipment for a signal that will reach relatively few customers. Because TV stations earn the bulk of their income from selling advertising time, and the selling price of the advertising time is based on the number of expected view-ers, there is little or no income gener-ated by the “over the air” broadcast of TV signals because there are few view-ers of the “over the air” broadcasts.

All of this background is a lead in to the speaker’s main point: that the “over the air” broadcast equipment has little or no value because this equipment is required by the Federal Government and does not generate income to the TV station. I don’t know if this argu-ment has prevailed in other states, I suspect it has not been too successful as the speaker emphasized that “most

states get it wrong” when valuing this equipment.

Arizona is one state that “gets it wrong”, but here’s why I believe we get it right. The success of the speaker’s argument assumes the valuation of this equipment on the income basis. No income equals no value. OK, I did give this some thought, and on the surface it may make some sense, until you con-sider that without this equipment, there is no ability to operate a TV station. So, the entire income stream from all of the station’s operations is dependant on the broadcast equipment. That’s one of the problems with valuing per-sonal property on the income basis, it’s really hard to separate out the income from individual pieces of equipment and is most effective when valuing an entire unit, such as a production line in a factory.

Arizona statutes require that personal property be valued by the assessor us-ing acquisition cost less depreciation as prescribed by the department. Allow-ances may be made for excessive de-preciation, and property may never be valued over market value. The income approach is a valid method to examine whether property that is valued using the department’s tables is valued over market, however only in cases where an income stream can be directly traced to the personal property that generates that income.

There are many areas of business where “big brother” intrudes: pollution control, safety, and even the media. Equipment required by statute is not without value, in fact this equipment allows the business to continue to op-erate, and that right certainly holds a great deal of value.¤

EDITORIAL SECTION

Analog-to-Digital Television Broadcasting By Valerie Courtright, Research & Compliance Manager, DOR

A Non-Profit Education and Research Association

The speaker’s main point: that the “over the air” broadcast equipment has little or no value because this equipment is re-quired by the Federal Govern-ment and does not generate in-come to the TV station.

Attendees: Tim Boncoskey, Sandie Savage, Charles Krebbs, Doc Gillies, Tony Hagenstein, Jeff Law, Judy Bender, George Shook, Dawn Humphrey, Steve Barney .

ITEMS:

• Education—IAAO Class 300: Class scheduled for May 19-23, 2008. Twelve students enrolled, but have space for 20. Class is posted to IAAO website. Bad timing due to appeal season. Moratorium on classes pro-posed by Joe Propati from May to October.

• IAAO Class 400: Ron Gibbs is currently booked to teach in June 2008; however it will be re-scheduled for November 2008.

Training curriculum is currently set up at 4 classes per year to support a 2 year cycle for obtaining a designation. Education committee has iden-tified a need for continuing education, certification tracks and initial training. A suggestion was made to survey jurisdictions in the western United States to determine training needs. Other jurisdictions send stu-dents which help the chapter break even or make money providing classes.

• 2008 Tax Conference- Tim Boncoskey (and others)

1. Tax conference date changed to 10/01/08 to 10/03/08. Little Amer-ica in Flagstaff.

2. Communication is the key. Suggest E-mail blasts to advertise in advance and encourage attendance.

ACTION: Steve Barney to email attendees from last 4-5 years.

3 Confirmed Conference Sponsors to date: Thomson Accounting, Star-wood, Steptoe and Johnson.

4. Conference Sponsor Ideas:

ACTION: Doc to contact COSTAR

ACTION: Tim to reach out to Colorado CustomWare

ACTION: Dawn to locate previous lists of sponsors. Solicit gift baskets, etc.

5. Current Economic Climate Speakers Assignments;

ACTION: Tony H. 10-2-08, AM session 1 (Tony to secure speaker)

ACTION: Charles 10-2-08, PM session 2 (Charles to secure speaker)

ACTION: Joe W. 10-3-08, AM session 1

ACTION: Charles 10-3-08, PM session 2 (Charles to secure speaker)

6. ACTION: Doc to secure speakers & continuing education credit from DOR & Appraisal Board Continuing Education.

Executive Board Meeting Minutes—5/6/08 By Joe Walters

President: Tim Boncoskey Boncoskeyt@mail.maricopa.gov

Vice President: Judy Bender benderj001@mail.maricopa.gov

Secretary: Joe Walters jwalters@maricopa.gov

Treasurer: Sandie Savage savages@mail.maricopa.gov

ACIAAO P.O. Box 1788

Phoenix AZ 85001

Page 6

Volume 2 - Issue 4

To Contact Your Local

ACIAAO

Continued on pg 7

Connecting Property Tax Professionals

Page 7

Volume 2 - Issue 4

COMING SOON!

TO PHOENIX

Sponsored by

ACIAAO

IAAO Course 201:

Appraisal of Land –

October 2008

Executive Board Meeting Minutes—5/6/08 (cont’d)

7. ACTION: Steve Barney to see if DOR can act as the education pro-vider for the appraisal board to help contain costs and eliminate the two month period for education provider approval.

8. ACTION: Charles to try to establish accreditation with Department of Real Estate & Appraisal Board etc.

9. ACTION: George and Steve to help secure columnist/humorist. Need to know the cost for securing a sponsor.

10. ACTION: Tony H. to confirm and arrange transportation for Guy

Griscom speaker for 10-2-08 P.M. dinner.

11. ACTION: Tim to contact Harold Scott for Friday’s mock SBOE Hear-ing. ACIAAO will pay cost for SBOE attendees. Panel discussion – maybe Coconino?

12. ACTION: Doc to contact COSTAR for COSTAR Friday session, also. Saturday Doc to establish subject of one-day IAAO session by con-tacting Assessors. Doc to send COSTAR sponsor opportunity.

• Funds: Sandie to set up separate account (w/ Chris Mazon) for Tax Con-ference with remaining money go back to Tax Conference fund. Need to decide on one-day registration fee $125 - $150?

• IAAO Golf Workshop- Tony Hagenstein

Larry Clark IAAO Education Chair wants to confirm AZ will participate and provide instructor. We need to provide venue and students.

ACTION: Tony to check on golf course rates, workshop length, curricu-lum, costs.¤

Committed to Education

IAAO’s 2008 “We Grow Together” Contest Campaign to refer new members coming to a close soon! How To Enter: The “We grow together contest begins at 12:01 AM Central Time April 1, 2008, and ends 11:59 PM (CT) on June 30, 2008. Simply e-mail, fax or mail membership forms with completed referral line by deadline. Each new membership received qualifies the referring IAAO member to receive a limited edition IAAO “we grow together” ceramic mug and one entry in the “Member-Get-a-Member” drawing. All new recruits will receive a mug as well. New members can mail/fax in applications and the IAAO referring member will be credited as long as the referral line is completed on the application. Judging: Winners of the Garmin GPS and IAAO annual conference will be selected in a ran-dom drawing from all eligible entries on or about July 15, 2008 by IAAO whose decisions on all matters pertaining to the Contest are final. All prizes will be awarded. Odds of win-ning depend on the total number of eligible entries received. Winners will be notified by phone and/or mail. Winners may be required to sign an affidavit of eligibility (which af-firms that they have complied with these rules) as well as a liability release. Entry materi-als that have been tampered with or altered are void. Prizes:. (1) One Winner will receive a Garmin nuvi 250w ($264.99 value) (1) One Winner will receive one free registration to the 2008 IAAO Annual Conference in Reno, NV ($500 value). (3) Taxes on prizes are the sole responsibility of the winner. No prize substitution or transfer of prize permitted except by IAAO due to prize unavailability, in which case prize substitution will be of equal or greater value. By entering, participants agree to release and hold harmless the IAAO from and against any and all claims, actions and/or liability for any injuries, loss or damage of any kind arising from or in connection with participation in and/or entry into this contest or use of any prize won. For complete eligibility rules, go to www.iaao.org

In light of the recent formation of the Prop 13 Arizona movement, and con-sidering that our guest speaker for the July ACIAAO meeting will be speaking on California’s version of Prop 13 and the benefits and fallout of the legisla-tion, I thought it might be interesting to give a few highlights of such a proposition and what has historically been the outcome of this type of man-date.

First of all, the Prop 13 Arizona group has written a proposition that essen-tially mimics the characteristics of Cali-fornia’s proposition. The basic verbi-age in Arizona’s version of the legisla-tion states that Prop 13 will:

• Roll back valuations to 2003 assessed full cash value or purchase price after Decem-ber 31, 2003

• Cap total tax at 1/2 of 1% (.5%) for all residential prop-erty and 1% for commercial property and land

• Limit tax increases to 2% a year

• Eliminate speculative assess-ments and the need for as-sessment appeals

The primary concern of the Prop13 agenda seems to be the issue of tax-payers being able to ‘budget’ for their taxes, rather than fall victim to the whims of the market, especially when it is driven by speculative buying, as we recently experienced over 18 months ago. What is not readily evident in their ma-terial, however, is a solution to the problem of how the lost revenue will be generated for those items that are budgeted to be paid from property tax revenues. In the case of California’s

Prop 13, that revenue loss was to be made up by a varying mix of state funds and new revenue generated by ‘specialized’ local fees and taxes, as well as forced budget cuts. But guess who pays those new taxes and fees? Either directly or indirectly, the same consumers who want to reduce their property taxes by passing the Proposi-tion. In addition, the California legisla-tion proposed that any excess revenue generated by property taxes was to be returned to the taxpayers. But wouldn’t it have made more sense to allocate those excess revenues to pay the budgeted items that were to be cov-ered by ‘specialized local fees’? It just sounds like they’re moving the same money around and forcing the need to become ‘creative’ in how additional revenue is generated and allocated. The passing of Prop 13 in California initially slashed property tax revenue by 57%, thereby dramatically reducing the revenue base for local government and schools. Can you imagine reduc-ing Arizona’s property tax revenues by 57%? We are already facing a state-wide deficit. The passing of this proposition could potentially cripple our state and local governments, given a similar scenario, if there isn’t a plan in place to cover the gaping ‘hole’ left by lost property tax revenues. Another negative impact this piece of legislation has had in California is the inequity of the property tax burden it created. Because commercial proper-ties turn over less frequently than resi-dential property, the tax burden even-tually shifted to residential property owners. Prop 13 also diminished local taxing authority and shifted it to the state (since the state was now respon-sible for covering the deficit in reve-nues), and this left the local jurisdic-tions at the mercy of the state in deter-mining what their actual budgets would be. Another unfortunate back-lash was the

Arizona’s Proposition 13: Can We Learn a Lesson from California? By Sandie Savage

Page 8

Volume 2 - Issue 4

Continued on pg 9

AZ Chapter IAAO

July Meeting

The Gurley St. Grill In Prescott

July 25th

11:30 a.m. - 2:00 p.m.

Topic: Cause and

Effects of California’s

Proposition 13

Connecting Property Tax Professionals

Page 9

Volume 2 - Issue 4

DON’T FORGET !

COMING SOON

TO PHOENIX

Sponsored by

ACIAAO

IAAO Course 201:

Appraisal of Land –

October 2008

Arizona‘s Proposition 13: Can We Learn a Lesson from California? (cont’d)

unintended consequence of cities and counties promoting retail develop-ment over residential development in order to increase sales tax revenues to increase local government coffers. But because one of the “fixes” for the slash in property tax revenues was to increase corporate taxes across the board, it sent big companies fleeing to tax havens like Arizona and Texas. Resulting fallout for Arizona? Drastic increase in residential market prices when homes were snatched up like penny-candy by the re-locating popu-lation from California. Why sell your California home with a frozen prop-erty tax and buy another California home, knowing that the moment the ink dries on the loan, you’ve poten-tially increased your property taxes by thousands of dollars? The smart thing to do (and they did) is to take the money and run….to Arizona… and

pay cash for a home that’s half the price and twice as big. And that is exactly what happened. And where did that leave California? Keep reading… In a Los Angeles Times article dated February 21, 2008, legislative analyst Elizabeth Hill has called on lawmakers to raise taxes by at least 2.7 billion to help cover California’s deficit that has now swollen to over $16 billion. Arizona may want to learn a hard-earned lesson from a state that is scrambling to keep its head above the water, before it so easily embraces a ‘quick fix’ in nearly frozen property taxes. You can read more on Ari-zona’s version of Prop 13 at: http://prop13arizona.com/ ¤

Committed to Education

NEWS YOU CAN USE…...

Need to find out if that Single Family residence has a 2-Car carport or a 2-Bay garage but you just can’t justify driving out to the property yet? Wondering if that Commer-cial building is one-story or more? What about determining whether or not that add-area is enclosed, or just an additional covered patio? Is it an above-ground pool or in-ground? You might want to check out Microsoft’s Virtual Earth site that can help an appraiser answer these simple questions before setting up a field check. Take a look….. http://maps.live.com Type in the property address, click on Bird’s Eye View and zoom in until you see what you need. See screen shot below.

Prescott is Hosting the AZ Chapter IAAO July Meeting On Friday, July 25th Lunch, 11:30 a.m. to 2:00 p.m. at the

The Gurley St. Grill, 230 W. Gurley St. Cost: $13.00 includes lunch & beverage

Speaker: Mark Winters* of Orange County, CA Topic: Cause and Effects of California’s Proposition 13

*an additional guest will be on hand to answer questions about the possible impact in Arizona Accommodations: (on your own for your convenience) Hotels in the area: (Government Rates Available) Hampton Inn 928-443-5500 Holiday Inn Express 928-445-8900 (both are near the mall and Costco) Residence Inn 928-775-2232 Downtown Favorites: (No Government Rates Available) Hassayampa Inn on Gurley 928-778-9439 Marriott Springhill on Sheldon 928-776-0998

RSVP by to: Sandie Savage: savages@mail.maricopa.gov with your choice of entrée: Chicken Salad Sandwich, Caesar Salad, Cajun Chicken Pasta, or Pot Roast Sandwich. All entrees except pasta dish include a side plus beverage, bread, tax & gratuity.

A C I A A O Arizona Chapter Of The International Association of Assessing Officers

New or Renewal Membership Form

Annual Membership Dues:

ACIAAO Chapter Membership Dues $20.00

Please fill out the following information in order for us to keep your contact information up to date.

Date:

Name:

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Organization:

Address:

City: State: Zip:

Telephone Number:

Fax Number:

E-mail:

Check here if this is new contact information

Check here if you are a National Member

Return completed form with payment to:

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P.O. Box 1788

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