Tempe tax rate up, but bills stay the same

Tempe homeowners who open their next property tax statement could suffer sticker shock when they see their rate has climbed about 28 percent.

But perhaps just as shocking is they'll probably pay the same as this year - or even less.

This is the result of a new approach to property taxes in Tempe.

Rather than have tax bills spike when values soar or plummet along with falling home prices, the city is stabilizing the bottom line for homeowners. The exact amount will vary with each homeowner's valuation, said Ken Jones, Tempe's finance and technology director.

"You might be a little bit less and you might be a little bit more," Jones said. "But on average, all the property from which we collect property tax will pay less."

Tempe's tax rate for several years has been $1.40 per $100 of assessed valuation. For the median Tempe home value of $149,500, that translates to $267.60 a year.

The City Council raised the rate to $1.79 after seeing home valuations will continue to decline and leave the city unable to fund many capital improvement projects or the debt on them.

The revenue from the secondary property tax funds projects like road paving, refurbishing parks and buildings, and constructing new facilities. It also will include $45 million to replace the west-end dams at Tempe Town Lake. It will not fund the planned $162 million Mill Avenue streetcar. The city's share of $42.4 million is funded through Proposition 400, a county-wide sales tax for transportation projects.

The secondary property tax generated $22.1 million this year, but falling property values would result in only half that much coming in within two years. Tempe's roads and public buildings would deteriorate with so little money coming in, Jones said.

"We said we can't allow that to happen," he said.

The plans adjust the rate so it results in $22.1 million a year coming in. That amount is based on property values in 2004, just before the housing bubble triggered a spike in prices. City projects show the rate will hover above $2 for several years and gradually decrease. The total revenue can increase up to 3.3 percent a year, with each year's potential increase limited to the consumer price index of western states.

Hearings over the new policy generated some criticism about city spending in general but little opposition to the new stabilization policy, Jones said.

"I don't think there have been a lot of people who protested the policy because once they understand the policy, they understand that it protects them from future increases," he said.

Tempe's City Council approved the new tax policy last week and next Thursday is set to approve the Capitol Improvement Plan that's funded by the secondary property tax.