1. Prop 117 – Two Years Later…
easy as (Prop) 1 – 2 – 3
1
2. WWW.MFPOER.COMMarvin F. Poer and Company 2
Arizona’s Dual Value System
• FCV (Full Cash Value)
– Constitutionally required to reflect market value
– Value basis for secondary taxes which fund voter
approved bonds and overrides, and special taxing
district budgets
• LPV (Limited Property Value)
– Growth limited to 10% over the previous year or 25% of the
difference between the current year’s FCV and the previous
year’s LPV, whichever is greater
– The LPV cannot exceed the FCV
– Primary taxes are levied against the LPV to support local
government budgets
2
3. WWW.MFPOER.COMMarvin F. Poer and Company 3
Proposition 117
• Proposition 117 approved by Arizona voters November
2012. Effective calendar year 2014, it first impacted 2015
property tax assessments.
• FCV is synonymous with market value and can change
dramatically year to year while the LPV cannot increase
more than 5% per year. The LPV cannot exceed the FCV,
as before.
• Property taxes are now computed based solely on the
LPV.
4. WWW.MFPOER.COMMarvin F. Poer and Company 4
Can an Owner Protest Values?
• Property taxes are based on the LPV, however the
property FCV is the appealable assessment. This is
because the FCV represents market value.
• Due to Proposition 117, there are certain instances where
a successful appeal will not impact property taxes,
specifically, when the FCV exceeds the LPV and the market
value is well above the LPV.
5. WWW.MFPOER.COMMarvin F. Poer and Company 5
Proposition 117 – Example #1
Owner’s Opinion
of Value
$190,000
If the property owner wins the appeal…
• The new FCV will be reduced to $190,000.
• The LPV will also be reduced to $190,000, since the LPV cannot
exceed the FCV.
• Tax liability is based on the LPV, and would be reduced in this case.
$200,000FCV $190,000
LPV $195,000 $190,000
6. WWW.MFPOER.COMMarvin F. Poer and Company 6
Proposition 117 – Example #2
Owner’s Opinion
of Value
$180,000
If the property owner wins the appeal…
• If the owner is successful in reducing the FCV to $180,000, it will
not be low enough to impact the LPV.
• The LPV will remain $175,000 and yield NO reduction in taxable
value since the FCV is no longer used to calculate property taxes.
$200,000FCV $180,000
LPV $175,000 $175,000
17. WWW.MFPOER.COMMarvin F. Poer and Company 17
Pillar / The Catherine Townhomes Summary
• Sold on October 1, 2015 for $95,750,000
• Assessment at next lien date (January 1, 2016)
– FCV $67,902,500 (~71% of purchase price)
– LPV $59,605,119 (~62% of purchase price)
• 2015 Property Taxes Paid $732,949.98
(~0.8% of purchase price)
18. WWW.MFPOER.COMMarvin F. Poer and Company 18
Proposition 117 Analysis
FCV Increase LPV Inrease
Apartments 62.10% 22.87%
Hotels 54.38% 14.42%
Commercial 40.29% 14.96%
Office 38.76% 12.34%
Industrial 66.53% 19.82%
Single Family 46.76% 26.14%
19. WWW.MFPOER.COMMarvin F. Poer and Company 19
“Market” / “Taxable” Spread
0.00
50,000,000,000.00
100,000,000,000.00
150,000,000,000.00
200,000,000,000.00
250,000,000,000.00
300,000,000,000.00
350,000,000,000.00
1 2 3 4
Year
FCV
LPV
20. WWW.MFPOER.COMMarvin F. Poer and Company 20
Proposition 123
• The Arizona Education Finance Amendment, Proposition 123 was
on the May 17, 2016, ballot in Arizona as a legislatively referred
constitutional amendment.
• The measure was designed to increase education funding by $3.5
billion over the course of 10 years by allocating money from the
general fund and increasing annual distributions of the state land
trust permanent funds to education.[2][3]
– A "yes" vote was a vote in favor of devoting $3.5 billion of the general
fund and state land trust fund toward education.
– A "no" vote was a vote to keep the current education funding levels from
the land trust fund.
