Frequently Asked Questions
The Superstition Fire & Medical District is seeking a temporary tax override during the November 8, 2016 election. These Frequently Asked Questions have been compiled in an effort to inform voters and community members of what the override entails.
When is the election?
To cast your vote on the Override, it will be on the ballot during the General Election on Tuesday, November 8, 2016.
What exactly does the temporary override mean?
Arizona lawmakers realize fire districts are struggling statewide and during the last legislative session they offered a temporary solution in the form of this override initiative. The law states fire districts, with voter approval, can temporarily exceed the current maximum allowable tax rate of $3.25 per $100 of assessed valuation to a maximum tax rate of $3.50 for the five-year period ending 2021. Fire districts however, can only ask for voter approval in 2016 or 2017. After 2017, fire districts are no longer eligible for the temporary override.
If lawmakers know Arizona fire districts are struggling, why is the override temporary?
Lawmakers are looking to create long-term strategies for stabilizing and sustaining fire district revenue. The override is intended to be a short-term fix while these long-term solutions are being developed.
What’s wrong with the way fire districts are funded? Why are so many fire districts struggling?
The recent recession, coupled with crippling legislation in the form of Prop 117, have had a devastating effect on Arizona fire districts. Prop 117 is essentially preventing fire districts from recovering from the recession. The Superstition Fire & Medical District (SFMD) witnessed assessed property values plummet 44% from fiscal year 2008/2009 through fiscal year 2013/2014. Since then, SFMD’s assessed property valuation growth has averaged only 1.62% over the past three fiscal years. At this rate, it will take more than 27 years to get back to 2008/2009 fiscal year assessed property valuation levels.
Assessed valuations are the metric county assessors use to calculate property taxes and Prop 117 went into effect at precisely the same time Arizona saw its lowest assessed property values in more than a decade. Prop 117 is effectively preventing those values from returning to normal the way they always had in the past.
What is Prop 117? What did it do to fire districts?
Prop. 117 did two key things – placed an artificial cap on revenue growth to a maximum of 5% annually and changed the way property taxes are calculated on real property, shifting from Full Cash Value (FCV) to the lower assessed value of Limited Property Value (LPV). Again, this change occurred just as assessed values on real property reached historic lows.
The “5% cap” turned out to be misstated as county assessors statewide have gone on record asserting fire district’s should never expect to see a 5% increase in revenue growth even following major gains in assessed values. Although the law says annual growth is capped at 5%, in reality the new tax calculations, that were not voter approved, may never allow more than a 1-3% growth.
Had Prop 117 delivered the promised 5% per year growth in revenue, instead of the 1-2% the District has actually received, the District would have received an additional $1,064,404 over the last 2 fiscal years. Prior to Prop 117, actual gains in property valuation could have been realized.
What about the SFMD Capital Fund? Why is it running out of money?
The district’s Capital Fund was established in 2008. The intent of the Capital Fund was to establish an account where the district could set aside money for future major capital expenditures such as fire trucks, SCBA’s, radio’s, computer equipment, heart monitors, and major training and staffing software purchases. Unlike the Maintenance and Operations (M&O) Fund, the Capital Fund does not have its own revenue stream. Monies in the Capital Fund must consciously be diverted by the SFMD Board of Directors from M&O tax revenues when there is an excess of funds available beyond what is needed to fully fund the M&O operations.
During the past four years, SFMD has made several necessary large purchases out of the Capital Fund. In addition, during this time decreased valuations and tax revenues, coupled with increased operating costs, have made it increasingly difficult to balance the annual M&O budget. Despite these challenges, the SFMD Board of Directors and Senior Leadership were mutually committed to maintaining a fair and competitive wage and benefit package for our employees. With the emphasis on maintaining employee pay and benefits as well as avoiding the tax rate cap, there was no extra revenue to put into capital reserves. Without a revenue stream, the Capital Fund will continue to exhaust itself as more capital purchases become necessary.
What will happen if voters approve the temporary override?
If voters approve the temporary override, the SFMD Board of Directors will have the authority to increase the tax rate to a maximum of $3.50 per $100 of assessed valuation in order to generate revenue specifically intended to replenish the SFMD’s depleting Capital Fund. With this additional revenue, the SFMD will be able to maintain a safe and responsible replacement schedule for its aging equipment. Equally important, the tax paying public can be assured they will continue to be recipients of the highest quality service from its fire district.
What will happen if voters do not approve the temporary override?
If voters do not approve the override in 2016 the SFMD Fire Board can direct staff to attempt a temporary override one more time in 2017. After that, the SFMD will no longer be eligible for this temporary override opportunity. At the SFMD, the denial of the override means major capital purchases will have to be delayed or denied all together. However, some major capital expenditures are not negotiable. Expenditures such as those that support the Phoenix Regional Radio Communications Cooperative, are mandatory for all participants. The SFMD has no choice but to pay these fees.
However, other purchases, such as fire trucks, personal protective equipment, and advanced medical equipment, will have to be reprioritized and may be delayed until the required revenue becomes available. In short, our equipment will age, become less reliable, and cost more to maintain. Customer service and firefighter safety may also suffer as the district attempts to preserve life and protect property with aging and less reliable equipment.
As a taxpayer, what will this temporary override cost me?
If the temporary override passes the SFMD Board of Directors will have the discretion to temporarily increase the tax rate cap from $3.25 per $100 of assessed valuation to a maximum limit of $3.50. If the SFMD Board of Directors increased the tax rate the full $0.25, a homeowner would at most see a temporary annual increase of $25 per $100,000 of assessed valuation.
What happens after the 2021 sunset on the temporary override? How will the district fund future capital needs after that?
The temporary override sanctioned by state officials is again an indication lawmakers recognize Prop 117 had and will continue to have severe unintended consequences on fire districts across the state, and long term solutions are necessary for the sustainability of Arizona’s fire districts. The temporary override is intended to be a short-term solution while long-term solutions are being developed. We anticipate the establishment of a stakeholder group consisting of lawmakers, fire service representatives, labor officials and other policymakers developing this fall to begin discussing long-term funding reform.
Why a Temporary Tax Override? Why Not a Bond?
SFMD’s Capital Fund does not have a revenue source. The Capital account is funded by the transfer of ordinary tax revenue from the Operating budget.
Due to the impact of Prop 117, it has proven impossible to manage the District’s M&O budget and have money left over for future capital investments.
The issuance of a Bond involves significant issuance, legal, and interest costs.
SFMD citizens approved a 20-year, $9.5 million Greater Arizona Development Authority (GADA) Bond in 2006. The 2006 GADA Bond involved $172K in issuance costs, and $5.6 million in interest costs over the 20-year payback period.
SFMD is pursuing a Temporary Tax Override instead of a bond to keep the cost to its citizens as low as possible.
I am paying for a Bond already. Why does the District need more money for capital items?
Bond funds must be spent on the specific items that the money was approved for. The 2006 Greater Arizona Development Authority (GADA) bond was voter-approved and spent on the following specific capital items:
- Fire Station 265 (Gold Canyon) land and building; Station 263 (AJ) improvements: $2,200,000
- Traffic Preemption equipment: $420,000
- Fire Training Campus: $1,290,000
- Fire Apparatus: $5,559,000
Ten years later, the SFMD has additional capital needs, but the SFMD is asking voters to consider a Temporary Tax Override instead of the more expensive bond alternative to keep the cost to its citizens as low as possible.
If, however, the Temporary Tax Override is not successful, SFMD will need to consider a bond in order to maintain the adequacy of its capital apparatus and medical equipment.
Where can I go or who can I call if I have additional questions?
Anyone with questions is strongly urged to contact the SFMD and get the facts. We have a page on our website dedicated to this initiative. Anyone with questions can visit this page at http://sfmd.az.gov/override/. All other questions can be answered by the Fire Chief or a member of his senior leadership team by calling (480) 982-4440 ext. 164.