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  • Growth in tax base shows success of economic development effort

    Under the Dome
    By Chuck Huckelberry
    Pima County Administrator

    There are a lot of numbers economists use to take the economic temperature of a city, county or region. They look at employment trends, outside investment, construction, wages and more. 
    Chuck Huckelberry
    They also look at property value, or the overall tax base, which, for the county, is our most important economic thermometer. Increasing the tax base also is the primary goal of the county Economic Development plan. 

    Pima County government is primarily funded through property taxes. They are the source of funding for our General Fund, for the Library and Flood Control districts, and for paying back voter-approved bonds. The taxes are collected through a two-part process, the first is the setting of property values by the County Assessor, who is an elected official, and the second is the setting of tax rates by the Board of Supervisors that are applied against the values to levy the taxes necessary to fund county government. 

    The recent brutal recession we all suffered through provides a real-world illustration of how the tax base affects tax rates. 

    The housing market bubble of the 2000s drove up property values, with the tax base hitting its historic peak in fiscal year 2011 of $8.94 billion (though the recession started in FY 2009, property values lag the economy by about 18-24 months). After FY 2011, the tax base contracted for five straight years, which was a reflection of the larger implosion of property values driven by the wave of foreclosures and job losses caused by the recession. 

    By FY 2015, the tax base had fallen to $7.5 billion, or by more than 16 percent. Although the county reduced its payroll by 1,100 employees and reduced spending everywhere it could, cutting the budget by almost $300 million, inflation, pensions, population growth and other factors put enormous pressure on the Board of Supervisors to continue to adequately fund county operations. To compensate, the board raised the tax rate to offset some of the lost revenue caused by the decreasing tax base. 

    In FY 2016, the tax base finally grew again and has continued to grow. For the budget year just approved by the Board, FY 2019, it grew by 3.21 percent and is back up to $8.3 billion. Because the tax base has been growing again, the Board was able to cut the tax rate for this fiscal year by 39 cents per $100 of assessed value, which is the largest tax rate cut by the board in over 30 years. 

    Economists are predicting continued economic growth over the next five years with the tax base jumping up to 4.5 percent predicted growth year-over-year between FY 2020 and 2023. 
    Building construction
    Rising single-family home property values, which is a result of supply and demand, often gets the credit for the increase in the tax base. But increased value of existing properties is only part of the tax base picture. 

    Expanding businesses, new businesses, new home construction and new commercial construction also are prime drivers of an expanding tax base. 
    In 2012, the county issued its first Economic Development Plan, partly in response to the effect of the Great Recession on the local economy. The plan, which has been updated twice and currently undergoing a third revision, primarily seeks to increase primary job creation in the region and add value to the tax base by aiding the expansion of existing businesses and creating a business climate that attracts new business to the area. 

    We’ve certainly had some success. Most notably is the huge expansion at Raytheon – more than 2,000 high-wage jobs -  which wouldn’t have been possible without direct county action and our leadership of a regional effort to remove regulatory barriers that had impeded Raytheon’s expansion in the past. 

    We’ve created the Aerospace Research Campus, which is home to World View and will soon be home to Vector Space, a rocket manufacturer. We aided the relocation of Caterpillar’s Mining Technology Division HQ to town, are working with Rio Nuevo on the addition of a major office tower downtown, have master planned a business research campus at Sunset Road and Interstate 10, we’ve begun the development of a major sports tournament facility at Kino Sports Complex and we’re transitioning the area around the County Fairgrounds into a major manufacturing and logistics hub. And that’s just some of what we’ve been up to.

    All of it, once completed or successful, will add to the tax base and grow the employment base. 

    And that will mean the Board of Supervisors will be able to provide services to over 1 million residents without having to raise tax rates. 

    So, whenever you hear local economists talking about the state of the economy, ask them how the county tax base is doing. If it’s growing, the economy is growing. 
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