Committee allows assessors to use market subareas for Rule B valuation resets; critics warn of legal risk

The Senate Commerce & Finance Committee voted to advance SB 11-21, a bill that would permit county assessors to use either countywide parcels or narrower market subareas when calculating Rule B valuation ratios used to reset limited property value after certain property changes.

Under Arizona law, limited property value (LPV) caps annual increases at 5 percent under Rule A but allows a Rule B reset when a property has a ‘‘substantial physical change’’ (for example, an addition or change of use). Currently many assessors calculate the Rule B ratio using all county parcels of the same classification. SB 11-21 would explicitly allow assessors to calculate Rule B ratios using all parcels within a specific market (a neighborhood or submarket), a method proponents say more accurately reflects local value differences.

Maricopa County Assessor Eddie Cook and other county assessors described the proposal as a technical, fairness-minded fix for large, countywide disparities between LPV and full cash value. ‘‘In Maricopa County, 90.5 percent of properties saw a 5% increase and, after 10 years, a property owner has seen their LPV increase 50%,’’ Cook told the committee during a background presentation about Rule A and Rule B mechanics.

The Arizona Association of Counties’ Megan Pitner said neighborhood ratios allow the assessor to reflect local markets rather than leveling values across geographically diverse counties.

The Arizona Tax Research Association’s Jennifer Stilo opposed the bill, citing a Court of Appeals decision that found neighborhood-based Rule B calculations violated statute in a prior dispute and raising concerns about the state constitutional uniformity clause. Stilo warned the bill could invite additional litigation without clear controls on how submarket boundaries would be drawn and appealed.

Several county assessors testified the neighborhood approach can reduce unfair outcomes that arose when countywide ratios treated widely divergent markets the same. Some committee members asked whether the change should be time-limited or require public notice of neighborhood boundaries; sponsors indicated willingness to work on transparency and process.

Committee vote: SB 11-21 passed out of committee (roll call recorded as 5 ayes, 1 no, 1 not voting in committee discussion).

What happens next: The bill will move to the Senate for possible amendments on transparency and appeals; assessors asked for statutory certainty to avoid repeated litigation and asked for explicit direction on mapping submarket boundaries.