Business groups throughout Arizona are calling for a legislative proposal to reduce the assessment ratio on commercial real estate. They say dropping the ratio would be a strong catalyst for investment.
“State tax policy must be designed so businesses can remain competitive,” explained Jim Rounds, an economist specializing in public policy and economic forecasting, who prepared a report for the Arizona Chapter of the National Association of Industrial and Office Properties (NAIOP).
Arizona has taken steps in the past to reduce commercial property taxes. Prior to 2006, the assessment ratio on commercial property was 25%. The ratio has gradually reduced to 18% compared to 10% for residential. As the rate declined, the value of commercial property increased at an average annual rate of 5.1% between 2000 and 2020, according to the analysis.
By gradually phasing down the commercial rate to 17% over the next two years, the net assessed value reduction will equal $1.39 billion by tax year 2023. That represents a 1.7% percent reduction, the report said.
Business advocacy organizations statewide are in support of the proposal.
“Coming out of the pandemic, there are going to be a lot of companies looking to relocate and we want the whole state of Arizona to be in that top tier of the markets that companies are going to when they are either locating or expanding into the western region,” said Suzanne Kinney, Arizona NAIOP president and CEO. “Right now, the commercial property tax is one area where we’re simply not competitive, and unfortunately, it causes us to not make it into the final consideration for some site selectors.”
Groups that have lined up to lobby for the assessment reduction include the following:
Arizona Association for Economic Development
Arizona Chamber of Commerce and Industry
Arizona Fire District Association
Arizona Free Enterprise Club
Arizona Public Service Company
Arizona Tax Research Association
Building Owners and Managers Association of Greater Phoenix
East Valley Chamber of Commerce Alliance
Greater Phoenix Chamber of Commerce
National Association of Industrial and Office Properties, Arizona Chapter
National Federation of Independent Businesses
National Association of Commercial Real Estate Executives for Economic Development, Arizona Chapter
National Association of Theatre Owners
Salt River Project
Tucson Metropolitan Chamber of Commerce