5133 N Cent. v. Maricopa Cnty.

• Decision Date: 18 April 2023
• Docket Number: 1 CA-TX 22-0005
• Parties: 5133 N CENTRAL, LLC, et al., Plaintiffs/Appellants, v. MARICOPA COUNTY, et al., Defendants/Appellees.
• Court: Arizona Court of Appeals

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5133 N CENTRAL, LLC, et al., Plaintiffs/Appellants,
v.
MARICOPA COUNTY, et al., Defendants/Appellees.

No. 1 CA-TX 22-0005

Court of Appeals of Arizona, First Division

April 18, 2023

Not for Publication - Rule 111(c), Rules of the Arizona Supreme Court

Appeal from the Arizona Tax Court No. TX2019-001719 The Honorable Danielle J. Viola, Judge

Mooney Wright Moore &Wilhoit, PLLC, Mesa By Paul J. Mooney, Jim L. Wright, Paul Moore, Bart S. Wilhoit Counsel for Plaintiffs/Appellants

Carden Livesay, Ltd., Mesa By Roberta S. Livesay, Joshua W. Carden Counsel for Defendant/Appellee Maricopa County

Arizona Attorney General's Office, Phoenix By Jerry A. Fries, Lisa A. Neuville Counsel for Defendant/Appellee Arizona Department of Revenue

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Judge Angela K. Paton delivered the decision of the Court, in which Presiding Judge Jennifer M. Perkins and Judge D. Steven Williams joined.

MEMORANDUM DECISION

PATON, JUDGE

¶1 5133 N. Central, LLC, and 5115 N. Central, LLC, representing a class of property owners who held Class One assessed properties in Maricopa County in the 2018 tax year (collectively "Taxpayers"), challenged the valuation method used by the Maricopa County Assessor ("Assessor") to determine their tax liability. The superior court granted summary judgment in favor of Maricopa County and the Arizona Department of Revenue ("ADOR" or "Department"). For the following reasons, we affirm.

FACTS AND PROCEDURAL HISTORY

¶2 In 2019, Taxpayers sued Maricopa County and ADOR, and argued the county's method of calculating the limited property value ("LPV") of their properties violated Arizona tax law. Taxpayers sought a refund of taxes collected using the county's assessment method. The superior court granted summary judgment in favor of Maricopa County and ADOR. Taxpayers timely appealed. We have jurisdiction under Arizona Revised Statutes ("A.R.S.") Sections 12-120.21(A)(1) and -2101(A)(1).

DISCUSSION

¶3 We review de novo both the superior court's order granting summary judgment and its interpretation of our tax statutes. Qasimyar v. Maricopa Cnty., 250 Ariz. 580, 584, ¶ 6 (App. 2021). Our primary goal in interpreting a statute is to effectuate the text. See James v. City of Peoria, 253 Ariz. 301, 303, ¶ 9 (2002). When statutory language is unambiguous, we apply it without resorting to secondary methods of interpretation. Id.

I. Methods of establishing LPVs

¶4 Under Arizona's property taxation system, each county is responsible for levying and collecting taxes for the properties within its limits. Every year, the county assessor must determine the full cash value

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("FCV") of all real property within the county that is subject to taxation. A.R.S. § 42-13051(B)(2). In 2012, Arizona voters adopted Proposition 117, which amended Arizona's constitution to require that real property taxes be assessed based on the property's LPV rather than its FCV. See Ariz. Const. art. 9, § 18 (establishing LPV in subsection (3) though not using the term); see also Qasimyar, 250 Ariz. at 584, ¶ 9 (citing other relevant statutes and legislative authorities).

¶5 Real property taxes are calculated by multiplying a property's LPV by an assessment ratio, which is dictated by statute based on the property's classification. See Aileen H. Char Life Int. v. Maricopa Cnty., 208 Ariz. 286, 291, ¶ 8 (2004). The result is the property's assessed value, which, when applied to the relevant tax rate, determines the amount of property tax due. See id.

¶6 There are two ways to calculate a parcel's LPV, depending on the property's status. See Qasimyar, 250 Ariz. at 584, ¶ 10. "Rule A" is the "general rule" and applies when there have been no significant changes to the property that would affect its value since the previous tax period. See id. Under Rule A, a property's LPV increases by 5% each year provided that the LPV never exceeds the property's current FCV. A.R.S. § 42-13301(A)-(B). Rule A "prevents rapid rises in [LPV] that might result from market increases." Premiere RV &Mini Storage LLC v. Maricopa Cnty., 222 Ariz. 440, 442, ¶ 4 (App. 2009).

¶7 "Rule B" properties are properties which have undergone modifications, omissions, or changes since the preceding tax year. See A.R.S. § 42-13302; Premiere RV &Mini Storage LLC, 222 Ariz. at 442, ¶ 4. Under Rule B, a property's LPV is determined "by reference to the value of comparable properties." See id. Specifically, the Legislature has directed county assessors to establish the LPV of Rule B properties "at a level or percentage of [FCV] that is comparable to that of other properties of the same or a similar use or classification." A.R.S. § 42-13302. The LPV established under Rule B is used to calculate the parcel's Rule A LPV in the following tax year. See A.R.S. § 42-13301.

¶8 Until the 2018 tax year, nearly every county in Arizona used the same method, referred to as the "Ratio Aggregate Method," to calculate the Rule B Ratios. In 2018, Maricopa County adopted a different method for calculating Rule B Ratios, known as the "Ratio Average Method."

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A. Ratio Average Method

¶9 Under the Ratio Average Method, the county assessor calculates the ratio of LPV to FCV (LPV divided by FCV) of each Rule A property in a class. The assessor then adds those ratios together and divides that sum by the number of properties in the class. In other words, under the Ratio Average Method, the assessor calculates the Rule B ratio by averaging the LPV/FCV ratios of all similar Rule A properties.

B. Ratio Aggregate Method

¶10 Under the Ratio Aggregate Method, the assessor establishes the Rule B Ratio by dividing the aggregate LPV of all the Rule A Parcels in a given class by the aggregate FCV of those same parcels.

C. Example of Ratio Average Method and Ratio Aggregate Method

Class X properties	FCV	LPV	RATIO (LPV/FCV)
1	$1,000,000	$800,000	0.80
2	$500,000	$340,000	0.68
3	$250,000 $190,000	0.76
Sum: $1,750,000	$1,330,000	2.24

¶11 Under the Ratio Average Method, the assessor would add the individual ratios of each Class X property (0.80 + 0.68 + 0.76 = 2.24) and divide that by the number of properties in the class (3), resulting in a Rule B Ratio of 75% (2.24/3 = 0.75).

¶12 Under the Ratio Aggregate Method, the assessor would divide the sum of the LPVs of the Class X properties ($1,330,000) by the...