Deer Valley Unified on hook for $5M after property tax lawsuit

Property taxpayers within Deer Valley Unified School District are among those to be impacted by the recent Qasimyar judgment.

The Arizona Court of Appeals upheld a ruling that Maricopa County overtaxed a group of property owners going back to 2015.

As a result, county taxing authorities – including DVUSD – must refund revenue previously received or budgeted due to excessive property valuations for tax years 2015, 2016, 2017, 2018, 2019, 2020, 2021, 2022, and 2023 for multiple properties that operate within the school district boundaries.

Deputy Superintendent Jim Migliorino told the governing board in June the incorrect assessed valuation for district taxpayers comes out to almost $11 million that needs to be recalculated. The state will have to pay its share, which will leave DVUSD responsible for just under $5 million.

The mechanics of how the amounts will get paid back have yet to be finalized.

“When it is paid back and the timing of that is of concern to us because it could create a cash flow situation for us,” Migliorino said. “And where the money comes from to be able to pay back our portion of it is also a concern.”

Repayment also includes interest on the amount owed, so the county wants to move quickly to mitigate the growing interest on the balance.

Maricopa County determined in 2015 that a change from Tax Class 3 (owner-occupied home) to Tax Class 4 (rental, non-primary residence) was not a change in use and therefore did not recalculate the limited property value. A case was brought, known as Qasimyar v. Maricopa County, that went all the way to the Court of Appeals where it was determined that a change from Class 3 to Class 4 is a change in use and does require recalculation of the limited property value.

State law has been changed since the appeal so reclassifying a home to a rental or secondary home, or the other way around, doesn’t count as a change in use. Maricopa County school districts, fire districts, cities and towns will have to pay back more than $329 million, with school districts on the hook for nearly $150 million.

The estimated financial impacts on districts includes interest through February of this year, and interest will continue to accrue at a rate of 8% annually.

Migliorino added the district was not a party to the tax settlement or to the decisions that led to it.

“We are just kind of unfortunately collateral damage in this settlement,” he said.

The two primary funding sources are property taxes the Deer Valley Unified has taxing authority on and state aid.

“Eventually the property taxpayers that paid too much are going to get a refund,” Migliorino added.

That roughly $5 million amounts to about nine years’ worth of voter-approved initiatives (bonds, overrides, etc.). The DVUSD governing board voted to ask the state board of education to recalculate the state aid for the years that the settlement covers as identified in the statute.

Deer Valley Unified serves more than 33,000 students in northern Maricopa County, covering the communities of Glendale, Peoria, North Phoenix, Cave Creek, and New River.

The district’s four-year graduation rate ending in June of this year was 94.6% – 17.1 percentage points higher than the state average.