Property Tax
Counties are primarily funded through property taxes levied annually. As the entity responsible for setting and managing the county budget, the Board of Supervisors sets the county primary and secondary tax rates each year.
Subject to a number of constitutional and legal limitations, the property tax is the only significant revenue source for counties to manage rising costs or additional mandates that can result from state and federal action.
State Shared Transaction Privilege Tax (TPT)
Since the creation of a statewide TPT rate, commonly referred to as a sales tax, the state has distributed a portion of collections to counties to fund operations, which are largely dictated by state law. Currently, counties receive just over 40% of the shared portion of the state’s 5% sales tax rate. Those resources are distributed to individual counties based on a combination of where the tax was collected from (point of sale) and either population or property value.
Local Excise Taxes
In all counties except Maricopa, the Board of Supervisors is authorized to levy a local excise tax, commonly referred to as a sales tax, to support general county operations. The rate is capped at 10% of the state’s tax rate, which results in a 0.5% cap. Counties “piggy back” off of the state’s tax base, so transactions subject to or exempt from the state’s sales tax are similarly treated for the purposes of local county excise taxes. It requires a unanimous vote of the Board of Supervisors in order to begin levying the tax. Outside of this limited authority, counties do not have the ability to collect local sales taxes for general government services.
For more information about current rates and collections visit the revenue section of the County Encyclopedia.
Vehicle License Taxes - General Fund Distribution
Counties receive a portion of vehicle license taxes (VLT), which are payed by residents or businesses when registering vehicles in Arizona, to fund county operations. These taxes were historically assessed as property taxes, which have always been an integral part to financing county functions, and when the state transitioned to a VLT structure, revenues generated continued to fund general government services. Counties receive roughly a 25% of VLT revenues for general fund purposes, which are distributed to each county based on where the vehicle was registered.
Special Taxing Districts
Outside of the county’s authority to collect taxes for general government purposes, the State has authorized the creation of various special taxing districts, some of which are county controlled.
These special districts allow for the creation of separate legal entities that can levy certain types of taxes for specific purposes. Special districts which have the county BOS serve as their board of directors include those to support:
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Jail construction & operation
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Public health services
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County libraries Flood control
Additionally, counties under 500,000 persons also have the authority to levy up to a 0.5% sales tax for county road infrastructure with voter approval.
Below is a full overview of special districts created in Title 48 of the Arizona Revised Statutes and a more detailed treatment of special districts that are under the control of the county boards of supervisors.
Timeline of Statutory Authorization
Scroll along this timeline to see an overview of the years that state policymakers first authorized the creation of the various types of special taxing districts in Title 48 of the Arizona Revised Statutes.
LIMITATIONS ON COUNTY FINANCE
Constitutional Levy Limits
Arizona’s constitutional levy limits establish a cap on how much local governments may collect in primary property taxes each year. These limits, which restrict annual levy growth to 2% plus revenues from new construction, play a significant role in shaping county budgets.
Explore our guide to learn more about how levy limits affect county revenues and the ability to fund essential services.
Explore the guide to learn more about:
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An overview of what levy limits are and how they are calculated
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Historical and current county levy limit utilization from their inception to today
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Legislative context shaping levy limits over time
Levy Limit Utilization
Property Tax Levy as % of Levy Limit FY 1981 Forward
Constitutional Expenditure Limits
The county expenditure limits are constitutional limits on how much local revenues counties can spend in a given fiscal year. This is generally the amount of local revenues expended in FY 1980, adjusted for population and inflation. These limits were amended into the state constitution in 1980, along with a number of other modifications to state and local government finance, including county levy limits.
To support counties and policymakers in navigating these limits, CSA has developed a comprehensive resource guide. This guide includes:
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High-level overview of county expenditure limits
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Historical account of county efforts to seek voter approval for adjustments and resources on the process
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Consolidated resources for completing annual expenditure limit reports, Legislative history of the expenditure limitations
Expenditure Limit Utilization
Amount Subject to Limit as % of Expenditure Limit FY 2001 Forward