Deer Valley Unified on the Hook for $5 Million After Property Tax Lawsuit

Deer Valley Unified School District property taxpayers are one of the groups impacted by the recent Qasimyar ruling.

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

As a result, county taxing authorities – including DVUSD – must return revenues previously received and/or budgeted due to excessive property assessments for tax years 2015, 2016, 2017, 2018, 2019, 2020, 2021, 2022, and 2023 for numerous properties operating within the school district boundaries.

Deputy Superintendent Jim Migliorino told the board in June that the mispricing to district taxpayers amounts to nearly $11 million that needs to be recalculated. The state will have to pay its share, leaving DVUSD liable for just under $5 million.

The mechanism for refunding these amounts has not yet been determined.

“When that’s going to be paid off, the timing of that, is a concern for us because that could create a cash flow situation for us,” Migliorino said. “And where the money is going to come from to be able to pay our share is also a concern.”

The repayment also includes interest on the amount owed, so the county wants to act quickly to mitigate the mounting interest on the remaining amount.

Maricopa County determined in 2015 that a change from a tax class 3 (owner-occupied home) to a tax class 4 (rental, non-primary residence) was not a change of use and therefore did not recalculate the restricted property value. A case known as Qasimyar vs. Maricopa County was filed and went all the way to the Court of Appeals, where it was determined that a change from a class 3 to a class 4 was a change of use and required a recalculation of the restricted property value.

State law has been changed since the appeal so that reclassifying a home as a rental or secondary home, or vice versa, is not considered a change of use. Maricopa County school districts, fire districts, cities and towns will have to pay back more than $329 million, and school districts will have to pay nearly $150 million.

The estimated financial impact to districts includes interest until February of this year, which will continue to accrue at a rate of 8% per year.

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

“Unfortunately, we are just a collateral victim of this settlement,” he said.

The two primary sources of funding are property taxes, for which Deer Valley Unified has taxing authority, and state aid.

“Ultimately, taxpayers who paid too much will get their money back,” Migliorino added.

That roughly $5 million is about nine years of voter-approved initiatives (bonds, overrides, etc.). The DVUSD governing board voted to ask the state board of education to recalculate state aid for the years covered by the settlement, as provided in the statute.

Deer Valley Unified serves more than 33,000 students in northern Maricopa County, including 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.