How Arizona property tax shows up in a commercial loan file

Lenders put property tax in the expenses and, often, in an escrow. The Arizona number they are reading is not a cap rate and not a debt-service coverage test. It is a tax bill built from a classification, an assessment percentage, and a levy. This note is general information. It is not tax advice, legal advice, or an appraisal. A CPA, an attorney, or the other professional named in the note decides how the rule applies to a given property. The rent-roll mechanics, separate from the tax bill, are on rent roll and trailing twelve.

A.R.S. 42-12001, opened the same day, establishes class one. Paragraph 12 is real property and improvements devoted to any other commercial or industrial use, other than property specifically placed in another class, valued at full cash value. Paragraph 8 is shopping-center property, with a class-nine carveout. A.R.S. 42-15001 then says the assessed valuation of class one property described in section 42-12001 is a stated percentage of its full cash value or limited valuation, as applicable. The schedule on that page steps down over time. Item 15 is sixteen percent beginning from and after December 31, 2024 through December 31, 2025. Item 16 is fifteen and one-half percent beginning from and after December 31, 2025 through December 31, 2026. Item 17 is fifteen percent beginning from and after December 31, 2026. On October 28, 2026, item 16 is the row in force. After December 31, 2026, read the statute again. Do not freeze this sentence into a permanent ratio.

The constitution page that was opened is a levy limit

The page at azleg.gov for Article 9, Section 19 is titled as a limitation on annual increases in local ad valorem tax levies. Subsection 1 says the maximum amount of ad valorem taxes levied by any county, city, town, or community college district shall not exceed an amount two per cent greater than the amount levied in the preceding year. The section lists exceptions, including taxes levied to pay bonded indebtedness and certain special districts, and it says the section applies to tax years beginning after December 31, 1981. That is a limit on the jurisdiction's levy. It is not, in the text of that page, a five percent cap on one parcel's limited property value. This note does not add a percentage the page did not contain.

The Arizona Department of Revenue's business property-tax page was opened the same day. It is the department's index. The ratios quoted here are from the statute, not from a table on that index. The Maricopa County Assessor site lists a resource titled 'Understanding Limited Property Value' and lists appeal and business-property forms. The formula behind that title was not on the homepage that was opened, so it is not restated here. A lender still wants the current bill, any notice the assessor has issued, and a comment from the CPA on whether a sale or new construction could change the next bill.

Escrow, refinance, and what this office will not compute

If the lender escrows taxes, the monthly deposit is sized from the bill, not from a ratio this page prefers. How escrows work as a loan term, separate from the Arizona classification, is tax and insurance escrows. A refinance that must reprice expenses uses Arizona refinance. A purchase uses acquisition. Apartment expense reading, which is not this tax statute, is Arizona apartment underwriting.

Capital Market Funds arranges financing. It is not a county assessor and not a CPA. Capital Market Funds is not a Fannie Mae DUS lender. The office is 7373 E Doubletree Ranch Rd #255, Scottsdale, AZ 85258. The phone is (480) 495-8072. Capital Market Funds, LLC - CBK-2007014 - Commercial Mortgage Banker and NMLS 1445066.