Escalating property values across Arizona appear destined to push property taxes to new heights.

The question is: How high? That depends on whom you ask.

The precise answer won't be known until 18 or so months from now after local governments and taxing entities have set their budgets and tax rates. But many homeowners aren't waiting.

They've been sitting around kitchen tables, punching calculators and sketching out their 2007 property-tax bills since getting notice from the county this week that they're sitting on properties suddenly worth 50, 60 or nearly 70 percent more than when their homes were last assessed in 2005.

Richard Gayer's 1,275-square-foot, 1930s-era home in the Willo Historic District of central Phoenix saw a 62 percent hike in value. The county valued the home at $294,000, $113,000 more than when it was last assessed in 2005. He figures he'll end up paying nearly $720 more in property tax for 2007.

"There's not going to be a disaster," the 67-year-old retiree said, "but the quality of life suffers. That's $720 I won't have to spend on something else."

Homes in Maricopa County, which are assessed every two years, saw a median increase in value of nearly 52 percent. Homes on all sides of the Valley saw substantial gains, but Ahwatukee, a suburb of Phoenix, saw the biggest with median increases of 69 percent.

Metropolitan Phoenix home values routinely jumped from 30 to 50 percent in 2005 alone, according to an Arizona Republic analysis. County assessed values, done on a two-year cycle, generally lag behind market values.

But not everyone is convinced the eye-popping increases will lead to sticker shock when tax bills come due in fall 2007.

Count Maricopa County Treasurer David Schweikert among the optimistic. His 1,499-square-foot Fountain Hills ranch home's value jumped nearly 60 percent, from $185,000, when the home was last assessed in 2005, to $295,000 for 2007.

But he projects his 2007 property taxes will increase just $66 over what he'll pay this year.

That projection assumes cities, school districts and other taxing entities increase their budgets to account only for income from new construction and that voters don't approve new bonds or additional government spending.

Fat chance, says Kevin McCarthy, president of the Arizona Tax Research Association. He believes it's more likely that many local governments, ranging from school districts to city or town councils, will keep their tax rates steady or cut them just slightly, allowing them to dip into the windfall from climbing property values.

McCarthy ran a projection of his own, and with his model estimates, he'll be paying more than $1,000 in additional property taxes in 2007. The latest county assessment added 60 percent of value to his 2,728-square-foot Gilbert home. It's now valued at $473,500, up from its 2005 assessment of $295,500.

"I know for a fact this is going to result in a tax increase," McCarthy said of the growth in property values. "It's going to be more than what anybody has experienced in the past.

"The policymakers at the state level ought to be concerned about this," added McCarthy, whose group lobbies in behalf of tax reform and generally favors efforts to cut rates. "They ought to be doing something to drive rates down."

Otherwise, he said taxpayers may take matters into their own hands.

As much as the assessed values have risen, homeowners can rest assured their property taxes won't increase at the same rate. Taxes are calculated based on local spending and the tax measures voters approve and not simply on the rate at which a property appreciates.

California-style limits

Property taxes are a concern across Arizona, and a group calling itself Arizona Tax Revolt is collecting signatures to place a measure on the November ballot that would institute California-style property-tax limits here. Taxes, under the proposal, would be limited to 1 percent of a property's assessed value.

Bullhead City resident Don Dixon is volunteering for the effort.

He and his wife, Judy, moved to the area from California in 2004. Although he is confident they can afford the additional property taxes they stand to pay now that the home that cost them $164,900 is valued at $210,000, he is not so sure about others. Dixon said he was mortified recently when he overheard elderly women in Bullhead City lamenting whether they could afford their property taxes.

For Dixon, the issue is simple: He has no faith in government officials to hold the line or cut tax rates in the face of escalating property values.

"I didn't go to war for this country to come back and see the elders crying because they can't keep their homes," said Dixon, a Vietnam veteran.

Following the mandates

Although his office is the target of much of the angst from homeowners, Maricopa County Assessor Keith Russell said he is simply following state mandates. Arizona requires local assessors to value properties according to market conditions. That means a system of mass appraisal that takes into account a property's basic characteristics as well as the recent sale of comparable properties.

Residents with a concern about their property taxes would be better off focusing on the spending of their local governments and taxing entities, Russell said.

Or consulting a mirror. Residents heap many of the taxes onto themselves through voter-approved bonds and other tax measures.

Ahwatukee resident Randy Bass doesn't plan to appeal his valuation, which saw his home shoot up nearly 60 percent, to $258,000.

Bass, 51, called the assessment "reasonable" and noted that he has always found the county estimate to be at least slightly below his home's actual value.

That's by design and typical, Russell said.

But below value or not, Bass said, the assessment increases and tax hikes that often follow are what hit hard.

Many Valley residents are living in homes they purchased not that long ago for not that much. Although in many cases the homes have become gold mines, the financial standing of the people living within them often hasn't changed.

"Just because you're in a home that's suddenly worth way more doesn't mean you have more income," Bass said. "You shouldn't have to take out a second mortgage just to be able to pay the property taxes."

So they sit, property assessment notice in one hand, a calculator in the other.

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Property taxes have become a hot topic with new home-valuation notices being mailed by county assessors across Arizona. The notices typically show big assessment increases, reflecting the jump in Arizona residential prices.

As homeowners open their mail, here are some issues worth pondering:

Question: Will the new valuations lead to higher taxes?

Answer: That's very possible, although the assessment notices aren't tax bills and the Maricopa County Assessor's Office insists higher taxes aren't automatic. At any rate, taxes may not rise at the same rate as assessed values.

Q: Why not?

A: A home's assessed value, as set by the assessor's office, is only part of the equation. To figure your actual taxes, you need to multiply that by the appropriate tax rates in your area, which are set by cities, school districts and so on. Those rates, for the new 2007 property valuations, won't be determined until municipal budgets are set in August 2007.

Q: What if I don't agree with my property's assessed value?

A: Owners can appeal the numbers within 60 days of the valuation-notice date. (Check the back of your notice, go to www.maricopa.gov/assessor or call (602) 506-3406.)

An appeal might be warranted if your property is worth less than the assessed value or is misclassified.

"The big question is: Could you sell your property for this (valuation) amount or more?" said Keith Russell, Maricopa County assessor. "If not, you should be filing an appeal."

Yet most owners don't appeal. Russell's office received appeals on just 22,000 parcels last year, which is a tiny slice of the 998,000 owner-occupied homes in Maricopa County.

Q: What factors improve the odds of winning an appeal?

A: Errors and inconsistencies. The assessor's office doesn't have accurate data on all properties nor the manpower to verify everything.

Perhaps the assessor has overstated the square footage of your home, or perhaps the county shows you with a swimming pool or other improvement you don't have. Maybe your home isn't in as good shape as nearby properties.

"Physical characteristics and condition of the property are the two biggest factors," Russell said.

Q: My assessed valuation is still well below what homes have been selling for in my neighborhood. Why?

A : In part, this reflects conservatism on the part of assessors. "Our target is to be a little below what you could sell the property for," Russell said.

Also, assessed valuations often lag prices, with gaps becoming more pronounced in fast-moving markets.

In recent years, Maricopa County has assessed valuations on a two-year cycle, but that will change to annually from now on, Russell said.

Q: Arizona voters passed a proposition in 2000 creating a valuation freeze for lower-income seniors. Is it still around?

A: Yes. County residents ages 65 and older can qualify for a valuation freeze if, among other things, they have lived in the home at least two years and have total income for 2005, includ ing Social Security benefits, at or below $28,944 for singles or $36,180 for couples.

Widows, widowers and totally disabled people with modest property values (generally below $209,050) can qualify for a partial reduction in assessed value, assuming they have income excluding Social Security benefits of $25,637 or below ($30,764 if any children younger than 18 live in the home).

Q: Are many people taking advantage of those breaks?

A: Not really. Roughly 17,000 senior households have qualified for the freeze. When the law was passed, officials expected 60,000 seniors to take advantage of it. The low response could reflect confusion on the part of the public.

"If you didn't qualify last year, try again," said Russell, noting the income limits have risen over the years. Only 7,300 disabled or widowed households have qualified, he said.

Q: Many homeowners pay property taxes as part of their overall mortgage payment, with the lender collecting money each month and passing it along to taxing authorities. Will mortgage-servicing companies collect higher monthly payments to reflect property-tax hike, if they materialize?

A: Yes, but probably not before next year.

"There is an annual accounting of escrow balances," said Mary Jane Rogers, a spokeswoman for JPMorgan Chase in Phoenix. "Mortgage lenders will watch closely."

Most Chase home-loan customers have escrow accounts for property taxes, she added. However, some borrowers pay their property taxes directly.

Q: Aren't property taxes deductible expenses for income-tax purposes?

A: Yes, provided you itemize deductions on your income-tax returns. Only 45 percent of Arizonans itemized last year, reports the Arizona Department of Revenue. The rest took the standard deduction.

Among itemized deductions used by Arizonans, property taxes ranked fourth in dollar value behind mortgage-interest expenses, state income taxes and charity donations.

Q: Should I raise my property insurance to keep pace with escalating housing prices?

A: That's not a bad idea, although it's not linked to assessment values, per se.

Rather, labor costs have risen in recent years and so have prices of building materials such as lumber, copper and concrete. Would your current insurance policy allow you to rebuild your home in the event of a fire or other calamity?

Marshall & Swift/Boeckh, a Los Angeles firm that tracks building costs, estimated 61 percent of U.S. homes were underinsured in 2004 by an average 25 percent.

Check your policy to see if you have replacement-cost coverage, which provides higher benefits than actual-cash-value coverage.

Q: So how much do people pay in property taxes? Do Arizonans carry a high burden?

A: Obviously, the numbers are all across the board based on tax jurisdictions and property values, yet an estimate by the Tax Foundation helps put it into perspective.

The Washington, D.C., research group figures Americans spent 38 days last year on average working to pay their income taxes, 30 days to support Social Security and other entitlement programs, 16 days to pay sales taxes and 11 days for property taxes.

States generate money from individuals from three main sources: sales, income and property taxes. It's unusual for any states to levy low taxes in all three categories. States lacking income taxes, for example, frequently counter with big levies on properties.

Arizona, which isn't viewed as a particularly high property-tax state, carries an overall state/local tax burden very close to the national average, the Tax Foundation reports.