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Asarco’s Smelter in Hayden.
Copper Area News
Residents of Hayden and Winkelman will likely cringe when they receive their 2014-15 property tax bills in October.
The expected higher rates approved in mid-August by the Gila County Board of Supervisors will double the rate in Hayden to $8.07 per $100 of assessed valuation, while in Winkelman the property tax rate is rising substantially to $5.89 per $100 of assessed valuation. The increases will result from the devaluation of the assessed value of the area’s largest business and employer, ASARCO, which operates copper mines and the large copper smelting operation in Hayden. ASARCO’s value, as verified by the Arizona Department of Revenue, declined more than 75 percent from $13 million in 2013-14 to only $3 million in 2014-15.
As a result, ASARCO’s property tax bill will drop, while taxpaying homeowners will be billed more to make up the difference to retain the same level of local municipal services. And this is on top of the $12.34 per $100 of assessed valuation to cover both primary and secondary tax rates supporting local education through the Hayden-Winkelman Unified School District, which is also higher this year.
Local taxpayers may wonder how ASARCO lost so much of its value in one year.
“It’s all done according to a complex formula set out in 53 pages of guidelines issued by the Arizona Department of Revenue (ADR),” says Sean Laux, ADR legislative liaison.
Laux admits that as reading matter, the ADR guidelines for mines, mills and smelters work better than Sominex in putting people to sleep. While hard to sum up for laymen, all businesses must go through the valuation process every year.
The process begins on or before April 1, when each company in Arizona files a report with ADR listing all assets that can determine the full cash value of that company. Values of these assets can take into account depreciation (such as for equipment), land the company owns, and any liens or expenses that can impact cash value. Changing market values for the business and its land can affect the valuation. Companies that fail to file have their valuations set by ADR at 105 percent of their previous year’s valuation.
While this is essentially a self-valuation process, ADR can accept the value reports as presented, or have its accountants check these reports to verify the data is correct and change the valuations where required. Companies can appeal ADR decisions in July. ADR sends out the final valuations to the appropriate county assessors in August of each year.
Companies owning mines, mills and smelters are among the special cases under ADR rules.
In determining the value of a firm like ASARCO, Arizona law allows the company to set a value on the ore in its mines and the cost required to extract it. The harder it is the extract (digging into harder rock, etc.), the higher the mining cost, and thus the lower value of these lodes. Also computed into valuation is the income approach estimate that is tied to projected future cash flows to justify current mine investments, on the assumption that all production is sold a year in advance. So mine valuations can fluctuate widely from year to year, affecting total valuation, Laux explains.
In fact, ASARCO’s valuation could spring back next year, if history holds true, he adds.
Equipment like smelters used by a company to process ore into the pure metal like copper also figure into the valuation equation. Use versus maintenance costs play into evaluation, as does the depreciation of tools and machines. In the case of ASARCO, the 2014-15 valuation could be skewed by demands from the US Environmental Protection Agency (EPA) that the Hayden smelter be upgraded to reduce emissions of sulfur dioxide to meet EPA standards going into effect in October 2018. ASARCO has proposed a $110 million upgrade to the Hayden smelter now being considered by the Arizona Department of Environmental Quality. If okayed as expected in mid-October, the proposal will be forwarded to EPA for final approval. ASARCO predicts the project to take two years, and while it doesn’t believe smelting operations won’t be interrupted during construction, it is still a possibility.
ADR guidelines also mentions a threat of a labor strike as a factor that can have an effect on company valuation.
ASARCO is correct in saying that while the company provides the basic data concerning its value to ADR, it is the agency that ultimately determines the valuation on which the company’s share of local property tax payments are made. But county assessors have noted that ADR approves most valuations supplied by the company on ADR forms in April.
To lessen the blow of rising property taxes, the Gila County Assessor is freezing property values for residents of Hayden and Winkelman.
James J. Hodl is a career journalist who has worked for newspapers, magazines and trade journals. A graduate of Southern Illinois University with a Bachelor of Science degree in Journalism, Hodl began his career as a reporter with the Palatine (IL) Herald and the Morton Grove (IL) Review before becoming editor of the trade publication Appliance Service News. In recent years, Hodl has had articles published in Consumers Digest, Good Housekeeping, Home Remodeling, Kitchens & Baths and Salute; and has contributed to trade publications serving the home furnishings, restaurant and casino markets. A native of Chicago, Hodl relocated to San Tan Valley in 2013.
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