Ten million dollars in lawsuit losses and settlements by the city of Phoenix will be paid out of property tax revenues instead of the city's general fund.
The lawsuits being paid involve cases between 2011 and 2012.
Phoenix, for the third time since 1999, is taking advantage of a Department of Revenue rule allowing municipalities to use property tax revenue to offset the losses incurred due to tort liability.
The change has riled up officials with the Phoenix Association of Realtors, who see it as a tax burden that is not distributed equally among Phoenix' residents.
"I think its very unjust and irresponsible," says Phoenix Association of Realtors CEO Diane Scherer. "Why would just property owners be responsible for $10 million in lawsuit liability rather than everyone that does business with the city."
The city of Phoenix actually has to pay out $16 million in tort liability for 2011-2012. Just over $10 million will come out of the property tax coffers.
The plan was announced in early August in a memo to the Mayor and City Council by City Manager David Cavazos. Cavazos was responding to a request for information on how to offset the phasing out of the food tax.
The option of paying off tort liability with property tax revenue allows the city to not cut funding to essential services and keeps the city's AAA bond rating, according to city of Phoenix CFO Jeff DeWitt.
"It's a way to help us get $10 million in through our property taxes instead of getting it from the general fund and that helps us phase out the food tax'" says DeWitt.
This will be the third time Phoenix has used this mechanism.
In 2009, the city notified the Department of Revenue it would possibly use $5.2 million from property taxes to pay lawsuit claims.
Officials requested to use $9.5 million in 2010, and $13 million this year, although the city can use less than the requested amount.
All torts need to be approved by the State Attorney General before they can be paid using this mechanism.
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