A cardinal rule during a recession is to not raise taxes. In our current unprecedented recession that Utah and the country is suffering through, following this rule is more important than ever.
Your Taxpayers Association has heard from many individuals and businesses that are suffering. Employers are struggling to keep employees and individuals are concerned about a loss of income and paying their bills as unemployment reaches heights unknown before.
We’ve reached the time of the year when cities, school districts, and special districts finalize their next year’s budget. Some of these proposals might include property tax increases through the Truth-in-Taxation process.
Utah’s Truth-in-Taxation (TnT) law is a shining example for the nation and has saved Utah taxpayers billions in property taxes since your Taxpayers Association got it enacted in 1985. Since its passage, Utah taxpayers have been protected against rampant and runaway property taxes resulting from government overspending while other states continue to crank their property tax burden higher and higher.
TnT provides the needed sunshine and transparency into the process of proposing property tax hikes by keeping taxing entities accountable to their taxpayers. As a reminder, the governing body of each local taxing entity is required to go before their taxpayers through a dedicated public hearing and make their case to increase property taxes over what they received the previous year plus new growth (new rooftops).
Surprisingly, no taxing entity is restricted in the amount they can raise taxes each year. There is no prohibition against taxes being raised. They simply have to give notice through the mailed property assessment notice, do it in the open and try to justify to their taxpayers why the increase is needed.
Since the passage of TnT, Utah’s rank among the fifty states for highest property tax burden has dropped from 24th to 36th in the nation. Even still, Utah’s property tax revenue has grown faster than inflation and population combined over the last thirty years.
Because of these protections for taxpayers, TnT also protects government revenue during difficult economic times. Since property tax revenue is guaranteed for taxing entities, they do not suffer nearly as much as individuals, families, and businesses. While private industries are forced to lay off employees, government doesn’t feel the same crunch.
Often, governments keep departments fully staffed because property tax revenues are protected from economic downturns so they have little incentive or need to lower costs, trim budgets, or lay off employees.
With this in mind, any entity proposing to not only maintain budgets from prior years, but raise property taxes through the Truth-in-Taxation process at this time is tone deaf.
Yet, more than 35 cities, school districts, and special districts in Utah are proposing to raise property taxes for the fiscal year 2021, which began July 1, 2020. To view the full list, scroll to the bottom of this page.
In what can only be described as completely tone deaf to the pains of its taxpayers, Spanish Fork City Council has approved a tentative property tax increase within the budget for FY 2021. This follows an increase in FY 2020, as well.
The Spanish Fork City Council tries to nullify outrage by increasing these taxes by “small” amounts, but every dollar counts, especially during this unprecedented recession.
The tentative budget approved by the Spanish Fork City Council includes a property tax increase to pay for a new library. Yes, that’s where their priorities lie. The tax increase is estimated to be $30.12 on the average home worth $293,000, with $20.88 of that dedicated for the new library. The remainder is to be used for the construction of a fire station.
But it won’t end there. The City Council has essentially promised that this increase is the 2nd of 3 property tax increases to pay for the library.
As outrageous as their priorities are right now, this is terrible tax policy. Your Taxpayers Association strongly believes that capital projects (such as buildings) ought to be funded through general obligation bonds. The GO bond would increase taxes by a much smaller amount over ten or fifteen years, which would be temporary. Once the construction is paid off, property taxes would then decrease.
However, by implementing a property tax increase through Truth-in-Taxation, the Spanish Fork City Council has opted to continue collecting these new revenues indefinitely.
As we dug into their budget even deeper, we also found they intend to increase staffing. At a time of record unemployment and massive layoffs in the private sector, Spanish Fork has decided to use your precious tax dollars to convert a part-time library clerk to a full-time position, and to convert a human resources clerk from part-time to full-time as well.
The Spanish Fork city council is also violating budget standards by using enterprise fund transfers to prop up the General Fund. Rather than find ways to trim the budget to protect taxpayers, they’ve opted to steal dedicated money that Spanish Fork residents pay for maintenance and operation of specific services, such as water, sewer, and electricity, to shore up their unnecessary and frivolous General Fund spending.
The budget document describes these enterprise fund transfers, it reads “Because Spanish Fork taxpayers are the investor-owners, these dividends are used to offset what otherwise would be a significant increase in property tax rates.”
Millcreek City is seeking to raise property taxes this year in order to pay for an increased salary of up to 3% for Unified Police Department officers working within city boundaries. The city is also seeking the property tax increase to make up for “lost” sales tax revenue.
While it varies from city to city, Utah State Tax Commission Chair John Valentine mentioned at the Utah Taxpayers Association’s Taxes Now Conference in June that state total taxable sales in April year-over-year was only down 0.8%. With this data, added with Millcreek having a relatively small retail sales tax base in comparison with its neighbors and increased online retail activity, we question the need for this property tax increase.
Once sales taxes do return to pre-recession levels, taxpayers in this city are still left paying the “makeup” property tax revenue.
In addition, Millcreek City officials are also investigating a plan to levy a storm drain fee on every landowner in its boundaries. This could take another $100 – 150 annually from the average homeowner.
The city is using the argument that most other cities in the county and metropolitan area levy such a fee, however, your Taxpayers Association strongly opposed implementing it at this time. We believe the need is not immediate, and the city ought to focus on protecting taxpayers during this recession rather than adding to their burden.
Central Utah Water Conservancy District (Duchesne, Juab, Salt Lake, Sanpete, Summit, Uintah, Utah, and Wasatch counties)
The Central Utah Water Conservancy District, which provides water to 1.5 million people in the state, is proposing a tax increase.
They are looking to “freeze” the property tax rate, arguing that completing projects requires the necessary funding. Freezing the rate means that the amount of taxes paid increases by those within the district, as Utah’s Truth in Taxation law makes sure the rate “floats” or changes, dependent on property values year-over-year.
For example, if property values increase, the rate will decrease in order to maintain the district receives the same amount of property tax revenue as the prior year (excluding new growth).
By freezing the rate, as property values increase, the amount of revenue the district receives also increases. In this case, it’s about $3 million annually.
The Central Utah Water Conservancy District has been freezing the rate since at least 2016.
According to the Utah State Tax Commission, the CUWCD plans to increase property taxes from the certified rate of 0.000382 to 0.000400.
Be sure to attend the Truth-in-Taxation hearing on August 25, 2020 at 6 p.m. at the CUWCD offices, which are located at 1426 E. 750 N. Suite 400, Orem, UT 84097.
Pleasant View and Clearfield
As mentioned above, Utah’s Truth-in-Taxation law works because the tax rate you pay each year floats up and down, depending primarily on property values (new growth in an area can also affect this). Because of this floating rate, taxpayers have likely saved billions in property taxes over the 35 years it has been in place in the state, all while ensuring governments can operate as necessary.
Some cities, like Pleasant View, believe they can get around this by ‘freezing’ the rate, telling taxpayers that the rate “stays the same” to give the impression they are not raising taxes. This is a lie. Freezing the tax rate at the prior year’s rate will result in a tax increase.
Using cheap communication tactics to undermine transparency in taxation threatens the system that keeps your property taxes low and needs to be called out at every possible instance. Public officials should not hide behind tricks in order to receive more revenue. Elected officials need to directly and transparently inform and justify to their taxpayers the needed increase, and allow the taxpayers to voice their opinion.
The Pleasant View City Council voted unanimously to freeze the rate in the tentative FY 2021 budget.
Clearfield City is also using this same tactic. They want to maintain the prior year’s rate, which would result in a property tax increase of nearly $500,000 from FY 2020.
The Clearfield City Council also estimates that sales tax revenue will be down $420,000 in FY 2021, and it appears the property tax increase is to try and protect the city’s budgets, rather than looking at ways to protect taxpayers.
For those taxing entities who abuse TnT by ‘freezing’ the rate, claiming they are not raising taxes, your Taxpayers Association is considering a proposal which would no longer guarantee their property tax revenues from declining when property values drop. They should not be able to have it both ways.
If you have any questions about any of these entities’ proposals, email firstname.lastname@example.org.