howardnlby Howard Stephenson
Utah property owners barely avoided being overcharged between $68 million to $97 million on their November 2004 property taxes, thanks to action by several local officials and the Utah Taxpayers Association.

Two weeks ago, the Utah Taxpayers Association learned from officials at Salt Lake County and Davis County that the recently released certified property tax rates (CTRs) from the Utah State Tax Commission’s Property Tax Division were higher than expected. The new CTRs would have increased property tax revenues for taxing entities in Davis County by 10.7%, well in excess of inflation and population growth. Additionally, this 10.7% increase did not include any property tax increases that would have been subject to Truth-in-Taxation hearings. Tax hikes in counties throughout the state would have been similar to those allowed in Davis County.

Most of the CTRs were actually higher than last year’s adopted rates. Under Truth-in-Taxation, property tax rates are required to float downward as valuations of existing properties increase as a result of reappraisal. If local governments want to increase tax rates above the CTR, they must print notices in local newspapers and conduct public hearings before adopting the increase. The Property Tax Division, however, had given permission for all taxing entities throughout the state to increase property taxes without going through the Truth-in-Taxation procedures.

Representatives of some taxing entities were thrilled at the news and some had begun the process of deciding how to spend the windfall. However, there were several local officials who blew the whistle on the Tax Commission’s error and admitted that the higher taxes were not allowed. In a meeting of taxing entities of Davis County, County Clerk-Auditor Steve Rawlings, explained that the higher rates were in error and urged taxing entities not to accept them. Rawlings was backed up by Davis County Commissioners and Bountiful City Manager Tom Hardy. Salt Lake County Council member Steve Harmsen also notified the Taxpayers Association of the problem. The Salt Lake County Council refused to accept the higher rates.

The Taxpayers Association staff met with officials of the Tax Commission’s Property Tax Division for several hours and reviewed the methodology used to determine CTRs. The discussion focused on a bill that the Legislature passed in 2003 which changed the formula that determines the CTRs. The issue was which value should be used in the numerator of the CTR formula: taxes budgeted or taxes charged. Your Association argued that the new statute stipulated that taxes budgeted must be used. The Association argued that since the Tax Commission’s formula already included an adjustment for taxes that are not collected in a given year, using taxes charged would lead to “double-dipping.”

The Property Tax Division agreed with the Taxpayers Association and has reissued new lower CTRs to local governments throughout the state. Under the inflated, original rates property owners would have been overcharged approximately 5% to 7%.

Taxpayers should thank officials at Salt Lake and Davis counties for bringing this issue to our attention after they received their erroneous tax rates. Had the Association waited for the Tax Commission’s public disclosure of rates, Property Tax Assessment Notices may have already been mailed and the mistake would have been more difficult and more costly to correct.