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 in tough economic times. 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.
This year, more than 55 cities, school districts, and special districts in Utah are proposing to raise property taxes for the fiscal year 2022, which began July 1, 2021. To view the full list, scroll to the bottom of this page.
Citizens in Moab haven’t paid a property tax in nearly 30 years, since the city has opted to not levy a property tax and relied upon sales tax and other revenue sources. The city says it has decided to implement a levy to “establish a more diverse revenue stream”. While there is some wisdom to this, particularly since Moab is so reliant on a singular industry (tourism), the amount seems a bit high.
Moab is proposing a $3.3 million increase, which would increase a citizen’s overall property tax bill by 20%.
Moab is arguing that its infrastructure is in need of repair, as well as the need to hire more police officers. They are looking to hire 8 new officers in a 5-year period, totaling $2.7 million.
The city is also arguing that it needs additional revenue to increase its rainy day fund. Moab’s current rainy day fund is sitting at roughly 8% of its operating expenses, and its target balance is between 25 – 35%.
Using an increase in property taxes to put new revenue into reserve is a huge disservice to its taxpayers. Governments seem to forget that their taxpayers are also hurting economically and would like to build their own reserves. Asking city taxpayers to pay more in order for the city to put it into its savings account is terrible policy and unfair to taxpayers, particularly those who are still recovering from the economic impacts of the COVID-19 pandemic.
The city is increasing taxes for the 4th time in 5 years, with a proposed increase of 20% above the prior year’s property tax revenue. That’s roughly $38 annually for a home in the city valued at $302,000.
Payson Mayor Bill Wright says “Payson City has held the certified tax rate steady. This creates a small incremental increase in taxes, but precludes much higher increases in the future.”
We’ll break this down in a moment. However, the mayor makes an even more ridiculous claim.
He continued “in the certified tax calculation, generally the certified tax rate declines each year, so Cities are not able to reap the full benefits of growth in the community, even though growth means more expenses to the city. This year is no exception, the calculated certified tax rate was a reduction from the previous year.”
Alright, so let’s break down what he’s talking about, and what the actual purpose of Utah’s unique Truth in Taxation law is.
Mayor Wright is correct in saying that by Payson “holding the rate steady” it results in small increases every year. But by doing this, he and the Payson City Council have decided to follow the example of the Salt Lake City Council, with its ballooning budget and unending tax increases. There are times when an increase is not needed and taxpayers are much better served with possible increases every 5 to 8 years. Despite what some folks in Washington say, government does not need to automatically grow every year.
While final tax rates have yet to be approved, the mayor is suggesting that the rate would be held steady, but even that is incorrect. The 2020 property tax rate in Payson was 0.001193, but the 2021 proposed rate sits at 0.001354. That certainly does not qualify as “holding the rate steady”. It will be up to the Payson City Council to decide how much additional revenue to collect.
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 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 Payson, believe they can get around this by ‘freezing’ or ‘holding the rate steady’, telling taxpayers that the rate “stays the same” to give the impression they are not raising taxes. This is misleading and completely false. Freezing the tax rate at the prior year’s rate will result in a tax increase.
Again, Payson claims they haven’t decided what the final tax rate will be, the proposed rate is higher than simply “holding steady”. The Payson City Council is trying its best to hide the true cost of government, by incrementally increasing taxes each year, giving its citizens no reprieve.
This tonedeaf message of “incremental increases” also demands that its citizens look at ways to cut their family’s budget in order to pay these new taxes, while the city has no incentive whatsoever to cut its own budget or find ways to be more efficient.
Finally, the mayor claimed that new growth in his city leads to new expenses. This is a possibility, depending on the type of growth. But he conveniently neglects to mention that cities automatically gain new property tax revenue with new growth, such as new houses or businesses, in its boundaries.
Payson, in 2021, can levy its property tax against $63,578,212 in valuation of new growth.
The city will automatically begin collecting property taxes, not to mention any other taxes such as sales and municipal energy, on this $64 million in new growth.
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 gimmicks 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.
Central Utah Water Conservancy District
Continuing its long-running stretch of increasing property taxes year over year, the Central Utah Water Conservancy District is looking to increase taxes on 62% of the state’s growing population.
The entity is proposing a $6 million increase into its general fund, which will then be automatically transferred into its capital projects fund. Unfortunately, it is unclear precisely what capital expenses the district plans on using this new revenue for.
Collecting new property tax revenue in perpetuity for short-term capital projects is not justified. Later this year, the District will ask taxpayers for $180 million bond for capital projects. Again, it’s not specifically defined whether the additional $6 million will be for ongoing operational expenses of these proposed capital projects, or whether it’s a short-term or one-time expense.
Water conservancy districts receive revenue from the sale of water, but a primary source of their revenue comes through property taxes. For Central Utah Water, 30% of its revenue comes from taxes, and just 21% from water. Let that sink in for a moment. Property taxes provide a massive subsidy for water usage in Utah, which makes no sense as we try and conserve.
If property tax and sales tax subsidization of water were phased out, the water districts would have to charge water users the full price, which would in turn lead consumers to economize their monthly water use and show users the true cost of water, including the capital projects involved in delivering it to them.
The Central Utah Water Conservancy District has been freezing the rate since at least 2016. The District’s Truth-in-Taxation hearing will be held on the 12th or the 16th of August, depending on the county in which you live. Check your property tax notice for more information.2021 Truth in Taxation List