by Howard Stephenson
Utah statewide property tax revenues are expected to reach $1.69 billion in calendar year 2003, an increase of $81 million, or 5%, from the previous year, according to a recent report by the Utah Taxpayers Association. This estimate is based on recently adopted rates by all Utah school districts, counties, cities, towns, and special service districts and includes locally assessed real and personal property, centrally assessed property, and automobile fee-in-lieu of taxes (FIL). Taxes paid on real and personal property accounted for $1.52 billion, or 90% of the total amount, and increased 5.3% from the previous year. Automobile FIL accounted for 10% of the total.
Taxes on Real and Personal Property
Utah’s statewide effective tax rate on real and personal property increased from 1.260% to 1.286%, a 2.1% increase. Property tax revenues also increased in 2003 as a result of growth in the tax base. When rates and growth in tax base are combined, school district property taxes increased 6.4% from 2002 to 2003 and accounted for 64.8% of the total statewide increase. School districts increased their share of statewide property taxes from 53.9% in 2002 to 54.4% in 2003. Alpine School District accounted for nearly a fifth of the statewide school district increase.
County property taxes increased 3.6% from 2002 to 2003 and accounted for 13.1% of the total statewide increase. Half of this increase was due to Davis County’s 24% property tax rate increase.
Counties’ share of statewide property taxes decreased from 19.3% to 19.1%. Property taxes for cities and towns increased 5.1% and accounted for 15.0% of the total statewide increase. Cities and towns collected 15.6% of all property taxes, unchanged from 2002. Special service districts’ property taxes increased 3.4% and accounted for 7.1% of the total statewide increase. Special service districts’ share of total property taxes decreased slightly from 11.1% to 11.0%.
RDAs Get a Growing Piece of the Pie
Cities continue to divert a growing share of total real and personal property taxes, including the school district, county, and special service district portions,
to Redevelopment Agencies (RDAs). In 2003, Utahns will pay $1.52 billion in real and personal property taxes to local governments, but most taxpayers are unaware that $72 million of this amount, or 4.8% of the total, will be funneled to RDAs to subsidize commercial developers. Local governments call these diversions “economic development”, but tax and economic policy experts call these subsidies a “racket”.
The Taxpayers Association says these diversions are really attempts by city councils to steal commercial activity from each other. Taxpayer subsidies of retail, office, and industrial developments are generally a zero-sum game in which one city’s gain is done at another city’s expense. Developers, also known as rent-seekers, are the winners, and local governments, schools, and taxpayers are the losers. Since school districts collect more than half of all property taxes, school districts are especially impacted by this diversion.
Countywide Effective Tax Rates
The Taxpayers Association calculates countywide effective tax rates by dividing total property taxes charged by all tax entities within a county – including school districts, cities, special service districts, and the county itself – by the county’s total assessed valuation. The accompanying table lists all 29 Utah counties by effective tax rates. Valuation-weighted tax rates vary dramatically from county to county for several reasons. Some local governments are operated more efficiently than others. Nevertheless, cities, counties and school districts with low property tax bases, which may be due to low property values and/or low population bases, need to provide similar services as counties with high property tax bases. However, a high tax base does not guarantee a low tax rate. Salt Lake City, for example, has the highest tax rate of any major city in Utah despite having one-third of the state’s municipal tax base and ten percent of the state’s incorporated population.
In addition to local government fiscal efficiency, other factors impact average property tax rates. At the city level, property tax rates are impacted by cities’ decisions to impose utility franchise fees. Most urban cities impose this tax while many rural towns do not. City property taxes are also impacted by city sales tax base, which explains why so many Utah cities use RDA subsidies to encourage “economic development” within their cities. School district property tax rates are impacted by enrollment growth rates and assessed valuation per student. Rapidly growing districts with modest to low assessed valuations per student like Tooele, Jordan, Nebo, and Alpine typically have high tax rates.