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TAX ALERT!
From The Utah Taxpayers Association
1578 West 1700 South #201, Salt Lake City, Utah 84104 PH 972-8814 FX 973-2324

October 29, 2003
To: All Taxpayers in Salt Lake City
Re: Bond Election

Salt Lake City Taxpayers Should Be Very Concerned About Proposed Bonds

On Tuesday, November 4, Salt Lake City taxpayers will be voting to approve or reject six bond proposals totaling $47.6 million. Each bond will be voted on separately. If all bonds are approved, the city’s portion of your property tax will increase 6.6%. The annual fiscal impact of each bond is indicated in the following table.

Annual Property Tax Impact of Proposed Salt Lake City Bonds
Proposition $175,000 Residence* $175,000 Business
Capital
Operation
Total
Capital
Operation
Total
#1 Hogle Zoo - $10 million
$5.25
$0.00
$5.25
$9.50
$0.00
$9.50
#2 The Leonardo- $10.2 million
$5.25
$0.00
$5.25
$9.50
$0.00
$9.50
#3 Library Facilities - $5.4 million
$2.75
$8.25
$11.00
$5.00
$15.00
$20.00
#4 Open Space - $5.4 million
$2.75
$0.00
$2.75
$5.00
$0.00
$5.00
#5 Soccer Fields - $15.3 million
$7.75
$2.00
$9.75
$14.00
$3.65
$17.65
#6 Tracy Aviary - $1.1 million
$0.50
$0.00
$0.50
$1.00
$0.00
$1.00
Total (if all pass) - $47.6 million
$24.25
$10.25
$34.50
$44.00
$18.65
$62.65
* Residences receive a 45% exemption under state law. Business properties receive no exemptions.

These projects are worthy endeavors that will benefit many city residents, but taxpayers also need to understand the several downsides to these proposals:

1. Taxpayers in Utah and Salt Lake City are facing several severe fiscal challenges, mostly related to population growth and Utah’s unique age demographics. This requires taxpayers to make hard decisions as to which projects are essential, which ones are time-critical, and which ones are not. Gas taxes will be increased significantly in the next three years to fund major highway projects. At the same time, state officials will have to determine how to fund Utah’s rapidly growing public education system. These challenges will impact Salt Lake City taxpayers, even though the city is not growing as fast as other parts of the state.

2. Several bond supporters have dismissed these tax increases as costing only a Big Mac per person per week. However, Utah’s state and local tax burden as a percent of personal income is already the nation’s ninth highest, and Salt Lake City’s property tax rate is the highest of any Utah city. In fact, Salt Lake City’s property tax rate is already more than double the typical rate for a Utah city, despite the city’s high property tax valuation per resident. Salt Lake City has 16% of the state’s municipal tax base but collects nearly a third of all municipal taxes in Utah.

3. Salt Lake City’s inflation-adjusted per capita general-fund revenues have grown 2% annually since 1990. In the long run, these growth rates are not sustainable without additional tax increases.

4. Since 1990, property taxes have shifted away from the Salt Lake City School District and towards city government. In 1990, property taxpayers in Salt Lake City paid 28% of their property tax bill to the city (including library) and 43% to the school district. In 2002, the city’s portion of property taxes increased to 35% while the school district’s portion decreased to 39%. Some of this shift – but not all -- can be attributed to the legislature’s decision to reduce the statewide basic levy and make up the difference with state income taxes. During the same time period, the county’s portion of property tax bill decreased from 25% to 21%. The following chart demonstrates the shift in property taxes from 1990 to 2002.

Share of Property Taxes by Entity, 1990 and 2002
Tax Entity
1990
2002
Salt Lake City (including Library)
28%
35%
Salt Lake City School District
43%
39%
Salt Lake County
25%
21%
Other entities
4%
5%
Total
100%
100%


5. Utahns, and Salt Lake City and Salt Lake County residents in particular, are already spending large amounts of tax dollars towards parks and recreation. According to Census Bureau data, the amount of tax dollars spent on parks and recreation by Utah state and local governments as a percent of personal income is 50% higher than the national average.

6. These projects are not legitimate engines for economic growth, despite claims made by bond proponents. Promoting economic growth is best accomplished by other means, including keeping taxes under control so businesses can reinvest profits and hire more employees. Experience in the United States and in other countries clearly demonstrates that keeping tax burdens low while providing for essential needs such as infrastructure and education are the keys to higher long-term economic growth. Other means for promoting economic growth that are more effective than any of the proposed projects include offering tax and financial incentives to high-wage employers in other states to locate their facilities in the city.

7. If approved, these projects will place additional pressures on ZAP tax revenues. Most of these proposed projects, if approved, will be eligible for ZAP funding, and proponents of most of these projects have indicated that they will seek ZAP funding for their projects. Two outcomes will be inevitable: projects currently receiving ZAP funding will receive less funding and pressure will build to request legislative approval to increase the ZAP tax from 0.1% of taxable sales to 0.2% or higher.

Since none of these six projects are time-critical, at least compared to Utah’s transportation and education needs, the city should consider approving the projects over a several-year period as the tax base grows and existing general obligation debt, which due to the recently completed library has increased from $26 million in 1999 to $93 million in 2002, is gradually retired.


     *Please make copies of this Tax Alert and distribute them to family members and neighbors.
The Utah Taxpayers Association is a non-profit, non-partisan association working for greater efficiency and economy in government.