No swelling of coffers
Rising home values don't necessarily raise government's take
As home values soar in Utah, all that growth doesn't always mean money in the bank for Utah's cities. And it doesn't mean you'll necessarily have to pay more in property tax if you're a homeowner.
That may seem counterintuitive to some Utahns, who might expect that a tax on property values would automatically bring in more money for cities as values go up. The average price of a Utah home was 17 percent higher in the first three months of 2006 than during the same period in 2005, the Utah Association of Realtors announced last month. The U.S. Office of Federal Housing Enterprise Oversight this month named St. George as No. 1 of 275 U.S. cities for increases in home values and ranked Utah 15th among the states.
But a Utah property-tax law, known as Truth in Taxation, measures tax increases not by tax rates but by the total amount of tax revenue collected by municipalities. So when home values increase, cities must lower their levy rates to keep property-tax revenues the same as the previous year, or else advertise to the public a "tax increase" and hold a public hearing.
Property owners in some areas may see increases in their overall property-tax bills because some taxing entities will decide they need more revenue, not because home values have gone up. That's the case in several cities that have proposed property-tax increases this year, including Taylorsville, West Valley City and Kaysville.
According to a Deseret Morning News analysis last November of 500 cities, counties, school districts and other taxing entities statewide, property taxes increased 6.2 percent from the previous year. During that same year, home prices climbed 14 percent, according to the Utah Association of Realtors.
Each year, the state Property Tax Division gives every local taxing entity a "certified tax rate." The rate is an up-or-down adjustment from the previous year's levied rate. The state's formula for calculating the certified rate requires the local government to collect the same amount of revenue as the previous year, plus any extra revenue generated by "new growth": new subdivisions, commercial developments, an extra room built onto an existing home. If property values rise to the point that they would exceed the previous year's revenue, plus the revenue from new growth, the state adjusts the rate down.
To collect more revenue than the state formula allows, a government must approve a tax levy above the certified rate. To do so, they must go through the politically tricky process of an official tax increase, with Truth in Taxation hearings — a move most politicians want to avoid.
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