Southern Utah News Articles
Top Stories for May 19, 2010
Property taxes and Kanab City's 2010 budget
Property tax seems like a simple concept, but it’s more complex then it appears at first glance. Before talking about Kanab’s property tax situation, there are a few concepts you should understand.
First, you need to understand only a fraction of your property tax bill goes to Kanab City. This year, approximately 38% of your property taxes go to Kane County, 44% to the Kane County School District, 5% to the Kane County Water Conservancy District and only 12% to Kanab City.
It is important to know Kanab City’s property tax rate is one of the lowest in Utah, and by far the lowest of any community in Kane County. Alton’s property tax rate is 246% higher, Big Water’s rate is 223% higher, Glendale’s rate is 171% higher and Orderville’s rate is 155% higher.
One question often asked is whether increases in the value of property generate additional money for the city. No, they do not. During the 1980s, the Utah State Legislature changed how property tax is handled. If property values increase, then the tax rate is reduced.
Similarly, if property values decrease, the tax rate increases. The end result is that city revenues do not suffer or benefit and your taxes stay roughly the same, unless local leaders justify increases through at least two public hearings.
The city does, however, receive more property tax revenue as growth occurs. During Kanab’s growth years, significant increases in property tax revenue occurred. Few, if any additional revenues will be generated during our current period of very slow growth.
Finally, it is essential to understand how Kanab City’s property tax is distributed. Approximately 40% ($150,071) is dedicated to recreation, 7% ($24,752) is budgeted for the interest and sinking fund and 53% ($200,094) goes to the General Fund to support critical city services like your streets, the police and the fire department.
The impact of how Kanab City has allocated its property tax isn’t immediately clear until you consider last week’s article outlining the ongoing loss of sales tax dollars in Kanab. Since roughly half of your local property tax dollars are dedicated to recreation, the costs for general fund purposes like police, fire and street are disproportionately funded by sales tax dollars, which dropped more than 10% last year. For this reason, new revenue sources must be identified, or the city will be forced to cut significantly in these areas.
One final point needing to be discussed is the impact of sales and property taxes on different categories of citizens. Tax experts typically agree sales taxes most seriously impact the poor and families with large numbers of children.
On the other hand, property taxes are considered progressive with a greater impact on the wealthy, who own more property.
Property taxes however, tend to have a more negative impact on senior citizens who have accumulated property during their lifetimes, but live on fixed incomes. In Kanab, we rely heavily on sales tax dollars, so tourists can contribute more to our budget. In doing so, our budget disproportionately impacts the poor and those with large families. It is also worth noting, high sales taxes encourage residents to buy high ticket items like cars and building supplies in other areas with lower tax rates.
Your elected city officials will do everything possible to cut back on projected expenditures for the upcoming budget year. However, we will only be able to cut back to a point, beyond which we would be unwisely impacting critical services.
If additional revenues are required to fund these services at that point, an increase in property taxes will be one of several options discussed. Your recommendations regarding other alternatives are welcome and encouraged.