Southern Utah News Articles
Top Stories for August 18, 2010
Confusing tax rates explained at Kanab City Council
The very confusing issue of property valuations, tax rates and, to some, what appears to be discrepancies in personal property taxes, were addressed by Kane County Auditor and Clerk Karla Johnson during the work session prior to the regular Kanab City Council meeting on August 10.
Johnson reported to the council that for decades prior to 1986, the personal property taxes for both Kanab City and Kane County were determined by assessed property values multiplied by a mill levy or tax rate determined by these governments, and were rarely changed by law.
Any increase in tax revenue by property taxes was a result of an increase in valuation of those properties, as the mill levy rate was fixed. As long as properties appreciated in value, tax income would increase, and in most of those years that was the case.
In 1986, the state legislature passed the Truth in Taxation bill as a means of limiting governments from collecting windfall tax amounts secondary to rapidly escalating inflation in the housing market. It was done by eliminating the fixed rate mill levy, in favor of a variable rate, which could be adjusted on a yearly basis to provide governing bodies with adequate income, yet not let taxes spiral out of control because of dramatic increases in home values.
“Many homeowners remain under the impression property taxes are still calculated based on their home’s valuation and a fixed rate, and therefore think when their assessed values go down, their taxes should go down as well, and that’s where the confusion begins,” said Johnson.
The measure allowed municipalities and counties to collect an amount each year equal to the previous year’s General Fund tax revenue by increasing the tax rates if housing values dropped, and lowering them when those values increased. Overall, property values dropped for this tax year, which led to an increase in tax rates from .002605 to .003015 in the county and from .000678 to .000723 in the city.
The analogy of a teeter-totter came into mind. The goal is to fund the budgeted amount (keeping the board parallel to the ground) by balancing the tax rate with the home values. This was rarely achievable under the mill levy system, which threatened under or over taxation, depending on home values.
With the passage of the Truth in Taxation bill, if the assessed home values went down, the tax rate side of the fulcrum went up. This provided a means of restoring balance between both sides, thereby keeping the board parallel meaning the budget was funded.
“Whether you pay the same, more, or less tax this year depends on where your property value falls in regard to the overall county property values, even though most properties declined in value. This is the real confusing part. If you are above the halfway line of property values, you’ll pay more taxes this year and the further you’re up and away from that line, the more you’ll pay. Whereas, the opposite is true below that line, even though nearly all properties decreased in value. So generally, half the taxpayers will pay more and half will pay less with the higher tax rate this year,” explained Johnson.
Legally and technically, there was not a tax increase this year, but many people will not feel that way because their tax bills won’t seem to reflect that.
A separate issue regarding taxes, not apparent to anyone via their tax notice, is the impact of House Bill 23, known as the redemption factor (RF), which passed earlier this year and allows government entities an opportunity to forego collecting a predetermined amount of the legally allowed overall property tax. This, in effect, reduces the property tax burden of the populace affected.
Kanab’s General Fund budget, that could be legally collected in taxes, was $205,857 of which $12,705 was eligible as a redemption factor. Kanab City took this redemption factor, rather than not accept it and thereby lowering their total general operation tax revenue to $193,151, in order to fulfill the budgeted revenue amount of $205,857. Alton and the Kane County School District also kept their RFs. The city council did not discuss the RF previously, but budget woes would seemingly preclude them from not utilizing the RF monies.
Kane County, on the other hand, decided not to take their RF share of tax in the amount of $164,298, thereby lowering their total general operations taxes by that amount to $3,553,208.
“The commissioners saw it as an opportunity to give something back to the taxpayer and felt they could fund the county’s general operations adequately with less than the $3,717,505 they were allowed to collect in property taxes. Glendale, Orderville and Big Water also declined to take their RFs,” said Johnson.
Since next year’s eligible tax amounts are based on this year’s intake, not taking the RF could jeopardize the amount allowed to be collected with next year’s property taxes in those communities. But, to many in the governing bodies of these towns, it was better than appearing to raise taxes.
If anyone has questions regarding property tax issues, Karla Johnson would be happy to give you some answers and can be contacted during regular business hours at the Kane County Clerk’s office.
Mayor Nina Laycook gave an emotional thank you to all of the volunteers, city employees and community leaders who pitched in to help protect homes and businesses impacted by the recent monsoon flooding. “The emergency preparedness plans are working,” said Laycook.
Fire Chief Joe Decker reported over 300 volunteers spent anywhere between three and 16 hours apiece doing what was asked of them, and many brought their own earth-moving equipment with them. “Everyone pulled together for a cohesive effort without any real problems, despite many of our community leaders being out of town,” said Decker.
Public Works Director Keith Robinson reported his crews have been cleaning streets and ditches and retention ponds the past two weeks and will continue.
The council approved Howard Davis’ request to split his property near Center St. and 300 East, to be able to sell the front property with a house, and build on the back property once street access and SID agreements are formulated. No opposition was voiced.
Peter King was appointed to the Library Board to replace Trent Keller.
The council voted to purchase the lowest limit for the uninsured/underinsured coverage on city vehicles.
Preliminary drawings of the proposed new BLM complex just south of the fire station were shown to the council. The building will house the Kanab Field Office and the GSENM office once completed late next year. It will incorporate multiple energy-saving features, including photovoltaic cells and geothermal heating and cooling.
Public Works Maintenance Tech II Travis Clark, “the best backhoe operator in the state,” and Police Department Secretary Suzette Bunting were awarded merit pay increases.