In my post yesterday on Fire/EMS and the city’s budget, I suggested one option for eliminating a deficit could be increasing property taxes. Here is some information on how property taxes work and impact Ivins residents.
When you look at your property tax bill you will see a long list of taxing entities reaching into your pocket every year. Ivins is just one of many. Ivins received a little less than 13% of your total tax payment last year.
Ivins has not raised its share of property taxes since 2010. The chart shows that in 2011, the city collected 0.21% (about one-fifth of one percent) of your property’s taxable value. For permanent residents, your taxable value is 55% of market value. Last year the city collected less than one-tenth of one percent of your taxable value.
The city’s tax rate went down because the value of homes increased, yet the city collected the same amount from existing properties every year since 2010. That’s despite inflation constantly eating away the purchasing value of the dollar.
Instead of increasing property taxes, the city has relied on new property taxes from new construction to help cover normal inflationary cost increases. New property taxes from new construction should exist to help pay for the expansion of services resulting from adding new homes and population. They can’t do that and at the same time cover normal inflationary costs that impact existing services. Inflation has reduced the purchasing power of the dollar by almost 40% since 2010.
Unless or until we have sufficient taxes from other sources (sales tax, room tax, etc.), we rely on property taxes to cover the impact of inflation. Cities in Utah don’t like increasing property taxes. That’s good news. But it is unsustainable. As a result, when they reluctantly need to raise taxes it’s a big increase.
Last year 89 communities in the state proposed property tax increases. Their average increase was 34%! If they had just set property tax rates annually to cover inflation, increases most years would be just 2% to 3%. Similarly, if Ivins were to increase taxes to cover inflation since 2010, the increase would need to be almost 40%.
Fortunately, we don’t need to do that. Our current draft budget shows a deficit of $382,000. That’s not good news, but it’s a lot better than the first draft budget. It showed a deficit of over $1 million. But if we can’t trim that deficit, we would need to increase the Ivins portion of property taxes by 18.6% to eliminate the deficit.
At least that’s my view because I don’t believe we should pass a deficit budget or dip into reserves to fund a planned deficit. There, I said it. And I finally found a way to make everyone in Ivins mad at me. But don’t freak out about my tax increase comment. I may be the only council member who would consider that. And the city would have to hold a public hearing before increasing taxes.
Okay, 18.6% sounds awful. But, (1) it’s the first increase since 2010, and (2) since the Ivins property tax is 12.7% of your total property tax bill, it would increase your total property taxes by 2.4%.
I’m not trying to minimize the fact that it would be a tax increase. None of us like tax increases. I’m just showing what the impact would be. If we had more businesses generating sales and room taxes, we wouldn’t need to rely so much on property taxes. But I think most of the community is not in favor of a lot more, or any more tourist accommodations generating room taxes, and not that excited about much commercial/retail development increasing sales taxes.
Mike, thank you for your research and presenting the facts. Yes, as unpopular as it sounds, a tax increase is inevitable if we are to maintain the level of services that the citizens of Ivins enjoy and have come to expect.
Ivins is no longer a small town; it has grown into a legitimate city with the associated needs to function as such. My one suggestion would be to examine the current impact fee schedule to see if the increased growth and needs for services created by the new development is providing adequate funding to serve these needs.