Top tax delinquent? Rio Tinto soccer stadium
Rio Tinto Stadium which, along with its tenant Real Salt Lake soccer team, is now co-owned by real estate developer Dell Loy Hansen did something in 2010 for which developers have long had a reputation.
It failed to pay its property taxes on time. They totaled more than $1.5 million, and make the stadium the single largest tax delinquent in Salt Lake, Utah and Davis counties.
Its unpaid tax is equivalent to about two-thirds of Real's 2010 player payroll, which a USA Today database says was $2.4 million. (Professional soccer players are paid less than stars in such sports as football, basketball and baseball. Real's top-paid player in 2010 was Javier Morales at $252,200.)
While developers are known for often delaying tax payments as a sort of "cheap loan" because the penalties and interest often cost less than other business loans, in the case of Rio Tinto "it was some sort of an oversight," said Trey Fitz-Gerald, public affairs director for Real Salt Lake.
"It should be paid within a couple of weeks," he added. When asked if the team is in any financial trouble, Fitz-Gerald said, "No, not at all." (Hansen in 2009 became a co-owner of both the stadium and soccer team with Dave Checketts' SCP Worldwide Corp.)
A Salt Lake Tribune analysis of tax records in the three counties identifies the largest 2010 tax delinquents, and the continuing trend of developers not paying taxes on time.
It found that real estate developers and construction companies accounted for nearly a third all delinquent taxes. They were late on $23.5 million worth, or 29.9 percent of the $78.5 million late in the three counties.
Why? "Many of them see it as a cheap loan. They figure they will just pay the taxes when they sell the land later," after also passing on those costs to buyers, said Utah County Treasurer Robert C. Kirk.
It's also easy. Owners do not need to fill out any "loan" applications before receiving automatic approval. They need not make any payments for five years (after which property is auctioned if taxes are not paid). The interest is 7 percent this year, which is lower than some other types of loans, plus a 2.5 percent penalty.
Kirk said he noticed that an increased number of developers failed to pay property taxes when the recession deepened in 2007 and sales and construction slowed. He said it dropped his county's overall on-time payment rate from 91 percent to about 88 percent.
"It will be interesting to see how [developers] handle things because they are sneaking up on the five-year mark for many of those taxes," after which the property would be auctioned to pay off any still-unpaid taxes, Kirk said. "They are running out of that grace period after next year, so it's going to be interesting."
Besides developers, two other types of businesses that deal in property also have much higher-than-normal delinquency rates.
The Tribune analysis found that commercial property companies such as the owners of apartments, offices and shopping centers accounted for about 4 percent of all late taxes. Banks and mortgage companies which sometimes delay property tax payments on foreclosed properties accounted for about 3 percent.
All other types of businesses combined account for about 16 percent of delinquencies.
The list of largest tax delinquents in the three counties is top-heavy with developers and similar companies.
After Rio Tinto Stadium, top delinquents include: Arbor Gardner (a developer), $784,797; Draper Irrigation Co., $382,493; DAE/Westbrook (a developer), $362,719; the U.S. Department of Housing and Urban Development (holder of foreclosed properties), $324,504; Midtown Joint Venture (developer), $294,082; Cottonwood Estates Development, $290,421; Mountain Home Development, $238,291; Layton Pointe, $211,866; and Centrepointe Properties, $178,940.
County treasurers have divided opinions on how much late payments hurt the local governments funded by property taxes and whether changes in the law are needed.
Davis County Treasurer Mark Altom says that as long as not too many people are delinquent, the penalties and interest charged to delinquents may be a bit of extra financial help.
He notes the 7 percent interest charged on late 2010 taxes "is a lot more than returns we are getting from the Public Treasurer Investment Fund, which has been less than one-half of 1 percent." But he adds quickly, "Still, we don't want anyone to pay late. We want them to pay on time."
Newly elected Salt Lake County Treasurer Wayne Cushing says he's anxious to see whether a change the Legislature made last year may encourage delinquents to pay more quickly.
If they pay all 2010 taxes owed by Jan. 31, the initial penalty will be only 1 percent. If not paid by then, the penalty is instead 2.5 percent and interest of 7 percent accrues, retroactive back to the Nov. 30 due date for taxes.
Utah County's Kirk says, however, "I don't think that will affect developers at all. They don't care as long as they can sell their property in the five years" before a tax sale, and pass on costs to buyers.
Kirk adds that some treasurers in the state are discussing perhaps seeking legislation that would allow Utah counties, as in some other states, to sell the debt from unpaid taxes to investors so counties do not need to wait for years for payment, and investors take the interest and penalty and perhaps end up with property if taxes are not paid.
The tax rolls show some other interesting 2010 tax delinquents, including some well-known businesses.
For example, Pulitzer Newspapers owed nearly $31,000 on taxes for the Provo Daily Herald facilities. Daily Herald Executive Editor Randy Wright said the taxes were not paid on time because of a clerical error, and says the bill, along with late fees, was paid Tuesday. The county, though, said that money was still owed as of Friday afternoon.
Union Pacific Railroad owed nearly $175,000 in the three counties. Singh Petroleum which operates several Conoco/Circle K convenience stores owed nearly $160,000.
Peery Hotel (in downtown Salt Lake City) owed $65,000; Zions Bank owed $113,000; Paul Ream Enterprises owed $41,000 for a Ream's grocery store in Springville; Performax Gyms owed nearly $93,000; Syracuse Stadium Cinemas owed nearly $44,000; and Carmike Cinemas owed $12,000.
Hi-Grade Meats owed nearly $24,000; Lehi Roller Mills owed nearly $18,000; Davis Lanes owed $23,500; and Redwood Plaza owed $49,000.
Property tax dates
Nov. 1 • Deadline for tax notices to go out to property owners
Nov. 30 • Last day to pay current year property taxes without penalty
Dec. 1 • Property taxes become delinquent. The penalty for 2010 delinquent taxes is the greater of 2.5% or $10 for each parcel. The penalty will be reduced to the greater of 1% or $10 if all 2010 delinquent taxes and the 1% penalty are paid on or before Jan. 31, 2011.
Jan. 31 • Penalty for paying delinquent taxes increases from 1 percent to 2.5 percent, plus interest.
May and/or June • County auditor conducts the final tax sale for properties on which taxes are five years delinquent.