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Surging real estate prices have given Utah homeowners a lot of reasons to grin — that hefty investment sure is worth a lot more — but it’s also hitting many where they weren’t expecting it: in their property tax bills.
The Beehive State’s tax laws are supposed to protect against this, so what happened? And what other factors are creating the cocktail of taxation hitting homeowners this year?
Let’s break it down.
Why are my property taxes going way up?
In short, your tax bill is most likely going up for at least one of these three reasons:
• About 90 taxing entities across the state — from cities and towns to water districts and libraries — are seeking property tax rate hikes this year, so chances are pretty good that your wallet will feel the sting of one or more of those increases.
• The valuation of your home could be increasing your bill. Because home values are skyrocketing — much faster than those of commercial properties — homeowners are carrying more of the revenue burden.
• An education funding law adopted by the Utah Legislature in 2018 is interfering with a mechanism in the state’s truth-in-taxation law from the 1980s, leading to higher payments than you would have to make under normal circumstances. It has affected taxpayers since it passed, but increased valuations have exacerbated the payments this year.
But first, let’s unravel Utah’s truth-in-taxation law
This law sets up a system that allows taxing jurisdictions (think cities, counties, school districts, water districts) to receive only the amount of revenue they collected the year before, plus whatever taxes they got from new development in their jurisdiction.
Because of those constraints, when property values in a jurisdiction rise, tax rates automatically adjust downward to offset the additional revenue that the taxing entity would have collected from appreciation.
If a taxing jurisdiction wants to create additional revenue to pay for things like new public safety services or water infrastructure, officials in that jurisdiction would need to hold a truth-in-taxation hearing.
Those hearings put governing bodies in the political hot seat, forcing officials to explain to the public why they want to raise property tax rates. They usually attract an abundance of opposition, and that political blowback often prevents, or at least reduces, major tax increases.
About half the time, entities that seek a rate hike back off their initial proposals, according to John Valentine, chair of the Utah State Tax Commission.
How are home values affecting property tax bills?
Taxing jurisdictions look at property tax revenue as a whole, not on a category-by-category basis.
Utah’s housing market is booming, and the value of residential properties shot up exponentially more than commercial properties, many of which are seeing sluggish growth coming out of the COVID-19 pandemic.
Many businesses don’t want to “buy an office building right now because everybody’s dealing (with) remote work,” Valentine said. “So your value didn’t increase very much, or even maybe went down.”
Because home values grew so far and so fast, and commercial property values grew relatively slowly, homeowners are taking more of the tax burden to meet revenue needs for taxing jurisdictions.
Let’s look to Salt Lake County as an example. In 2022, the median residential property value was $561,100, a whopping 28.7% higher than the year before.
“This is unprecedented, really,” Salt Lake County Assessor Chris Stavros said.
Commercial property values, meanwhile, climbed by 11.8%.
The difference in growth between both categories of property created a natural shift in taxation from commercial property owners to residential property owners.
Note, however, that appreciation only hurt homeowners whose property value grew by more than the median increase in a given jurisdiction.
“If an individual property’s valuation went up less than the median increase to the taxing entities they paid to,” Stavros said, “then they probably saw a decrease or no increase.”
Why are jurisdictions proposing higher tax rates?
While appreciation didn’t raise bills for everyone, proposed tax hikes from individual jurisdictions are affecting almost everyone who did see a larger bill.
Local governments, school districts, water districts and other taxing entities have lots of reasons for bumping up property tax rates.
Tiny Mayfield (about 50 miles south of Nephi in central Utah) initially proposed boosting its property tax rate by nearly 260% — the highest leap in the state — but settled on a lower level after reworking its budget, Mayor Steve Anderson said. If Mayfield had stuck with its initial proposal, the average homeowner would have faced a property tax increase of about $191.
The town has not raised its property tax rate substantially since at least 1997, Anderson said, and had been siphoning off its reserves to operate. The only thing the new tax rate does is plug a roughly $20,000 hole in the budget.
South Salt Lake’s rate hike of nearly 110% ranked among the highest in the state. At a truth-in-taxation hearing this month, city officials said the increase would allow them to bring on more public safety workers, which they contend would reduce response times and create safer neighborhoods.
They acknowledge the hike — almost $300 on the average home — is significant but said efforts to raise the rate incrementally through the years have been unsuccessful. The last time the city upped its property tax rate was 16 years ago.
The relatively steep increase South Salt Lake approved is exactly what Salt Lake City is trying to avoid with its proposed rate bump this year.
Utah’s capital wants property owners to chip in about 10% more, mostly to cover increased costs and additional employees to meet the rising demand for city services. By absorbing a smaller uptick now, Mayor Erin Mendenhall has argued, the city could stave off a more jarring one later.
Salt Lake City’s proposed rate would raise property tax payments on the average home by about $90.
How is that education funding law affecting my tax bill?
In 2018, the Utah Legislature passed HB293, which created a rate floor for the line item on your valuation notice that reads, “state basic school levy.”
Because of HB293, the truth-in-taxation law can’t adjust the rate for the basic school levy low enough to offset the additional revenue created by appreciation.
The potentially frustrating news: There’s no public process for protesting the increased payment for this line item.
The silver lining: This is the final year Utahns will have a rate floor on this line item, unless the Legislature extends it.
Are there any mechanisms already in place to protect homeowners when home values suddenly soar?
There are options for homeowners to appeal the valuation of their property, but there is nothing in state law to automatically cap how much you’ll have to pay when residential property values increase faster than other property categories.
Are there any legislative reforms in the works?
Lawmakers have just started discussing possible reforms. One aspect that makes reform tricky is the language in the Utah Constitution. It deems that property has to be taxed at fair market value.
“It’s going to be difficult to be able to say that the values didn’t go up,” Valentine said, “or that the constitution doesn’t require me to tax at that (fair market value) level.”
In Salt Lake County, year-over-year increases to assessed residential property values appear in line, Stavros said, with what is reported in real estate’s Multiple Listing Service.
How do I challenge the valuation of my property?
Homeowners have until Sept. 15 to file an appeal with their county’s board of equalization. If you provide a compelling basis for your appeal, the board could agree to lower your valuation.
You can start the appeal process by visiting the website for your county treasurer or assessor. More information about how to file an appeal is available on your valuation notice.
Do appeals ever succeed?
Yes. In Salt Lake County, officials say, appeals that make it to the board for consideration end up with some sort of reduction to the valuation about 70% of the time.
“So when people say that’s a futile cause,” Stavros said, “they’re wrong.”
That 70% success rate doesn’t include cases that get tossed because the homeowner failed to provide evidence that the valuation was wrong. You’ll want to bring in documentation to back up your appeal — like a recent appraisal or sales data from properties similar to yours.
Keep in mind, this process is only for those who want to appeal the valuation of their property. The only way to protest the proposed increase of a tax rate, Valentine said, is at a truth-in-taxation hearing.
What if the county rejects my appeal?
You still have options, but it will require jumping through more hoops. You can take your case to the Utah State Tax Commission, which has a few ways of seeing if your county got your valuation right.
Cases that make it to the tax commission also have a fairly good success rate. Most of the time, taxpayers get at least some change to their valuation, according to Valentine, the commission chair.
You can start with an informal hearing, where you tell your story, the county tells its story, and a judge decides. You could also waive this informal hearing and go straight to a formal hearing. There’s also the option of going to mediation, where a judge will help you and your county come to an agreement on what the valuation of your property should be.
If you can’t reach an agreement through mediation, you can get a new judge and go through a formal hearing.
Still didn’t get an outcome you like? You have another set of options.
You can take the record from your formal hearing and send it straight to the Utah Supreme Court to make a call, or you can file the case in district court.
I can’t afford my property taxes. Now what?
There are multiple options for homeowners who simply can’t afford to pay their bill.
If you have low income, you can file for what’s called the “circuit breaker” tax relief program. That application needs to be filed with your county by Sept. 1.
You can also ask your county for an abatement in which your elected county leaders can decide to take off up to $1,110 from your tax bill for the year. To request an abatement, you’ll have to file a TC-90CY form with your county.
Deferral options also exist for low-income Utahns who are 75 or older the year they apply for this new program. If you go this route, the taxes add up each year you defer and come out of the profit of the sale of your house. You need to apply with your county by Sept. 1.