Utah senator sees a way to ease the property tax burden on homeowners

Arming county assessors with information on commercial real estate sales might help them bring more fairness to the system.

(Trent Nelson | The Salt Lake Tribune) The C9 Flats apartments in Salt Lake City on Friday, Oct. 21, 2022. A new measure would require the sale price in commercial real estate transactions to be disclosed to county assessors.

An eleventh-hour bill in the Utah Legislature is pitting tax fairness for homeowners against the state’s strong reputation for being friendly to business.

SB228 would lift the veil in limited ways on actual prices paid in millions of dollars of commercial real estate transactions each year — information that has long been kept secret under Utah law.

A lack of up-to-date and accurate data on what properties such as open land, apartment complexes, office buildings and other commercial assets sell for has thrown the state’s property tax system out of whack, according the bill’s sponsor, Sen. Dan McCay.

Homes are not the problem, the Riverton Republican and real estate executive told colleagues in recent days, as Friday’s adjournment of the 2023 session looms. A vast majority of residential sales prices are captured in a multiple listing service used by real estate agents, giving county assessors what they need to pinpoint how those properties ought to be valued for tax purposes.

Housing prices, meanwhile, have shot up dramatically in recent years, a trend accelerated along the Wasatch Front and in rural areas alike by the COVID-19 pandemic. That’s all meant that assessed values on commercial properties — and the taxes their owners pay — have lagged behind, McCay said, while those on homes have risen steadily, as many homeowners know from recent hikes in their property tax bills.

“If we don’t do this, we will continue to hurt single-family home and town home owners versus commercial,” McDay said Monday. “So this policy really benefits the voters.

“All this is,” he added, “is making all taxpayers equal.”

SB228 — with its final language still being crafted as of Tuesday by dozens of legislative analysts — would require that the buyer, seller, parcel number, legal description, acreage and sales prices all be disclosed to a special Multicounty Appraisal Trust, while still shielding the data from public eyes.

The information would be otherwise defined under state open records laws as private and off-limits, except to assessors and those involved in the transaction, with the figures kept in a database designed to aggregate and, in effect, anonymize it.

Powerful forces in Utah’s real estate sectors remain highly wary, though, even with those limits. They fear that pricing data could be used someday to tax real estate deals themselves, as most states already do. So SB228 has what McCay describes is a must-pass companion bill meant to prevent that.

SJR1 would amend the Utah Constitution, subject to a statewide public vote, to prohibit state officials or any other arm of government from ever imposing a tax on the transfer of property.

SJR1 and SB228 moved late Monday to the House after a divided committee vote, and McCay vowed that should either measure falter, he would yank the counterpart. “Please pass this bill,” he told the House Revenue and Taxation Committee, “or else I’ll kill the other one.”

Countering ‘a massive shift’ in taxes

McCay said lawmakers studying the issue over the summer took heavy flak from those complaining about the imprecision of property assessments as well as perceived inequities in the spread of the state’s tax burdens.

“That massive shift,” he said, “caused a lot of people to be upset over property taxes last year.”

An attorney and a former real estate portfolio manager for The Church of Jesus Christ of Latter-day Saints’ Suburban Land Reserve, McCay said SB228 was part of a wider attempt to reform and bring fairness to the tax system by giving assessors better data.

Along with other limits on how the information could be used use, the changes in SB228 are written to expire in 2026, meaning actual price data would only be submitted until that time.

Burt Harvey, property tax administrator for Utah County, said the past 10 years of property value increases had significantly boosted the tax share on residents.

“This has been a huge problem,” Harvey said, “simply because there’s more data available for residents than there is for other types of property.”

Tooele County Assessor Jake Parkinson, representing Utah’s 29 county assessors, said the measure would “promote equity in the property tax system. And right now, we have a system that is not equitable.”

McCay said SB228 is also crafted to explicitly exclude residential property and to prevent a disclosed price from being the sole basis for settling tax appeals. A host of other transactions would be excluded as well from the disclosure rules, partly to ensure the new data generated is accurate, including those involving condemnation, forfeiture, eminent domain and sales of leases or easements.

Still, even the measure’s sponsor said he had mixed feelings about the proposed changes, which were still coming into focus as the Legislature’s shot clock ran down. “I’ve never spoken against my own bill,” McCay said Friday of one draft of SB228, “but I might speak against it in its current form.”

All six Democrats in the Utah Senate voted against the measure’s companion bill, SJR1, as it passed that chamber 22-6 and headed to the House.

As many as 34 U.S. states and the District of Columbia currently levy some kind of one-time real estate transfer tax, according to the progressive Center on Budget and Policy Priorities. Typically, these are “ad valorem” taxes, meaning they are based on the price of the property transferred instead of a flat fee.

“To prohibit that in the Utah Constitution,” said Sen. Nate Blouin, D-Salt Lake City, “that goes a little too far for me.”

Privacy and business concerns

Utah’s status among the roughly dozen so-called nondisclosure states when it comes to real estate prices is deeply cherished on Capitol Hill and in the private sector.

“Why would we want to change that now?” asked Rep. Phil Lyman, R-Blanding. “I know they want the data, but there’s good reason why Utah has opted not to give it to them in the past.”

Lyman and others said the approach was an important part of an array of tax and regulatory policies that make Utah attractive to businesses, by maintaining the privacy of real estate transactions.

“This moves us away from, not closer to, being a business-friendly state,” complained Rep. Keven Stratton, R-Orem, who is an attorney and former head of the Provo-Orem Chamber of Commerce. He and Rep. Kay Christofferson, R-Lehi, voted against advancing the bill to the full House.

McCay disagreed, saying most businesses attracted to Utah “are honest, and they want to be contributing members of the community.”

Lew Cramer, CEO at Colliers International in Utah, the state’s largest commercial real estate brokerage, warned that even the “blended” disclosure McCay is proposing threatened to dampen opportunities for growth and economic development.

Mandating disclosure, he noted, also could jeopardize the value of a trove of proprietary real estate data currently compiled for private use by the state’s top commercial brokerages, including Colliers, CBRE, Cushman & Wakefield and Newmark Group.

“Our main advantage is competitive information,” Cramer said, adding that his firm had provided comparable sales information to assessors on hundreds of transactions. “We’re reluctant to have those shared with the world.”

He joined others in urging SB228 be held for further study, saying “we’re not there yet.”