Monticello • The highest taxed county in Utah is heading for another property tax hike as the San Juan County Commission attempts to respond to the dropping value of industrial properties and to recover from years of costly litigation.
With a per capita income of $17,500, San Juan is the poorest county in the state, but its residents already pay 0.84% of a property’s assessed fair market value in taxes, the state’s highest rate. Neighboring Wayne County, by contrast, has the lowest taxes in the state at 0.34%, according to tax-rates.org.
The commission hosted a truth-in-taxation hearing in Monticello on Wednesday for proposed tax increases to the general, health and library funds, which would raise the overall tax rate to 0.88%.
San Juan County is near the middle of the pack for the state when measured by median property tax. Residents pay $911 per year for a home worth the median value of $108,000, according to tax-rates.org. The proposed increase would raise that tax bill by $43 annually.
“Tax codes should be fair, they should be balanced and they should be as small as possible,” said Bill Boyle, the editor of the San Juan Record newspaper, who was representing the San Juan County Chamber of Commerce on Wednesday. Boyle warned that higher rates could drive businesses away, leading to a “free fall” in the county’s potential for economic development.
“We all want success for San Juan County and its businesses and its people,” he said. “It’s a pleasure and an opportunity to live here, but it’s not always easy.”
Mack McDonald, the county’s administrator, explained that the county’s general fund was nearly depleted after plummeting since 2014. “We’re in trouble,” he said. “We’re running out of money, and we’ve got to do something to start to shore up the fund. When you deplete your general fund ... that’s like going into bankruptcy.”
The fund has been used to cover shortfalls in other county funds in recent years, McDonald said, including the public health, emergency medical services and library funds, but that can no longer continue.
The county has not had a tax increase in over 10 years, he added, meaning inflation and the rising cost of goods and services have also eaten into the county’s coffers.
The county’s general fund had close to $10 million in reserves in 2015. By last year, it had dropped to $2.5 million and has since fallen under $1 million.
Over the four-year period from 2015 to 2018, the county spent $3 million on outside legal counsel in addition to $1.1 million on the County Attorney’s Office. Costs included $500,000 spent on a high-priced Louisiana law firm that lobbied the Trump administration for the reduction of Bears Ears National Monument, as well as $360,000 spent on an attempt to gain right-of-way to a controversial route in Recapture Canyon.
The litigation also included two voting rights cases, which redrew the county’s voting maps and led to greater protections for Navajo language speakers. In September, the county agreed to pay $2.6 million in plaintiff’s fees to the Navajo Nation as is required under provisions of the Voting Rights Act after unsuccessfully litigating and appealing the case since 2012. Payments will be spaced over the next eight years, starting with a one-time payment of $1.3 million in 2020.
At Wednesday’s meeting, Rep. Phil Lyman, R-Blanding, who sat on the commission from 2011 to 2018, suggested some of the lawsuits were carried out in order to protect commercial interests in the county.
“We have a responsibility to the producers in the county, to take care of them,” he said. “Sometimes that means we get into lawsuits. Sometimes that means we try to preserve the access: roads and things that are important to these companies ... if those things get shut down, the county gets shut down.”
Commissioner Willie Grayeyes, a Democrat who won the seat in Lyman’s district last year, said the previous commission’s litigious streak had a direct impact on the need to raise taxes. He also noted that many of his predecessors’ decisions to hire costly outside legal counsel were made behind closed doors.
“Those decisions were made without public input,” Grayeyes said. “They were done in executive session.”
The Salt Lake Tribune was unable to locate any public vote made by the previous commission to hire attorneys for the Recapture Canyon or Bears Ears work.
And multiple public records requests were made requesting any contracts between the county and Suitter Axland, a Salt Lake City-based law firm that represented the county in the two voting rights cases and charged over $1.1 million to taxpayers. County officials did not return any contracts, suggesting that Suitter Axland’s services were carried out between 2013 and 2018 without any signed representation agreement.
The county is expected to spend just $26,000 in legal defense for 2019, the lowest in years.
Dropping property values
Another factor in the county’s current budgetary difficulties is a substantial drop in centrally assessed property values, which include mines, oil and gas facilities, pipelines and utilities whose property holdings aren’t contained to one county.
For example, the White Mesa Mill, a uranium processing plant between Blanding and the Ute Mountain Ute town of White Mesa, was valued at $70 million in 2012, as was reported in the San Juan Record. Last year, its assessed value had dropped to $24 million as the facility became less profitable.
“We rise and fall with centrally assessed property,” Lyman said, acknowledging he noticed the trend during his tenure on the commission but hoped it wouldn’t continue.
A copper mine in Lisbon Valley was likewise once a major driver of revenue for the county, but it has been delinquent on its taxes since 2014 and owes $1.4 million. In October, the commission agreed to forgive $250,000 in penalties accrued over the past five years after the company announced financial difficulties and agreed to a payment plan.
“If I didn’t pay my taxes, [the county] would be selling my land on the steps of the courthouse, not giving me a break,” said Mike Wilcox, a rancher who lives near the mine.
One major new development in the county was the Latigo Wind Farm in Monticello, which was completed in 2016 and generates 140 million kWh per year, or enough to power more than 12,000 homes.
The project cost $125 million, but it was valued as personal property — a category used to tax equipment and machinery — not as real estate or centrally assessed property. Under Utah law, only new growth can be taxed without a tax rate change, and the massive renewable energy project was not considered new growth.
That meant the county was not able to collect any new revenue from the $2.2 million in taxes generated in the first two years after the project was built. Instead, property owners saw their taxes reduced; for example, a $150,000 home in Monticello has seen a tax reduction of $100 per year, far more than the proposed increase.
According to the Utah Division of Oil, Gas and Mining, San Juan County has produced 600 million barrels of oil since the 1940s, more than any other county in the state. But those numbers too have been falling. Much of that oil, and the associated revenues, has come from the Navajo Nation, where a federal program reimburses the county for non-taxable tribal lands.
‘Tighten the belt’
Multiple residents spoke out Wednesday to request the commission look onto ways to cut costs before raising taxes. “Tighten the belt,” was a phrase repeated a dozen times throughout the evening.
Commissioner Kenneth Maryboy, a Democrat, said he recognized local businesses can struggle to pay taxes and said he listened carefully to the comments. “As the chairman of your commission, I will recommend any way we can see this best fit for everybody. The hard-earned dollar you work for, that means a lot... I will do whatever I can."
For the San Juan County Public Health Department — which was created in 2014 and oversees water quality, disease prevention and other programs — cuts might not be a possibility, said Kirk Benge, the department’s director.
“Local tax dollars are used to meet mandated state minimum performance requirements” that allow the department to access the majority of its funding from state and federal grants, Benge said.
Likewise, Tammy Squires, the head of San Juan Counseling, said only 4% of her organization’s $2.7 million in revenue comes from county funding, but it unlocks much larger grants to provide mental health, substance use disorder and other counseling services to county residents.
The library fund, which is requesting a 0.0002 increase to the local tax burden, would use the extra money to keep libraries open in small communities on the Navajo Nation as well as in Bluff and La Sal, according to Pat Smith, the library director.
Several residents spoke in support of the library increase, citing the crucial internet services the libraries provide in rural areas.
The commissioners will vote on the tax increases at an upcoming commission meeting.