With the interest in Ivins City’s tax increase on the table, it is worth our collective time to ensure that we all understand the facts of property taxes in the State of Utah. So here are a few items that often cause confusion. Warning: it gets more complicated as you go on; I hope you find it worthwhile. At the end, there is a description of some confusing items on your tax bill.
THE BASICS
1) Assume that the value of your home went up in value by some amount, say 10%, in the past year, and so did all the homes in Ivins. What is the increase in tax that your home would see?
- 10%
- 5%
- 0%
- Unable to know from the information presented.
The correct answer is 0%. The total amount of tax dollars collected from existing homes cannot increase without the lengthy process of Truth in Taxation.
2) Assume that inflation over the past year has been 5%. What is the increase in property tax that your home would see?
- 10%
- 5%
- 0%
- Unable to know from the information presented.
The correct answer is 0%. The state does not allow taxing authorities to even keep up with inflation.
3) Assume that your home assessment went up by 10% AND inflation was 5%. What is the increase in property tax that your home would see?
- 15%
- 10%
- 5%
- 0%
By now you understand this stuff. 0% is correct. The next scenario will be different.
4) Assume that YOUR NEIGHBOR’s home assessed value increased by 25% because they put in a new pool and a casita, but all the other homes in Ivins saw their value increase by only 10%. YOUR taxes will:
- go UP
- go DOWN
- remain the SAME
- Unable to know from the information presented.
The correct answer is that YOUR taxes will go DOWN a tiny amount, as they will for all the other people in Ivins, except for your neighbor, whose taxes will go UP. The total amount of tax that Ivins City collects must remain the same as collected for the previous year from the existing properties, but as one property goes up in value more than the average home, its taxes go up, while the properties that stayed the same or went down in value, will see some decrease in tax, keeping the total tax collected constant.
WHAT ABOUT GROWTH?
Now that we have those preliminaries out of the way, let’s look at what happens as the city grows. You already know that the existing homes will see the same dollar amount charged from year to year, unless their value has significantly outpaced or fallen behind those of the average Ivins home. But what about the new homes?
5) Assume that new homes in one year account for an additional 5% in total assessed value for all homes in the City. WHICH statement describes their tax individual tax burdens relative to other Ivins’ homes with similar assessed values?
- New homes each pay 5% MORE each than similar Ivins homes
- New homes each pay the SAME as other Ivins homes
- New homes pay 5% LESS each than similar Ivins homes, because of they already paid impact fees during the construction process.
- Unable to know from the information presented.
The correct answer is that the new homes will pay the same amount of tax as other homes of similar value. They have already paid impact fees during construction to cover costs of city infrastructure due to their presence.
6) How long are new homes considered “new” and not included in the tally of tax dollars that cannot be exceeded each year?
- 0 years
- 1 year
- 5 years
- Unable to know from the information presented.
The correct answer is 1 year. Only in their first year are they not included in the sum of tax dollars that cannot be exceeded. In their second year, they are counted along with all other existing homes.
GOWTH AND INFLATION
Now let’s move on to inflation and growth in the past several years.
7) How much has inflation been since 2010, the last time that taxes were adjusted in Ivins?
- 5%
- 10%
- 25%
- 47%
The correct answer is 47%, according to the Bureau of Labor Statistics. That means that the purchasing power that the City has lost in that time has been considerable, costing them $1.47 for what used to cost $1.00, while homeowners are still only paying $1.00.
8) How much have Social Security payments increased since 2010? That is, for someone retiring in 2010, and receiving some amount each month, how much more will that person be receiving in 2025?
- 0%
- 10%
- 25%
- 43%
The correct answer is 43%, according to various sources, but it is easiest to find on AARP’s website, in plain English. (The SSA uses a different method of calculating inflation, ignoring things that they assume do not affect retirees.)
9) If growth in the number of households has been, for the sake of a simple value to work with, 25%, over some period of time, how will the total tax dollars received by the city have changed over that time?
- 0%
- 25%
- Unable to know from the information presented.
The correct answer, finally, is “unable to know…” because I did not provide you enough information. If the new homes, on average, had the same assessments as other existing homes, on average, then the tax dollars would have increased by 25%. But it seems that, in general, newer homes are larger and more expensive than most existing homes, so their average assessed values are greater than the those of older existing homes. Therefore, the tax dollars received by a city would have gone up by more than 25%. Remember, this 25% value was chosen for convenience, but the principle is the same; if newer homes are more valuable than existing homes, they pay more tax than existing homes.
10) If growth in numbers of households has been 25% and inflation has been 50% (to choose numbers easy to deal with, not to resemble any real case), what should be our anticipated increase in costs to the City if all other aspects remain the same (that is, no improvement in City services)?
- 25%
- 50%
- 75% (because 25 + 50 = 75)
- 87.5% (because 1.25 x 1.50 = 1.875)
The correct answer is 87.5%. This may be confusing, so let’s look at an example: Assume that the population starts at 100 households, and the initial cost to provide services is $100 per household; the cost to provide services for the entire city is then 100 x $100 or $10,000. Now allow the population to grow to 125; the cost is obviously 125 x $100 or $12,500. But the new cost should also reflect the increase due to 50% inflation on top of that $12,500, ( that is, $12,500 + 50% of $12,500) or $18,750, for an overall increase of 87.5%.
SOME DETAILS FROM YOUR PROPERTY TAX STATEMENT
The Notice of Property Valuation and Tax Changes you received in the mail is extraordinarily confusing. It is as if the designers of the form wanted to include all the information that they could, but with insufficient labeling and explanation. Here are a few pointers:
1) We all saw $860,000 listed as the “$ Increase” for the public hearing. This refers to the increase in the budget for the entire city that the City Council wanted to request; it is not a value determined for your home, nor anything else. Of course, this is meaningless without some reference point, such as the current budget; but it is what they print and what we see.
2) It is worth noticing that the tax for the City of Ivins is shown on the third line; all of the other lines are for taxes that are not collected by the City of Ivins. It represents about 13% of your overall property tax bill, and has not changed significantly since 2010.
3) You may have noticed that the comparison between “last year” and “this year” is shown in both Tax Rate (in percent) and in Tax Amount (in dollars). Of course, you are interested in the dollar amount, but it is worth noticing that in most components, the tax rate went down. If your home value went up more than the average value in the area then your tax dollar amount also went up. If your home value went up less than the average value in the area then your tax dollar amount also went down. (Very few properties in Ivins had their value go down, but those would also have seen a decrease in dollar amount to be paid).
4) What is the taxing agency’s area, over which property values are computed? For the City of Ivins, it is obviously the city limits. But the largest items in your tax bill are the Local School Fund and the State School Fund – these average the property values over all of Washington County and the State of Utah, respectively. Your taxes went up more for the State School Fund than for the Ivins because Ivins’ property values must have gone up more, in general, than the average property values in the State. The Local School Fund is more complicated and addressed in the next item.
5) Why did the Local School Fund go up by a smaller percentage than some other items, and why did the Charter School Fund almost triple in dollar amount? There is some sleight of hand going on here, representing our legislature’s best attempt at clarity. The Charter Schools are funded by tax dollars, but because they are not constrained by geographic borders, they cannot simply apply a property tax; instead, they are supported by the local school district (and other sources from the state). The local school district breaks out what they provide to the charter schools attended by students in that district, and each year that ratio becomes something different. So the total amount collected by the Washington County School District is actually the sum of these two items, but they are broken out so that you can see what is collected on behalf of “public” schools, and what is distributed to “charter” schools. The sum of those two results in a tax change that, this year, is at a similar rate as that for most other items. School taxes represent almost half of your total property tax bill each year. But the Local School Fund went up 44% in 2023, representing the largest dollar-value increase in your property tax bill in many years. The Truth-in-Taxation hearing for it was held on August 7, 2023, at Dixie High School. The tax hike represented by that increase was over twice as large (in dollar amount for each household) as the one proposed by the City of Ivins this year.
6) The Water Conservancy line item represents, obviously, taxes that go to the Washington County Water Conservancy District. I point out this item simply because you may have seen arguments that all the cost of water should be placed on monthly water bills, rather than being subsidized from our property tax bill as found on that line. The amount of money going to the WCWCD is 6% of your total property tax bill. This amount of money is equal to almost half of that which Ivins City received from the property tax.
CONCLUSION
If you have read this far; congratulations! It is important for citizens to be informed, and the State of Utah has made property taxes practically inscrutable. But now you are hopefully better informed, indeed, and can make decisions based on facts.
(I have avoided putting personal opinions on this TAX FAQs site. But you can find my own opinions elsewhere on my website if you wish.)
