A lot of cities have been talking property tax hikes lately, and the most certain thing about all of the proposals is that elected officials are going to look for someone or something to blame. In UTOPIA member cities, blaming the fiber network has become the easy go-to solution, especially since so many mayors and city council members weren’t involved in the original decision. The problem, however, is that this blame is completely paving over a deeper problem of city tax structure that’s boring, doesn’t fit the anti-UTOPIA narrative, and is a much larger problem for city budgets. Let’s take the examples of West Valley City, Orem, and Taylorsville, the latter of which is not a UTOPIA member city. In all three cases, they’ve called for large (as a percentage) property tax increases to make up for lagging sales tax revenues. So if UTOPIA is the cause of property tax increases, why would a non-member city need to more-or-less do the same thing?
When you dig deeper, you’ll find that all three cities have worked very hard to make themselves retail shopping destinations. Orem has pumped a lot into University Mall. West Valley did the same thing with the Valley Fair Mall (albeit with the additional burden of having a less-than-stellar reputation for public safety). The Family Center is Taylorsville’s retail play. All of the cities have said that the sluggish economy is to blame for flagging sales tax revenues, yet the greater Utah economy has been doing fairly well. None of the cities, however, seem to have counted on continued growth in online sales to drain their sales tax revenues.
This is the core problem: sales tax revenues are a volatile source and have been on a downward trend for well over a decade, but these cities seem to be blissfully unaware of it. Instead of recognizing the long-term structural problems associated with attaching on-going costs to what has effectively become one-time revenue booms in good years, cities have tried to be a “last man standing” in the retail field as it experiences significant contraction. The property tax increases are really nothing more than finally realizing that you can’t hitch too much of the city’s on-going operations to a volatile source of income. You’re going to see a lot more of this rebalancing in the coming years from most cities, and especially those with large retail centers, as property taxes tend to be a lot more stable. So why blame UTOPIA, an expense, for what is effectively an issue with an improperly-balanced tax base?
For starters, it’s easy to go along with the perception of popular opinion. UTOPIA gets a lot of negative press because of the cost associated with it, even though the cost is relatively small. (Consider that UTOPIA comprises just under 3.2% of the Orem city budget, and that assumes both zero budget growth and that UTOPIA never produces enough revenue to pay back any of the bond, both extremely unlikely possibilities.) Since nobody has done much in the way of public opinion polling among member city residents to see what the actual feelings about the network are, city council members who are relatively new to the issue are going off of their anecdotal evidence of who’s yelling at them the most. Since people angry about the network are more likely to show up to city council meetings, they get a non-representative view of public opinion. It’s the same problem a business has of angry customers talking to far more people than happy customers.
It’s also really hard to explain tax policy in simple sound bites. As much as people hate property taxes, it’s an exceptionally stable source of revenue. While sales taxes can often attract revenues from outside the city, it’s subject to to the whims of the greater economy. Sales taxes are often very small micro-transactions, so many people don’t really realize just how much sales tax they’re paying. Compare that to the property tax bill where you see a statement of just how much you owe. If it were possible to tally up the total sales taxes you pay to the city, you’d probably be surprised just how much it is. It’s also a Good Thing(TM) to tie recurring costs to more stable revenue sources. Now how do you take all of that information, condense it into a 20-second response, and convey it to someone who’s more angry than reasonable? It’s exceedingly difficult, so most elected officials won’t bother trying, especially when the next wave of ill-informed constituents is just around the corner.
It also provides cover for other city expenses. Orem is also proposing a 2% increase in city employee salaries after several years of wage freezes
and significant costs in the new Center for Story performing arts complex. (UPDATE: I read the Daily Herald story incorrectly. The Center for Story is funded via a voter-approved tax levy, but the maintenance comes from the general fund. Even that may be covered by a private donor.) While these items can equally be blamed for most or all of the property tax hike, it’s a lot easier to say “my predecessor did it” and act as if you have no choice rather than own your own spending. It’s a dishonest move meant to shift ownership, and it’s a lot easier than trying to explain why these things are necessary.
There is a silver lining with the current blame being assigned to UTOPIA: it’s a single-use excuse. The payments increase at under the rate of inflation, so even if the full bond has to be paid with tax pledges, it will be an ever-shrinking portion of the budget. (Using the previous Orem example, we’re talking payment increases of about $56K annually a few years from now. Compare that to the total city budget of $88.7M.) It’s also watered down substantively by other cities who are proposing similar property tax increases but are not members of UTOPIA.
For more on Orem’s property tax increases, read the full article at the Daily Herald.