SALT LAKE CITY — Utah homeowners are experiencing significant increases in property taxes because many counties lack proper data to assess commercial real estate assets, causing a “tax shift” toward residential properties, according to a recent legislative audit.
The Legislative Auditor General's report also found that the state's property tax department “has been reluctant in its oversight role” and recommended greater transparency in the property tax appeals process. The auditor general said lawmakers should consider a policy requiring the disclosure of some property sales data to guide property assessments, but the report noted that some people worry such disclosures could violate privacy.
The auditors reported that in some counties, the average homeowner's property taxes will increase by 100% to 235% between 2017 and 2022. This is due to multiple factors, including an “unexpected increase in taxes levied by school districts” due to a legislative freeze on the statewide base tax rate.
“Residential property values were reported to have increased more rapidly than other property types, further increasing the strain on residential property,” the report added.
The inflated values are exacerbated by a lack of data on commercial properties, which auditors say makes county assessors “hesitant to make property assessment changes” for commercial properties.
“As a result, commercial property values in some counties remain static for several years,” the report said.
The audit report said the property tax department receives “very little” data on commercial property sales and that “the county has more residential property sales than commercial property sales, which changes residential values but not commercial property values. As a result, the tax burden shifts to residential property owners in the county.”
House Speaker Mike Schultz, R-Hooper, who co-chairs the legislative committee, noted assessors have been working with industry experts in recent days to gather more voluntary data and asked auditors how the program is working.
“My point is, it's rural and smaller counties that still have a lot of issues,” Auditor General Leah Blevins said. “There are years and years where commercial properties are left alone because there isn't enough data to make a change.”
Other findings from the audit include:
The Property Tax Division has been passive in its oversight role. Increasing assessor training on mass assessments would improve assessor effectiveness. Counties should provide property owners with more information on assessment forms. Taxpayers would benefit from clarification regarding the truth of the assessment process. County Boards of Equalization Process could benefit from greater transparency and uniformity in the appeals process.
Additionally, the auditors recommended that lawmakers consider authorizing the Property Tax Division to employ a “multi-tiered enforcement mechanism” for counties with different levels of compliance, and to require more transparency from counties when it comes to property taxes.
The audit was referred to the Revenue and Taxation Interim Committee and the Business and Labour Committee for investigation throughout the interim period.
Correction: An earlier version and headline incorrectly stated that homeowners have a higher tax rate than commercial owners. Residential and commercial property have a flat tax rate, but homeowners have a higher tax burden because of incomplete data used to value commercial property.