39 tax hikes across Utah have been rejected because of a change in the law

SALT LAKE CITY — Dozens of cities, school districts and special service districts are scrambling to figure out how to fund millions in government and education services after their tax increases were rejected.

A change in Utah law regarding "Truth-in-Taxation" hearings led to the Utah State Tax Commission denying roughly $80 million in funds.

"Now, there’s going to be some bills that are going to be tough to pay," Draper Mayor Troy Walker, who is also the president of the Utah League of Cities & Towns, told FOX 13 News.

Across Utah, communities held legally-required Truth-in-Taxation hearings to consider property tax and sales tax increases. In Draper, Mayor Walker said they asked residents to allow them to continue collecting about $953,000 on a retired bond in order to pay for a new firefighting truck.

"We had our hearing correctly. We took input, we noticed it exactly correct," he said. "We were supposed to — according to the statute — put one slide up that showed what every other taxing entity in Salt Lake County was doing. And we didn’t do that."

The minor error means they won't collect that money.

"That $953,000 was going to go help pay for that fire truck," the mayor said. "We’ll have to pull it out of our emergency reserves to pay for."

A bill passed by Senate Majority Whip Chris Wilson, R-Logan, also blocked taxing entities from getting any kind of leeway from the Utah State Tax Commission.

"In the past, we would just work with them and say, 'OK, you made these mistakes here and here, do better next time.' This year? The language is very strict and says the Tax Commission shall not certify a tax rate if the requirement is not met," said Jason Gardner, deputy director of the Utah State Tax Commission.

According to a list provided to FOX 13 News, 39 different cities, school districts and special service districts failed to strictly follow the law so they are now out money. They include the Alpine School District, which sought a nearly $23 million property tax increase; the Granite School District is out nearly $18 million; West Valley City is out nearly $3 million.

The reasons for their denials vary. Some violations included not strictly holding a standalone Truth-in-Taxation hearing, but instead lumping it in with other government business or failing to notify residents of other proposed tax increases in their county.

Many of these taxing entities are using the funds to pay for classroom needs, teacher salaries, road repairs and public safety. FOX 13 News is told some taxing entities are considering a legal challenge, while others are trying to find other sources of funding to make up for it.

But one tax watchdog group said it's only fair that these taxing entities don't get a free pass for not properly notifying the public.

"We understand this is a difficult situation, but we want to make certain there’s equity. That when the government follows its procedures when it comes to taxes, they also face the same scrutiny and penalties that a taxpayer pays," Billy Hesterman, the president of the Utah Taxpayers Association, told FOX 13 News.

The Utah Taxpayers Association, which pushed for Truth-in-Taxation laws, said it doesn't see a problem with the law and its strict scrutiny.

"It is probably a little ticky-tack," Hesterman said. "But also, if I mess up on my tax form in a ticky-tack way? The government still makes sure I fix it."

Gardner said ultimately it is a policy call by the Utah legislature.

"If the legislature wants to be very strict on this, they can pretty much leave the law where it is, although we would recommend some clarifications just to make sure the taxing entities understand exactly what the obligations that are being imposed on them," he said. "The Tax Commission? We’re not out to deny people, we’re not out to approve people. We just want to make sure the law is followed."

Mayor Walker said the Utah State Legislature may have to clarify the law again. He argued that no city is purchasing "luxury items" with the tax increases.

"I think it’s important for people to know how we raise taxes, have the hearings, have the notices, but let’s make the system really clear," he said.

The Truth-in-Taxation problem not the only issue some communities are facing. Nine different cities were found to have improperly handled ZAP or RAP taxes. The "Zoo, Arts and Parks" and "Recreation, Arts and Parks" tax is wildly popular. On Utah's Capitol Hill, it's jokingly referred to as "the tax everyone likes to pay" because voters approve it by huge numbers.

The RAP tax, a tiny portion of sales tax revenues, is supposed to be reauthorized by voters every 10 years. But the city councils were found to have kept the funding going and not put it to voters. Duchesne, Roosevelt, Monticello, Gunnison, Centerfield, Mayfield, Aurora, Redmond and Salina were all found to have not complied.

"We received no notice so we assumed 'Well, they had their opinion question and everything was correct,'" Gardner said. "We decided to audit this and when we audited this issue? We found there were these nine jurisdictions that had not had their opinion question so that’s when we raised the issue."

But the issue is easier to resolve to keep parks, arts and recreation going in many of these smaller, rural communities. Gardner said eight of the communities will put an opinion question before voters on the November ballot. Monticello has opted to let the tax expire and RAP tax funding will stop in that community in January.

See the 39 entities and their proposed tax increases here: