Truth & Taxation- What does that mean?
Utah’s “Truth in Taxation” laws were passed in 1985. Utah’s “Truth in Taxation” laws are revenue-driven. That means the requirement to hold a “Truth in Taxation” hearing is based upon the collections of a taxing entity, not the rate charged. Utah law requires “Truth in Taxation” hearings to be held when a taxing entity elects to collect more revenue than was collected the previous year, although the entities are permitted to keep revenues generated by “new growth”—such as value added from a new subdivision or a new business.
The determination that a property tax increase is being proposed is made by the Tax Commission’s Property Tax Division. The certified tax rate—established by the Property Tax Division, is that rate which will yield the taxing entity the SAME property tax revenue that it collected in the previous year (and includes an allowance for revenue generated from real new growth in its tax base). That determination is based on a comparison of an entity’s proposed tax rate with its certified tax rate. (http://propertytax.utah.gov/about/truth.html)
City A collects $1.2 million in taxes during Year 1. A new subdivision is constructed during the year. In Year 2, a certified rate will be set to permit City A to collect $1.2 million, plus additional revenues from the new growth. Revenues collected in Year 2 are $1.5 million. In Year 3, City A will be given a certified rate permitting it to collect $1.5 million. But in Year 3, it only collects $1.1 million because of an economic downturn and some individuals & property owners didn’t pay their property taxes. In Year 4, City A is given a certified rate that permits it to collect only $1.1 million, plus any growth.
Since the process is “revenue driven” and not “rate driven,” it only allows for an increase in taxes to provide for inflationary growth through the “truth in taxation” and public hearing process.