Understanding Carbon County’s Property Tax Challenge – Part 1
Property taxes affect nearly every household and business in Carbon County. To understand why the tax burden has changed, residents first need to understand how Utah’s property tax system works and what Carbon County can, and cannot, control.
What Has Changed in Carbon County?
Over the past 10 years, Carbon County has lost more than $1 billion in taxable property value, according to County tax records. Much of that loss is connected to the closure or reduced operation of major coal mines and two power plants.
These industries once represented a significant part of the County’s tax base. They also provided well-paying jobs and contributed substantial property tax revenue.
When a major industrial property closes or loses value, the need for public services does not disappear with it. Residents still rely on law enforcement, emergency response, roads, courts, elections, public records and other essential services. Schools, cities and special taxing entities must also continue operating.
As a result, the cost of providing those services must be supported by a smaller tax base. This can leave the remaining property owners carrying a greater share of the burden.
How Utah’s Property Tax System Works
A property tax bill includes taxes from several separate taxing entities. Depending on where a property is located, those entities may include:
- Carbon County
- A city or town
- Carbon School District
- Special service districts
- Other authorized taxing entities
Carbon County collects and distributes property taxes, but the County Commission does not control every charge on a tax bill. Each taxing entity adopts its own budget and sets its own property tax rate within the limits of Utah law.
Utah uses a system known as the “certified tax rate.” In general, this system is designed to allow a taxing entity to collect approximately the same amount of property tax revenue it collected the year before, excluding revenue from eligible new growth.
This means that when the total value of taxable property decreases, the certified tax rate may increase so the taxing entity can continue collecting approximately the same amount of revenue. When the value of existing property increases overall, the certified tax rate generally adjusts downward.
An increase in a property’s assessed value does not automatically provide a taxing entity with the same percentage increase in revenue. If an entity wants to collect more property tax revenue than Utah’s certified-rate process allows, it generally must follow the state’s Truth in Taxation requirements. Those requirements include public notice and a public hearing.
What Is New Growth?
“New growth” is new taxable property added to the community. It may come from a new business, a new building or a major expansion. It does not simply mean that an existing home or business increased in value.
Under Utah law, new growth gives each taxing entity a choice.
Imagine that a taxing entity collected $1 million in property taxes last year. New development is then added to its tax base and could generate another $10,000 in property tax revenue.
The taxing entity may choose to collect the additional revenue, bringing its total property tax revenue to $1,010,000.
It may also choose to keep its total collection at $1 million. Because the new development is now helping pay that $1 million, the cost is spread across more taxable property. This allows the entity to use a lower tax rate than it would need without the new development.
Put simply, the taxing entity can use new growth in one of two ways: it can collect additional revenue, or it can use the larger tax base to reduce the tax rate for everyone served by that entity.
This does not mean every property owner will receive the same dollar reduction or that the entire property tax bill will decrease. The effect on each bill depends on the property’s taxable value and the decisions made by all the other taxing entities listed on the bill.
Each taxing entity makes this choice independently. Carbon County makes the decision only for the taxes it controls. Cities, the school district and other taxing entities make their own decisions about their portions of the property tax bill.
How Tax Incentives Affect New Growth
Sometimes a new business or development receives a temporary property tax incentive. These incentives may be used to help bring a project, jobs and private investment into the community.
Under this type of agreement, part of the property tax revenue generated by the new development may be returned to the business or used to support the development project for a set number of years.
The new property still adds taxable value. However, the participating taxing entities cannot treat the incentivized portion as money available for regular services during the incentive period.
For example, if a new development generates $100,000 in property tax revenue but $60,000 is committed through an incentive agreement, only the remaining portion is available to the participating taxing entities during that period. The exact amount depends on the agreement and which taxing entities agreed to participate.
When the incentive expires, the committed portion is no longer returned or redirected. The full property tax revenue generated by the development then becomes available to the applicable taxing entities.
This is why tax incentives must be evaluated carefully. The community gives up access to part of the new revenue for a limited time in exchange for development that may not otherwise occur. The long-term goal is to create jobs, bring private investment into the County and build taxable value that will continue producing revenue after the incentive ends.
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