Salt Lake City schools hope to retain $8M in property taxes after equalization 'quirk' ends

Property owners throughout Salt Lake County will face tax adjustments this year after a 7-year-old school equalization law expires.

In most cases, the changes will be negligible, such as the estimated 55-cent annual tax break that Granite School District administrators say average homeowners there will receive.

But in Canyons and Salt Lake City school districts, combined effects from the changes are putting millions of dollars at stake as the byzantine revenue-sharing system among districts is phased out and districts move to adjust.

Paradoxically, leaders in Salt Lake City School District will have to follow a state-required process for increasing taxes — public notices and hearings and the like — just to ask their residents to pay tax bills at existing levels.

Residents in Canyons, meanwhile, will pony up a combined total of $6.8 million in additional property taxes — with no action taken by their school board.

Those and other complex budget effects have school officials wondering if state lawmakers thought the whole thing through.

"I hope that in the future if the Legislature looks at equalization, that they look very closely at the unintended consequences," said Janet Roberts, the Salt Lake district's budget administrator.

Born out of the contentious Jordan-Canyons school district split in 2008, the notion of equalization among districts was intended to aid the west-side Jordan School District after it lost a sizeable portion of its property tax base.

Salt Lake County's five school districts — Salt Lake City, Granite, Murray, Jordan and Canyons — were required to levy a capital outlay tax at a uniform rate and deposit those funds into a pool. Cash from that pool was then distributed to all contributing districts on a per-student basis.

"You can accurately describe it as a budgeting quirk," Canyons spokesman Jeff Haney said. "It's one of those things that we have just had to take into consideration as we've put our budget together every year."

Because Utah's tax laws are supposed to stay revenue neutral — with property tax rates floating up and down as home values fall or rise — equalization did not result in surplus funds for the school districts that benefited.

Instead, residents in cash-receiving districts were given various tax discounts, at the expense of their neighbors in other parts of the county.

"It didn't really impact the districts," said Mitch Robison, Granite's budget director. "It impacted the districts' taxpayers."

Initially, Jordan School District took in money from its four neighboring school districts and offset that with tax discounts to its residents.

But trends in population growth and school enrollment now have Canyons School District taxpayers as the largest recipient of other districts' cash, at a combined $6.8 million, followed by Murray School District at $1.2 million and Jordan School District at roughly $480,000.

Those district's tax discounts were mirrored by upward tax adjustments that cost Salt Lake City and Granite residents an additional $7.9 million and $541,000, respectively.

Now, if the five school boards do nothing, Salt Lake City and Granite residents will see tax breaks as the program ends, while taxes will increase for residents in Murray, Jordan and Canyons.

"Canyons is a big shocker," said Jennifer Hansen, assistant director of the Utah State Tax Commission's property tax division. "Their rate will naturally float up a little bit, but it's not considered a tax increase."

What is considered a tax increase, Hansen said, is any attempt by a district to hold on to revenue that until now has been sent to other districts.

That's the case in Salt Lake City School District, where administrators are preparing a budget that includes the $7.9 million its residents have until now paid to Canyons, Murray and Jordan.

Roberts said Salt Lake City residents are still likely to see their taxes drop by roughly $6 per $100,000 of property — the result of increased property values. But that drop would be even larger — $25 per $100,000 of property value — if the board does not act to retain current taxes it collects.

The district is in the process of replacing several older Salt Lake City schools — namely Lincoln Elementary and Meadowlark Elementary — and Roberts said holding on to equalization funds would allow construction to begin on a new Edison Elementary School.

"We have sent all of this money to other districts in the county," she said. "Now we want to keep our taxpayers' tax burden the same but use those dollars for our district."

In Granite School District, where, like Salt Lake City, a formal tax hike would be required just to maintain current taxing levels, Robison said next year's annual budget is being written with the assumption Granite will maintain the nearly $540,909 it currently sends to Canyons, Jordan and Murray.

A tax boost of that size — roughly 55 cents for a $250,000 home — is offset by variations in property values, he said.

"I'm not aware of any plans at this point to try and capture that money," Robison said. "My guess is that [tax] rate will float down."

Haney said that although Canyons' is now a recipient of equalization funds, the district had been a net contributor for most of the last seven years.

And while Canyons residents will now bear the $6.8 million cost of the district's equalization funding, Haney said increases in property values will leave the district's tax rate effectively unchanged.

"We think the [tax] rate will be close to what we've had in the previous year," Haney said.

In Murray School District, the upward adjustment translates to roughly $50 in additional yearly taxes for a $250,000 home.

bwood@sltrib.com

Twitter: @bjaminwood