At their regular meeting on May 11, the Moab City Council discussed the possibility of a property tax for the 2021 through 2022 fiscal year. Moab has not levied a property tax for residents since 1992, but new finance director Ben Billingsley emphasized the advantages of a tax for funding infrastructure and law enforcement.
“The sales taxes currently being collected are only enough to pay for the services that, essentially, are impacted by the increase in tourism,” Billingsley said in an interview with the Moab Sun News. “There’s a gap missing there to pay for infrastructure and things like the police department for residents.”
Billingsley explained that there are three property categories: primary, secondary and commercial. The state of Utah allows a 45% discount on property tax bills for primary residences in which one lives for 180 days out of the year. For those who own property where a renter occupies the home for at least 180 days a year, that property also qualifies for that 45% discount.
Secondary residences — usually vacation homes or short-term rentals where one lives for less than half the year — are taxed at 100% of their assessed value, and thus do not receive the state-sponsored 45% discount. The same applies for commercial properties.
Most cities comparable to Moab across the state can pay for their services with a combination of sales taxes, property taxes and other taxes. But unlike most other municipalities of approximately 6,000 residents, Moab must accommodate millions of tourists at a time.
“There's a huge disparity between the services that Moab City is providing, and the services that a lot of those non-tourist cities provide,” said Billingsley. For the past decades, Moab’s tourist economy has covered the cost of municipal services and allowed the city to make repairs to dated infrastructure. But now, “that ever-increasing tourism base brings us to a point where our infrastructure needs to be completed. We don’t have the money to pay for the replacement of our infrastructure,” he continued. Consistent repairs are no longer feasible; the city’s capital improvements list includes roads, sewer projects, stormwater projects and nearly 30 other needed projects.
A property tax would provide a “stable and predictable base” to fund such projects, according to Billingsley. While the sales taxes that Moab’s tourists pay do generate revenue, Billingsley noted that sales taxes vary significantly depending on the market and economic conditions, with no way to predict the future. “It’s pretty challenging to budget to predict what sales tax revenue is going to be like year over year,” he said.
While the city has not collected a property tax in nearly three decades, Grand County has consistently imposed a property tax for the past 30 years.
According to a report made to the Grand County Commission by County Treasurer Chris Kauffman in April, the property tax collection rate for the county in 2020 was 95% — one of the highest rates in the last 30 years — despite the spring pandemic shutdown. Though there were real concerns about residents’ ability to pay property taxes last year, the economy rebounded and relief programs allowed most taxpayers to pay in full and on time.
Kauffman reported that a higher collection rate one year means a lower tax rate in the following year, and that increasing collection rates since 2015 has saved taxpayers in Grand County nearly $2 million.
Billingsley emphasized that Moab’s property tax would not increase proportionally to property values. A property tax would only increase if a property’s value increased disproportionately to the city as a whole, or if one of Moab’s 11 taxing entities goes through a Truth-in-Taxation process. The latter refers to a situation in which Moab City would want to exceed an existing certified tax rate. In that scenario, city leaders would have to present their proposal to constituents for feedback and comply with strict requirements from the state.
“The public will be educated as much as possible. Cities are required to put out a lot of information about how much the proposed property tax would increase your overall tax bill,” said Billingsley.
Though Moab, as well as many cities and towns across the country, suffered economic blows due to the COVID-19 pandemic, Billingsley reported that numbers are bouncing back. However, the city doesn’t plan to use property taxes as an economic recovery tool.
“This isn't to make up for lost revenues during the pandemic,” said Billingsley. “It will strengthen the rainy day fund balance, but it's really about finding that revenue diversification that the city needs in order to increase our law enforcement capacity and infrastructure.”
While the city suffered economically during the pandemic, the unplanned shutdown allowed local officials to look more closely at Moab’s budget.
“There were a lot of items that were cut back during the pandemic, some of which the city has found that we can do without, so that provided some insight into city operations,” said Billingsley. “We've also rebuilt some of those basic services and activities that hopefully the residency will find valuable.” One such service includes bringing back the city’s sustainability director, a position put on hold during the pandemic.
“This was still a pretty conservative budget. With ongoing unknowns, there wasn't a lot of spending added back,” Billingsley continued. “There was no budgeted increase in revenues. Basically, we’re assuming that we had to do with the same amount of funding that we were given last year.”
As the city continues conversations about the property tax and the next fiscal year, Billingsley hopes that the public will stay engaged and provide feedback to the city council.
“We’re really going to be as transparent as possible through the whole process. We hope that the public understands what the council would be spending the money on and the reason behind it,” he said. “It’s important for people to understand that this property tax particularly is really something to help protect and preserve the health of our community and our local residents.”