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Gearing up for a fight: Residents question local officials on the need for a property tax

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The Moab Chamber of Commerce hosted a Community Action Chamber Chat about Moab City’s property tax proposal on Tuesday, where city staff took questions from residents. Elected officials, including the mayor and city councilmembers, stressed that a property tax will be necessary to fund the city’s lagging infrastructure and understaffed police department — both of which are suffering due to increased tourism.

“I don’t expect anyone to like the idea of paying more taxes. There's no way we're going to like it. But there are still reasons why we need to talk about it,” said Mayor Emily Niehaus. “It’s worth it to look in the mirror and question why all other cities charge a property tax and we don’t.”

According to city staff, Moab has a backlog of over $60 million in capital improvements, including road, sewer and water projects on which maintenance has been deferred for a number of years. City staff estimate $14.4 million worth of “critical projects” to complete in the next five years; a portion of that sum may be covered by grants and loans determined by the city’s property tax revenue.

“There's a $60 million elephant in the corner of Moab that's 80 years old. The generations that went before us didn’t maintain or update our infrastructure, and that has built up over decades,” said City Manager Joel Linares. “That money needs to come from a property tax or we need to cut our recreation, swimming pool and art — that money will have to be shifted to infrastructure.”

The council could either continue to set the property tax rate at 0% for Moab residents, or increase the rate to a level that would generate at most $3.3 million. If the council decides to increase the city’s property tax rate, the amount of revenue collected from the property tax cannot surpass $3.3 million.

Residents at the Chamber Chat voiced their hesitation to go from paying nothing in property taxes to up to $3.3 million, suggesting that the city make a more moderate step for an increase.

“As tourism increases, the demand on city services increases proportionally, and puts more pressure on the city to provide services. Even as tourism is increasing, it doesn’t increase at a rate that can outpace the needs of the city,” said Finance Director Ben Billingsley. “There comes a point where it catches up.”

Recent property tax discussion

At the Moab City Council’s regular meeting on May 11, Finance Director Ben Billingsley introduced the possibility of a property tax increase for Moab residents. A property tax, according to city staff, would diversify the city’s tax revenue stream and reduce the city’s reliance on tourism to fund city services.

The city has not levied a property tax since 1991 and is one of only four municipalities in Utah that does not enforce a property tax. The other three cities have collected a special property tax to pay for law enforcement specifically.

Billingsley has stated that a property tax is needed as a stable, predictable revenue source to fund city services such as law enforcement and infrastructure repairs — such as on Kane Creek Road — and to beef up the city’s emergency fund. The sales tax revenue generated now, Billingsley explained, can only cover services that are impacted by Moab’s booming tourism industry.

Moab’s sales and use taxes are the primary sources for the city’s general fund, which vary annually. The city’s website states that “property taxes provide a reliable annual revenue source that can help stabilize the City's ability to fund critical services, including law enforcement, and basic infrastructure needs such as water, sewer, and roads.”

Funding law enforcement is one of the main arguments for a property tax in Moab. The Moab Police Department anticipates it will need to hire at least eight additional police officers over the next five years to manage traffic enforcement, emergency calls and non-emergency calls.

The City Council has also stated their concern for Moab’s “Rainy-Day Fund” for emergencies, which a property tax could potentially help fund. The Rainy-Day Fund should be at 25%, but has fallen to 8%.

Currently, property owners in Moab pay a property tax to 11 primary entities: School, (General), School (State Basic), Grand County, Library, Library (Debt), Moab Valley Fire, County Assessing and Collecting, Moab Mosquito Abatement, Grand County Cemetery, Charter School State Levy and Multicounty Assessing and Collecting.

If Moab City were to levy a property tax rated to generate $3.3 million in revenue, property owners’ total property tax bill would increase by 20%, and represent approximately 26% of total taxes collected by Grand County.

The Grand County assessor determines the value of properties in Moab City. Primary property tax is based on the market value of the property; 55% of the value of primary residences is taxable. There is a primary residence discount at 45% of the property value. Secondary homes and commercial properties would be taxed at their full market value.

The city has determined what improvements could be made to Moab’s target areas at various levels of property tax revenue. At a $1 million property tax revenue level, the police department could hire two officers within five years, and the city could fund 29% of critical capital projects and increase the Rainy-Day Fund to 15%. At a $1.5 million property tax revenue level, the police department could hire four officers within five years, and the city could fund 44% of critical capital projects and increase the Rainy-Day Fund to 19%. At a $2 million property tax revenue level, the police department could hire eight officers within five years, and the city could fund 51% of critical capital projects and increase the Rainy-Day Fund to 24%. At a $3.3 million property tax revenue level — the maximum — the police department could more quickly hire eight officers within five years, and the city could fund 100% of critical capital projects and increase the Rainy-Day Fund to 35%.

Residents raise concerns at Chamber Chat

Billingsley gave a short presentation at the Chamber Chat to explain the details of the potential property tax increase. Chamber of Commerce members stated confusion at the need for a property tax considering Moab’s successful tourism economy.

“I would exempt the primary residents from the property tax and tax secondary homeowners, like those who rent out Airbnbs, through the roof,” said Howard Trenholme, Chair of the Moab Area Travel Council Advisory Board. “Our neighborhoods are being overrun by them. Anything you can do to get more from the visitors to help with costs is worth it. We’ve been burdened enough.”

The mayor brought up the history of the property tax in Moab, which was set to a rate of 0% in 1991. “What was different about the state of this city 30 years ago?” Niehaus asked. The uranium boom had just collapsed and many residents left due to the city’s lack of jobs. “Reducing the property tax was meant to be an incentive,” said Niehaus. “What do we do with incentives after we get over the hump?”

Linares emphasized that the property tax discussion boils down to what Moab residents want to prioritize. “Do we want to cut our recreation and other programs we provide to the community to pay for infrastructure?” He asked. “The problem isn't tourists needing to pay for everything. The problem is our $60 million cost as a city that we have put off for decades that we can’t keep putting off.” Regardless of whether the city decides to implement a property tax, he argued, the infrastructure funding must come from somewhere.

“Even if tourism doubled next year, the needs that would be created for services or infrastructure, it doesn’t sustain itself,” said Billingsley. “The resort community tax is structured to mitigate the cost of tourism, which it’s doing. But it’s not addressing the long term infrastructure needs and service levels that will be required.”

Residents also asked about the management of property taxes in the future. Linares clarified that future city councils are at liberty to change the property tax rate, either by increasing or decreasing it. “This council cannot do something that binds future councils,” he said.

Billingsley also explained that property tax revenue qualifies as unrestricted funds, meaning that if future city leadership assessed different needs for the revenue, the money could be spent in a different way. Niehaus also proposed that a property tax would diversify the city’s income so that it wouldn’t rely as heavily on tourism.

“I am the most frugal member on the council. Do I want revenue to be set at $3.3 million? No, but I do see that we need to enact some sort of property tax,” said Councilmember Karen Guzman-Newton. “Our residents also want us to be sustainable. We’re talking about solar and electric vehicle chargers. All of that costs money.”

The mayor and present councilmembers asked residents to send in specific suggestions and concerns about the property tax at the end of the Chamber Chat.

“We have to make this decision very soon, and I would like to hear from you,” said Guzman-Newton.

The Moab City Council will hold a Truth in Taxation public hearing on August 4 at 6 p.m. to hear residents’ opinions on the proposed property tax increase. After the Truth in Taxation meeting, the council will decide if they will increase the property tax rate, and if so, by how much.