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SALT LAKE CITY — Utah homeowners have seen a higher increase in property taxes because many counties lack adequate data to evaluate commercial property assets, causing a "tax shift" to residential properties, according to a recent legislative audit.
The report from the Office of the Legislative Auditor General also found the state division over property taxes "has been passive in their oversight role" and recommended more transparency in the property tax appeal process. Auditors said lawmakers should consider a policy to require the disclosure of some real estate sale data to better guide valuations, though their report noted that some worry such disclosures would infringe on privacy.
Auditors write that property taxes in some counties increased between 100% and 235% for the average homeowner between 2017 and 2022, driven by multiple factors, including a legislative freeze of the statewide basic tax rate "unexpectedly resulting in an increase in taxes collected for school districts."
"Residential property values reportedly increased faster than other property types, shifting more of the burden to residential properties," the report adds.
Compounding that increase in value is a lack of data on commercial properties, auditors said, which results in county assessors being "hesitant to change property valuations" on commercial properties.
"Therefore, in some counties, commercial property values do not change for multiple years," the report states.
The data on commercial property sales the Property Tax Division receives is "minimal," and "since counties are more likely to have residential sales than commercial sales, residential values will change, while commercial values remain the same," according to the audit. "Consequentially, the tax burden shifts toward residential property owners in the county."
House Speaker Mike Schultz, R-Hooper — who co-chairs the legislative committee — noted that assessors have been working with industry professionals recently to get more voluntary data, and asked the auditors how that program has been working.
"What I would say is, I think a lot of the struggles that still exist are for the more rural and smaller counties," said audit manager Leah Blevins. "There are many years that they don't have enough data to make a change, so the commercial properties remain the same."
Other findings from the audit include:
- The Property Tax Division has been passive in its oversight role.
- More training for assessors on mass appraisal will improve their effectiveness.
- Counties should provide property owners with more information on their valuation forms.
- Taxpayers would benefit from greater clarity around the truth in taxation process.
- County board of equalization processes could benefit from greater transparency and uniformity in the appeals process.
Additionally, auditors recommend lawmakers consider giving the Property Tax Division the ability to adopt "multi-tiered enforcement mechanisms" for counties with differing levels of compliance and consider requiring more transparency from counties when it comes to property taxes.
The audit was referred to the Revenue and Taxation Interim Committee and the Business and Labor Committee for study throughout the interim.
Correction: An earlier version and headline incorrectly said residential owners have a higher tax rate than commercial owners. Tax rates are uniform for residential and commercial properties, but residential owners have a higher tax burden due to incomplete data used to assess commercial property values.
