Utah League of Cities and Towns

Making Life BETTER

So You’re Thinking of Exceeding Your Certified Tax Rate…

This month’s question comes to us directly from Midvale, Utah.

QUESTION: “If we believe we want to adopt our certified tax rate at a level that exceeds the rate issued by the County Auditor, are there any special notice requirements that we need to give for the public hearing on our budget in June?”

SHORT ANSWER: The initial answer I gave to this question was “Well, I don’t know. Let me find out.” After checking with various sources, the most notable of which is Richard Moon, the best friend local officials have in the State Auditor’s Office, I found a far more interesting answer.

While the short answer is “no”, there aren’t any special notice requirements for the June budget hearing; remember, a truth in taxation hearing must be held prior to August 17 (and there are a bunch of special requirements for that hearing and notice as detailed below). The reason there aren’t any special notice requirements for a June hearing is because in reality, once a municipality has decided to exceed the certified tax rate, the budget isn’t officially adopted in June; rather, it is officially adopted in August following the referenced truth in taxation hearing. Thus, technically speaking, a budget hearing does not need to be held in June.

As indicated, there are special notice requirements for the truth in taxation hearing and notification. Specifically, the advertisement must be placed in a newspaper or combination of newspapers of general circulation within the community. The ad must be no less than page in size and the type font shall be no small than 18 point, and the ad must be surrounded by a inch border. The advertisement may not be placed in the legal notices and classified ad sections of the paper. At a minimum, the ad needs to run once per week for the two weeks preceding the adoption of the final budget. The legislature’s intent is that the ad be placed in a newspaper that is of general interest and readership in the community rather than a newspaper that is limited in subject matter. The ad should state the date, time and place the council will meet to accept public comment on the proposed tax rate increase. The hearing should not begin prior to 6:00 p.m. (PLEASE NOTE: The public hearing may coincide with the hearing on the proposed budget of the taxing entity.) The advertised Notice should substantially read as follows:

NOTICE OF PROPOSED TAX INCREASE

The (name of the taxing entity) is proposing to increase its property tax revenue. As a result of the proposed increase, the tax on a (insert the average value of a residence in the taxing entity rounded to the nearest thousand dollars) residence will be $__________, and the tax on a business having the same value as the average value of a residence in the taxing entity will be__________. Without the proposed increase, the tax on a (insert the average value of a residence in the taxing entity rounded to the nearest thousand dollars) residence would be $__________, and the tax on a business having the same value as the average value of a residence in the taxing entity would be_________. This would be an increase of ______%, which is $______ per year ($______ per month) on a (insert the average value of a residence in the taxing entity rounded to the nearest thousand dollars) residence or $______ per year on a business having the same value as the average value of a residence in the taxing entity. With new growth, this property tax increase, and other factors, (name of taxing entity) will increase its property tax revenue from $_____ collected last year to $_____ collected this year which is a revenue increase of _____%. All concerned citizens are invited to a public hearing on the tax increase to be held on (date and time) at (meeting place).”

OTHER CONSIDERATIONS:As is typical, the answer to the budget hearing question raised other questions. For example, if the budget isn’t officially adopted until the truth in taxation hearing is completed in August, how does the community operate when the fiscal year begins on July 1? Municipalities have two options to resolve this date conflict. The first option is to adopt and operate on the tentative budget from July 1 until the official date of budget adoption in August. The second option is to adopt and operate under the current year budget as an interim budget for the new fiscal year until the new tentative budget is adopted as the final budget in August. Our view is that it is probably easiest to operate on the tentative budget, but the decision is purely yours.

Another question raised centers on the appropriateness of canceling the May/June public hearing on the tentative budget and combining the budget public hearing with the truth in taxation hearing in August. Certainly, Section 59-2-919 allows the hearings to be combined, but League staff contends (as do municipal officials we discussed the issue with) that a combination of hearings is not a “best practice”. Our recommendation is that a community hold the public hearing in May or June (whichever is traditional for the community) to accept public comment on the tentative budget. To comply with the Property Tax Act, we suggest the truth in taxation hearing be a separate hearing held in August for the express purpose of obtaining citizen input regarding the proposed property tax increase, but also to allow citizens an additional opportunity to comment on the proposed budget. This process allows citizens two distinct opportunities to comment on the tax increase proposal and the proposed budget first during the May/June hearing, which they are familiar with by tradition; and second during the August hearing required by the State Code. The basis of our recommendation is that the tentative budget must be submitted to the governing body by the first Tuesday in May regardless of whether or not the city plans to exceed the certified tax rate. Because the budget is presented in May, many citizens are accustomed to the May or June public hearing and may feel that the municipal officials are
attempting to limit public comment and budget inspection if the hearing is not held.

Hopefully, this article has clarified some of the concerns surrounding notification of budget hearings and truth in taxation hearings.
Until next time, may you find all the revenue you desire to address your community’s needs.