Where does your money go?
Each year every household receives a Notice of Property Valuation and Tax Changes from the Utah County Auditor. This notice provides the estimated value of your home, the change from the prior year, and lists the various portions of the property taxes you have to pay. Most, if not all of the homes in Cedar Hills increased in value over the past year. For a home in Cedar Hills valued around $260,000 the breakdown for last year looked similar to this:
Approximately 20% of your overall property tax bill goes to the city. The city has no control over the remaining amount you pay to other entities such as the school district, which collects the largest portion, or the county. Also, notice that there are two line items for Cedar Hills. In order to be transparent, the city separates the amount due for the golf course bond payment (listed as CEDAR HILLS CITY BOND) from everything else. For fiscal year 2017 the tax rate for the General Fund went down from 0.001594 to .001512, which will bring in $695,654 in property tax revenue for the city. The portion labeled Cedar Hills City Bond goes to the golf debt service fund to pay off the general obligation bond. This year the tax rate for the bond went down from 0.000721 to 0.000674, which will bring in $309,970 of revenue for the golf bond payment. When we refer to property tax rates we reference the combination of both, which went down from 0.002315 to 0.002186 for fiscal year 2017.
How are property taxes assessed?
When it comes to the city’s portion, there are generally two approaches cities use to determine how much city tax you must pay each year. The first and most common approach is for the tax rate to adjust each year as property values change so that the total tax collected by the city is approximately the same every year. Each year the county re-estimates property values and then calculates what this tax rate should be so that the revenue collected by the city remains constant. The benefit of this approach for residents is that you will pay about the same amount of city property tax every year, regardless of the value of your property. The benefit to the city is that revenues stay consistent whether home values go up or down.
The second approach is for the tax rate to stay the same regardless of changes in property values. This means when your property values go up you pay more in taxes, and as your property values go down you pay less in taxes. One of the problems with this approach is that if property values go up significantly during a bubble, the city can receive much more revenue, leading some to worry that government could needlessly expand during these times. In addition, the constant fluctuation of tax revenue makes it difficult to budget each year for city services, causing some services to be cut if revenues go down.
For the past several years, the City Council has chosen to adopt the County’s calculated tax rate so that city revenues stay constant and resident city taxes stay about the same.
Is it true that Cedar Hills has the highest tax rate in North Utah County?
While it is true that Cedar Hills does have one of the highest tax rates in North Utah County, this is not the same as the tax burden. The city’s portion of your property tax bill is approximately 20% of the total bill, and it is a smaller portion now than it was in 2007-2008 (from 25% then to 20% now). Because Cedar Hills’ property values are near the middle for North Utah County, our actual tax burden is likewise near the middle.
There are two primary factors that explain Cedar Hills’ higher tax rate. First, Cedar Hills is a relatively young city that has experienced most of its growth in the last 15 years. This means we have had to bond in recent years for infrastructure such as water facilities and buildings, whereas surrounding cities are older and have had many years to pay off this debt. Second, in 2005 the residents of Cedar Hills voted to bond for the golf course and the payments for this bond use about 1/3 of our total property tax revenue. While some may regret this decision, it is our obligation to pay off this bond and work to make the course as successful as possible so that we can preserve our open space and the value of our assets.
It is also important to remember that the tax rate is only one way to compare property taxes across cities. Another way to compare property taxes is to examine how much revenue is collected per household. The chart below (updated September 2015) shows the property tax collected per household for cities in Utah County. As you can see, Cedar Hills residents pay less city tax per household than our neighbors in Alpine, American Fork, and Highland.
Finally, property taxes only make up only 28.07% of tax revenue for the city; most of our revenue comes from sales and use taxes (48.71%). As the city continues to attract commercial development, this will help reduce our reliance on property tax revenues and allow Cedar Hills to provide additional services at a lower cost to residents.
Is anything being done to reduce my tax burden?
Many in the city would like for the commercial zone to be developed with businesses that bring in additional sales tax revenue and commercial property tax revenue. In the meantime, city officials and staff work to make sure that operations are efficient and look to identify ways to reduce the amount of debt owed by the city. Below is an analysis of property tax rates for each taxing entity over the past 15 years as of September 2015. In the year 2000 the percentage of the overall property tax bill for general operations was 16.48%. It spiked in 2003, which is about the time the city started experiencing tremendous growth, but has steadily gone down and last year was at 13.26% of the total property tax bill, the lowest it has been since 1999.
In 2006 an additional tax levy was assessed to pay for the golf course bond. This started with a rate of 10.26% of the total property tax bill. Staff and officials have worked to reduce that burden, including refinancing the bond at a lower interest rate of 2.47%. As a result, the debt levy percentage of the total property tax bill is now approximately 6%.
We just received the new tax rate from the County a few weeks ago, so don’t yet have new numbers to update the chart above. Once we have that information, I will provide an updated spreadsheet.
I hope this answers any questions on how the city tax rate is calculated. Feel free to call me or email with any additional questions.