The Times-Independent

Audit: ‘Significant’ gaps in state oversight of property taxes

Tax commission can’t find or fix unequal assessments, report says

A state audit has sounded the alarm about “significant” shortcomings in the Utah Tax Commission’s ability to identify and fix inequalities in property tax assessments, according to a letter released Jan. 11 by the Office of the State Auditor.

This downtown Moab home is listed for sale at $745,000. Rapidly increasing real estate prices in some parts of Utah have exacerbated property tax inequity, galvanizing an audit of the Utah Tax Commission.
Photo by Sophia Fisher

Spurred by Wasatch and Summit county residents who noticed irregular valuations in some properties, the audit asserts that the tax commission neither provided proper oversight to county assessors responsible for re-valuing properties every five years, nor ordered fixes of such errors.

In Wasatch and Summit counties, the error was thousands of incorrectly valued properties. Residents noted many properties that hadn’t seen their assessed valuations increase during a period when overall real-estate values skyrocketed.

As a result, said Utah State Auditor John Dougall, some residents had shouldered a far higher property-tax burden than others.

“When some properties are going up in value significantly per the market and others are not, then the tax burden is improperly shifted onto those that are seeing the valuation increase, and away from those that aren’t properly valued,” he said.

That’s partly due to the way Utah public schools administer taxes. Unlike cities and counties, whose property-tax rates decrease as values rise — thereby keeping their revenues neutral — every school district in the state administers at least one fixed-rate property tax, Dougall said.

That means a property taxed at 3% by a school district, for example, will pay more in taxes as the property itself increases in value: the 3% is being drawn from a larger figure.

Therefore, if only some properties are reassessed, they’ll pay a disproportionately high chunk of the taxes.

“You’ll see an increase, plus you’ll see some of my tax burden shift onto you,” Dougall said.

Dougall emphasized that the audit only examined Wasatch and Summit counties and state-level oversight. He noted, though, that should similar valuation errors exist in other counties, the state “can’t proactively detect that.”

“And while the tax commission has started making certain changes in Wasatch [County] … those have not been applied to all other counties yet,” Dougall said.

Those upcoming changes may include requiring county assessors to regularly provide parcel-level data to better assure valuation equity, according to a letter from Scott Smith, executive director of the Utah Tax Commission.

In addition to developing a new mass appraisal system, the audit recommends the tax commission overhaul its existing method of ensuring assessment equity: the sales ratio study.

That study compares a small sample of recent property sales with property assessments to ensure the values roughly conform. But according to the audit, those studies seem to feature properties previously agreed upon by the assessor and the commission — a facet that “kind of defeats the purpose” of a samplwe, in Dougall’s words.

“Unfortunately, the system may be designed to avoid detecting problems rather than to detect problems,” he said.

The audit adds that the tax commission had failed in its duties to enforce assessment standards, as it hasn’t issued a corrective order since 2009 — despite, for example, the shortcomings in Wasatch County.

“While it’s important to counsel, you also have to hold [officials] accountable,” Dougall said.

While the auditor’s office cannot compel state agencies to make changes, the tax commission is working with Wasatch County officials and “actively taking action to improve processes,” reads Smith’s letter. They’re requesting some statutory changes and extra funding from the state Legislature to bolster data analysis.

In the meantime, Dougall said any resident worried about inequitable property taxes among parcels should gather data before raising their concern, as Wasatch and Summit residents did.

“That’s why we think it’s so important to get this out there,” Dougall said of the audit. “Because then we can empower the public to better hold government officials accountable.”