SOUTH SALT LAKE — A plummeting tax base is plaguing South Salt Lake, so much so that city leaders are slated to meet with Gov. Jon Huntsman Jr. next week, with a plea to quit picking on the blue-collar city.

Through the state-run Olene Walker Housing Loan Fund program, a site for a housing project for homeless veterans has been purchased on seven acres in South Salt Lake at 3420 S. 700 West. A handful of developers were originally bidding on the property, a dream for the city that is in need of an economic development boost. But once the state stepped in, all other bidders withdrew.

South Salt Lake isn't concerned about the number of homeless people who could soon find shelter in their city, though — it's that lucrative tax base that becomes null on all public buildings.

More than 30 percent of city land is committed to public uses that hold a tax-exempt status. That leaves South Salt Lake with a tax base so low that city leaders are going so far as to ask the Olene Walker Housing Loan Fund board of trustees to pick a new site in another city.

"It's kind of killing us," South Salt Lake Mayor Bob Gray said. "This is the worst place in my mind to put it. We can't keep losing our business district to tax-exempt properties.

"Thirty percent is an enormous amount to try and operate, and that really harms the city in trying to do economic growth and doing things to keep us viable," he added. "By having the state hurt us by continually purchasing these properties is really harming the city."

Add to that a 2006 law that changed how sales tax was distributed to Utah's 242 municipalities, drastically hurting South Salt Lake. That law dropped a 1983 "hold harmless" provision that allowed local governments to receive 0.75 percent of state sales tax. Instead, the cities had to conform to the statewide sales tax formula that gives cities half the sales-tax money based on point of sale and half based on population.

South Salt Lake loses about $2 million in taxes each year because of the law. To solve the problem, the city had to raise property taxes 134 percent.

"The Legislature, in the interest of fairness in 2006, took a third of our sales taxes and said everybody is going to share sales taxes the same," said South Salt Lake Councilman Bill Anderson. "If you're going to be fair, why don't you wait until every other community in this valley has 30 percent of their property tied up in public uses and then come to South Salt Lake and ask for more?"