SALT LAKE CITY — A recent audit of Utah's property tax system revealed a miscalculation that caused property owners in the state to be undertaxed by more than $100 million since 2006.
As a result, Utah property owners could face slightly higher tax rates in the coming years.
Salt Lake City officials have been puzzled in recent years as developments such as City Creek Center and numerous apartment complexes have been built but tax revenue projections seemed to remain flat, according to Salt Lake City Councilman Charlie Luke.
"Over time, you add that kind of growth, so there's also a cost to the city," Luke said.
Mayor Ralph Becker sent a letter to the state auditor earlier this year requesting that new growth within the tax system be examined.
A policy within Utah's property tax system known as truth-in-taxation determines that local government entities receive the same revenue from existing properties from year to year, regardless of rising property values. Newly developed properties, known as new growth, pay the same rate but bring additional revenue to the government entity.
Calculations for new growth by redevelopment agencies, however, were understated by $1 billion statewide each year and improperly lowered tax rates by about 0.01 percent annually, according to a report by the state auditor.
The audit examined tax revenues from 2006 to 2013, but with truth-in-taxation laws being passed in 1986, it's likely the error prevailed long before the period of study, according to David Stringfellow, chief economist for the Utah State Auditor's Office.
Corrections have been made to calculations in the tax system, which will likely lead to minor tax increases, Stringfellow said.
"Under this error, everybody's taxes were a little bit low," he said. "Fixing this error, everybody's taxes will be a little bit higher."
Tax rate increases will largely depend on location and local redevelopment, Stringfellow said.
Although Salt Lake City alone has been shortchanged about $20 million, tax entities do not plan to collect what was lost, Luke said.
"Going back and trying to recoup that would be unfair on taxpayers, just because it's such a big number," he said.
The report also calls for increased transparency in local governments and redevelopment agencies in the allocation of tax-generated funds.
"It's good to have official publications that are re-emphasizing the importance of making sure we know exactly where those dollars are so that taxpayers can be confident the money is being spent appropriately," said Royce Van Tassell, vice president of the Utah Taxpayers Association.
While taxpayers were favored in the error, the $100 million could have been used to support Utah schools and other service agencies, Van Tassell said.
"We hope that we can figure out the right way to solve this problem going forward," he said. "Certainly, the teachers and the students in this state deserve nothing less, and we as public servants can do nothing less."
The Utah State Auditor's Office will present the results of the report Wednesday to the Utah Legislature's Revenue and Taxation Interim Committee.
Contributing: Richard Piatt