Officials of a Salt Lake-based tax protest group say their lawsuit against Payson's franchise-utilities tax will become a test case in the courts, against what they contend is an unconstitutional law prohibiting local residents from holding a referendum vote on taxes imposed by cities.

Representatives of the Utah Taxpayers Association filed suit in 4th District Court in Provo on Oct. 17 protesting Payson's 6 percent franchise-utilities tax, which went into effect in April, according to Taxpayers Association executive vice president Howard Stephenson.Earlier, when the City Council passed the tax - which applies to utilities such as US WEST and Mountain Fuel Supply, but not to the city's electric company - the tax association notified city officials that they would be gathering signatures for a possible referendum vote. Members of the council said they would not allow a referendum.

City Recorder Jeanette Callaway said the council instructed her that those signatures were invalid and that no referendum vote would be held.

"The city rejected the signatures and referendum on the basis of a 1987 law (Utah Code 20-11-21) that appears to prohibit citizens from holding a referendum vote on taxes imposed by cities," Callaway said.

However, Stephenson calls that state law - which evidently does not affect the right of initiative and referendum at the state level - unconstitutional. He said the group is using the Payson tax as a test case for that statute.

"Basically, this law allows elected city officials to thumb their noses at the taxpayers. We're using Payson City as defendants in this case to get the ball rolling."

Stephenson told the Deseret News in April that the association would be meeting with lawyers to determine whether the statute is constitutional. "If the tax issue could be put on a state referendum, as it was two years ago and is this year, then why can't city residents do likewise?"

Other Utah city officials, such as those in Richfield and Cedar City - as well as Sevier County officials - have adopted tax increases this year, so the whole taxation issue is reaching a head, "not just in the sales tax on food referendum," Stephenson said.

City Administrator Glen Vernon said earlier that Payson would be working with attorneys from the Utah League of Cities and Towns, as well as City Attorney Dave McMullin, for counsel on the statute.