Tax-initiative backers say tax cuts will encourage economic development, but a lobbyist for the Utah League of Cities and Towns said at a convention Thursday one initiative would do just the opposite.
Singling out the initiative that caps property taxes, lobbyist David Spatafore said, "Initiative A will not breed prosperity . . . because it's not going to pay to go out and economically develop."Spatafore spoke to 200 municipal officials at a tax-limitation workshop at the league's 81st annual convention being held in a downtown Salt Lake hotel this week.
Citing a complicated formula in Initiative A that limits revenue increases, Spatafore said the property tax cap would remove the incentive for cities to try to attract new business.
Under normal circumstances, when a business settles in a city it expands the municipality's tax base. But because of the revenue limitation in Initiative A, the city doesn't get that increase in revenues.
Still, the city is obliged to provide services for the new business. Without an expanded tax base, the city would be forced to pare services, such as sewer and water, for other residents, Spatafore said.
Because of costs to residents and because the cities have no interest in attracting businesses that, under initiative A, will not strengthen the tax base, economic development will fall by the wayside, Spatafore said.
"Initiative A is going to do the exact opposite of what we (cities) are trying to do" by encouraging economic development, he said.
Cities can increase revenues under the formula, which is based on population and per-capita income, if an increase is approved in a referendum vote or if the city experiences an increase in population.
Tax Limitation Coalition Chairman Greg Beesley said Spatafore "is really stretching it" and that limiting such revenue increases is not the intent of the drafters of the initiative.
"There is nothing in that bill that can by any stretch of the imagination be construed that the city would be prohibited from taking a business' money," he said.
Radio talk show host and tax initiative backer Mills Crenshaw said if new business does come in, increased revenue can be spread among taxpayers to lessen the burden throughout the community.
"What it (Initiative A) is saying is that taxes cannot be increased willy-nilly without the consent of the voters," Beesley said.
Spatifore said Initiative A capping property tax would be the "kicker," having the most impact on cities and towns. But he said Initiative B, which rolls back taxes to 1986 levels, would also affect municipalities.
Initiative B would roll back increases made by the 1987 Utah Legislature on income, sales, cigarette and gas taxes. Of those, municipalities receive only gas taxes, which they share with the state.
Under the initiative, gas tax would be lowered from 19 cents a gallon to 15 cents a gallon, a loss of $10 million annually for cities and towns, which rely heavily on the revenue to keep up roads, Spatafore said.
The third initiative would provide tax credits for parents with children in private schools.