Audit: Utah property-tax increases tied to residential value growth, 2018 rate freeze and new-growth rules

The Revenue and Taxation Interim Committee on Oct. 1 heard a legislative performance audit that traced why residential property taxes have risen faster than other categories and identified procedural gaps the Legislature could address.

Auditors told the committee that, although most taxing entities collect within roughly 10% of their budgets year to year, several statewide and local factors have driven higher residential bills. "We presented this, to this committee last year," said Leah Blevins, audit manager who oversaw the review. Blevins and staff described a combination of rapidly rising residential market values, a 2018 basic-rate levy freeze and inconsistent treatments of "new growth" as the main drivers of shifting tax burdens.

The audit found that when primary residential values outpace commercial or centrally assessed values, the truth-in-taxation system—which is designed to hold entities' total revenue roughly flat—can shift the share of revenue to homeowners even when total revenue targets stay the same. Auditors highlighted that in their six-county sample, residential taxable value rose in every county between 2015 and 2024; in Emery County, residential value more than doubled. "That was the situation in Emory," Blevins said, outlining centrally assessed appeals and multiyear adjustments that compounded local effects.

Why it matters: Committee staff and the auditors said the 2018 freeze on a component of the basic levy, which kept a statutory rate at 0.0016 for five years, prevented rates from falling as property values jumped—so taxes paid rose even without entities increasing revenue. Auditors also told the committee that different counties and assessors interpret "new growth" and permitted virtual participation in truth-in-taxation hearings differently, producing inconsistent outcomes across jurisdictions.

Presentation highlights - Audit managers said most taxing entities did not appear to be intentionally increasing revenues without following truth-in-taxation procedures; exceptions were tied to underestimates in personal-property budgets. "Entities are not collecting significantly more on a consistent basis than they've budgeted for," Blevins said. - Auditors recommended that the Legislature consider clarifying what counts as "virtual participation" in truth-in-taxation hearings and consider clarifying statutory language around new growth so counties treat similar events the same way. - The audit also suggested expanding use of the statewide mass appraisal system to improve oversight, a step the Utah State Tax Commission has previously endorsed.

Committee staff and analysts gave follow-up presentations. Chris Stitt, policy analyst, described two families of policy responses: (1) shifting the tax burden among property types (for example by changing the residential exemption) and (2) tweaking the truth-in-taxation mechanics (timing of notices and virtual hearing rules, consolidated lists counties provide, and rate/levy limits). Jared Gibbs, staff economist, presented data showing primary residential property has grown faster than commercial and centrally assessed bases and modeled impacts of raising the residential exemption (the office prepared scenarios modeling a 55% exemption). Gibbs summarized: increasing the residential exemption shrinks the residential tax base and, under truth-in-taxation, would raise the aggregate rate entities must set to maintain revenue—producing a net tax cut for primary homeowners but higher liabilities for commercial and centrally assessed taxpayers.

Committee discussion and next steps Committee members pressed auditors and staff on magnitude and equity. Senator Dan McKay, committee chair, asked staff to explain scatterplots and county differences. Josh Nelson, director of property tax at the Utah State Tax Commission, and auditors described how centrally assessed appeals, market spikes in certain counties and differing primary/secondary residence mixes change how the statewide trend is felt locally.

Representative Eliason moved to open two committee bill files: one constitutional amendment to increase the primary-residential exemption and a companion implementing bill to adjust levies and provide a state income tax mechanism to offset revenue impacts. Committee members debated trade-offs—several members warned shifting burden to commercial taxpayers or out-of-state owners would require a clear backfill plan—and the motion was approved by voice vote. The committee did not adopt final policy; opening bill files allows staff to draft language and analyses for later hearings.

The auditors left the committee with three near-term recommendations: clarify virtual participation rules in statute, provide clearer statutory guidance on new-growth calculations, and evaluate whether the mass appraisal system can be expanded for better statewide oversight. Committee staff will prepare bill drafts and fiscal analyses if members request them.