Big firms paying less land tax
Some of the largest companies in Utah have been paying Summit County less property tax in recent years, forcing homes and small businesses to make up the difference.
Corporations in the power, railroad, mining, natural gas and telecommunications industries own expansive tracts of land across the state. Those property values are assessed for the purpose of taxation at the state level, explained Summit County Assessor Steve Martin.
The county then sends out property tax bills based on those assessments. Last year that total value was $243.3 million less in 2010 than in 2004 and $402.8 million less than in 1998.
At a tax rate of just under 1 percent, that equates to about $2.4 million less than seven years prior, and $4 million less than 12 years ago.
Looking at the values over the past decade, the two recessions did not appear to have had a sizable impact. The values of these lands, called Centrally Assessed Properties (CAPs), have simply been declining.
Property tax is not like sales tax where the total amounts collected can change, Martin explained. The government services funded by property taxes like schools are entitled by law to the same amounts year after year. Changing the total amount collected requires "Truth in Taxation" public hearings an expensive and difficult process.
Because a taxing entity must collect the same amount from a community based on individual property values, it adjusts the tax rate to compensate for rising or declining values. This is a difficult process to understand and explain, Martin said. As a result, sometimes lower home values result in higher taxes, and vice versa.
As a consequence, property taxes have been rising for homes and businesses to compensate for declining revenue from the biggest companies.
It’s a little puzzling, Martin acknowledged. The land they hold isn’t less valuable, but they are paying a smaller share for the county’s services.
Not all types of CAPs are to blame. Property tax assessments from some sectors have been fairly steady over the past several years, like railroads and airlines. Land values have been increasing from some like Questar, pipeline companies, power companies and non-metal mining firms.
The two industries that have consistently paying lower property taxes to Summit County in recent years are the oil and gas industry and telecommunications.
Within every industry, some individual companies have seen values increase, while others have decreased.
"They’ve changed the system a couple of times over the years trying to figure out a fair way of doing it," Martin said.
One company that has seen declining land values is the telecommunications firm Qwest, formerly known as U.S. West and currently under re-branding to become CenturyLink.
In 2001 the company’s Summit County property was assessed at $45,880,992. In 2010, they were just $19,473,225. Year by year, the figure has gone up and down, but the gross loss of value has been $26.4 million.
CenturyLink was contacted for comment and spokesman Mark Molzen gave the following statement: "Qwest, which was acquired by CenturyLink on April 1, is valued by the Utah State Tax Commission each year based on the current fair market value of existing operating plant and equipment. The company and most other local telephone companies have experienced declines in local access lines over this period, which impacts the assessed value of the company’s network."
Why do so many companies have decreasing land values? There is no easy answer, Martin said, but an important factor is lawsuits and legislation. Sometimes an individual company or industry can convince a lawmaker to change how their properties are assessed. Sometimes a court decision changes the methodology.
Three famous cases all county assessors are familiar with are Wiltell vs. Beaver County in 2000. Lawsuits waged by Kennecott Copper and Amoco Pipeline were also game changers.
The latter in Summit County was assessed at $18,378,140 in 2002, but only at $74,520 in 2010.
"The county or industry can, and often do, appeal to the State Tax Commission. Each of those properties, they look at them case by case," Martin said. "If either party isn’t satisfied, they can appeal to district court or the (state) supreme court."
In his opinion, the appeal bodies tend to side with the taxpayers, leaving assessors like him disappointed, Martin added.
Sometimes small cases have big impacts, he said. Summit Water’s litigation with Summit County has resulted in an exemption of all water companies from paying on CAPs, he said.
"These little decisions when applied throughout the state fiscally and monetarily have big impacts," Martin said.
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