REC DISTRICT LEVIES UNAUTHORIZED TAX
Summary. During the December 13, 2004 budget hearing of the South Davis Recreation District, Ronald Mortensen of CitizensForTaxFairness.org (formerly Citizens for Tax Fairness) expressed concern that the 2005 budget included an annual tax levy to operate and maintain a new recreation center that will not be operational in 2005. In addition, the funds collected are to be spent on items not related to the operations and maintenance of the new center.
A review of pre-election information, including that presented in the official Voter Information Pamphlet, statements by public officials, press reports, and the ballot proposition, clearly shows that voters were asked to approved a separate operations and maintenance subsidy in the amount of approximately $500,000 for a new recreation center.
They did not, however, authorize the District to collect the subsidy prior to the time that the new center became operational nor did they give approval for funds for the subsidy to be used for any other purpose.
In spite of this, the Board in its December 13, 2004 meeting approved levying the tax for the subsidy in 2005 ($432,571) and then misappropriated the funds to things other than an operating and maintenance subsidy for the yet to be constructed center as approved by the voters.
As a separate taxing entity, the South Davis Recreation District was expressly granted its own taxing authority to cover its ongoing expenses and project costs. Therefore, if the District requires additional construction, operating and/or administrative funds, it will, unfortunately for the citizens of the District, have to assess a separate tax for these items. CitizensForTaxFairness.org regrets that additional taxes may be necessary to support the District and its projects.
However, city and county officials have created this new entity and the costly overhead that goes along with it and they are, therefore, fully accountable for their actions. End Summary
On December 13, 2004, the Davis County Recreation District held a public hearing on the District's proposed 2004 and 2005 budgets.
Authority to Impose Tax challenged
Addressing the District Board, Ronald Mortensen of CitizensForTaxFairness.org (formerly Citizens For Tax Fairness) expressed concern that the 2005 budget included an "Annual tax levy for operations subsidy" (Fund 83, Dept. 0000, Acct Number 3110, 0000 General Property Taxes) in the amount of $432,571.
Mr. Mortensen further noted that the operations subsidy had been approved by the voters in the August 3, 2004 special election for the operations and maintenance of a new recreation center that is not scheduled for completion until late 2006. Therefore, there will be no operations and maintenance costs for the center in 2005 and, consequently, the tax for the subsidy should not be implemented until the 2006 budget year or possibly the 2007 budget year.
In spite of this, the Board approved the 2005 budget as presented including an "Annual tax levy for operations subsidy in the amount of $432,571."
Improper Use of Tax Funds
Further analysis indicates that in addition to improperly and very possibly illegally imposing the tax which voters approved in the flawed August 3, 2004 special election as a subsidy for the operation and maintenance of the new recreation center, the Board has misappropriated the $432,571 that it will bring in. None of the following budgeted expenditures are to subsidize the fees collected for the operations and maintenance of the still non-existent, new recreation center.
Salary for District Secretary and Board Members $ 12,000
Social Security and Medicare Taxes associated with salaries $ 918
Workers Compensation Insurance Premiums $ 970
Public notice expenses for District $ 1,000
Paper, stationary, envelopes and related office supplies $ 2,000
Engineering, geotechnical and appraisal services $ 20,000
Legal Fees ($25,000), Audit Fees ($2,500) $ 27,500
General liability premium $ 5,669
Construction change orders, interest & other unforeseen expenses $362,514
Tom Hardy, Bountiful City Manager and District Purchasing Agent acknowledged that the funds would not be used to subsidize the operation of the recreation center. According to the Standard Examiner, Mr. Hardy "explained the money as a contingency fund for project expansions and purchasing fitness equipment." The Standard Examiner further writes: "We didn't vote for contingency funds," said Mortensen, referring to the Voter Information Pamphlet from the Aug. 3 election to approve bonding and an operations and maintenance tax levy. "I don't see how you got that authority," he said.
Pre-Election Information - Tax of $500,000 to Operate & Maintain Center
A review of the official Voters Information Pamphlet, pre-election statements by public officials, press reports and other official documents clearly shows that the intention of those proposing the tax was for it to subsidize the operations and maintenance of the new recreation center at a rate of approximately $500,000 per year. There is no discussion of using the operations and maintenance tax for anything else or of collecting it prior to the time that the new center became operational. Therefore, based on the preponderance of evidence presented in the following sections, it is clear, that the tax approved by the voters was to be used only to subsidize the operation and maintenance of the new recreation center once it was operational at a rate of approximately $500,000 per year.
It is further noted that the Districts' authorizing document establishes a separate taxing entity that is authorized to develop and operate "recreational and park facilities." Thus, its scope goes well beyond constructing just one recreation center. The District is, therefore, authorized by the resolution establishing it to establish and fund an administrative account to cover the expenses for the operation of the District as a whole - Section 5(c)(iii). This authority is separate and distinct from the tax approved by the voters since that tax is dedicated uniquely to subsidizing the operations and maintenance of the new recreation center once it becomes operational.
Official Voter Information Pamphlet
The official Voter Information Pamphlet prepared by Bountiful City officials clearly states that the tax is "to operate and maintain" the center at a rate of roughly $500,000 per year.
The proposed recreation center will cost $23 million to build, and approximately $2 million per year to operate and maintain. User fees are anticipated to pay for $1.5 million of the operation and maintenance costs. Bountiful City and the Davis County School District plan to put $5 million into the new center leaving $18 million to be paid for with the issuance of general obligation bonds. The bond ballot proposition requests authorization to issue the bonds to finance the cost to build the center and to levy a tax to pay said bonds and to operate and maintain the center (emphasis is added here and through the remainder of the document). Note: The difference between the estimated operating costs and fees collected is $500,000 and there are actually two tax levies. The first to pay for the bonds and the second to subsidize the operation and maintenance expenses of the center and nothing else.
Property taxes to build the center and operate and maintain it will be about $40 per year on a home with an assessed value of $180,000, or a little over $3 per month. These taxes can be itemized as deductions on both your state and federal income tax returns. Note: Again it is clearly stated that the tax is to operate and maintain the center.
If a "RAP" (Recreation, Arts, and Parks) tax is placed on the ballot in November and if it is approved, 45% will be allocated to the Arts. The remaining 55% could be used to operate the new center, thus reducing the tax levy. Note: Yet again it is clearly noted that the tax levy is to operate the new center.
If the voters approve the ballot measure, bonds would be issued, final plans prepared, and the project would be bid for a start in early Spring, 2005, with a completion date of Fall, 2006. Note: The projected completion date is Fall, 2006, therefore, there will be no new center to operate and maintain in 2005 thus no reason to collect the operations tax. If the tax is eventually levied in 2006, it should only be in an amount necessary to cover the operational subsidy of the center once it is fully operational. Assuming the center is operational in October, then only three months of subsidy ($125,000) would be required.
Intent Expressed by Public Officials in Official Communications
Mayors and other officials of the recreation district are on record as stating that the operations and maintenance tax approved by the voters is for the ongoing operations and maintenance of the new facility at a rate of approximately $500,000 per year.
Mayor Joe Johnson. "...the ultimate result was that a bond issue of $18.4 and a tax levy sufficient to pay for the ongoing operation and maintenance of the facility was passed. User charges and facility fees will pay approximately 75% of the annual operating budget, which is estimated to be approximately $2 million annually. Bountiful City Newsletter, August 2004, "Voters Approve New Recreation Center." Note: 75% of $2 million is $1.5 million leaving an operating subsidy of $500,000.
"In order to construct a new facility and to be able to pay for the operating costs of the facility, a special election was called for August, which included both a bond issue to construct the new facility and a tax levy to help support the facility." Letter from Tom Hardy to Ronald Mortensen, Citizens for Tax Fairness, dated September 23, 2004.
From the City of Centerville Website: "On June 15, 2004 the Davis County Commission formally created the South Davis Recreation District. The District includes the Cities of Centerville, Bountiful, North Salt Lake, West Bountiful, and Woods Cross. The vision of this district is to first build a recreation complex, at the site of the current Bountiful Bubble. The funding for the District would come from user fees and it is proposed that an election authorizing a levy of a property tax on properties in the district to build the facility and offset operating costs (sic)." http://www.centervilleut.net/recreation.south_davis_rec.html
Information Given to the Public through the Press - Prior to and After the Election
Excerpts from the Davis County Clipper, Salt Lake Tribune, Deseret News and Standard Examiner follow. (The entire article can be accessed by clicking on the link provided). All newspapers consistently reported over a period of months that a tax of $500,000 would be imposed to subsidize the operations and maintenance costs of new recreation center.
Rec center day of decision nears July 29
Passage of the bond would raise taxes on the average home ($180,000) in the recreation district by $38 per year, two-thirds of which goes to pay the bond and one-third going to fund operational expenses. Once the bond is repaid, only the operational expense tax levy will remain.
Rec. center is an investment in the future of South Davis
Pro: Tom Hardy July 29, 2004
Bountiful City Manager
During my 24 years as city manager of Bountiful, we have worked hard to be a "pay-as-you-go" city. We have not asked the voters to indebt themselves for any of the many facilities we have built — park, water reservoirs, streets, public buildings, storm drain detention basins, etc. The last general obligation bonds we asked the voters to approve were in 1972 — to build the existing recreation center and the golf course. Those bonds were paid off in 1992. The city has been debt-free ever since.
During this time, Bountiful has been consistently recognized by the Utah Taxpayers Association as having the lowest property tax of any major Utah city. I even received the "Taxpayer Advocate Award" from them for "minimizing city taxes by efficiently and effectively managing city government."
I am proud of that award, but I am more proud that during the past 24 years we have provided outstanding services and facilities to our citizens, all at a very low cost in taxes, utility rates, and other fees and charges. We have tried to be wise, frugal stewards of the public trust and resources. Even with the additional property tax levy to build and operate the proposed new recreation center, Bountiful City property taxes will still be lower than almost any other major city. Note: Mr. Hardy erroneously indicates that there is an additional property tax levy when in fact two tax levies were being voted on - one for the bonds to pay for construction and one for the operations and maintenance of the new center. Mr. Hardy does, however, indicate that revenues from the second levy will be dedicated to the operation of the new recreation center. The statement that "Bountiful City property taxes will still be lower than almost any other major city" is curious since the new tax levies are not being imposed by Bountiful City but by the new taxing entity that the city helped create.
Vote ‘no’ on rec center bonding
Letters to the Editor 29.JUL.04
... Should $23 million in tax monies, plus an annual stipend of $500,000 more be used to harm taxpaying private fitness centers that pay income taxes that support our school systems and won’t even generate property taxes to support our local governments. Note: Citizens obviously understood that there was a separate operations subsidy of $500,000.
Rec center vote today
Warren Pettey 03.AUG.04
If passed, a property tax on a $180,000 home in Bountiful, Centerville, North Salt Lake, West Bountiful or Woods Cross would increase by a little more than $3 per month until the bond is repaid. The repayment is expected to conclude in 20 years but may take as long as 22 years. After the bond repayment, a much smaller fee for operational subsidies would remain permanently in place.
Rec center wins in nail-biter
Warren Pettey August 5, 2004
The vote was actually not for the SDCRC [South Davis Cities Recreation Center] itself, but for bonds to fund and operate it. The tax will cost the average home within the district — Bountiful, Centerville, North Salt Lake, West Bountiful, Woods Cross and unincorporated Davis County in the county’s south end — a little less than $38 yearly. This cost includes both the bond repayment and an operating cost subsidy of $500,000. (The center’s annual operating cost is projected at $2 million with users paying around $1.5 million.)
Twelve questions about rec center
Letters to the Editor 02.SEP.04
Parks and Recreation Chair
Bountiful City Council
Question #5: Why has no money been set aside in the past ten years after the present center was paid off?
Answer: All money generated by the existing center has gone to pay for the facility’s operation. That money was enough to pay for 80% of operating costs. The other 20% has been paid through tax revenue. That gap is why private entities are not in the multi-facility recreation center business (see response to Question #1). Those additional operating costs for the SDCRC [South Davis Cities Recreation Center] are part of the bond issue that just went before the public. And, oh yes, it still passed.
WEDNESDAY June 30, 2004
South Davis County to vote on rec center fix
By Lori Buttars
The Salt Lake Tribune
Officials estimate the upgraded rec center will cost about $21 million. The 22-year bond will cover $18 million of that construction tab. The remaining funds will come from the Davis County School District because three area high schools will use the gymnasium, ice rinks and swimming pools for their athletic programs.
In addition to the construction bond, residents also will vote on a tax increase to fund operation and maintenance of the facility.
The new taxes would amount to $38 a year on a $180,000 home.
"We hope our citizens will get behind this and come out and vote," said Bountiful City Manager Tom Hardy.
Article Last Updated: 12/07/2004 12:23 AM
Costs already rising for Davis rec center By Lori Buttars
The Salt Lake Tribune
Voters in five south Davis County cities - Bountiful, Centerville, Woods Cross, West Bountiful and North Salt Lake - approved the bond in an Aug. 3 special election. It is expected to cost the average homeowner in those cities about $38 annually to pay off the bond and to help cover operation-maintenance costs.
Morning News, Thursday, July 22, 2004
Citizens group in Davis urges passage of recreation center
They say facility will be beneficial even to seniors
By Larry Weist
Deseret Morning News
Estimated annual operation costs for the recreation center are $2 million, of which users would pay $1.5 million with taxpayers from the cities of Bountiful, North Salt Lake, West Bountiful, Woods Cross and Centerville paying the rest, [Jerilee] Jones said. Hardy agrees and said users could end up paying more of the operating costs if a larger number of season passes are sold.
"We estimated conservatively that users would pay three-quarters of the operating costs," Hardy said. Note: Mr. Hardy confirms that the tax is meant to cover a maximum of $500,000 in operating expenses ($2 million less $1.5 million).
Davis County votes on Bountiful rec center
Tue, Aug 3, 2004
By MATTHEW FLITTON
Standard-Examiner Davis Bureau
If approved, property taxes on a home worth $180,000 would increase by about $38 annually. It will also cost homeowners an additional $12 or $13 annually to provide the $500,000 in operation and maintenance costs for the center.
Rec center bond passes by 249 votes
Wed, Aug 4, 2004
By MATTHEW FLITTON
Standard-Examiner Davis Bureau
Hardy said he would like to begin construction on the center next spring and finish it in the fall of 2006.
As a result of this bond, property taxes on a home worth $180,000 will increase by about $38 annually. It will also cost homeowners an additional $12 or $13 annually to provide the $500,000 in operation and maintenance costs for the center.
That amount could be lower if a proposed recreation, arts and parks tax were to pass this year's election.
The wording of the ballot proposition for the construction, operation and maintenance of the center reads as follows:
Shall the South Davis Recreation District, Davis County, Utah, (the "District"), be authorized to issue general obligation bonds of the District in an amount not to exceed Eighteen Million Four Hundred Thousand Dollars ($18,400,000) (the "Bonds) for the purpose of financing the costs of acquiring real property, constructing recreational facilities and related improvements, and paying the costs reasonably incurred in connection with the issuance of said Bonds, said Bonds to be due and payable in not to exceed twenty-two (22) years from the date of said Bonds; and shall the District be authorized to levy a tax on all taxable property within the District (a) in an amount sufficient to retire said bonds, and (b) at a rate of not to exceed .0002 per dollar of taxable value to pay operation and maintenance expenses? Note: As clearly shown in the previous sections, the operation and maintenance expenses referred to here are those required to subsidize the new recreation center once it becomes operational at a rate of approximately $500,000.
District a Separate taxing Entity - Able to Develop Multiple Projects
The creation of a new special district, the South Davis Recreation District, by the Davis County Commission resulted in a new taxing entity that is authorized to impose taxes to develop recreational and park facilities. The first project is the recreation center; however, the District's charter allows it to develop and operate multiple recreational and park facilities. By creating a separate entity, the County Commission also created a new bureaucracy that will require funding. The District already has its own Board and will eventually have its own paid staff, offices, etc. in order to manage its projects. This means that the District will have to impose a separate District tax to support its overhead since it is absolutely clear from the previous discussion that the operations subsidy approved by the voters is to be used only for the operation and maintenance of the new recreation center, not for the operation of the District.
In fact, Section 5(c)(iii) of the resolution creating the District states that the District shall provide services by: "establishing and funding an administrative account to cover the expenses for the operation and maintenance of the District." Again, this is clearly a separate tax from the one that was approved by the citizens on August 3, 2004 and which was, as shown above, is dedicated uniquely to the operation and maintenance of the new recreation center once it is operating.
The fact that the District was being established to carry out multiple projects is confirmed by statements of public officials and press reports.
From Centerville Website
On June 15, 2004 the Davis County Commission formally created the South Davis Recreation District. The District includes the Cities of Centerville, Bountiful, North Salt Lake, West Bountiful, and Woods Cross. The vision of this district is to first build a recreation complex, at the site of the current Bountiful Bubble. The funding for the District would come from user fees and it is proposed that an election authorizing a levy of a property tax on properties in the district to build the facility and offset operating costs (sic). Note: The wording indicates that after the recreation complex - the first project - is built, other projects may follow.
For a PDF copy of this flyer click here
Rec. district gets commission nod
FARMINGTON — The South Davis Recreation District became a reality Tuesday.
That’s thanks to the formal vote authorizing its creation by the Davis County Commission. That three-member body needed to give its approval because of its regional, or countywide authority. The district itself is a regional body, serving the five cities of Bountiful, Centerville, North Salt Lake, West Bountiful and Woods Cross. Small pockets of unincorporated Davis County within the area also will be a part of the district.
Formed primarily to construct and operate a regional recreation center in Bountiful, voters will be asked to indicate their support later this year.
Rec district set for today
Tom Busselberg 15.JUN.04
The district’s primary focus, at least initially, would be to construct a new recreation facility to replace the 30-year-old "Bountiful Bubble."
Based on the extensive documentation presented above, it is clear that the operations and maintenance tax was sold to the voters as a tax to subsidize the operations and maintenance of the new recreation center at a rate of approximately $500,000 per annum. Voters, therefore, approved the tax for that purpose and that purpose only. The tax was not approved to fund operations of the South Davis Recreation District, to cover construction cost overruns nor for any of the other functions listed in the District's 2005 budget. Therefore, the operations and maintenance tax (subsidy) may not be implemented until the new recreation center is operational and funds derived from the tax are only be used to subsidize the actual operations and maintenance costs of the new center.
If the South Davis Recreation District, which was created to construct and manage recreation facilities and parks, requires funds to support its ongoing operations or to meet construction costs in excess of the amount realized from the sale of bonds as approved by the voters, then it will have to, regrettably, impose new taxes to fund these additional costs. It appears that the District has this authority by virtue of Section 5(c) of Davis County Commission Resolution No. 2004-212 that established and organized the District on 15 June 2004.
CitizensForTaxFairness.org notes that city and county officials chose to establish a new taxing entity that in effect created a new layer of government along with its accompanying overhead costs. Regrettably, the District will have to levy additional taxes above and beyond those that the citizens approved in the flawed August 3, 2004 special election to meet the Districts ongoing costs and to provide contingency funds. City and county officials who supported the creation of this new taxing entity and its accompanying bureaucracy are fully accountable for all new costs and taxes that are associated with it.