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.

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."

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

Total $432,571

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.

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.

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.

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.

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.

The wording of the ballot proposition for the construction, operation and maintenance of the center reads as follows:

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.

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.