Sandy will lose about $900,000 in revenues in 1992 and might face increasing property taxes if the sales tax on food is eliminated.
If Utah voters approve the elimination of the food tax, the state will lose between $80 million and $90 million in revenue. Just how the state would make up the loss is still uncertain. Sandy City Council members also are speculating how to make up the revenue loss from its share of the sales tax, and when presented a projection sheet by Councilman Bruce Steadman, they spoke of increasing the property tax to make up the difference.The city has held the line on taxes for four years, even when the state raised taxes, and as a result has struggled through difficult economic times. However, that no-tax-increase record could be broken.
"The reality is if we remove the sales tax from food, that's nearly $1 million that we will have the need to replace from other sources and that means property tax," Mayor Larry Smith said.
According to Steadman's estimate, 1992 revenues would be $13.9 million. However, if the bill passes, revenues could drop to $13 million.
"The only other revenue source that we can adjust is the property tax," Steadman said. "We hate it because it's such a hated tax. It just creates a lot of bad publicity and ill feelings."
The issue that is causing so much controversy among politicians is a food sales tax removal initiative that made the November ballot largely through the efforts of Merrill Cook and the Independent Party.
The initiative supports removing sales tax on unprepared food items which can be purchased with a food stamp, excluding non-food items and alcoholic beverages.
This elimination of food sales tax would create a hole in future Sandy city revenues because tax on food sales makes up one-fourth of its sales tax revenues.
Other major city revenue sources are franchise taxes - taxes on utility, telephone and electricity - user fees such as court fines and building permits and property tax.
In reviewing these sources, Steadman said, the franchise tax, which accounts for one-sixth of revenues, cannot be raised because rates are set by the state and limited to 6 percent.
"Basically, our franchise tax is at the state-set limit and can't be raised," he said.
Some user fees can be adjusted, but making up the revenue difference by raising fees would make them ridiculously high, Steadman said.
The only option is to adjust the property tax. In Sandy, since the property tax is 67 percent below the state-controlled ceiling, it can be adjusted.
"We're less than half at the ceiling that the state set. We have a window from which to work," Steadman said.
Although Sandy council members are concerned about the revenue loss, they have not taken a formal stand on the issue. They will not make definite plans until after the November elections.
"I'm not urging (citizens to vote) one way or another," Smith said. "My feeling is that issue is appropriate to be on the ballot and (we will) let the citizens make the determination. We'll follow whatever direction they give us.
"As of now I have some real concerns about it. If the loss of revenue on the state is made up on the property tax, Sandy residents will pay a greater amount of tax than the present sales tax."
Sharing the mayor's opinion is Councilman John Winders.
Council members opposing the sales tax initiative are Steadman, Dick Adair, Ron Gee, Scott Cowdell, Dennis Tenney and council Chairman Bryant Anderson.
"I don't think I want to make up the whole difference in property tax; however, the city can't stand the cut in revenues," Anderson said. "We'd have to cut basic services."