Salt Lake City is counting on a little help from its friends to convince the Utah Legislature that the city needs new ways to pay some of its expenses.
The "friends" are the lodging industry, Questar and large entities that buy natural gas at the wellhead.Salt Lake Mayor Deedee Corradini knit the corporate friendships Thursday when she announced plans to drop both a proposed change in the franchise tax and an increase in the innkeepers' tax.
Corradini said the city learned late Wednesday from the county auditor that it would receive $1 million more in property tax revenue than it expected. The windfall will cover an expected $1 million budget gap in the coming year.
That wipes out the need to increase the innkeepers' tax from 1 percent to 2 percent, Corradini said.
"We know we're growing, we know we're on a roll, we can feel it, but we didn't expect the numbers to show up until next year's budget," the mayor said.
Property taxes make up the largest source of revenue in the city's general fund. Based on the new figures, the city will receive $31.4 million in property tax revenues in fiscal 1994-95.
The property tax news comes just five days before the City Council is scheduled to adopt a final budget. Corradini said every year the city builds its budget with "blinders on" because it receives actual property tax figures so late in the process.
"It's frustrating," she said. And some years the "surprise" goes the other way, forcing the city to make last-minute budget cuts.
As it is, the late development spares Corradini a potential showdown with the hotel/motel industry in the Utah Legislature.
The lodging industry had vehemently protested doubling the innkeepers' tax. Representatives said that if the city went ahead with the proposal, the industry would lobby the Legislature to revoke the tax.
"We're pleased with the mayor's decision. We know property taxes played a role, but we think she recognized the economic development role of hotels and tourism and didn't want to make it more difficult for us to compete," said Rick Davis, president of the Salt Lake Convention and Visitors Bureau. "It's (the property tax windfall) good luck, and we're happy for that. We think our arguments were also an important factor."
Although the proposed increase by itself was small, it would have boosted the overall tax at hotels and motels from 11 percent to 12 percent and moved Salt Lake City from mid-rank to top echelon among competitors.
"That's enough of a change that it could cause us to lose some conventions," Davis said.
Thursday's good news doesn't change the fact that Salt Lake City must find ways to pay for and provide services while accounting for a daytime population that doubles and the large amount of tax-exempt property in its confines.
Corradini said the lodging industry has pledged to help her lobby the Legislature for other mechanisms to fund city services, such as payment in lieu of taxes.
Corradini also would like the Legislature to revisit distribution of sales tax. The city receives only 50 percent of the sales tax it generates, which Corradini said results in a loss of $5 million in revenue annually.
"I think our industry is well-respected at the Legislature. They listen to us," said Julie Peck, executive director of the Utah Hotel Motel Association. "I think we can help."
Corradini also backed off a proposal to close a loophole in the franchise tax that allows entities that buy natural gas at the wellhead to skip the tax. The city estimated closing the loophole would have netted $650,000 for the general fund.
Corradini said she believes there is still a question of equity about large consumers of gas avoiding a tax that small users such as homeowners pay. But the dynamics of the industry were such that large users could get around the tax even if the city closed the loophole, Corradini said.
To make up for that lost revenue, the city has juggled other funds. A remaining $150,000 gap will be closed by asking departments to cinch their budgets another notch, said Management Services Director Roger Black.