With a hectic construction schedule in one hand and a scathing state audit in the other, the Salt Lake County Special Service Area No. 1 board of directors is asking local property owners for a 31 percent tax increase.
If approved, the increase will amount to just over $17 a year on a $75,000 home and about $31 annually on a business property of the same approximate value.David Howick, executive director of the service district, said the money is needed for "start-up costs" on the Oquirrh Park Fitness Center expansion.
Construction is moving ahead full throttle on the new sections of the fitness center, and the addition is scheduled to open next July.
The new addition will feature swimming pools, steam and sauna rooms, new co-ed locker facilities for families, exercise rooms, a climbing wall and other amenities.
Howick said the increase will generate up to $465,281 for new pool and fitness equipment as well as the 70 or 80 workers needed to staff the $11 million addition.
Service area taxpayers will have an opportunity to comment on the proposed property tax increase Sept. 30 during a public "truth in taxation" hearing.
The service area office is located in a strip mall at 5624 S. 4800 West in Kearns.
And coming on the heels of a state audit that excoriated the service district for questionable financial management, Howick admits the request for more tax money couldn't be coming at a worse time.
Issued by State Auditor Auston G. Johnson, the financial report excoriated the district's board and management for inadequate financial controls and records, improper use of funds and payment of compensation and benefits to Howick that auditors considered questionable and/or excessive.
Some of the mismanagement was so egregious, the audit said, that board members might be in danger of failing "to fulfill their fiduciary responsibilities" to the public.
Howick said the board has no choice but to seek a tax increase because all other funds are being used to run the existing center.
"We anticipated a tax increase would happen prior to the opening of the new expansion," he explained, because the district needs up-front money until the revenues start rolling in.
"Once we are open and are getting the revenue to offset the labor, it still won't offset it entirely," Howick added.
Howick, who has been under fire more months for his management and personnel practices, concedes his critics are having a field day.
"The timing may be terrible, but it's determined by the date when the new facility will open," Howick said. "We need to approve the tax increase now so we will have the money by next July."
The 31 percent increase would increase the district's certified tax rate from its current .001581 level up to .001996.
Howick said the higher percentage is the maximum property tax rate that can be assessed, although the board could opt for a lower rate and cut back on both equipment purchases and staff.
"But once we are open, we have to have money to buy equipment and offset the labor," he said.
The three-member board's only other option, Howick said, would be to borrow the money and pay it back with interest.
"But that would still take a tax increase," he added, because the service area can't absorb a 30 percent increase in operation costs and must cast around for the money elsewhere.
Of the $11 million used to expand the facility, $5.5 million came from a 1992 bond issue and the rest came from bond money interest earnings and the service area's own funds.
Howick said some people have asked him why bond money can't be used to to cover the start-up costs. "But bond money cannot be used for operations," he added.
Service area records indicate Oquirrh Park's certified tax rate was set at .002307 in 1993, the year after the bond was issued.
Population increases drove some of the rate down, Howick said, while the board also trimmed the tax rate a little each year.
Without those tax cuts, he said, the certified tax rate for the past year would've been .001996 - the same rate the board is now seeking to cover start-up expenses.
"We wouldn't need this tax increase if we had not cut taxes," Howick added. "But now the trustees will have to make the hard decisions."