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S.L. offers to settle airline tax suit

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Salt Lake City residents could get a tax cut, possibly at the expense of taxpayers throughout the state, should a Monday settlement offer to reallocate airline taxes move forward.

Salt Lake City School District and Salt Lake City, which are suing the Utah State Tax Commission, made a formal settlement offer that would bring the city 97 percent of some $9 million in annual airline taxes. Of that, the school district would get $3.7 million, according to a proposed formula based on 1997 dollars. The money would be phased in over three years.The rest would be divvied among Salt Lake city and county taxing entities, said Steve Allred, Salt Lake City's chief deputy attorney. Numbers likely will change.

Utah County taxing entities stand to lose $364,500, most of which goes to school districts. Alpine School District would lose $97,000, Provo School District would lose $2,000 and Nebo School District would lose $116,000.

"It's significant to us," said Nebo Superintendent Denis Poulsen. "It has happened one other time before. People in Salt Lake have been trying to get taxes paid according to destination. Salt Lake is at it again, both the district and the county together. It means more money for them."

Nebo's current budget is $86.4 million.

A meeting, organized by the Utah Association of Counties, is scheduled Thursday in Heber City to discuss the settlement offer.

Currently, counties below scheduled airline flight paths receive a portion of property tax revenues paid by commercial airlines. The mobile property tax is based on the premise that should a plane crash, the impacted county would have to pay for the cleanup and rescue.

All 29 counties receive some revenues, most of which go to the school districts, from $250 in Logan City School District to $443,500 in Tooele School District.

In 1994, Salt Lake City and the school district filed a lawsuit to keep the money in counties where planes land, mostly at the Salt Lake City International Airport. The plaintiffs contend property taxes must funnel to the county in which the property physically is located.

"The tax commission assignment is unconstitutional and totally irrational," said Salt Lake City attorney Roger Culter. "If some fly at 30,000 feet, there's no nexus for taxation."

If the city and district prevail, airlines would pay some $2 million in extra taxes under the proposed formula, as Salt Lake County has a higher tax rate than other counties, said Brent Eyre, assistant director of the property tax division who specializes in centrally assessed property for the Utah State Tax Commission.

Airlines protest their centrally assessed valuation every year, Allred said.

Taxing entities in counties hardest hit likely could be forced to significantly increase their property tax, said L. Brent Gardner, executive director of the Utah Association of Counties. Others may be able to absorb the loss. All counties but Salt Lake would lose money.

Terms of the settlement offer were not disclosed. But it includes prospective revenues only, not five years of retroactive revenues as sought in the lawsuit, said Gary Harmer, business administrator for the Salt Lake City School District.

"I know that there's people who lose assessed valuation who are not going to be happy about that, and there probably will be some feelings. But as far as we know, this is what the (Utah) Constitution provides, unless the Constitution has changed," Harmer said.

"We think (flight-path tax distribution) is arbitrary and capricious. . . . Salt Lake City has been robbed by this system for many, many years. Airlines undoubtedly are paying less tax through this scheme."

The district's budget would not receive a windfall, as its tax burden would be lightened for homeowners and businesses, Harmer said. But it would gain a larger tax base.

The same could go for Salt Lake City, unless the City Council decides otherwise, Allred said.

Counties with municipal airports, such as Grand and Iron Counties, would keep some of the tax, numbers show.

Proposed numbers are supplied by the State Property Tax Division's September 1994 analysis to provide the potential change in property tax revenues.

"Counties are the minor player in this decision. The school districts are going to be the hardest hit," Gardner said.

But the State Office of Education may ease some of the blow by making up the basic levy portion of the loss, or that which funds basic education costs. That could total between one-third and one-fourth of the lost revenues, said deputy state superintendent Laurie Chivers.

Still, Daggett School District faces a deep cut in its capital budget: about $30,000 from an annual budget of about $2 million, said Superintendent Gerold Erickson. The district on the northwestern Colorado border serves about 215 students.

"It would cut it down to almost nothing so we're quite concerned about it," Erickson said. The fly-over issue compounds the district's budget problems because the state's smallest school district is losing students.

On the other hand, if Daggett was forced to repay tax revenues dating back to 1994, the debt would be devastating. "That would really kill us. We would have no choice at that point but to go to a tax to recoup that money. It's a substantial amount. That money has to come from somewhere."

To the west, Tooele School District's loss would amount to three-fourths of a voted leeway tax voters approved last week. The loss may require the district to ask the Tooele Board of Education to raise taxes for the 1999-2000 fiscal year, said assistant superintendent Richard Tolley.

But the board last February approved a leeway resolution to add $22 to the property tax on a $100,000 home, to go into effect July 1999 and bring in $400,000. The voted leeway will add $33 to the tax on a $100,000 home.

In Salt Lake County, the Jordan School District faces a loss of about $120,000 in tax revenue - not a huge sum given the district's $374 million budget for the 1998-99 school year.

"We hate to give up any revenue. Me, I'd rather put that $120,000 into textbooks," said Devon Sanderson, Jordan District business administrator.

Any settlement or court decision would not affect 1998-99 fiscal year budgets. The Supreme Court is to hear the lawsuit in September if a settlement is not reached, Harmer said. A lower court has ruled in favor of the city and school district.

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Additional Information

Big win for Salt Lake City

School districts throughout Utah - except Salt Lake City - stand to lose property tax revenue under a proposed settlement for the airline tax lawsuit. This is the amount based on 1997 dollars, each district would lose, phased in over three years.

Approximate

School District Tax change

Beaver $69,054

Box Elder $269,634

Logan City $250

Cache Countyv $62,892

Carbon $68,889

Daggett $66,176

Davis $145,561

Duchesne $296,365

Emery $14,337

Garfield $73,718

Grand $84,338

Iron $14,130

Juab County $83,950

Tintic $84,769

Kane $32,056

Millard $209,745

Morgan $51,050

Piute $20,670

Rich $28,165

Salt Lake City +$3,229,948

Murray City $1,158

Granite $125,801

Jordan $120,651

San Juan $77,243

North Sanpete $3,217

South Sanpete $16,945

Sevier $34,882

Park City $116,004

North Summit $132,318

South Summit $63,552

Tooele $443,519

Uintah $241,635

Alpine $96,962

Provo City $1,918

Nebo $116,199

Wasatch $85,334

Washington $23,254

Wayne $3,128

Ogden City $1,136

Weber County $59,466