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Initiative 1 may prompt a tax warning

Bond for open space fuels worries about Utah's AAA rating

Financial snags in an open space initiative may prompt Utah's Tax Review Commission to warn voters about the ballot item.

Keith Prescott, commission chairman, said the repercussions of Initiative 1 could run deeper than taxpayers realize. Prescott will air his concerns about the proposed $150 million bond authorization Friday when the commission is expected to discuss how the initiative could affect Utah's tax base and economic future.

Initiative One, sponsored by Utahns for Clean Water, Clean Air & Quality Growth, would pay to improve air and water quality, build parks and preserve open space with a $150 million bond backed by a .05-cent sales tax hike. The increase would mean about $14 more a year for an average Utah family.

"I'm for clean air and open space, who isn't? But nobody looked at this from a tax standpoint," he said. "We will attack the subject vigorously."

While the Tax Review Commission cannot block the initiative, it can present its opinion on the bond in hopes of swaying voters, Prescott said. Mainly, he added, the commission wants to discuss the tax issues so that voters know exactly what they are getting with Initiative 1.

"I'm not saying I want to kill it, I just want people to understand the real policy issues," he said. "When an initiative is passed, you get the whole package. You can't tinker with it later."

One of the main sticking points for Prescott is how the initiative will affect the state's AAA bond rating — the highest possible. The state has a $195 million cushion before it slips from its sterling rating, which allows the state to borrow money at a lower rate.

"If we lose our bond rating, you just watch what will happen to taxes in Utah," he said.

Gov. Olene Walker announced last week that she shares Prescott's concerns about the state's bond rating, as does Mike Jerman of the Utah Taxpayers Association. Jerman said the $150 million bond would mean open season on taxpayers in Utah.

"If taxation by initiative became commonplace in Utah, that would probably hurt our debt rating," he said. "These are horrible ways of doing budgets. If this proposal passes, we'll see special-interest groups trying to dictate government spending."

Amanda Smith, head of Initiative One's sponsor group, disputes the claim that the initiative would affect Utah's rating because it has a steady sales tax revenue source.

"The Taxpayers Association is trying to muddy the waters. But these waters are not muddy. They're very clear," Smith said.

Prescott said the breakdown of the $150 million has also made several Tax Review Commission members think twice about endorsing the initiative. The main concern, he said, is that $30 million of the bond is available for convention centers, recreation centers and other community projects.

Smith said the $30 million does not have to be spent on such buildings but is the maximum amount allotted to such projects. Cities that apply for part of the $30 million pot will still have to compete against conservation projects for funding, she said.

But Prescott questions whether taxpayers are aware that any money can go toward buildings, even though the bond is being sold as open space preservation.

"I'll bet that there aren't 3 percent of the people out there that know that 20 percent of this money is going towards buildings," he said. "Right out of the chute, that's bad policy."

Prescott said it also made him uncomfortable to dedicate all of the state's sales tax to conservation, a move he said will tie the Legislature's hands as Utah's economy fluctuates.