A group of state legislators is looking to give Utah senior citizens the option of deferring annual increases in residential property taxes until they sell their home or die.
"We want to deal with the specter of seniors forced out of their homes by rising property taxes," said Sen. Curt Bramble, R-Provo.
Bramble is co-chairman of the Legislature's Revenue and Tax Interim Study Committee, which heard a draft bill Wednesday that, if adopted in the 2007 Legislature, would join Utah with 24 other states that currently have a property tax deferral program.
Utah currently has a "circuit breaker" program that can help poorer senior citizens with their property taxes.
But a plan pushed by Sen. Howard Stephenson, R-Draper, and other legislators would be available to every senior citizen age 65 or older, regardless of their income, home value or amount of yearly property tax.
Property taxes are going up in many Utah communities. A handout to the committee showed that in 2006, 81 taxing entities increased their property taxes. That is 11.63 percent of all property taxing entities in the state — a 20-year high.
The bill discussed by committee members would not defer a senior's total property tax payment. Rather, it would defer the property owner's increase in property taxes from one year before they apply to the special program to the final year they pay property taxes before they sell their home or die.
Upon death, the senior citizen's heirs would sell the property and/or deal with the deferred property tax bill, which would include annual interest of around 6 percent.
One of the arguments against such a broad-ranging property tax deferral program is that it could financially hurt the property taxing entities — the counties, cities, school districts and special improvement districts.
But Stephenson has a solution: Set up a commercial-based deferral pool fund. Local financial lenders would band together, county by county, to set up and fund the pool. Senior homeowners would borrow money to pay their property tax increases from the pool, and upon selling their homes or their death the seniors or their heirs would pay back to the pool the borrowed money plus interest.
A senior citizen could easily opt into the pool, and then the pool would pay the senior's annual increase in property taxes. Upon selling the house or death, the senior would pay back to the pool those property taxes with interest.
"All taxing entities would be blind to whether someone in their district were getting the deferral or not — they would be held (financially) harmless," said Stephenson.
Some seniors find themselves "house rich and money poor," noted Stephenson, who is also the president of the Utah Taxpayers Association, a group that lobbies for lower taxes.
This proposal doesn't subsidize the senior's heirs, either, said Stephenson.
Several committee members said the proposed plan would not give tax breaks on the senior's current tax bill — only defer payment of property tax increases. And some seniors on a lower fixed income upon retirement may find themselves still unable to pay their current, or "base," property taxes before they get into the deferral pool.
Is the deferral program "adequate to protect their home" in their senior years? asked Rep. Fred Hunsaker, R-Logan. That is debatable, he was told, but there are other programs — like reversible mortgages — that can help with the current property tax owed.
"I even suggest that we include second residences into this program," said Stephenson.
Some people may own a mountain cabin where they hold family reunions or other important family events. They should not be taxed out of that house, either, said Stephenson.
Again, taxing entities wouldn't lose any property tax revenue since they would be getting 100 percent of the tax levied, the homeowner paying this base tax himself and the annual increase in property tax coming from the deferral pool.
Sen. Lyle Hillyard, R-Logan, questioned whether some counties could get commercial banks or other financial institutions to participate and fund the pool.
"Some small southern Utah counties with a lot of retired people" could see huge inflation in residential housing, and a lot of seniors jumping into the pool — thus making it financially difficult to work, he said.
Bramble noted that one reason he's looking at a deferral program is that Cedar City homeowners have seen property taxes go up from an average $1,200 to $3,000 in recent years.
Salt Lake County Treasurer Larry Richardson said he sees one big problem with the program as suggested: By saying the back taxes are due at sale of property, what do you do with properties that don't change title but end up in different people's hands?
"In my neighborhood, I know of one property that has not changed title 10 years after the homeowner died," he said.
Children often take over their parents' home after they both die but don't bother to change title with the county.
Even in cases of private contract sales, the new residents of the house may not change title, he said. "We have no idea, really, how many properties don't have title changes (upon the owners' death) because they don't change the title."
Lorna Koci, who works for the Commission on Aging, said a study of the 24 states that currently have some kind of senior property tax deferral program by the AARP in 2003 shows that only 20 percent of seniors even know about their state's deferral program.
And of those who did know about the program, only 1 percent actually participated in it. The study found that a number of seniors didn't want to participate in what they considered a "welfare program."
But the deferral program in Utah "could be a great program to help people stay in their homes," she said. "This could be an important safety net."
E-mail: bbjr@desnews.com