Utah’s newest city, Ogden Valley City, is in a pickle over taxes and its budget. After suing the Utah State Tax Commission, they are back to the starting line in the budget process: They can’t raise property taxes this year.
A Third District Court judge ruled Monday that the tax commission rule that prevents Ogden Valley City from charging its own property tax this year is constitutional. Unless the decision is overturned on appeal, residents will pay property taxes to the county, as they did before incorporation, and the county will pass the city its portion, as outlined in Utah law.
The saga began when leaders found out the nascent city of roughly 7,500 residents could not levy property taxes this year because its incorporation certificate was dated after Jan. 1 — a deadline set by tax commission rules, not state law.
The city sued the tax commission in June, arguing it should be able to charge its own property taxes because the rule is not a law. A different judge in the Second District Court previously allowed Ogden Valley City to proceed with Truth in Taxation, the process by which cities propose a tax increase. The new decision overrides that.
In his ruling, Judge Todd Shaughnessy was sympathetic to the city. He recognized that continuing without raising taxes could cause “irreparable harm,” and he wrote, “The failure to obtain the certificate on or before January 1, 2026, was due to circumstances that were essentially beyond the City's control.”
That’s because of the paperwork timeline, which he laid out. The city submitted incorporation materials to the Lieutenant Governor’s Office on Dec. 17, and later cured a missing signature or notarization on Dec. 23. The Lieutenant Governor’s Office issued the city’s incorporation certificate on Jan 2.
In the end, though, the judge found the deadline does not contradict state law, because the law does not dictate when a new city can start levying taxes.
Ogden Valley City Council member Kay Hoogland, a retired attorney, said they will meet soon to discuss the ruling. She believes the case is ripe for appeal. In her view, an obscure tax commission rule shouldn’t override the city’s and residents’ rights under the law, which gives new municipalities the ability to levy taxes and makes no mention of a Jan. 1 certification deadline.
She said without an increase in funds, the valley won’t be able to cover the costs of maintenance and repairs for almost 100 miles of roads. Council members will also have to continue working as volunteers.
“To really serve this valley the way it deserves, we really want targeted hires, including public works hires, community development manager who would oversee zoning and the like, and also there's a possibility of hiring a city manager as well,” Hoogland said.
The money they’ll receive from county taxes isn’t enough to cover city operations, Hoogland said.
The city is looking to bring in an additional $2.475 million by increasing property taxes. Other possible revenue sources won’t bring in anywhere close to that, Hoogland said, like a municipal energy tax, a transient room tax or a transportation utility fee to pay for roads. That fee would take some work to implement, since the city would have to analyze roads and set up a billing process. The city has also taken out loans to cover required costs.
Adding insult to injury, Hoogland said sales tax revenue was low this past winter with the record-low snowpack, and she doesn’t expect many visitors to Pineview Reservoir with one of the boat ramps under construction. Water there is also being drawn down for a pipeline replacement.
Still, Hoogland isn’t despairing.
“We are fighters in this valley. We come together and make things happen, and so I'm absolutely confident we'll get through it if we cannot raise property taxes,” she said.
If a tax increase doesn’t happen this year, it’s just being pushed down the line like a family deferring expenses as long as possible.
“It’s coming,” Hoogland said. “If not this year, then next.”
Things are simpler for the town of Spring Lake in southern Utah County, which also incorporated after Jan. 1. Unlike Ogden Valley City, the town doesn’t need to raise taxes to fund itself, said Mayor Wade Menlove. That means residents will keep paying taxes to the county for the city’s first year of existence.
Menlove said the town’s feasibility study seems to have underestimated costs of services, mostly law enforcement, and slightly overestimated some revenue — but to a lesser degree than Ogden Valley City.
“Right now, it looks to me like the budget will be OK. We just, we don't do much. We're just operating kind of as if we were still in the county.”
He wonders if there’s a way to conduct more accurate feasibility studies. And he wants the state to take a look at the Jan. 1 deadline to save future cities the headache.
“As far as I could tell, it's almost impossible to have that certificate of incorporation by January 1.”
Macy Lipkin is a Report for America corps member who reports for KUER in northern Utah.
