$87 Million was chosen for the Streets Reconstruction Bond because City leaders wanted to find the greatest balance between addressing our streets reconstruction need and limiting the cost to City residents.
Because of the long-lasting effects of the Great Recession on City resources, competition with other priorities, and years of frugal budgeting, Salt Lake City has not spent what is needed to preserve and rebuild roads. Also, due to the City’s climate during winter, the freeze-thaw cycle worsens the road conditions. Over the past several years, the cycle has been more noticeable and the streets are showing that wear.
The City will use revenue from a recent sales tax increase to double the work done to maintain the City streets that are in good condition. This will extend their life and make sure that we are maximizing the money spent when roads need to be reconstructed.
The bond amount is $87 million over ten years. This could be issued in one bond, but more likely, the $87 million will be issued in three to four bonds over the coming years. This will allow the Engineering Division to plan for the number of projects that can be accomplished in required three-year phases and minimize the financial impact on residents.
No. The recently approved sales tax will help boost funding for ongoing street maintenance (resurfacing, pothole repair, etc.) but funding for capital-intensive street reconstruction projects is still needed. Saving the amount required for these major reconstruction projects using sales tax funding would take decades and would ultimately be more expensive due to rising construction and material costs.
The City uses funding from the Capital Improvements Program (CIP) fund and General Fund to support projects like street reconstruction. However, the amount needed to “catch up” in reconstructing Salt Lake City’s streets far outnumbers the amount that would be available in the CIP or General Fund at any given time. If the City were to try to complete these street projects using the CIP and General Fund, it would take far longer and therefore result in higher long-term costs. A General Obligation Bond allows for a more equitable distribution of costs (paid by all property owners, existing and future) and because the City has a AAA bond rating (highest available), is a more affordable and responsible way for the City to fund large infrastructure projects.
The City is continually implementing cost-saving measures to be responsible stewards of tax-payer money. Examples of recent cost-saving measures include small changes like reducing staff travel, office expenditures and purchasing police vehicles in bulk to receive quantity discounts, and large changes like repurposing $2.4 million through a comprehensive review of City accounts, being more diligent about using one-time money to pay for one-time needs, and energy efficiency improvements in buildings and parks.
There are great funding needs in the areas of transit and transportation – not only in Salt Lake City but countywide. While Salt Lake County’s portion of the sales tax will address regional roads and transit, the critical need to rebuild Salt Lake City’s most traveled streets and continue to expand transit is still larger than available funds. A General Obligation Bond remains the preferred funding choice for addressing large infrastructure needs because it generates a meaningful amount of funds, provides accountability to residents, and is the least expensive form of government financing. Having new sources of revenue – whether from the County sales tax or other sources – are necessary for projects that contribute to our City’s quality of life.
The Council and Administration agreed on an 80/20 split to ensure that funds are applied to both the most-traveled streets (arterials serving the most people) and smaller neighborhood streets throughout the City. The cost of reconstructing the larger arterial roads is also more expensive so it will require a larger percentage of funds.
An arterial usually refers to a high-capacity urban street, such as 300 West, that delivers traffic at the highest level of service possible. A local street is a smaller street that carries less traffic and has fewer lanes.
Maintenance includes preventative activities such as crack sealing, pothole repair and resurfacing that help prolong the life of a street.
Reconstruction is generally performed when a street has deteriorated to the point of no return, often requiring the street to be excavated and rebuilt from the bottom up using layers of rock and asphalt.
The City has a bond rating of AAA, which is the highest rating available. This means that the City has a great history of managing debt responsibly and has extremely strong creditworthiness. Having a high bond rating is like having a high credit score and greatly influences interest rates and bond pricing.
Sidewalk repair is funded through the Capital Improvements Program and is not included as part of the Streets Reconstruction Bond projects.
Streets reconstruction is defined as curb-to-curb. When the Roadway Selection Committee is evaluating streets for reconstruction, the condition of the associated curb and gutter will be reviewed in addition to other existing projects, including any stormwater or utility repair that are planned on or near a street.
The City’s worst roads have been identified by a comprehensive pavement study conducted in 2017. City leaders propose using results from this study to apply funds in an 80/20 split – meaning 80 percent of funding would go to major streets that residents use most and 20 percent would be spent on local neighborhood streets.
The prioritization of these streets will be conducted by the City’s Engineering Division and the Roadway Selection Committee using the following criteria (in no specific order):
Bond funding can only be spent on streets reconstruction projects. The goal is to fund the reconstruction of the City’s worst streets first with 80% of funding going to the worst arterials (major roads), which require more money to reconstruct, and 20% going to neighborhood streets in each of the City’s seven Council Districts, which typically require less money to rebuild.
The bond will fund reconstruction of the City’s worst streets allowing the City to take a more proactive approach to improving the overall quality of City maintained streets.
The first new street reconstruction projects will begin design in 2019 and construction in 2020.
Because the City is paying off two existing bonds in 2019, the new GO bond would have minimal new financial impact on property owners – less than $5 a year for the average residential property owner.
Commercial properties are calculated differently. At the City’s current bond rate, commercial property owners can expect to pay $25.72 total a year per $100,000 of taxable value.
There are three reasons why property taxes fluctuate from year to year:
1) A tax rate increase from one of the taxing entities including the county, utility districts, libraries and school districts;
2) An increase in the assessed taxable value of your property, and
3) How the values of other properties in the area fluctuate.
Market Value is the amount you can sell your house for, Assessed Value is the County’s valuation of your property (usually less than market value), and Taxable Value is the figure you actually pay tax on. In Salt Lake City the Taxable Value is 55% of the Assessed Value for a primary residence with exemption. Commercial and secondary residences do not receive an exemption and are taxed on 100% of their Assessed Value.
The taxable value of a property is public information and can be found through the County Assessor’s Office parcel search. Property owners can enter the address of the property and click “Property Tax Information” to find the most recent taxable value of the property.
The Assessed Value that would be used in the Streets Bond Calculator is listed as Market Value on this report. That is the Assessed Market Value of your home as determined by Salt Lake County.
Tax bill increases will come in phases, because the City will issue a few smaller bonds (no more than $87 million total) rather than one large $87 million bond. This means the full impact to property tax bills will not happen all at once. This allows the City to maximize bond funding over the full 10-year period allotted. The first bond of approximately $20 million would be issued in either 2019 or 2020 and would appear on property tax bills in the following tax cycle.
Anyone who spends money in Salt Lake City. This means that, instead of residents carrying the majority of the burden, about 60 percent of this revenue is paid by nonresidents – office workers, visitors, tourists.
Groceries and large purchases (cars, boats, etc.)
Grocery items such as fruits, vegetables, pantry basics and more did not increase in cost as a result of a sales tax increase. To help clarify how food is taxed, here is an example: the meal you eat in a restaurant will be taxed, but if you buy those same ingredients and cook at home, you’re not paying increased sales tax. See this chart for a detailed breakdown.
Per State Tax Code, large items like boats and cars are also exempt.
Currently, Salt Lake City’s new sales tax rate (effective August 2018) is 7.35%. Comparatively, the current sales tax rate in Murray and South Salt Lake is 7.10% and includes groceries and large purchases. Park City has a tax rate of 8.45% and Moab’s tax rate is 8.60%. The sales tax rate in Sandy City and Provo is 6.85%.
The City is very sensitive to the sales tax increases impact on retail business. However, leaders also recognize that good roads and better transit options for customers, affordable housing for employees and increased public safety all have positive impacts for the future of retail and economic development in Salt Lake City.
In preparation for the process to increase the City’s portion of sales tax, the Salt Lake City Finance Department met with two nearby cities, Murray and South Salt Lake, to discuss their recent sales tax increases and what impact, if any, those increases had on business revenues. Their studies of sales before and after the sales tax increase noted no negative impacts as a result of the increase.
Sales taxes are considered a regressive tax, meaning that the relative effect on fixed- and lower-income families is greater than those earning higher incomes. It is important to note that the sales tax is not applicable to groceries or large purchases like cars and the sales tax will help fund transit and affordable housing – two important considerations that benefit those on lower- and fixed-incomes.
Revenue generated through the sales tax increase is being treated as a separate budget item; setting a precedent of use by future administrations. Residents can track how revenue is being spent on the Funding Our Future Dashboard.
City leaders can only change the amount of sales tax with State legislative approval. In 2015, when legislators decided to relocate the State prison to northwest Salt Lake City, they provided the City with the rare opportunity to raise its portion of sales tax by 0.5 percent (as part of HB454).