Experts say data centers could result in volatile property taxes
Data centers can create volatile property tax bills for Utah homeowners due to the state's revenue-neutral tax structure. While initial rates may drop with new construction, the rapid depreciation of internal technology causes rates to rise again. Experts suggest staggered equipment purchases could smooth out these fluctuations, but systemic changes require state legislative action.
The construction of data centers in rural Utah counties could lead to significant volatility in property tax bills for homeowners, according to experts. This is attributed to Utah's revenue-neutral property tax structure, which dictates that taxing entities can only collect the same amount of revenue as the previous year, with adjustments for new growth.
Maddy Oritt, director of public finance research at the Kem C. Gardner Policy Institute, explained on KPCW's "Local News Hour" that data centers count as "new growth," which can initially lead to a decrease in certified tax rates. However, the high-value personal property within these centers, such as chips and server racks, depreciates rapidly. As this equipment loses value, homeowners' tax rates begin to climb to maintain the overall revenue balance, creating a cycle of drops and increases.
Oritt described this effect as "whiplash" for residents, noting that while rates may not exceed previous levels, the instability is problematic. She suggested that data centers could mitigate this by phasing in their equipment purchases over several years, creating a "smoothing effect." However, local policymakers have limited ability to address this issue, and any fundamental changes to the property tax system would need to come from the state legislature.