Lehi City Council Financial Policy Discussion and Property Tax Overview - February 5, 2026
Lehi City Council Financial Policy Discussion and Property Tax Overview - February 5, 2026
The Lehi City Council held a work session on February 5, 2026, to review financial policies, including budgeting, debt, reserves, impact fees, and property taxation. The discussion centered on balancing growth-related costs, maintaining fiscal discipline, and considering the long-term impacts of tax and fee decisions on residents and businesses. Council members and staff provided various perspectives on how to approach these issues without formal votes being taken.
Discussion Items
- Budgeting Policies: The finance director outlined seven financial policy categories, emphasizing the need for balanced budgets, conservative revenue estimates, and careful use of one-time funds. He noted that using reserves for capital projects is acceptable but warned against using one-time revenues for ongoing expenses.
- Debt and Intergenerational Equity: Discussion covered the trade-offs between issuing debt for capital projects versus pay-as-you-go financing. The finance director explained that debt can promote intergenerational fairness, as those who use the infrastructure help pay for it. Council members debated the cost of debt interest versus construction inflation (7-10% per year) compared to borrowing rates under 3%, making debt attractive. One council member raised concerns about paying interest over long periods.
- Impact Fees: The finance director reported that single-family homes in Lehi pay approximately $25,000 in impact fees. A council member noted that lowering impact fees to address housing affordability would shift the burden to existing residents through higher taxes or rates. A recent workshop with a major homebuilder revealed that reducing impact fees by 10% would not necessarily lower home prices, as builders sell at market rate. The discussion also highlighted the importance of regularly updating impact fee studies to stay compliant with state auditor requirements and to account for inflation.
- Property Tax and Truth in Taxation: The council reviewed the truth-in-taxation process, including the certified tax rate and the two-year cycle for considering property tax increases. Staff explained that property tax growth from new development (new homes) does not require a tax increase hearing, but increases due to inflation do. Council members with prior experience noted that public turnout for small increases was minimal, while school district increases drew more attention. There was discussion about the timing of tax notices versus budget adoption, and a potential legislative bill to adjust the timeline.
- Commercial vs. Residential Tax Base: Several council members emphasized the importance of growing the commercial tax base to reduce reliance on residential property taxes as the city nears build-out. They noted that Lehi struggles to attract commercial development due to competition from neighboring cities like Saratoga Springs and Eagle Mountain, which have lower property tax rates and faster growth. One council member suggested that increasing the residential exemption or lowering impact fees could discourage commercial investment. Another pointed out that shifting the tax burden to commercial would make it harder to attract businesses and jobs.
- Reserves and Utility Rates: The finance director reviewed reserve policies, including a goal of 35% of general fund expenditures to weather a three-year recession. Utility rates should cover full costs including asset replacement, as reflected in impact fee facilities plans. A council member asked about the new power generation plants and whether their cost is allocated to growth or existing users; the finance director confirmed that a recent impact fee study allocated costs appropriately.
- Quarterly Financial Reports: The finance director shared that quarterly reports are prepared but that the first quarter report is often less useful due to timing of revenue collections (e.g., property tax comes in December, sales tax lags two months). A council member suggested adding year-over-year comparisons for at least two years to improve the report's usefulness.
Key Outcomes
- No formal votes or motions were made during this work session.
- The council expressed interest in continuing discussions on financial policies, impact fee updates, and strategies to increase commercial tax revenue.
- The meeting was adjourned with the understanding that further discussions would continue, including potentially addressing the city's contribution to the county warming center at a future meeting.
- Council members agreed to review the financial policies and property tax approach in more depth, with some indicating they would use calculators to analyze the numbers before the next session.
Meeting Transcript
Or council feels unified says, Yeah, we want to make these as policies. We we can do that. But right now what we call them part of the reason they did this, I like it. And the other reason is anytime you go get uh rating for bonds, they want to look at your financial policies. So I kind of copied what you know, read some other cities, what they had, read GFOA, government finance officers, they have some guidelines and put these together. But I think it's good that you know what they are because they go in our budget every year. We had kind of adopt them as part of our budget. Um, but I also don't want to think it's like this isn't like city code or anything. This is when putting the budget together, we want to keep these things in mind. Um, and these are the seven categories, and we'll just look at these. I don't think this will take too long. Budgeting. So some of them are pretty obvious. We want to have balanced budgets, right? We have whatever we budget in revenues is what we can budget in expenditures. Now, that being said, realize that if we have surplus from a previous year and we want to budget that as a capital project in the next year, your butt your budget is still balanced. Like you're using like using reserves is okay to balance your budget. It's not a good idea maybe necessarily for your general fund. So I I'll uh a city I work for that I'll remain nameless. We sold a piece of property for a million dollars and use that in our general fund as a revenue to pay for ongoing things. What's the problem with that? What do I do next year? I can't if I hired people with that money, I can't, and I guess I can. Am I gonna lay them off? Or I have to have money, it's like I start that million dollars in the hole, if that makes sense. But if you think about it, most of our capital projects funds are gonna budget a deficit. They're gonna because we're saying we collected money this year, we're gonna use it the next year, and so our revenue source is savings, and that makes sense with capital projects. Conservative estimates, I've always tried to do conservative estimates, and by that I just mean when I look at what I think we're gonna get in revenues. I don't necessarily try to stretch it. Now, every year you get into this budget thing and you're looking at trying to make things balance, and so sometimes, okay, I'm gonna budget 22 million dollars in sales tax revenues, and so then you get into things and it's like you know, could I budget 22 million two hundred thousand and still be reasonable? There's not an exact formula that we need to follow. There's a little bit of art to this, but by being conservative, that gives you a little margin for error. You don't really know what's gonna happen, especially with sales taxes during the year. You could have certain downturns or certain things happen, and if you've not been conservative, it can get you into trouble faster. Uh same with expenditures. We budget, we assume that our positions are gonna be filled all year long. No, there's there's probably gonna be times when they're not filled. Of course, you have the they have the opposite too. You have somebody who retires that's been here for 20 years, and you have a vacation payout, that's money you weren't necessarily planning. Usually they kind of balance out. Um so now by nature, could having conservative estimates is gonna lead to a little bit of a surplus at the end of the year, usually. One-time funds, I talked about being careful with one-time funds, quarterly reports. Um, I have one today. We maybe we won't get to this till next week, or maybe we get to it at a council. But there's a quarterly report I've been preparing that I get to the elected officials every quarter. Um I never really know what to put in there. I try to put it in a somewhat format that is fine, like our financial statements, but I don't want to put in, I don't want it to be 140 pages either. So look at that. And if you have input on things that would like something different. Pardon me, I'm trying to think of what I would like to see if I was in your seat, and I don't always know.
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