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Bill to limit local government tax growth heads to Senate floor

A bill restricting local government budgets is heading to the Senate floor amid opposition from local officials in nearly every corner of the state.

On Thursday, a proposal from Sen. Jim Rice, R-Caldwell, to cut local government budgets to give property tax relief to Idahoans had its first public hearing in the Local Government and Tax Committee. During the over two-hour hearing, local officials from cities, counties and several fire districts testified in fierce opposition to the legislation. They said the measure would not bring substantial relief and only cripple localities’ ability to provide services as the Gem State booms.

[Idaho tried to lure a nuclear company in 2008. Instead, Micron got millions in property tax breaks]

Officials, who came from Idaho’s largest cities in the Treasure Valley and from smaller localities like Rathdrum and Burley, all noted the need for tax dollars to keep up with the demand for services like police, fire, and maintenance for new roads. The majority acknowledged the need to address the growing property tax burden on residents, but they said solutions like indexing the homeowner’s exemption, exploring a cap on how much property values can rise, and aid to low-income homeowners would be more effective. 

“To point the finger at the local jurisdictions makes it very difficult to provide the services we need,” Nampa Mayor Debbie Kling told the committee.

What is the proposal?

Rapidly rising property taxes and their impact on long-time residents who bought their homes in much different markets has been hotly debated in recent years. The state legislature has largely focused its efforts to address the problem by curbing local government spending, instead of an overall restructuring of the property tax system or increasing aid to low-income homeowners.

Right now, local governments can increase their property tax collections up to 3% each year. They can also take increases based on the amount of new construction and annexation, which can be a heftier percentage in booming areas like the Treasure Valley. Taking new construction and annexation applies the previous year’s levy rate to the new growth in the county to account for the additional services needed.

Rice’s bill allows the 3% increase, but it would limit localities to 75% of the new construction and annexation taxes. It would also only allow 50% of new construction taxes in terminating urban renewal districts to add back into local budgets.  

Foregone taxes, or taxes localities did not take in a previous year and claw back later, would still be allowed, but the maximum increase to property tax revenues would be capped at 4%. Localities could also still increase property tax collections beyond the 3% if they got voter approval.

Killing the goose

After the hearing, Rice compared the way local governments treat taxpayers to “the goose that laid the golden egg” because they pay for all of their services. Except, he said in Idaho the local governments are poisoning the goose with growing taxes instead of trying to take care of it properly by keeping costs down.

“When taxes go up faster than the people’s incomes, what happens is you eat up a larger and larger percentage of their household budget with taxation and the uniform response I tend to get with that question is ‘but we need the money’,” he said, referencing conversations he’s had with local officials. “The problem is so do the taxpayers. They need the money.”

[Explain this to me: Inside Idaho’s complicated property tax system]

Only three members of the committee voted against the bill: Sen. Ali Rabe, D-Boise, Sen. Mark Nye, D-Pocatello, and Sen. Todd Lakey, R-Nampa. Before his vote, Lakey said he decided to oppose the bill instead of voting alongside his other Republican colleagues because there needs to be a more complete picture of possible solutions.

“I heard today we have shared goals and shared concerns,” Lakey said. “The folks that testified recognized we have a property tax problem and they want to be a part of the solution. They’re not saying ‘don’t touch it, leave us alone,’ so I think we need to address it.”

Other Republicans on the committee were far more supportive, even if several said they acknowledged the bill was not a perfect answer.

“I think this is an important issue and a good first step,” Sen. Mary Souza, R-Coeur d’Alene. “We can work it together as we go forward and maybe it’s closer to the right solution than we thought. Let’s give this a try because there’s a lot of things in here that make a lot of sense to me.”

Margaret Carmel - BoiseDev reporter
Margaret Carmel is a BoiseDev reporter focused on the City of Boise, housing, homelessness and growth. Contact her at [email protected] or by phone at (757)705-8066.

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