In an interview with BoiseDev Tuesday, Boise Mayor Lauren McLean said that if Senate Bill 1108 or some related measures ultimately become law, the city might need to roll back some of its current urban renewal areas.
“If those property tax bills pass we have to look at all solutions to make sure our residents who are already here do not suffer long-term disinvestment,” McLean said.
She said that she’s concerned if the ability of cities to increase tax revenues is frozen or further capped, they may need to look at options to supply city services.
SB 1108 from Sen. Jim Rice, R-Caldwell, 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. They would still be able to increase property tax collections 3% annually.
“It is an important tool that has proven to work,” McLean said, pointing to historic projects and recent efforts to use urban renewal to boost affordable housing. McLean sits on the Capital City Development Corp’s board of commissioners, which oversees urban renewal in Boise.
How TIF works
In Idaho, urban renewal gets funding from a model known as tax increment financing.
When a city creates a new urban renewal area, the property tax collections inside its boundaries freeze at the time of creation. Any increase in property values and the extra tax it generates goes to the urban renewal agency instead of taxing agencies like schools, ACHD, and police.
For instance: Say a property is worth $100,000 and pays $1,000 per year in property tax at the time the urban renewal area is created. Over time, it increases in value to $150,000 and the owner pays $1,500 in property taxes. Of that $1,500, $1,000 would go to the regular taxing agencies and the extra $500 would go to an agency like CCDC.
Boise currently has five active urban renewal areas – or districts:
- River-Myrtle/Old Boise. Scheduled to end in 2024.
- Westside. Scheduled to end in 2026.
- 30th Street. Scheduled to end in 2032.
- Shoreline. Scheduled to end in 2038.
- Gateway East. Scheduled to end in 2038.
One additional area, the Downtown Boise area, formally terminated in 2018.
McLean told BoiseDev that a long-gestating concept to use urban renewal on the Boise Bench is on hold for now due to the onset and aftermath of the COVID-19 pandemic.
If Boise decided to attempt to unwind one ore more of the urban renewal areas, any taxes on incremental value on the property in the districts could then flow back to the original taxing districts – including the city, Ada County Highway District, Boise School District and others.
Cities grappling with potential impact
“As costs rise, for instance, as it costs more to hire a police officer, we have fewer and fewer resources,” McLean said. “That concern is shared by this entire region.”
Boise isn’t alone in rethinking urban renewal in light of SB1108.
During a hearing on the bill in the Senate’s Local Government and Taxation Committee, an official from the City of Burley suggested this legislation would mean they would have to sunset their urban renewal district a few years earlier than expected.
A broad coalition of local leaders from the Treasure Valley came out in opposition to SB1108 last month. Municipal leaders say they fear the legislation would impact their abilities to provide services.
As BoiseDev reported, the City of Meridian started to delay any new annexation requests from developers to add new homes to the city until there’s clarity on the bill and its impacts.
The bill is currently in what’s known as amending orders, which will bring about changes to the bill for the third time. Rice hasn’t said yet what the amendments will be and it’s unclear when the bill could come to the senate floor.
BoiseDev’s Margaret Carmel contributed to this report.