Few topics garner more discussion in Idaho than property taxes.
With the residential housing market climbing into the stratosphere in recent years, residential property owners, especially in high-growth areas like the Treasure Valley, are straining under the rise in their bills.
Several factors influence these hikes, but one of the largest is the ongoing shift in tax burden from commercial properties to residential payers. This started with the Idaho Legislature capping the homeowner’s exemption in 2016 instead of pegging it to home values as they rose over time. With the tax exemption capped and home values shooting up, fewer home values are exempt from taxes than before.
In the simplest terms, this means even if a local government budget stayed the same, residential customers pay a larger percentage of the city or county’s bills than they did before. Commercial properties pay less.
To track this phenomenon in more detail, BoiseDev selected seven different properties around Ada County to track how their taxes have increased or, in some cases, decreased over time. This analysis only looks at individual properties within the larger trend. It is not a perfect way to study the problem, but BoiseDev wanted to dig deeper into individual properties to show how these policies operate in your neighborhood.
Values over time
Idaho’s property tax system isn’t always intuitive.
All of the seven properties we studied had their values increase during the years we studied, but not all of them had their property tax bills increase during this time. This is because the value of the residential properties across Ada County increased 26% last year, and their commercial counterparts gained 11.5% during the same time period. This means residential homeowners took on a higher burden of the local budgets.
This graph shows the rise in values for three residential properties and a farm with a homestead in Star. BoiseDev analyzed the tax values and their resulting bills from real addresses to get this data, but we are not publicizing the specifics of private residents’ homes.
Of these homes, the duplex in the North End had the steepest value increase of 132% between 2017 and 2021. The home on the Boise Bench followed with a 74% increase in the same time period, with the farm in Star and the Meridian home trailing behind with 61.3% and 57.5% boosts in value, respectively.
Next, we took a look at selected commercial properties.
These graphs show the values over time for the Jacksons on 8th Street, the C.W. Moore Plaza on 5th Street in downtown Boise and the Walmart on Overland. All three appreciated, but at flatter rates than the homes. These three properties are on different graphs because of the gap between the value of Jacksons, a smaller property, with the values of the other two.
Walmart led the pack with a 54% appreciation in value, while C.W. Moore Plaza and Jacksons only increased 24.5% and 21.5%, respectively.
What does this mean in taxes?
This next series of charts shows you the property tax bills for these properties up until 2020 because 2021 tax bills are not available yet.
This is complicated by Governor Brad Little’s one-time property tax relief initiative in 2020, which used CARES Act funds from the federal government for tax relief. All cities and counties in Ada County opted in to the program, leading to tax cuts for many residents across the region last year.
For some high-growth cities like Meridian, this program saw a noticeable reduction in bills. But, it didn’t have a noticeable impact in areas of the highest growth in values like Boise’s North End.
The duplex we tracked (which doesn’t have a homeowner’s exemption) continued to see an increase in property tax bills each year from 2016 through 2020, even with the property tax relief program.
Other than 2020, when the property tax relief program kicked in, the other three residential properties all saw double-digit gains in property tax payments between 2016 and 2019. The home on the Bench saw the steepest increase in property tax bills, with 36.1% during those three years tracked.
Meridian followed behind with 17.3% growth during this period, but it also had the highest benefit of the property tax relief program due to the City of Meridian’s growth rate.
The farm in Star also had a 15.8% increase in property tax bills between 2016 and 2019. The majority of this property is zoned for agriculture, which reduces some of its property tax costs, but properties in Star also receive relatively little benefit from the homeowner’s exemption. Because the City of Star is largely residential, the shift isn’t as profound since residences already carried much of the tax burden prior to 2016.
Commercial properties: a different trend
The commercial properties we checked out were a different story.
The C.W. Moore Plaza showed a steady 10% decline in tax bills due from 2016 through 2020. Jacksons’ tax bill also decreased 4.2% over this same time period.
The Overland Walmart bucked the trend with a 13.8% property tax bill increase during these years, which was a hike, but it still lagged behind the growth seen by residential property owners. This hike is due to the appraiser bringing the value sharply up to the market value in 2018. Commercial property values are more difficult to appraise than residential because there are fewer sales in the commercial sector. The sale price of those properties may not be disclosed under Idaho law.
IACI: ‘The system itself is broken’
This shift in property tax burden has been long debated in the halls of the statehouse.
Democrats and a segment of the Republican party called for a return to the practice of indexing the homeowner’s exemption to inflation instead of capping it at $125,000 per year to keep the tax burden more balanced. But, others say growth in local government budgets in rapidly growing areas are to blame for the increase in tax bills.
Alex LeBeau, president of the Idaho Association of Commerce and Industry, said it could be “misleading” to analyze tax bills in this manner. He said the biggest driver of the property tax increases is from local governments increasing their budgets from new construction and other increases, not commercial properties paying less.
His organization has long supported property tax cuts and an end to the personal property tax in Idaho. It also opposed to the recent increase in the homeowner’s exemption to $125,000 because it shifted an estimated $30 million in taxes back on to commercial payers.
“The system itself is broken,” LeBeau said. “It’s not a good system, but nobody in local government wants to actually tackle the issue because they’re the ones that are benefiting from it. (Residential properties are) paying more and it’s not a result of commercial paying less, it’s a result of local government taking more.”
Republicans target budgets
Local government budgets have long been in the crosshairs of Republican legislators looking to reduce property taxes.
House Majority Leader Mike Moyle, R-Star, and Sen. Jim Rice, R-Caldwell, are big proponents of legislation capping the growth of local government budgets in recent legislative sessions.
They successfully passed a sweeping property tax reform package at the tail end of the 2021 session imposing restrictions on how much local governments can grow their budgets with new construction increases and made changes to the formula along with the homeowner’s exemption boost.
This move was widely condemned by cities in the rapidly growing Treasure Valley, which argued it would stifle their ability to pay for essential services.
Rice said this is only the beginning of his planned fixes to the property tax system, which he likened to the cobbled-together Cadillac from the famous Johnny Cash song “One Piece at a Time.” Over the summer, the legislature will hold an interim committee for the third year in a row to study more property tax solutions.
One solution Rice is looking closely at is changing how commercial property is appraised so it is counted more accurately than using the current system, which creates a different result than how residential properties are appraised. He said changing the appraisal system will fix the root of the problem instead of returning the system to an indexed homeowner’s exemption, which he said was unstable.
“I just want to fix it right so instead of having something that works part of the time, we have something that works all of the time,” Rice said.
Democrats want indexed exemption
House Minority Leader Ilana Rubel, D-Boise, said there are benefits to changing the appraisal system, but she disagrees that cutting local government budgets is the answer. She said a state-sponsored study showed population outpaced the growth in spending in Idaho’s counties. Rubel said there could be more relief by better funding schools to cut down on supplemental levies or using the internet sales tax fund to pay for local government growth, instead of paying for an income tax cut.
She pointed out that every member of the Democratic delegation voted against the 2016 legislation that capped the homeowner’s exemption due to fears it would result in a tax shift onto residential payers.
“These counties are running lean budgets,” Rubel said. “They are not the problem. The problem pretty squarely is that shift that was created by the legislature. I think we want to make sure there is accurate counting, and there might be some benefit to that, but I think (Republican legislators) are still trying to deflect from the big issues.”