Like clockwork, it’s budget season in the City of Boise once again.
On Tuesday, Boise City Council kicked off its annual process to evaluate its revenue and priorities to build the municipal budget for the upcoming fiscal year. The 2023 budget, which will be rolled out in pieces this spring before the final draft is available to the public in June, will cover all of the city’s operations, capital projects, and staff for the next year.
Mayor Lauren McLean said this week she directed staff to study the impact of not taking the full 3% increase to property tax collections allowed under Idaho code. She said at a time when property values (and the corresponding taxes) are still on the rise and inflation is eating away at the purchasing power of Boiseans wages, it’s important for the city to find a way to meet its growing needs without overburdening residents.
“I’m really impressed with staff’s commitment to meeting these goals and not sacrificing the experience we have here for those who are coming, but at the same time we need to explore some relief for existing residents,” McLean said in a strategic planning session.
For more relief for low-income homeowners, McLean said she is excited to take advantage of a new process the Idaho Legislature voted to create this year allowing cities to give property tax rebates back to residents, like the state of Idaho does. She said the city is looking at giving rebates to Boiseans using the state’s property tax reduction program, which gives property tax discounts to low-income seniors, veterans and disabled Idahoans.
Commercial versus residential assessments
Not all properties are created equal under Idaho’s property assessment system.
In 2016, the Idaho legislature voted to stop indexing the homeowner’s exemption to inflation and set it at a set rate of $100,000. This allowed the state’s tax break for homeowners to stay static while home values shot through the roof, leaving an increasingly heavy tax burden on homeowners and decreasing tax bills for commercial property. Under this system, even when local governments don’t increase property taxes, or even make multi-million dollar budget cuts, homeowners will still pay a higher tax bill.
After years of asking the legislature to index the homeowner’s exemption and boost funding for the property tax reduction program, McLean and other council members zeroed in on a different element of the puzzle: commercial real estate assessments.
Every county has an assessor who is legally bound to study the market and assess the value of residential and commercial properties to determine what their tax bill should be. Assessing home sales is easy in Idaho because the county can study MLS data real estate agents report to in order to see what properties are going for. But, there is no similar system for the prices of commercial properties, and owners aren’t required to disclose sales prices.
This leaves assessors largely in the dark when they have to determine the worth of a property that’s not a home. Because of the lack of transparency, some elected officials and others believe this allows values for commercial properties to be undervalued, letting them pay lower taxes than homeowners.
Ada County Assessor Bob McQuade made a presentation to Boise City Council on Tuesday morning, where McLean asked him several pointed questions about how he is pushing for reform in this area. He said he hoped for a disclosure requirement, but wasn’t optimistic it would happen anytime soon. McQuade will step down at the end of 2022 after nearly thirty years of holding the position.
“The best thing would be disclosure where they have to disclose this (sale) information to us,” he said, about commercial property owners. “We’ve been asking for it for years and years and years, but the legislature is not known for that at all. That will be left for someone else to get that done.”
‘It’s not about sticking it to businesses’
McLean and the rest of the Boise City Council were not impressed with the status quo.
Later in the meeting, after McQuade left, they aired their grievances about the Idaho Legislature and the county assessors for not fighting harder for an equal process for assessing commercial property. McLean floated the possibility of finding a way to freeze residential property values in order to provide some relief, but Budget Director Eric Bilimoria said due to the assessor’s legal responsibility to assess properties within 10% of their actual value that wasn’t likely an option.
“If the assessor is bound to be within 10% accuracy, but the information (on commercial sales) doesn’t exist where is the accountability?” McLean asked. “Can residents make a complaint that the assessment on a commercial property isn’t accurate in the same way residents can show up to contest an assessment on their own property? I don’t understand this piece.”
City Council Member Patrick Bageant said the city is not trying to demonize businesses, but it’s important to make sure everyone is paying their fair share.
“It’s not about sticking it to businesses,” Bageant said. “The reason we’re talking about this is because every dollar a commercial property owner avoids in taxes they should pay based on the actual value it’s a dollar homeowners have to pay instead, so in an actual real way if this dynamic is happening homeowners are paying taxes for businesses and that’s the problem.”
City Council President Pro Term Holli Woodings weighed in too, adding some sharp words for the Idaho Legislature’s property tax strategy. She said state legislators only listen to business interests and ignore the please of city officials who constantly hear from their constituents crushed under the burden of rapidly rising property taxes.
“We’re not respected,” she said, about local government officials’ efforts at the legislature. “We’re not invited into conversations about actual property tax relief. Instead, any of the real solutions are jettisoned by lobbyists representing business.”