If the state buys Hewlett-Packard’s campus in West Boise, HP will come off the property tax rolls.
HP, which paid $1.5 million in taxes last year to the West Ada School District, the city of Boise and other taxing districts, won’t have to pay them any more. Neither will the state.
But that does not mean the city, the West Ada School District, the Ada County Highway District and other districts will get less money. Under current law, remaining taxpayers will pay more. That’s because state law lets taxing districts make up the lost revenue from other taxpayers.
That rubs many legislators the wrong way. It is already becoming a point of contention as a new measure authorizing the HP purchase makes its way through the Legislature.
Gov. Butch Otter and legislative leaders announced Thursday a plan to buy HP’s entire 197-acre Boise campus on Chinden Boulevard, use part of it for state offices and lease the rest back to HP.
A measure authorizing the purchase passed a House committee the same day. It declares the Legislature’s intent that local governments not make up the money they lose.
A separate bill approved by a different House committee, also on Thursday, does even more. It would enforce the Legislature’s intent by changing state law to force local governments to reduce their budgets by the amount of money taken off the rolls whenever the state acquires private property.
Referring to the HP purchase, Rep. Janet Trujillo, R-Idaho Falls, who sponsored the second bill, said, “We need to be able to remove that completely from the taxation structure.”
Tax exemption winners, losers
Big commercial and manufacturing sites can generate a lot of property tax revenue for cities, schools and other taxing districts. But government, nonprofit, school and religious properties are exempt from property taxes.
Nearly 54 percent of all real estate in Ada County was exempt from property taxes in 2015, an Idaho Statesman analysis of Ada County assessor records last year showed.
When property goes off the tax rolls, taxing districts still get to collect the same amount of property tax overall as the prior year, as long as they do not exceed the maximum levy rate. But now there are fewer taxpayers.
From 2000 to 2015, the number of wholly tax-exempt parcels in Ada County increased 37 percent, from 3,016 parcels to 4,121. They covered 10,877 acres, a 3 percent increase over total exempt acres in 2000.
“They stop paying tax and everyone else pays a little more,” Alan Dornfest, the State Tax Commission’s property tax policy supervisor, said then.
The Hewlett-Packard campus lies in seven taxing districts: Ada County, Boise, the West Ada School District, the Ada County Highway District, Emergency Medical Services (Ada County Paramedics), Joplin Cemetery and the College of Western Idaho.
What the HP plan means for taxpayers
The Idaho House Ways and Means Committee voted Thursday to introduce the resolution authorizing the HP purchase.
The resolution says: “[I]t is the intent of the Legislature that due to the tax-exempt status of state-owned property, a property tax shift could result to other property owners in those affected taxing districts, and those taxing districts should remove the assessed value of this property from their budget.”
Rep. Mat Erpelding, D-Boise, a committee member and the House minority leader, expressed concern about the possible impact on local governments.
“Will the state pay the city of Boise for any of the maintenance around the facility, like the roads, the police, the fire, anything?” he asked.
Idaho Tax Commission Chairman Ken Roberts, who was testifying, said no.
“There would be a slight shift to other taxpayers to pick that up,” Roberts told the committee.
Roberts said a tax commission analysis found that the owner of home with a taxable value of $100,000 would have a net tax increase of about a penny for the smaller taxing districts, like Joplin Cemetery, to “maybe a couple of dollars” for the larger taxing districts, like the city of Boise and West Ada School District.
The total assessed value of all property in the county is about $35 billion, according to Roberts and the Ada County Assessor’s Office. The assessed value of Hewlett-Packard is $97 million.
HP still must pay business local personal-property taxes on business equipment and furnishings.
New bill could help taxpayers, hurt taxing districts
The related bill would require that when the state buys property, affected taxing districts must reduce their respective budgets by the amount of revenue coming off the tax roll. The bill is retroactive to Jan. 1, which means it would applies to any state real estate purchases this year.
Local governments are allowed to boost their budgets up to 3 percent each year, plus whatever their levies generate from newly taxable properties resulting from new construction. The bill would effectively subtract HP’s contribution from the budget amounts upon which they can calculate 3 percent increases.
The Revenue and Taxation Committee sent that bill to the full House.
Erpelding told the Idaho Statesman that he opposes the bill “because it is directly targeted at the Treasure Valley and will harm the West Ada School District, Ada County and the city of Boise. It was brought in advance of the HP roll-out and was clearly intended to target the HP purchase.”
City spokesman Mike Journee said Boise officials are concerned.
“The way this legislation is written, the residents of Boise would be expected to foot the bill for the state taking property off of our tax rolls or face a decline in services like police and fire protection or parks,” Journee said. “There would be some hard choices to make.”
The Ada County Highway District has not yet taken a position on the bill, spokesman Craig Quintana said.
The West Ada School District did not immediately respond to a request for comment.
How HP’s $1.5 million 2016 property tax bill was distributed
West Ada School District: $390,079.54
Ada County: $292,940.73
Ada County Highway District: $92,712.49
College of Western Idaho: $15,482.82
Emergency Medical Services $14,650.96
Joplin Cemetery: $735.47
Source: Ada County Assessor’s Office
How the HP purchase and leaseback would work
Idaho plans to sell bonds to raise the $110 million it expects to pay for Hewlett-Packard’s nearly 200-acre Boise campus, which includes eight buildings totaling 1.5 million square feet of office and warehouse space.
HP Inc. will lease back about half the space, 793,000 square feet, for an initial seven-year term. The state will assume existing leases totaling just under 308,000 square feet. The state will occupy the remaining space, whose square footage will increase over several years as the existing leases expire.
Lease payments from HP, the other tenants and the state agencies that move in will be enough to pay off the bonds, state officials say.
“Revenue from HP’s leaseback and third-party leases, combined with rent collected from state-agency occupants, will be sufficient to provide for the operation and purchase of the facility without additional burden to the state,” Department of Administration Director Bob Geddes told the House Ways and Means Committee this week.