David Frazier, author of the watchblog Boise Guardian, is slamming the city over one of his favorite topics: government ownership of buildings that are leased to private companies.
In the case of Boise's proposed construction of a $17- to $20-million aircraft-maintenance facility that it plans to lease to SkyWest Airlines, Frazier revisits his claim that Boise's ownership of the facility will cost taxpayers money.
There's no doubt he's correct on this point. If SkyWest, a private company that operates short-haul flights for several large airlines, were to build the facility with its own money on private land, it would probably pay somewhere in the neighborhood of $370,000 a year in property taxes.
Here's how I came up with that number: a total property value of $20 million, multiplied by the total tax levy for the area southeast of the airport, roughly in the area where the city plans to build SkyWest's facility. That levy is .018528707.
As Frazier rightly states, that tax money would go to the city of Boise, Ada County, local schools, Ada County Highway District and, of course, mosquito abatement.
Because the city will build and own the facility, however, no property taxes will come from it. Governments in Idaho are tax-exempt. Obviously, this shifts more of the tax burden to the rest of taxpayers.
But does that mean Boise's SkyWest facility will cost the rest of us come tax time? Not necessarily. First, if all goes according to plan, taxes won't go up. SkyWest will enter a long-term lease with Boise that requires the company to cover Boise's cost of construction. For the record, the city plans to use about $8 million from airport reserves and borrow the rest of the new buildings cost. The length of the lease would be at least as long as the term on that debt — probably in the range of 25 years.
Here's an important point that seems to be confusing some people out there: If SkyWest breaks its lease, it has to pay the un-amortized portion of its lease. That means that if it abandons the facility after, say, 10 years, it will have to pay 15 years of lease payments to the city. That's how the the city protects itself from being left holding the bag if SkyWest breaks its lease, Boise Airport Director Hupp said.
Then there's the question of whether SkyWest would open a long-term aircraft maintenance facility in Boise if it had to shell out $20 million to build it. There's no doubt the facility itself — disregarding any questions of the city's role in it — will boost Boise's economy. SkyWest says it will hire more than 100 workers for the facility and pay them more than $5 million a year. Those wages will ripple through the local economy, driving up sales of groceries, entertainment, houses and such. That will lead to more jobs, which creates more demand, and so forth. All of those wages and sales increase the flow of income, payroll and sales tax money to local, state and federal coffers.
But wouldn't it be better if SkyWest were also paying hundreds of thousands in property taxes to the city, the county, local schools, etc.? Of course. And maybe the company would have built its own facility if Boise refused to do it and if the state didn't agree to reimburse taxes on the operation for 12 years. Maybe not.
From my conversations with Frazier, my sense is that he believes the question of whether SkyWest would open the maintenance facility in Boise without public intervention is beside the point. Frazier is always suspicious of public involvement. He especially hates public debt. If a company wants to do business in Boise, he says, it should pay for everything on its own.
Boise's elected officials counter that requiring that kind of investment would put Boise at a competitive disadvantage with Salt Lake City, Denver or a dozen other cities that would offer to build facilities and reimburse taxes, etc. In other words, trying to wring a little more money out of the SkyWest operation could cost Boise the whole thing.
Economists, watchdogs, municipal think-tanks and a host of other experts have, and will continue to, go rounds over that very question. It's at the heart of Idaho's decades-long battle over urban renewal — a battle in which Frazier, not surprisingly, has played a huge role.
A more interesting question, to me at least, is whether it's proper for Boise to interfere in the free market by renting a tax-free building to a private company. Frazier and I have discussed this point, too, and he makes it clear he thinks it's wrong to give one private company the advantage of renting a facility that's cheaper because the landlord doesn't have to pay taxes.
I'm not sure what to think on this point. I get Frazier's argument, but I'm not sure SkyWest has enough aircraft-maintenance competition in Boise to say it's getting an unfair advantage from the city.