A newly formed group of Idaho legislators aiming to get to the bottom of the state’s property tax problems got underway on Monday at the Capitol in Boise.
“I really feel that the property tax issue is coming to a head,” House Revenue and Taxation Chairman Gary Collins, R-Nampa, said, based on feedback he has received from his constituents and from around the state.
Collins is serving as co-chairman of the 10-member bipartisan and bicameral property tax working group created this summer in response to House GOP leadership saying property tax reform is a top-line item.
“I really feel if we do not get a grip on property taxes and the way they are affecting our constituents, we will have a Proposition 13 or something like this will come forward,” he said, referring to California’s sweeping property tax reform initiated by residents.
Proposition 13 caps the property tax rate, and property value reassessment occurs only with ownership change or new construction.
A solution to property taxes is complex
Identifying the problem is easy: Many Idaho homeowners are suffering under burgeoning property taxes.
But figuring out why — and the solution to that problem — is much more complex.
In Idaho, state government is primarily funded by sales and income taxes while local governments are primarily funded by property taxes. The Gem State has hundreds of local taxing districts including county, city, school, highway, fire and cemetery.
Each of these districts levies property taxes against residential, commercial, agricultural and other land based on the property’s value, which can vary greatly within and between urban and rural areas.
For some taxing districts, like fire and cemetery, nearly all of the agency’s budget comes from property taxes. Counties, cities and schools, though, have other revenue sources, including state and federal money and fees.
The Legislature’s new focus on addressing property taxes has put cities and counties on notice, and on edge, that changes may be coming.
Two of the presenters at Monday’s meeting, Idaho Association of Counties Executive Director Seth Grigg and Garden City Mayor John Evans, urged committee members to use caution when comparing the state’s 44 counties to each other and its 200 cities to each other in terms of property values and local taxing districts’ budgets and property tax collections.
Idaho’s most populous county, Ada, has more than half a million residents, while its least populous, Clark County, has fewer than 1,000.
About 70 percent of Idahoans live in one of Idaho’s 200 incorporated cities, Evans said. Rapidly growing larger cities, like Boise, Meridian and Nampa, are seeing skyrocketing property values and rising property taxes, while smaller rural communities are struggling with stagnant property values and corresponding low property tax collections.
“The city of Boise and the city of Cottonwood are not the same,” Evans said. “We have dozens and dozens of cities that are just getting by.”
“The message we want to send is there is a lot of unintended consequences,” he said, “and our request is that you don’t focus more acutely on seven or eight cities at the expense of the other 190 or so that are basically small towns.”
Evans said the result of curbing property tax collection rules or reducing state revenue-sharing with cities “really is not very complicated for the overwhelming majority of our cities.”
“Cities will reduce services,” he said. “If we cannot keep up with the cost of doing business, then we will do less business.”
While all Idaho counties and cities must follow the same state rules when it comes to levying and collecting property taxes, there is one key difference between counties and cities. Under state law, counties are mandated to provide certain functions, including public safety services such as law enforcement, jail, prosecuting and defense attorneys and a courthouse. Counties also provide a landfill, election system, tax assessor, tax collector and coroner.
Cities, on the other hand, are not mandated by the state to provide any services. The services they do provide — libraries, parks, police — are by choice, not mandate.
Rep. Mike Moyle, R-Star, a committee member and staunch watchdog of local government spending, used his own city as an example.
“The city of Star, they have parks and they plan subdivisions,” he said. “They don’t do water. They don’t do fire. They don’t do sewer. I want to find out if there is a correlation with what these cities are charging in property taxes and what services they are providing.”
The committee asked state tax and budget specialists to gather this information, along with information about city franchise fee collections and the effect of changes to the homeowner’s exemption and other information for its next meeting on Nov. 18.
Committee Co-Chairman Collins said Monday’s meeting was to “start the discussion and get some issues out.”
He cautioned the committee not to start focusing on possible property-tax reform legislation.
“We are a long ways from that point,” he said.