Did you get your property tax bill yet? Solution to soaring bills, not one-size-fits-all

Property tax bills are arriving in the mail this week, so here’s a pop quiz for those of you who are following along with the Legislature’s efforts to control them.

What’s the best way to control property taxes in Idaho?

A. Keep a check on local government spending.

B. Allow school districts to collect impact fees to build new buildings.

C. Allow cities and counties a local-option tax for public transit.

D. Remove the cap on the homeowners exemption and index it to inflation.

E. Increase state funding of K-12 education to eliminate the necessity for supplemental levies in local school districts across the state.

F. All of the above.

The only correct answer is F. All of the above.

Note that none of the answers alone is correct.

That’s an important point, as the Legislature’s property tax working group, which met for the second time last week, continues its effort toward possible legislation next session.

It would be foolish to focus on only one element of a person’s property tax bill, such as a city’s portion.

It also would be foolish to create a state mandate that treats all cities the same, making a city such as Melba or Marsing play by the same rules as a city such as Boise.

The city of Boise, for example, collects $158 million in property tax revenue. The city of Kuna, meanwhile, brings in $3 million. Star, $1.4 million. The margins are a lot tighter for smaller cities.

We caution state legislators against looking at Boise’s budget and coming up with a new law, such as eliminating new construction from the amount that cities can collect on when budgeting. That would be the very antithesis of having growth pay for itself, as it would place even more burden on existing taxpayers. They would now be the ones shouldering the burden of hiring the new police officers needed to patrol those new neighborhoods, and paying for the city crews to change streetlights and patch water lines.

It’s also worth noting that cities make up widely varying percentages of residents’ tax bills. The city of Boise, for example, accounts for 42% of the tax bill in Boise, but the city of Meridian accounts for 31%. Kuna city makes up 19% of the tax bill, and Eagle city is just 8% of the tax bill there.

Perhaps, if legislators are looking for a statewide check on city spending, they could get rid of the option for cities to take forgone taxes, a practice by which cities can budget based on previous years in which they didn’t take their allowable 3% increase in property taxes.

Homeowners exemption cap

Eliminating the cap on the homeowners exemption, a cap passed by legislators in 2016, also would reduce property taxes on residential property owners. Kathlynn Ireland, property tax specialist with the Idaho State Tax Commission, said that if the homeowners exemption had not been capped in 2016 at $100,000 and had continued to rise with inflation, it would be $135,850 today. That means that a homeowner with property assessed at $300,000 would have her taxable value reduced from $200,000 to $164,150. At a levy rate, for example, of $1,080 per $100,000 of taxable value in Meridian, that alone would reduce the tax bill by $387 per year. (There’s a slight caveat, in that if net taxable value goes down, the levy rate overall could still go up.)

Education funding, impact fees

Another part of the tax bill legislators should look at is the school district portion. They should look at what they can do to get supplemental levies and bonds off of the residential property taxpayers’ backs. Currently, Idaho’s school districts are operating with $214 million, up $100 million in the past decade, according to Idaho Ed News. Supplemental levies are paid by property taxpayers. One could argue that if the Legislature increased K-12 education funding by $214 million, that would eliminate the need for these supplemental levies and thus remove this part of the tax bill from the property owners.

Similarly, school districts all over the state are building new facilities to accommodate growth in their districts. How do they pay for these buildings? On the backs of taxpayers, of course. If the state would allow school districts to collect impact fees that could be used to pay for new school construction, that would in part reduce the need for bonds paid for by property taxpayers. Legislators also could look at establishing a state building fund, similar to the state’s existing permanent building fund, to at least partially offset these costs.

Public transit

In the Treasure Valley, the contributions to Valley Regional Transit come from cities’ general funds, i.e., property taxpayers. Valley Regional Transit relies primarily on federal aid and voluntary contributions from the eight cities and two counties it serves. Idaho does not have a significant fund for public transit and does not allow cities and counties to levy separate taxes for public transit, such as a local-option sales tax. State transportation departments provide money for public transit in 45 states. Idaho has a small pot of money, which goes primarily to resort towns and none of it goes to ValleyRide. Some states, such as Utah, that don’t have state public transit funds, allow local governments to levy sales taxes for transit and roads. Idaho does not.

For years, some state, county, city and business leaders have pressed the Idaho Legislature to give local governments the authority to ask voters to approve sales taxes for transportation. Year after year, the proposal went nowhere. Lawmakers resisted tax increases and worried that local agencies might abuse the authority.

As for a check on city spending, that’s up to the voters in each city. If Boise residents want nice things and are willing to pay for them, that’s up to them. If they think the city portion of their taxes is too high, they can vote out the incumbents or testify at city budget hearings.

Property tax bills are multifaceted, and so are the solutions. There is not a silver bullet that would magically reduce taxes. If legislators want to reduce property taxes, they need to look at the whole picture, not just a small piece. They also need to look at themselves to see what effect their actions — or lack thereof — have on tax bills.