Idaho property tax conversation isn’t new. Legislators just haven’t been listening
Several Idaho legislators who approved sending a property tax budget freeze bill to the House floor Thursday spoke about wanting to “start the conversation” or “force a conversation” about the issue.
Everyone agrees rising property taxes is a problem. Freezing property tax budgets for one year, the argument goes, will get the conversation going.
“We’ve got to find a solution,” said Rep. Mike Moyle, R-Star, who brought the bill. “But if you don’t advance this bill and force people to come to the table and talk about the solution, you’ve ended the discussion. You’ve ended it. This bill has to advance. Is this the final solution? I’m smart enough to know that I don’t think it is. But I’m also smart enough to know that if this bill advances, my hope is that our good friends from the cities and counties and other taxing districts will sit down with us and find a solution that works.”
The Idaho House Revenue and Taxation Committee listened to three days of testimony before approving, on a party-line vote Thursday, to send to the House floor with a “do-pass” recommendation a bill to freeze cities’ and counties’ property tax budgets for one year.
Legislators heard from a host of county and city officials from across the state asking them not to pass the bill, arguing that it would hurt their ability to provide services. Some taxpayers also testified, urging passage to provide at least temporary relief to rising taxes.
Some legislators were hesitant to pass it, recognizing that back home in their districts, county commissioners, city council members and highway district commissioners were going to be none too pleased at the handcuffs being placed on them. The legislators who voted to approve the bill, even reluctantly, argued that the freeze would now “get the conversation started.”
But the conversation already has been going on.
Legislators just haven’t been listening.
Local school districts have been asking the Legislature to allow school districts to collect impact fees so the construction of new schools doesn’t fall on the backs of property taxpayers. Legislators aren’t listening to that conversation.
Local school districts have been pointing out that state funding levels have just barely reached prerecession levels, which is not enough to run schools in 2020. So school districts asked voters for — and voters approved — supplemental levies to bolster their budgets. Who pays for those? Property taxpayers.
School districts often make up one of the biggest shares, if not the biggest share, of an Idahoan’s property tax bill.
School district makes up big portion of tax bill
Take, as an example, a property in Moyle’s District 14, in and around Star.
A property just outside the city limits, assessed at $466,000, has a tax bill of $3,403, or 0.73% of assessed value. Of that $3,403 tax bill, 37.75%, or a full $1,287, goes to the West Ada School District, which wouldn’t be affected at all by this bill in the Legislature.
If there were no supplemental levies and no bonds to build new schools, that amount would be drastically reduced.
But legislators have continued to ignore that conversation.
For a neighbor living just over the city limits within Star, paying Star property taxes, West Ada School District makes up 31.5% of the property tax bill. The city of Star makes up just 11.8% of the bill.
So if legislators really want to provide property tax relief, the first place they could and should look is that school district portion.
But they haven’t listened to that part of the conversation.
Homeowners exemption was capped
Local governments have pointed out that capping the homeowners exemption at $100,000 didn’t make sense and increased the property tax burden on homeowners.
But legislators weren’t having any of that conversation, either.
For sure, increasing the homeowners exemption would just shift the tax burden around; it would shift it to commercial properties, which have been held relatively blameless through all of this.
The Ada County property tax burden went from 60% residential and 40% commercial in 2011 to 72% residential and 28% commercial in 2019. That spread began to accelerate after 2016, when legislators capped the homeowners exemption at $100,000.
What’s happening here — which won’t be fixed by a property tax freeze — is that the rise in residential property tax values is far outpacing the rise in commercial property values.
Because property taxes are assessed based on value, when one segment of valuation goes up, that segment takes on a greater share of the burden. Therefore, if you exempt a chunk of that segment (increasing the homeowners exemption), another segment would take on a bigger piece of the pie.
The goal here with a property tax budget freeze is to keep that pie the same size for a year.
Other ideas have been raised to alleviate property tax burdens, including a local-option tax to get things like public transportation and new jails and courthouses off the property taxpayers’ back. Those ideas, too, have been sidelined.
More harm than good
In the end, I suspect a property tax budget freeze might actually do more harm than good.
As was pointed out several times, including by Moyle himself, most people won’t see a freeze in their property taxes. Even if property tax budgets remain the same, if the value of your property goes up, you’ll likely see an increase in your property tax bill.
With continued trends of home values skyrocketing, residential properties will continue to make up an even bigger piece of the pie, and commercial properties will make up a smaller piece.
With a freeze, taxpayers may even see some cuts to service. Legislators get calls from constituents complaining about property taxes; county clerks and commissioners get calls complaining that there’s only one DMV office in a county of 460,000 people.
Ada County Clerk Phil McGrane told committee members that if a property tax budget freeze passes, the county likely will be able to lease a second DMV office but not be able to staff it. That’s not a threat or a complaint; it’s just a reality.
Debate on the House floor, hopefully, will be vigorous. If legislators are serious about property tax relief, there are plenty of options to add to the conversation.
That is, as long as legislators are willing to have that conversation.
This story was originally published February 14, 2020 at 4:00 AM.
