POCATELLO, Idaho (KIFI) - A new property tax law that aimed to lessen the burden on homeowners has city officials sounding the alarm.
Lawmakers promised to address the state’s growing property tax burden during the 2021 session. But it wasn’t until the final week of the longest legislative session in state history that House Bill 389 was introduced.
Author of the bill, Rep. Mike Moyle, R-Star, insists the new law will slow the rise of property taxes that have been burdening Idaho homeowners for years. But Pocatello Mayor Brian Blad doesn’t buy it.
“Property tax is such a complicated issue, that’s just another reason it should never have been pushed through (the legislature) in a matter of 48 hours,” said Blad.
House Bill 389 is a 26-page piece of legislation that addresses the property tax burden in several different ways: increasing the homeowners exemption, changing the qualifications for the “circuit breaker” tax break, and capping local governments budgets.
The new law increases the homeowners exemption from $100,000 to $125,000, which may save some homeowners a few hundred dollars a year, according to the Idaho Statesman’s calculations. But Blad said the exemption would be higher had lawmakers left things alone.
Back in 2016, the legislature stopped indexing--which meant the exemption went up or down based on property values--and capped the exemption at $100,000.
“The reality is, if they had left it alone a few years ago, (the exemption) would be close to $150,000 right now,” Blad said.
But Rep. Dustin Manwaring, R-Pocatello, who voted in favor of the new law, said homeowners exemptions aren't the fix-all to our property tax problem.
“I’m typically not a fan of (thinking) that’s the silver bullet solution, because as you increase the homeowner’s exemption, you shift who’s paying for it. So agriculture and commercial properties pay more than residential properties when you do that,” Manwaring said.
The new law also adjusts the qualifications for the Idaho Tax Reduction Program, also known as the “circuit breaker” tax break. Seniors, widows and people with disabilities who make $31,900 or less a year now qualify for a $1,500 tax break, up from $1,320.
But now, the new law excludes those who’s home value exceeds 125% of the median value for all homes in the county receiving the homeowner’s exemption. The new adjustment is expected to kick 15% of the qualifying homeowners off the circuit breaker program.
“If you’re on a limited income and you outright own your home, and the value of your home goes up enough, you are no longer eligible for a circuit breaker (tax cut), even though your income hasn’t gone up any,” Blad said.
In an emphasis on conservative spending, the new law caps local government agencies' budgets, but Blad worries that will constrain new growth.
The law caps the amount of revenue that can be collected from new development at 90% as well as caps the revenue from expiring urban renewal districts at 80%. Pocatello has a few urban renewal districts they're looking to close soon.
“When you close those down, we’ve promised taxpayers we would be able to reduce the tax ask from them. When we close them down now, we can only reduce the tax ask from them by 80%, not 100%,” Blad said.
Some cities are worried that the 10 and 20% gaps in funding will strain services that current homeowners pay for. Caldwell put a moratorium on new residential development so the city has time to figure out how new growth will fund city services for future residents, according to reporting from the Idaho Statesman.
“New construction is not paying for itself at this point. Growth is not paying for growth. Growth is paying for 90% of growth, and the other 10% is coming from current taxpayers,” Blad said.
Blad expects the new law to impact medium- and small-sized cities, like Blackfoot, Chubbuck and Burley. He said he's not sure our area lawmakers know what they've voted into law.
Manwaring said he knows this law will have to be adjusted in the next session, but lawmakers needed to pass something this session.
“It’s an imperfect piece of legislation, there’s a lot to like and a lot to hate in that bill. And that was known when I voted for the bill,” Manwaring said.
Manwaring recently met with area county commissioners to hear how they believe the law will affect their ability to govern. He said there are plans for an interim commission to meet again to study how best to approach Idaho's complicated property tax problem.
Blad hopes that legislators will involve city officials more as they work on future legislation.
To read more about how the new property tax law is affecting Idaho cities, read this story from the Idaho Statesman.