In an interview with BoiseDev Tuesday, Boise Mayor Lauren McLean said the city may have to withdraw some of its current urban renewal areas if Senate Bill 1108 or some related measures ultimately become law.
“When these property tax bills go through, we need to look at all solutions to ensure our residents who are already here do not suffer long-term divestments,” said McLean.
She said she is concerned if cities’ ability to increase tax revenue is frozen or further limited, they may need to consider options for providing city services.
SB 1108 by Senator Jim Rice, R-Caldwell, would limit localities to 75% of new construction and annexation taxes. It would also allow only 50% of the new construction taxes to end up in urban renewal areas to flow back into local budgets. You could continue to increase property tax revenue by 3% annually.
“It’s an important tool that has been proven,” said McLean, referring to historic projects and recent efforts to use urban renewal to promote affordable housing. McLean serves on the Board of Commissioners at Capital City Development Corp., which oversees urban renewal in Boise.
[Kuna hopes to ‘do it right,’ use urban renewal to keep residents close to home]
How TIF works
In Idaho, urban renewal is funded through a model known as tax increase funding.
When a city creates a new urban regeneration area, property tax receipts freeze within its limits at the time of establishment. Any increase in property values and the associated additional tax goes to the urban renewal authority rather than tax authorities such as schools, ACHD and police.
For example, suppose a property is valued at $ 100,000 and pays $ 1,000 per year in property tax at the time the redevelopment area is created. Over time, the value increases to $ 150,000 and the owner pays $ 1,500 in property taxes. Of that $ 1,500, $ 1,000 would go to the regular tax authorities and the additional $ 500 to an agency like CCDC.
Boise currently has five active urban renewal areas – or boroughs:
Boise Urban Renewal Areas Map. Courtesy of CCDC
Another area, the Downtown Boise area, was officially closed in 2018.
McLean told BoiseDev that a long-standing urban renewal concept at the Boise Bench is currently on hold due to the outbreak and aftermath of the COVID-19 pandemic.
If Boise decided to wind up one or more of the urban renewal areas, all taxes on the added value of property in the counties could flow back to the original tax counties – including the city, the Ada County Highway District, the Boise School District, and others.
[CCDC looking at redeveloping ‘super block’ off Front Street between 3rd and 5th streets]
Cities grappling with potential impacts
“For example, when the cost goes up and it costs more to hire a cop, we have fewer and fewer resources,” said McLean. “That concern is shared by this entire region.”
Boise is not alone in rethinking urban renewal in the face of SB1108.
During a hearing on the bill in the Senate Local Government and Taxation Committee, a Burley city official suggested that this legislation would mean they would have to go under their urban renewal district a few years earlier than expected.
A broad coalition of local Treasure Valley leaders came out against SB1108 last month. Community leaders say they fear the legislation will affect their ability to provide services.
As BoiseDev reported, the city of Meridian has delayed all new annexation requests from developers to add new homes to the city until there is clarity about the bill and its implications.
The invoice is currently in so-called change orders, which will result in changes to the invoice for the third time. Rice hasn’t yet said what the changes will look like, and it’s unclear when the bill could hit the Senate.
Margaret Carmel of BoiseDev contributed to this report.