Impact Fee Is Still A Tax, Rankin Says But Backers Say Property Tax Levies Would Fall If Assessments Rise

While a development impact fee bill appears to be cruising through the Legislature, property tax foe Ron Rankin is aiming to take the wind from its sails.

Rankin said Thursday that the bill - which will let fast-growing cities like Coeur d’Alene impose fees to cover the impact of development - is a property tax in disguise that the Republican Legislature is obligated to vote down. He contends the fees would bump up property assessments, thereby bringing tax increases.

“It’s a back-door increase in property tax, pure and simple,” said Rankin, president of the Idaho Property Owners Association. “And that’s what the Republicans have said they’re not going to do. They said they were going to give us some relief.”

Backers of the bill said Rankin is wrong on several counts.

Because Gov. Phil Batt’s property tax bill includes a 3 percent limit on budget increases, cities and counties can only get so much money from taxpayers, said Scott McDonald, executive director of the Association of Idaho Cities. If assessments go up, the tax levies will go down accordingly, he said.

“We’re not getting a windfall from anything,” he said. And since Rankin supported the tax cap, “he knows better than to be making these kinds of statements,” McDonald said.

The House Revenue and Taxation Committee Wednesday approved enabling legislation that would let cities like Coeur d’Alene and Hayden charge developers fees to cover municipal improvements required by growth. Coeur d’Alene began charging fees last year, but the state Supreme Court last week ruled they were not allowed to do so without the legislation now under consideration.

Rankin said the fees amount to a double-whammy against property owners.

First, people buying new homes would pay a higher price charged by a developer to cover an impact fee.

If that fee is, say, $5,000, it will then raise the assessed valuation of both the new house and others like it, raising property taxes overall, he said.

“It’s sort of like a domino effect,” said Rankin.

But impact fees in Ada County, the only county now covered by the law, average $882 a home, McDonald said, making their effect on valuations far less significant than Rankin’s example of $5,000.

Pat Harper, whose Idaho Building Contractors Association sponsored the bill, said taxpayers will foot a bill either through impact fees or exactions - land takings or fees municipalities often charge developers before issuing building permits.

“So you’re not paying any more in impact fees than you will with exaction fees,” Harper said. At least with impact fees, developers know where their money is going under a strict formula established under the law, she said.

The merits of his argument aside, the entry of Rankin - creator of the 1 Percent Initiative property tax revolt - will likely turn some legislative heads.

“I don’t want to underplay Ron Rankin,” McDonald said Thursday.

Harper predicted the bill will still “go through like a breeze” and downplayed Rankin’s powers of persuasion.

“I don’t think his clout is too clouty myself,” she said. “I think Rankin has shot his wad.”

If the bill passes the House, Rankin said he will ask the Senate Local Government and Taxation Committee to kill the measure unless it includes an amendment to exempt the cost of an impact fee from the assessed valuation of a house.

Harper said she would oppose such a move because it would be too late in the session to amend the bill in time for it to clear the Legislature.