Property tax revamp starts here

BOISE – A special legislative committee on property tax relief will hold 12 public hearings around the state in the next two months, with Sandpoint and Coeur d’Alene as the first stops.

“The … hearings will be to ask the public what their concerns are, and if they’ve got suggestions on how things can change,” said Sen. Shawn Keough, R-Sandpoint, co-chairwoman of the 14-member interim committee.

Rep. Eric Anderson, R-Priest Lake, said he’s hoping the panel will be able to agree on major changes to Idaho’s property tax system. “I’m very hopeful that we can, because I think if we don’t, the citizens are going to figure it out for us,” he said.

With homeowners picking up an increasing share of Idaho’s property tax burden and property values soaring, concerns are running high around the state, and a tax-limiting initiative is in the works.

But as the committee heard Wednesday in an all-day series of briefings on Idaho’s property tax system, changing the system can be complicated. Under Idaho’s system, breaks for one group of taxpayers just mean others pay more to make up the difference. Plus, the state constitution requires similar property to be taxed similarly, and requires property taxes to be based on value.

Ted Spangler, deputy attorney general for the state Tax Commission, told the panel that “a long line of state Supreme Court decisions” has held that value means “the fair market value of the property.”

Backers of a proposed initiative to limit taxes to 1 percent of value and redefine value as 2004 property values plus 2 percent a year appreciation could run into trouble with that. Their concept, which would unfreeze values when a property sells, is similar to a famous 1970s-era California initiative, but that measure amended that state’s constitution. In Idaho, the constitution can’t be amended by initiative – only by a two-thirds vote of the Legislature followed by a majority vote of the people.

However, Spangler told the legislators, the constitution does allow the Legislature to grant exemptions for specific, rational reasons – like the current homeowner’s exemption. The homeowner’s exemption, passed by initiative in 1982, hasn’t changed since, and still is capped at $50,000.

Rep. George Sayler, D-Coeur d’Alene, discounted warnings that raising that exemption would simply create a “tax shift” to nonhomeowners. “We have a tax shift already going on, and we have to bring that back,” he said. “It’s shifting to the homeowners.”

Residential property, which has been increasing in value much faster than any other type of property in Idaho, now pays more than 60 percent of the property taxes in the state. Its share has ballooned in the past 15 years, while other types of property, including commercial, agricultural, utility and more, have seen their shares decline.

Keough said, “I think we’re all interested in relief for the homeowner – I think we can agree on that. Beyond there, it splits.”

At the urging of Co-Chairman Rep. Dennis Lake, R-Blackfoot, the committee agreed to require a two-thirds vote of its members to recommend any legislation to the full Legislature in January. Keough said that likely will be needed for the panel’s recommendation to carry enough weight with the House Revenue and Taxation Committee, where all tax legislation must start. That panel this year rejected eight property tax relief bills and refused to consider others.

Sen. John Goedde, R-Coeur d’Alene, said he wants the interim committee to consider his local-option tax bills, which the House committee wouldn’t hear. In Kootenai County, a half-cent local-option sales tax, authorized by narrowly drawn legislation, is now paying for jail construction plus providing millions in property tax relief.

“In the next year, it’ll be $4.5 million – that’s a substantial savings,” said Goedde, who wants to expand the use of such measures.

He also suggested using a five-year rolling average to determine market values to avoid market-driven spikes. “Homeowners are getting huge spikes in value, mainly because homes near them are being sold,” Goedde said.

Lawmakers on the committee said they want all options on the table – including everything from impact fees to pay for services now funded by property tax, to expansions of the low-income “circuit breaker” exemption, which is paid for by state sales taxes.

Dan Chadwick, executive director of the Idaho Association of Counties, told the panel, “The status quo isn’t going to cut it – you’re hearing about it, we’re hearing about it. … We’re going to have to make some changes.”