Tax exemption proposed for homeowners

People paying inflated prices for property in Kootenai County are making it difficult for many other residents, especially retirees, to afford the taxes on their homes.

And the Kootenai County Assessor’s Office is looking to the Idaho Legislature for help.

County Assessor Mike McDowell is working on a bill that would help residents all over Idaho, but especially in resort areas like Coeur d’Alene and Sandpoint, keep taxes affordable.

McDowell made the announcement Tuesday, the same day the county mailed 74,504 assessment notices showing county property owners the value of their land and home.

McDowell said the proposed measure is still in the formative stages, but that the intent is to help people who have owned and lived in their home for at least 10 years. The property owner could apply for an exemption that would freeze the value of their home until the property is sold. That means as the home’s value increases, the homeowner wouldn’t have to pay property taxes on that new value.

“It would help stabilize their share of the tax burden,” McDowell said.

McDowell said the burden of new growth shouldn’t fall on the residents who have already paid their share of costs for roads, fire, police and other services over the years.

“My hope is this would serve to target the folks who are truly in the position to need this kind of relief,” McDowell said, adding he estimates about 12,000 homeowners in Kootenai County could be eligible for the proposed exemption.

Yet these proposals often aren’t popular because the burden is shifted to other taxpayers who don’t qualify for the exemption.

The Idaho Association of Idaho Counties usually opposes any type of tax exemption for that reason.

Executive Director Dan Chadwick hasn’t seen Kootenai County’s proposal but said the association doesn’t normally support freezing the value of homes and property.

The association opposed a similar measure supported by three North Idaho lawmakers that didn’t get a committee hearing or make it out of the 2004 Legislature. The bill, co-sponsored by Reps. George Eskridge, R-Dover, and John Campbell, R-Sandpoint, along with Sen. Shawn Keough, R-Sandpoint, would have slapped a 3 percent limit on annual increases in property tax values. Counties still would have assessed the property at full value, but would have added a new exemption for homeowners. That exemption would have been for whatever amount the new assessment grows that’s more than 3 percent above the previous year’s assessment.

“This is the only investment I know of where the government can recognize the increase in value of the investment, but the owner can’t,” Eskridge said in February. “In my area, Dover, we’ve got people who have had their homes for 30 to 40 years. These guys could be faced with real significant increases. On Social Security, you don’t have a lot of room for that.”

It’s a common story in Kootenai County—property values have increased so much in the last 20 years that many residents can no longer afford to keep their family homesteads or vacation retreats.

McDowell estimates net property values increased about $873 million this year, bringing the county’s total to about $7.7 billion. New development in Kootenai County added $213 million to the county’s tax base this year, which is up about $63 million from last year.

McDowell said the spike is a result of the strong real estate market in Kootenai County along with low interest rates. And he doesn’t expect new development, whether it’s businesses or housing developments, to decrease.

The assessor’s office has spent months reappraising nearly one-fifth of the properties in Kootenai County, focusing mostly on rural areas in addition to Rathdrum, Spirit Lake and Hayden commercial properties. More than 54,000 properties will have changes in their valuation, with adjustments totaling $660.1 million.

The adjustments reflect changes that have occurred in the real estate market in the last few years. The assessor’s office reviewed more than 4,000 property sales in 2003 to establish these new assessments.

In 2003, the average residential sale price was $141,713, which was an 11 percent increase from the 2002 average sale price. In rural subdivision throughout the county, the average sales price increased 10.5 percent to $212,451.

It’s these appreciated property values that have McDowell and other county officials worried about people being taxed out of their longtime homes.