Plans would defer tax hikes

The Fort Sherman area is Jerry Petersen’s home.

The old Forrest Avenue house isn’t much of a sight with its archaic wiring and plumbing and a low ceiling that almost makes the tall retiree duck. He jokes that it has the smallest bathroom in Coeur d’Alene, one where he can touch all four walls when sitting on the toilet.

Yet his property taxes are skyrocketing because his Fort Sherman neighborhood, tucked in the trees near Lake Coeur d’Alene, downtown and North Idaho College, has become so popular.

His tax bill went up $560 last year. He expects the 2004 tax bill to jump $980. His fixed Forest Service retirement can’t keep up and Petersen may have to sell the home that his parents bought in 1941 for $1,400.

“The way it’s going there’s no end in sight,” Peterson said while shuffling through envelopes of notes and tax bills Tuesday. “It’s unfair for everyone,” including working families, he said.

Situations like Petersen’s are getting the attention of elected officials who want to find a solution – a way to give longtime residents some tax relief without depriving counties of the tax base needed to provide services and schools. It’s an issue expected rise to the top of the 2005 Legislature.

On Tuesday, three Democratic candidates for the Idaho House unveiled a rough draft of a measure that would help Idaho residents who have owned their home for at least 10 years by deferring property taxes on any increased value. It’s very similar to a plan offered by Kootenai County Assessor Mike McDowell. It’s possible the two ideas could eventually merge.

“Maybe there’s room for a blending of ideas and creating coalitions,” McDowell said. “That’s what we really need to do in the legislative process.”

He said other lawmakers – and legislative candidates – also have approached him about how to help.

Rep. George Sayler, D-Coeur d’Alene, along with Democratic candidates Mike Gridley and David Larsen want to push a bill that would freeze the value of a person’s primary residence until the property is sold. That means as the home’s value increases, the homeowner wouldn’t have to pay property taxes on the new value until they die or the home is sold. The seller and new owner would have to work out who paid the owed taxes.

They said the idea is similar to the timber exemption where people don’t pay full taxes on forest land until the trees are cut.

“This is a start to giving us some fairness and protecting those most vulnerable in our society,” said Gridley, the Coeur d’Alene city attorney who is running against retired businesswoman Marge Chadderdon in the November general election.

Sayler is running against Republican challenger Dan Yake, the city of Coeur d’Alene’s stormwater coordinator. Larsen, an NIC math instructor, is running against former Kootenai County Republican Central Committee Chairman Bob Nonini and Constitution Party candidate Rose Johnson.

At a Tuesday press conference, the Democrats said this would help retirees on fixed incomes and is a start to coming up with a more equitable tax system.

McDowell pitched several options for stabilizing these longtime residents’ tax burdens last week at the Idaho Association of Counties’ annual conference in Coeur d’Alene. He said the deferral option is the most popular because it means counties won’t lose tax base. The state assessors will finalize the proposal at its October meeting and forward it to the Idaho Association of Counties in hopes of getting it on its legislative priority list. Usually the association doesn’t support freezing the value of homes and property, but the deferral option might get support.

Kootenai and Bonner counties are among about a dozen Idaho counties seeing rapid appreciation in market values. People paying inflated prices for property in these resort areas are making it difficult for many residents to afford their property taxes. Yet the majority of Idaho’s 44 counties aren’t seeing the same growth and some more rural areas are experiencing decreases in property values.

McDowell said he hopes these other counties will approve of the deferral concept because it means the local government would eventually get the full property tax amount.

“It sets up equilibrium,” McDowell said.

He estimates that about 12,000 homeowners in Kootenai County could be eligible for the proposed deferral program. Several other Western states, such as Washington and Oregon, also offer property tax deferrals for longtime residents.

The Legislature killed four bills last year dealing with property tax relief, including a measure supported by three North Idaho lawmakers that didn’t get a committee hearing. 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.

The Democrats’ challengers all agree that property taxes are one of voters’ top issues but they are unsure of the deferral plan. Because none of them had seen the proposal, they couldn’t comment on specifics.

Yake said he questioned what would happen if the tax was deferred for 40 years and the owed taxes were higher than the actual property value. He sees the Democrats’ proposal as a convenient campaign ploy, a promise that probably can’t be filled.

“The whole point is the devil is in the details,” Yake said. “We need to balance that with an appropriate action and not simply do grandstanding for the purpose of getting elected.”

Nonini, who has 170 feet of Spokane River frontage, understands the problem firsthand but is unsure of the Democrats’ plan.

“It’s an issue especially for senior citizens who have lived here for 30, 40, 50 years and try to plan their retirement but have taxes that keep going up,” he said.

Chadderdon agreed property taxes are a major concern but she prefers to pay as you go and questions the bookkeeping nightmare a tax-deferral system could create.

Peterson isn’t so interested in the details, he just wants his taxes to stabilize so he can keep the family home. A new owner would probably raze the house and build something bigger, more modern and luxurious.”People should not be forced from their homes because they can’t afford their property taxes,” said Sayler, whose wife is Petersen’s cousin. “We want to stop that from happening.”