Bill offers developers a hefty tax break

BOISE – New legislation would give subdivision developers in Kootenai County and the state’s other two most-populated counties a big property tax break.

The bill, introduced Tuesday in the House, “puts a legitimate process in place for developers to be assessed and taxed on lots they haven’t sold,” said Scott Turlington of Tamarack Resort, the ski and golf resort south of McCall that penned the legislation. “They would be assessed at one-third of current value.”

That’s more than many lot owners at Tamarack are paying now under a notorious tax loophole created in 2002, known as the “developer’s discount.” It gives developers and land speculators in rural areas a tax break originally designed for farmers, leaving owners of half-million-dollar lots paying less than $20 a year in taxes. But Turlington’s bill creates a new tax break, just for developers.

“Let’s call it what it is,” he said.

North Idaho members of the House Revenue and Taxation Committee were aghast when they read the bill, which they’d earlier unanimously agreed to introduce without discussion as committee Chairwoman Dolores Crow, R-Nampa, told the panel it was merely a fix to an earlier bill.

“I think that’s a terrible move. That goes against everything we’ve been trying to do for the taxpayers of Kootenai County,” said Rep. George Sayler, D-Coeur d’Alene. “I’m surprised that they would have the gall to do it.”

Rep. Jim Clark, R-Hayden, said, “I can’t support that – it’s just that simple.”

The current developer’s discount doesn’t apply in counties with more than 100,000 population – Kootenai, Ada and Canyon counties. It also applies only to land that once was farmed, and only in rural areas. All those restrictions are lifted in the new bill.

“It seems to me that uniform application of state law is the way to go,” Turlington said.

Crow had earlier announced a firm deadline for all property tax bills of Jan. 27, saying she’d accept no new bills after that date. The Tamarack bill “was just a change that’s already in the mix,” she said after the meeting.

The Revenue and Taxation Committee held public hearings on 35 property tax reform bills over the last week and a half. Its public hearings are over now, and it plans to begin voting on the bills as soon as today.

Turlington said he submitted his bill to the committee on Monday and didn’t know about the deadline.

“Developers, as far as I can tell, are the economic engine that’s driving a lot of the counties,” Turlington said. “There is some risk that we assume, the speculative risk, that we don’t think we ought to be on the hook for until it’s sold.”

He noted that Tamarack never asked for the developer’s discount as it exists now. “We’re just one voice,” he said. “We’re trying to correct this.”

The earlier hearings also included several other bills to do away with the developer’s discount, including one, House Bill 510, that has bipartisan support from both houses. On Monday, Gov. Dirk Kempthorne withdrew his bill to phase the loophole out over the next five years, deferring to lawmakers’ plans.

Kempthorne himself owns land in Valley County, the county where Tamarack is located, that has benefited from the developer’s discount.

“The governor will let the Legislature have their debate and see where it goes from there,” said Kempthorne’s press secretary, Mike Journee.

Sen. John Goedde, R-Coeur d’Alene, presented his own property tax bill, HB 502, to the same committee on Tuesday morning. It would allow expanded use of local-option sales taxes, with half the money raised going to property tax relief, and the other half going to capital projects. Kootenai County Commissioner Phil Currie and sheriff’s Deputy Ben Wolfinger testified in support of the bill.

“I was encouraged, because there were some good questions asked,” Goedde said.

Among them: Rep. Mike Moyle, R-Star, asked why the entire local-option tax proceeds wouldn’t go to property tax relief.

“In actuality, if the capital projects are needed, without local option they’re funded from property tax,” Goedde said, “so there’s an argument that it already goes 100 percent to property tax.”

Goedde, who along with Sayler served on an interim legislative committee on property tax relief that held a dozen hearings around the state over the summer, was surprised to hear of the new developer bill. “I heard, in every place that the developer’s discount was allowed, that it needed to go away,” he said. The new bill “would expand what appears to have been a bad idea into a statewide bad idea.”

Sen. Shawn Keough, R-Sandpoint, co-chairman of the interim committee, said, “People are having a hard time with growth. … They don’t want to pay for it, they want the growth to pay for itself.” Under the proposed new developer tax break, she said, “The existing taxpayers who have been there subsidize and pay for the developer’s growth, and that’s not fair.”

Rep. Ken Roberts, R-Donnelly, who’s sponsoring HB 510 to eliminate the current developer discount, said he thinks developers deserve tax breaks in some situations, but he said of the Tamarack bill, “I’m not going to be carrying it – I feel sorry for whoever gets assigned to it.”