PROPERTY TAX REFORM IS STILL NEEDED
By Fred Birnbaum
Idahoans’ frustration with property tax increases is likely to remain at the forefront as they pay their property tax bills this year. Why? Because real reform has been thwarted by local taxing districts (primarily cities and counties) and their legislative allies.
Despite several legislative working groups meeting over the last couple of summers and many bills considered by the legislature, no reform that helps taxpayers in the short term is evident.
Example A is Ada County Highway District, one of those small local taxing districts on your tax bill if you live in the county. You may not realize that the agency that maintains Ada County’s highway has about 388 employees, many of whom don’t work on roads. This agency wants to increase the portion of their budget received from property taxes by as much as 18% to 24% — the agency has yet to adopt its final budget. More on this later.
Let’s delve into some history and background on property taxes, why they are so difficult to reform, and why they grow with such persistence.
It comes down to several factors: the formulas are complex, as there are more than 900 local taxing districts throughout the state, and the money raised by property taxes is only used by local units of government: counties, cities, schools, highway districts, and others.
But the Legislature sets the property tax budget limitations, meaning that state statutes restrict or cap what these districts can take from your wallet. For several years now, local units of government have blamed the Legislature for rising property taxes because limitations are in state code. But these same local units of government show up at the Statehouse to thwart meaningful reform that would limit their tax take.
What does reform look like? Reform means limiting the percentage by which these districts can increase their budgets – your property taxes. Reform does not include merely shifting taxes from homeowners to commercial, rental, or agricultural property. The tax shift is a game some politicians like to play. It’s true that homeowners are being heavily burdened as home values grow faster than the overall property market values. However, shifting taxes does not address the underlying budget growth.
During the 2021 legislative session, lawmakers passed House Bill 389 to reform or at least begin the reform of property taxes. This complex, 26-page bill was rushed through in the session’s final days to at least pin a stake in the ground on property taxes. Without reviewing all of its provisions here, the headline was that the overall budget increase was limited to 8%, with the exception of a terminated urban renewal district. This was not the only exception; forgone monies were not fully included in the paragraph that referenced the 8% limit. Forgone monies are funds not claimed in earlier budgeting cycles that can be captured in a current budget cycle by increasing property tax budgets.
Why should Idahoans care about all of these mind-numbing details?
The Ada County Highway District (ACHD) is now proposing to increase the property tax portion of their budget by as much as 24%. Yes, Ada County is growing, but much of this budget has nothing to do with roads.
ACHD is massively increasing staff, salaries, and benefits. There were 370.5 full-time positions (FTEs) for fiscal year 2020 (FY20). The proposed budget increases the staffing to 412.5 FTEs in 2022 and to 432.5 in 2023. So 63 new positions or a 16.7% increase in three years. This staff growth means that salary and benefits costs, including generous pay raises, will increase over 37% in three years for ACHD staff. Property taxes are currently 45% of ACHD’s tax revenue. If the FY22 proposed budget is adopted, property taxes will increase to 49% of the tax revenue stream, up over $10 million. The new positions are in all major functions: administrative, planning, maintenance, and technical positions.
The following pay increases and benefit expansions are copied verbatim from page 2 of the proposed budget document:
The proposed labor budget includes a total of 412.5 positions.
We have included the following labor cost adjustments for FY22:
- 5% cost of living increase
- 0.5% increase for top 10% performers
- 0% medical & dental insurance increase
Recruitment Benefit Expansion:
- Hybrid work from home option
- Recruitment Incentives for specified positions
- Career Incentive Program
- Daycare contribution through flex spending
- 401k contribution match from ACHD to PERSI
- Full Paid 12-week Maternity/Paternity leave
The above has nothing to do with fixing roads. It is an egregious example of a local unit of government rewarding itself.
The irony is that Senate President Pro Tempore Chuck Winder sponsored a proclamation celebrating ACHD’s 50th anniversary. Senate Proclamation 103 reads: “The purpose of this proclamation is to acknowledge and celebrate the 50th Anniversary of the Ada County Highway District.”
Perhaps this spurred ACHD to reach for the moon.