Friday, February 2, 2007

Second homes: taxes for a unique community burden?

Flushed with personal financial windfalls, thousands of upscale Americans have invested heavily in second homes for occasional vacations or part-time residence, nowhere more widely than in Rocky Mountain resort communities.

Although they're considered icons of a community's popularity and evidence of a robust real estate market, these second homes have troubling negative impacts that are now becoming apparent and require serious attention.

Their pricey valuations are driving up property assessments and taxes for older, smaller, less expensive homes, forcing many middle-income families to sell and move.

This churn in turn reduces the stock of affordable housing and eventually shrinks the pool of families needed to staff community services and businesses.

Furthermore, as the number of non-resident second homes increases, a community's economic vitality is weakened for lack of full-time residents to shop and participate in civic activities as workers and consumers.

Yet, second homes require the same fire and police protection, among other services, even when owners are absent.

This describes the Ketchum and Sun Valley area's changing character to a T.

One Canadian resort community caught in the second-home tidal wave, Canmore, British Columbia, has acted: It's imposing a special second-home tax to compensate for economic losses and added costs.

Numbers tell Canmore's story: Of 11,549 people listed as the population of this Banff National Park neighbor, 42 percent (4,818) are non-permanent. The average new special annual tax of $420 is expected to yield $1.3 million more for the city's total budget of $28 million.

Along with urgent property tax reform, the idea of a special tax on second homes of non-permanent residents is an idea the Idaho Legislature should study and consider.

Special taxes to compensate for community costs aren't new. Since 1950, the federal government has paid billions of dollars to states and communities in the form of "in lieu" revenues. One such program is for children of families that live on military bases who attend local schools. Another is to compensate for federal lands taken off local tax rolls.

In 2006, in fact, the Department of Interior alone distributed $232,133,759 to states to compensate for federal lands exempted from local taxes. Idaho's share was $16,268,552.

Also, local option taxes now imposed in Idaho communities constitute a special tax mostly aimed at visitors to help defray costs of services created by resort tourists.

Lest inaction and indifference foretell the tale of vibrant communities deteriorating into ghost towns, Idaho must confront the dark side of the second-home boom now and find solutions.

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