Friday, January 14, 2011

Legislators push for URA reform

URA seen as priority because it diverts property taxes

Ketchum resident Sue Jacobsen's property tax bill nearly doubled from $2,900 in 2009 to $5,300 last year. She hadn't made any changes to her house or plot of land on the southern end of town, so she naturally blamed the difference between the bills on something called the Ketchum Urban Renewal District. It wasn't on her bill in 2009 or anytime before in her 30 years here, but the district took a $1,611 share in 2010.

The renewal district doesn't directly increase property taxes, but that's not to say it doesn't have an indirect role, causing many state legislators previously oblivious to renewal districts to stand up and take notice, said Rep. Kathy Sims of Coeur d'Alene. For that reason and more, Sims and others are putting urban renewal reform at the top of their priority lists in the 2011 Legislature. The current session started Monday.

"There's a lot of interest this year," Sims said. "Taxpayers expect to be represented this year."

The land included within a city's renewal district is chosen because it's seen by the government as deteriorated or undeveloped. The purpose of the district, as set out by state law, is to promote development by building infrastructure.

Property taxes provide the money for these infrastructure projects. The district—entirely separate from the city government—doesn't increase property taxes, but takes a piece of the pie that would normally be distributed among the school district, county, city and other taxing districts. The district gets only the property taxes resulting from property value increases.

For example, Ketchum's district was created in 2006. The total amount of property taxes collected at that time still goes to the normal places: schools, local governments, etc. However, any increase in property taxes from then on due to property value increases goes to the district over its allowed 24-year life span.

Herein lies one of the many problems, asserts Sims and Wayne Hoffman, executive director of the free-market advocacy group Idaho Freedom Foundation. As a district's properties are developed, more demand is put on the city, county, schools and other taxing districts to provide services for that development, but they're operating on the same amount of property taxes as when the land was undeveloped. All that property tax from increased property values is funneled into the renewal district. As a result, these taxing districts must increase their levies to generate revenue to provide these services, meaning increasing property tax.

Hoffman's scenario isn't just anecdotal. The Pocatello City Council ridded the city of its renewal districts in December. That move freed $83 million in property valuation previously locked up in urban renewal, allowing city leaders to announce they could cut taxes by 3.5 percent.

Sims said the Coeur d'Alene district, started in 1997, now collects more in property taxes than does the school district, a situation that will only worsen in its remaining 11 possible years of existence as property values increase.

Ketchum resident Jacobsen wasn't entirely wrong in her assumption that renewal districts increase property taxes. It happens, but indirectly. And property owners don't even have a say in creating these districts, even though it's their money being diverted. Cities can just create them.

Jacobsen said she wants out of the district, but she doesn't have a choice.

"The voters need a say," Hoffman said. "If the urban renewal district does such wonderful things, cities should have no problem taking it to a vote of the public."

Rep. Dennis Lake, R-Blackfoot, said he couldn't agree more and said he's not alone in the Legislature.

"There are a lot of people saying we need to make changes," he said.

He tried hard last year to rewrite urban renewal law, which has gone pretty much unchanged since its 1965 creation. His reform of last year included many changes, but in one package.

"It had enough in it for enough people to hate it and prevent it from going anywhere," he said.

He's trying a different tactic this year, putting forth pieces of reform one at a time. Reforms proposed by Lake and others include decreasing districts' lifespans to keep the other taxing districts from starving as the district reaps all the property taxes of growth. Lake also wants to prohibit districts from increasing their areas after creation.

Ketchum's URA increased by 140 acres last year when Sun Valley Resort's River Run property was added, making the district now 443 acres. That's about one-fourth of all Ketchum land. Lake said Blackfoot's district has grown from 67 to 300 acres.

Several legislators want to restrict the kinds of projects that districts—led by a board chosen by the city council—can do. State law currently doesn't restrict how a district's money is spent.

"Because there's no limitation on what they can do, they're doing everything," Hoffman said.

Sims said, "This is a problem created by the Legislature and it must be fixed by the Legislature."

Even though Lake is for more control over districts, he said most districts don't need it.

"Most people are using it fine. Unfortunately, some are abusing it," he said, adding that the state can't just make the abusers change, but must change legislation.

Ketchum City Administrator Gary Marks, who oversees finances for Ketchum's renewal district and sits on the board of directors for a consortium of about 20 districts called Redevelopment Association of Idaho, agreed some changes may be needed for the abusers.

"But you have to look at the whole picture," he said. "And the whole picture is a good one."

He said the state provides no other tool for cities to spur economic development.

"There's nothing else in our toolboxes," Marks said, adding that it's "ironic" that the state is trying to restrict the powers of such a tool when it's needed most.

District 25 Rep. Wendy Jaquet, D-Ketchum, said she has not been part of the URA reform effort.

Trevon Milliard:

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