Legislature eyes urban renewal district reform

In addition to budget problems, public education reform, and Health and Welfare program reductions, urban renewal district reform is another significant issue this legislative session.

There are now more than 60 tax-increment-financed districts (urban renewal districts) in Idaho. The amount of property tax that local taxing districts (fire, police, library, etc.) receive from land in these districts cannot exceed the amount they collected in the year an urban renewal district was first established. Any increase in property tax over this “base rate” for a period of up to 24 years goes to support just the urban renewal district. This means that even though these districts increase the need for fire, police and other services the urban renewal district diverts income that would be used to help defray the cost of these services.

The districts were initially “created to recuperate blighted areas that could not be restored or improved without government intervention and to assist areas within 25 miles of the state border who suffered a competitive disadvantage against their competition on the other side of the border line.

Urban renewal districts require no public vote to be created, yet they spend taxpayer money. The directors are appointed by the mayor or city council. Because they are appointed it can be argued that the board members are removed from direct accountability that is usually available through the election process and as a result can spend taxpayer money however they want. It can be further argued that urban renewal districts “lack meaningful oversight of any kind despite their large budgets.” The definition of “blighted” areas and the term competitive disadvantage has resulted in rules that are so vague that the use of urban renewal funds has been justified for many projects that are questionable under the original purpose for urban renewal districts.

Because there does seem to be a real abuse of urban renewal , rules do need to be tightened “to make sure funds are being collected and spend appropriately and to provide accountability to voters.”

Some thoughts for improvement include requiring voter approval, requiring elections for board members, requiring a vote to approve urban renewal bonds, creating more definitive terms for board members and allowing more transparency in district actions.

In an effort to improve the process for the formation of urban renewal districts and to insure a more reasonable use of district funds the Idaho House of Representatives passed four pieces of legislation on March 1 aimed at improving the process. The four bills that passed were House Bills 95, 96, 97 and 110 (HB95, HB96, HB97, and HB110). The main provisions of these bills are summarized as follows:

HB95 requires an election be held to create an urban renewal district, limits bonds to 20 years, requires agriculture land owners to provide written consent before being included in an urban renewal district and prohibits districts from expanding by annexation.

HB 96 provides “an option for taxing districts that overlap the urban renewal boundaries to opt out and retain their revenue allocation.” Currently over lying districts have no voice in the withholding of their tax share. This legislation provides for open dialog with the taxing districts to discuss proposed projects planned by the urban renewal district.

HB97 requires a clear definition of the project that enables the voters to have a “clear understanding “ of the project being funded, including the starting and ending time of the project.

HB110 requires a public hearing requirement to the process of establishing an urban renewal project to insure more accountability in the approval of the project.

These four House Bills will now go before the Senate Local Government and Taxation Committee and if approved by this committee to the full Senate for consideration. The legislation would then be forwarded to the governor for his consideration if passed by the Senate.

The creation of an urban renewal district can be beneficial to the local area when used properly; these four pieces of legislation, if passed into law, will provide more accountability to the formation of the districts and can help avoid inappropriate use of this economic tool.