Property tax relief? HB 389 says it provides that

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An unprecedented Idaho legislative session is about to come to an end, but not without contentious debate over a controversial bill to close the session out.

House Bill 389 cleared the Senate Wednesday night after sharply divided debate. The 26-page bill — mammoth by Idaho standards — is actually a mixed bag of property tax-driven policies, some of which were suggested in committee meetings earlier in the session but never reached the House or Senate floors.

How those provisions impact Idahoans will ultimately be decided by Gov. Brad Little, who will either sign the bill or veto it no later than Tuesday.

Homeowner’s exemption

The bill first calls for a 25 percent increase in the homeowner’s exemption. The current $100,000 exemption is the deduction homeowners can subtract from their assessed property value, meaning those with an assessed $400,000 house would only be taxed based off $300,000 of its value.

HB 389 calls for an increase in that exemption from $100,000 to $125,000.

“When it comes to property taxes, we are here to represent the ultimate stakeholders,” Rep. Ben Adams, R-Nampa, said in defense of his vote to send the bill back to the drawing board during Monday’s House Revenue and Taxation committee meeting. “That’s the homeowners. In my district, $125,000 is not going to cut it.”

That echoes many North Idaho lawmakers’ calls for a dramatic increase, with some local legislators wanting double the exemption. But Rep. Tony Wisniewski, R-Post Falls, said at a March 13 town hall in Rathdrum that the smaller increment is a reasonable step.

“If we want to change the homeowners exemption from $100,000 to, let’s say $125,000, that seems to be a reasonable way of reducing property owners’ expenses,” Wisniewski said. “What that will do is, it will shift the tax burden — because the budget is the same — it will shift that tax burden to commercial properties and agricultural properties.”

HB 389 faced sharp skepticism during Monday’s House Revenue and Taxation Committee meeting, mere hours after it was born, printed and distributed.

Tense discussion approached shouting in Rev and Tax, with the bill’s sponsor — Rep. Mike Moyle, R-Star and the House Majority Leader — chastising committee members for voting against it.

“I think the good representative doesn’t know what the bill does. I don’t think he’s read it,” Moyle said of Adams before mumbling, “You guys drive me crazy.”

Adams countered that he and Moyle merely had a difference of opinion while taking a parting shot at the sponsor’s last-minute rush.

“I have read the bill, even though I only saw it for the first time today,” Adams said. “I did take the time to read all of the bill, because that’s what we’re supposed to do.”

Tax and Rev passed HB 389 on a 6-3 vote down a fast-track one committee member made a point to critique.

“It’s been mentioned that time is running out and we have to do something,” Rep. Lauren Necochea, D-Boise, told the committee. “We’ve kind of forced ourselves into this position.”

The circuit breaker

Necochea’s opposition to HB 389 continued Tuesday on the House floor, when the House picked up the bill for debate. She continued to speak out against the hurried approach to property tax relief, but she also criticized a provision of the bill: reform to Idaho’s property tax reduction program, also known as the circuit breaker.

The circuit breaker provides a reduction in property tax burdens to homeowners who meet two criteria: First, they must bring in an annual income of $31,900 or less. Second, they must meet a particular status, which includes the blind, widowers and certain veterans, among others. But the most populous group on that list is the elderly.

Those who meet those criteria will see a reduction in their property taxes up to $1,320. Moyle’s bill calls for that number to rise to $1,500, but with a catch: To pay for the $2 million increase the bill would provide, the bill calls for those already on the program and whose homes exceed 125 percent of a county’s median average home price to be removed from the circuit breaker, starting in 2022.

That catch caught Necochea’s eye.

“We’re helping seniors age in place, stay in their homes, not get taxed out of their homes,” Necochea said. “This bill purports to expand assistance, but it actually doesn’t.”

The bill passed the House after hours of debate on a 48-20 vote before sending it to the Senate’s Local Government and Taxation Committee later that day.

New growth

When HB 389 got in front of the Senate Tuesday and Wednesday, Moyle made a point to address provisions in the legislation he said would piece together enough tax relief to make a "yes" vote worth it to Idaho property owners. Aside from the proposed homeowner’s exemption and circuit breaker increase, the bill also takes a swing at taxing districts.

HB 389 would limit a city’s or county’s budgets to show 90 percent of the value of new construction and annexation within their taxing districts. The current construction roll code, adopted in 1997, calls for 100 percent.

The bill also caps a total property tax budget increase for local governments to 8 percent, all in what Moyle calls an effort to restrict unchecked growth from punishing homeowners.

“What we’re learning is...because the new construction component uses the previous year’s levy, it has the tendency to raise the taxes of existing property owners through no fault of their own. They were there. A new house gets built. That causes their taxes to go up. It’s not right.”

Troy Tymesen, city administrator for Coeur d’Alene, said that bill flies in the face of what cities in North Idaho are dealing with during a period of unprecedented growth.

“We’re looking at new growth paying for new growth,” he said. “Why is this bill asking that new construction be reduced to 90 percent?”

The bill also places restrictions on a city’s or county’s ability to recoup a 3 percent foregone increase in future years, an option many North Idaho municipalities either choose not to take in the name of fiscal conservatism or simply don’t qualify for.

The bill also calls for an 8 percent cap in total property tax budget increases, which include re-classifications, annexations, and new construction.

HB 389 has taken heat from individual county clerks and city administrators. It has also taken fire from actual fire fighters, who stressed that one fire district provision in the bill limits a fire district’s ability to expand its budget to keep up with new growth.

Sen. Steve Vick, R-Dalton Gardens, said his own burden from fire districts has burned faster than any other portion of his tax bill, going from roughly $150 to around $500 in the space of nine years.

“As I’ve watched this debate and [see] the fire districts continue to complain about limiting our growth, it’s been a struggle for me to be sympathetic,” Vick said.