Bright lights on fees, taxes in PF
POST FALLS — Post Falls residents will be charged for street lights differently under the city's proposed fiscal 2017 budget — some paying more, and some less.
The city council plans to charge for lights as a tax instead of a fee that shows up on residents' monthly bills. As a result, the tax owed will be based on home values instead of the current flat $3.85 fee for all homeowners.
The council will hold a public hearing tonight at 6 on a proposal to collect $282,742 in foregone property taxes for fiscal 2017 to help fund street lights, and another $282,742 through a tax increase.
Some cities, including Hayden, are already funding street lights through taxes. City Administrator Brett Boyer said his city has generally taken a 3 percent property tax increase — and another is planned for fiscal 2017 — that generates about $33,000 per year. However, since Hayden’s levy rate is considerably lower than other major area cities — $1.30 per $1,000 — the 3 percent hit isn’t as heavy on taxpayers as it is in other areas. Hayden’s annual cost for street lights is $140,000.
Coeur d’Alene Finance Director Troy Tymesen said Hayden plans to keep street lights as a fee in its upcoming budget. Residential users are charged a monthly fee of $2.58. The amount for street lights budgeted in Coeur d’Alene for fiscal 2017 is $584,150.
“The council has brought the question (of fee vs. tax) up and has spoken with legal in workshops and the legal opinion has stayed the same — that it hasn’t been deemed that it’s not a fee,” Tymesen said.
HOW IT WORKS
In Post Falls, taking foregone taxes will generate the same amount of revenue as a 3 percent property tax increase, which is also proposed in the city budget to pay for the other half of the proposed change.
"A total amount of $565,484 in property taxes will be needed in the General Fund to pay for street lights (and eliminate the fee)," said Jason Faulkner, the city's finance director.
Under the proposed city budget, street light fees will come off residents' monthly utility bills starting in October.
"The intent (of taking foregone taxes) is to repeal the existing street light fee which is collected monthly in the city utility payments," City Administrator Shelly Enderud wrote in a memo to the city council. "This fee has been challenged in several Idaho cities."
When local governments set their annual budgets, they’re allowed under state law to increase property taxes as much as 3 percent.
WHAT IS FOREGONE?
If taxing districts like cities and school districts don’t use the full amount of their taxing authority during the budgeting process each year, the remaining taxing authority stays on government spreadsheets as "foregone" amounts that accumulate without end. The foregone amounts aren’t actual funds, but an accounting of the dollars the entity could have received from property owners. Post Falls has an amount of more than $2.2 million in its foregone account.
To make the change of charging street lights as tax instead of as a fee, a state law that went into effect July 1 requires governments to hold a public hearing prior to budgeting foregone amounts. They must certify by resolution the amount of the foregone increase to be budgeted along with the specific purpose.
Heeding the guidance of city attorney Warren Wilson, a majority of city council members was open to the change during a workshop last month.
As a result of street lights coming off utility bills as a fee, the owner of a $200,000 home will see a $12.14 decrease per year on the street lights. The owner of a $250,000 home will see an increase of $4.04 per year, and for the owner of a $500,000 home the increase will be $125 per year.
Post Falls has taken just one property tax increase — 2 percent in 2012 — since 2009. The last time Post Falls took any foregone amount was more than 10 years ago, Enderud said.
CHANGE AGENT
Government watchdog Larry Spencer went in front of area cities during last year's budget season to make the argument that street lights as a fee on utility bills is not legal.
The city council last year decided to stay status quo, pending an Association of Idaho Cities review. When the organization didn't take a position, the topic came up for debate this budget season again.
The U.S. Supreme Court in 1974 distinguished fees from taxes in that fees are based on usage by individual homeowners, while services funded by taxes benefit the general public. Other cases reaffirmed that definition and some other cities have already stopped charging for street lights as a fee.