Modernizing Idaho's urban renewal laws

COEUR d’ALENE — Idaho’s special committee on urban renewal is one meeting away from recommending several reforms to hold urban renewal agencies more accountable into the future.

However, the final step is proving to be fairly complex, according to Senator Mary Souza, R-Coeur d’Alene.

Souza said the legislature’s Interim Committee on Urban Renewal met on Thursday to finalize recommendations that would modernize Idaho’s urban renewal laws, but one more meeting will be necessary to work through some of the more complex issues the committee is grappling with.

The committee has met several times over the course of the year to study Idaho’s urban renewal laws that were created in the 1960s to generate tax revenue to transform blighted areas in Idaho’s cities into new economic engines.

Some lawmakers like Souza and Rep. Kathy Sims, R-Coeur d’Alene, say the current laws are outdated and lack accountability. They say taxpayers have very little control over the urban renewal agencies because their board members are appointed rather than elected.

It’s an issue that has been brewing statewide in recent years, so the 2015 legislature established the interim committee to study the existing laws and make recommendations for reform.

On Friday, Souza said the committee has come to consensus on several reforms, but they need a little more time to work out technical issues in Idaho’s tax laws.

Souza said the committee adjourned on Thursday with the intent to meet one more time before introducing legislation that she says will provide taxpayers more oversight in urban renewal activities.

“We are grappling with some of the complexities,” she said, adding that is challenge because the legislature wants to adjourn early this year due to the elections. “Just getting enough time to get this done will be a challenge.”

Souza said one of the more complex issues the committee is dealing with concerns how urban renewal agencies will be allowed to collect tax revenue. Currently when an urban renewal district is formed the property taxes currently being paid in that district are frozen at that level for the taxing districts that are collecting them, such as cities, fire districts, etc.

As property values continue to increase in the district and new taxable property is built in the district, the increment collected above the frozen rate goes to the urban renewal agency to be used to revitalize the blighted urban renewal district.

The frozen rate is referred to as “the base,” and adjusting that base tax rate as the district recovers economically has become an issue with the committee.

Souza said current state law requires agencies to adjust that base rate anytime the agency modifies its development plans within an urban renewal district.

“In current statute, the base assessment should be changed when an urban renewal plan is modified in any way,” she said. “That has not been occurring.” Souza said the state tax commission has interpreted that law in a way that did not require agencies to adjust the base rate, but they are now looking at ways to accomplish that under Idaho’s tax laws.

“It is a very complicated equation they are dealing with,” she said, adding changes in the current law could have ripple effects into several other tax laws.

Shae said both the tax commission and the attorney general’s office are looking at ways to accomplish that, and the committee will meet once they have recommendation on how to best make those adjustments into the future.

Tony Berns, executive director of ignite cda, said there are a lot of complexities the legislature is going to have to consider if they change the way urban renewal agencies set their base rate. Ignitecda is Coeur d’Alene’s urban renewal agency.

He said many agencies have incurred debt based on the way the agencies currently set the base rates, and changing those now could impact the ability of the agencies to meet their debt obligations. Berns said the legislature may have to make those rules apply to new districts and allow the existing districts to continue to satisfy their debt obligations under the current laws.

Souza said grandfathering existing districts is being considered.

Souza said the committee has reached consensus on many other reforms. One of those reforms would give cities the option of electing urban renwal board members rather than appointing them as they do now.

She said the committee has agreed to give cities more flexibility in forming urban renewal agencies. She said the new recommendation would allow boards to be anywhere between three and nine members, and if they are elected those candidates would have to follow all of the state election laws just like any other political candidate.

“I have talked with (Coeur d’Alene Mayor Steve) Widmyer about this several times,” Souza said, adding they don’t agree on every aspect of urban renewal. “But we are on the same page for much of this.”

Berns said he wants to wait and see what the legislature does with the committee’s recommendations before he can comment on how it may impact urban renewal in Coeur d’Alene.

“I am not sure how any of this is going to come out,” he said, adding there are a lot of factors that will have to be considered with any of the recommendations coming out of the committee.

For instance, he said if board members are elected, will they have to reside within the urban renewal district?

“It is going to be complicated,” he said, adding many changes could transpire throughout the legislative process. “I am not quite sure where my thoughts are on any of this yet.”

Souza said the committee is also recommending that urban renewal agencies can fund no more than 50 percent of the cost of a public building. She said if a city wants to use urban renewal money for more than 50 percent of a building that is not on the property tax rolls, it will have to put it to a vote.

She said the committee is still trying to determine what percentage of vote will be needed to allow the use of those dollars.

“I think we will settle somewhere around 50 to 55 percent,” she said. She said other issues such as who will have oversight over the urban renewal agencies need to be addressed as well. Souza said it could be the cities, but it could also be the state tax commission.

She said the committee is going to recommend a new repository to be set up at the tax commission for urban renewal plans and new reporting requirements will be established if their legislature adopts the committee recommendations.

Souza said that should provide the public with more transparency.

Berns said that is the one thing he hopes the legislature will make clear through this process.

“One of the things we asked them to do is to define transparency,” he said. “If they could define transparency in the code, that would be great.”

Souza said the committee has plans to meet one final time before introducing legislation, but a date for that meeting has yet to be determined.