Urban renewal reform passes

COEUR d’ALENE — As this year’s legislative session came to a close, it looked as if urban renewal reform wasn’t going to happen, but the bill passed just before the final gavel fell.

“We really didn’t think we would get to see it in the Senate,” said Sen. Mary Souza, R-Coeur d’Alene. “Then suddenly it moved, but it wasn’t the committee’s bill.”

Souza spent last year going over the urban renewal laws on the Interim Committee on Urban Renewal Reform. The committee met several times over the course of the year, and offered its recommendations to the Legislature this spring.

Souza said the committee was diverse and worked hard to come to a consensus on all the recommendations in the reform bill draft, but that did not seem to matter much after the bill started making its way through the Legislature. It was amended several times in the process.

Souza said the amendments resulted in a bill that wasn’t as strong as she had hoped it would be.

She said one provision of the bill seemed to be a sticking point for passage. It has to do with how much money the Urban Renewal District can collect through tax increment financing.

Currently, when a new district is formed, a geographic revenue allocation area is determined. Within that area, the property taxes that go to the local taxing districts are essentially frozen at their current rates. In urban renewal language, that is referred to as “the base.”

As property values increase in the revenue allocation areas, the property owners still pay taxes on the full value of their properties, but everything collected over and above the base is called “the increment.”

That “tax increment” is used to finance urban renewal projects within the district.

While investigating the current urban renewal laws, Souza said many on the committee discovered that one provision of the law wasn’t being enforced.

According to Souza, the urban renewal agencies have to file a development plan when the district is formed. If that plan is changed before the district is dissolved, the base must be changed to that point in time.

For instance, if the value of a property is at $100,000 when the district is created, the base is $100,000. If, five years down the road the value of the property increased to $125,000, the taxes collected on the new $25,000 constitute the increment.

But if the district were to modify the development plan at that point, the law says the base has to be reset to current value. That would raise the base to $125,000 and eliminate the tax increment until values begin to increase again.

Souza said the committee recommendation was to begin enforcing that provision of the law, but added a grandfather clause for the existing urban renewal districts that didn’t change the base in the past.

Souza said when she saw the final bill, she noticed it had been amended to grandfather all existing districts for not changing the base in the past, but also will not require existing districts to change the base in the future.

“They grandfathered everything both forward and back,” Souza said. “That will incentivize expansion of these districts.”

Souza said that provision will remain in the new law unless the Legislature decides to take that issue up again next year.

Tony Berns, executive director of Coeur d’Alene’s urban renewal district (called ignite cda), said that grandfather clause also restricted what the urban renewal districts can do when amending their plans.

“Going into the future you can only amend a plan to grow an existing economic opportunity,” Berns said. “You will not be able to amend a plan for a new economic opportunity.”

For example, Berns said, if there is an East Sherman urban renewal district formed, ignite cda would develop a 20-year economic development plan for that. But 10 years down the road if a new opportunity arises that was not in the original plan, the plan cannot be amended to include that opportunity.

“Say you get 10 years down the road and Natural Grocers wants to come in where the IGA is, we cannot amend the plan to include that unforeseen opportunity,” Berns explained, adding that happens quite often. “We saw that with the Kroc Center.”

He said the Legislature removed the ability to act quickly on new economic opportunities when they present themselves.

“I think that is a little short-sighted,” Berns said.

Berns said the Legislature can still amend the existing urban renewal plans to include new opportunities, but any future urban renewal districts will be subject to the new amending rules.

Despite the grandfather clause, Souza said, the bill does include some meaningful reforms.

Souza said her recommendation to make urban renewal board members run for election was included in the bill as an option.

“There is the option for local elections for urban renewal boards,” she said. “The city council now has the option to appoint the board or elect the board.”

She said urban renewal agencies will also have stricter reporting requirement that will be more specific and those reports will also be sent to a new state repository under the direction of the Idaho Tax Commission.

Souza said the interim committee requested copies of all of the urban renewal plans statewide and even after a year of waiting they still haven’t received them all.

“There wasn’t a place to get these plans,” she said. “We never did get them all.”

Souza said the bill also contains a lot of enforcement mechanism for non-compliance.

“It’s not a perfect bill,” Souza said. “But it is a step forward.”