Taxing districts win lawsuit over late fees

COEUR d’ALENE — A judge has ordered Kootenai County to distribute a proportional share of penalties and interest collected from property taxpayers to the taxing districts where the fees were generated, but the dispute over who gets to keep the funds may not be over.

“I will carefully consider the court’s ruling and will evaluate filing a stay and appeal,” said Kootenai County Treasurer Steve Matheson.

Last July, Matheson announced the county would retain the fees to cover expenses incurred in collection, rather than distribute them, as it always did in the past.

Matheson asserted that Idaho statute required him “to remit to the county all interest earned on public money” and in the county treasurer’s control. He said Idaho law is somewhat vague about what should be remitted to taxing districts and suggested the matter could be settled at the judicial or legislative level.

The cities of Coeur d’Alene and Post Falls subsequently sued the county for the money, as did the East Side, Lakes, Post Falls and Worley highway districts. The taxing districts indicated that withholding the funds would have a significant impact on their budgets — to the tune of $85,000 annually in Post Falls alone.

Judge Rich Christensen ordered Friday that Kootenai County must distribute a proportional share of collected penalties and interest to the taxing districts.

Idaho law provides that the treasurer is authorized and empowered to invest “surplus or idle funds” into certain investments permitted by Idaho Code. Interest received on such investments shall be paid into the general fund of the depositing unit — in this case, the county.

“The property taxes, interest and late charges collected by the county for the individual taxing districts are not ‘surplus or idle funds’ under (Idaho Code), so the county is not entitled to invest such funds and retain the interest,” Christensen wrote, in part. “A requirement that a county treasurer pay interest and late charges to taxing districts is not inconsistent with the county treasurer’s duties under the Idaho Public Depository Law.”

Some local leaders expressed satisfaction with the ruling Monday.

“The court has now provided the unambiguous clarification that Treasurer Matheson has asked for,” Post Falls Mayor Ron Jacobson said in a news release.

Coeur d’Alene Mayor Jim Hammond indicated that he hoped the judge’s decision puts an end to the dispute.

“Hopefully Kootenai County will honor the guidance provided by the court so that the longstanding partnership between Kootenai County and the taxing districts can move forward on other issues of importance to the residents of Kootenai County,” Hammond said.

Earlier this year, the Legislature declined to settle the matter, with some lawmakers calling the question of who keeps the funds an issue of local control.

The Idaho House Revenue and Taxation Committee held in committee, and effectively killed, a bill that would require counties to distribute a proportional share of collected penalties and interest to the taxing districts.

“The judicial ruling from Idaho’s First Judicial District appears to collide with the Legislature’s rejection of (House Bill 150) and the current practice of other counties in the third and seventh judicial districts,” Matheson said. “This ruling interestingly establishes a new remittance requirement for tax sales and redemptions that ultimately will be detrimental to local taxing districts.”

Late penalties and interest on delinquent property taxes should be treated uniformly throughout Idaho, Matheson said.

This story has been updated to correct a typo.