Court rejects effort to “radically expand the scope” of the Idaho Constitution in regards to municipal funding

By Devon Downey, Idaho Reports

On Tuesday, the Court released their opinion on Hoffman v. City of Boise unanimously ruling in favor of the city and finding that two city ordinances passed to create urban renewal districts were constitutional. 

The case involved two ordinances passed by the City of Boise in 2018 which created the Shoreline District and Shoreline District Urban Renewal Plan, and the Gateway District and the Gateway East Urban Renewal Plan

In order to pay for urban renewal, the city allocated tax increment financing (TIF) to Capital City Development Corporation (CCDC). TIF is a planned allocation of funds based on future anticipated tax revenue from new development. 

In the plans, the city says that tax increment revenue “shall be the incremental real property tax revenues. Incremental real property tax revenue is attributable to the increase of the current equalized taxable value of each taxable parcel of real property in the District over and above the certified base taxable value of each such property.” 

Full implementation of the plans would cost $66.5 million over 20 years for the Shoreline District and $96.5 million for the Gateway District.

G&G Ventures, LLC and five individuals sued, alleging that the ordinances violated article VIII, section 3 of the Idaho Constitution. Two of the individuals involved in this case were Wayne Hoffman and Fred Birnbaum of the Idaho Freedom Foundation. Their involvement was as individual property owners, not on behalf of the Idaho Freedom Foundation. 

Article VIII, section 3 of the Idaho Constitution states, in part, that “[n]o county, city, board of education, or school district, or other subdivision of the state, shall incur any indebtedness, or liability” greater than its yearly revenue without approval at the polls from two thirds of voters.

Justice Robyn Brody, writing for the Court, stated that “the challenged ordinances do not violate the Idaho Constitution because TIF revenues cannot create the type of ‘liability’ with which article VIII section 3 is concerned.”

Because the ordinance language only gives whatever funds are created out of the new development, Boise is not actually indebted the amount of full implementation according to the Court. “[I]t is impossible for the City, Ada County, or any other governmental subdivision to be liable to provide TIF revenues unless TIF revenues have been generated and the cash is on hand to distribute.”

The opinion also rejected the plaintiffs’ argument that the long term cost is greater than the income and revenue of the City of Boise in 2018, the year the ordinances were passed. The Court stated that the $66.5 million and $96.5 million costs are only if the plans are fully implemented. Furthermore, they state that  “CCDC will only receive the TIF revenues actually generated within the districts. In fact, though it seems unlikely, CCDC could receive no revenues at all if property values in the districts fail to increase above the base assessment value.”

The Court claims that the plaintiffs’ arguments “would radically expand the scope of the section to apply to nearly any action taken by a government subdivision… even a decision not to increase taxes in a given year would create a ‘liability’ under Plaintiffs’ argument because that could require higher taxes to meet needs in later years.”

In recent years, the City of Boise has faced criticism from residents and lawmakers regarding their budget and tax policies. A proposal by Boise officials, including former Mayor Dave Bieter, to expand the library drew heavy criticism due to its projected $85 million cost. Bieter himself acknowledged that the library and subsequent Boise initiatives likely cost him his re-election.

Fights over rising property taxes are likely to continue, but for now, the Idaho Supreme Court has blunted efforts by some citizens for larger control over municipal taxing decisions.

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