Lawmakers asked to settle delinquent property tax dispute

by Logan Finney, Idaho Reports  

A local disagreement over who gets to keep the fees and interest charged on delinquent property taxes has made its way to the state capitol. 

The House Revenue and Taxation Committee considered House Bill 150 on Tuesday, which would require charges levied on late property tax bills to be distributed among taxing districts in the same proportion as the taxes themselves. Lawmakers heard from several local officials before ultimately killing the bill and telling stakeholders to come back with a compromise.  

What’s the disagreement about?  

Rathdrum city administrator Leon Duce told lawmakers that the counties have distributed the fees and interest with late tax payments out to political subdivisions for decades. However, he said, more counties could start keeping the charges as they look to ease their own property tax burdens.  

Duce supported HB 150 alongside Rep. Rick Cheatum, R-Pocatello, who sponsored the legislation.  

“It should go to the taxing jurisdictions that assessed that property tax – and to whom it is delinquent – not the counties,” Cheatum said.  

Kootenai County Treasurer Steve Matheson disagreed with that and defended his decision to keep the charges. He began retaining the funds at the county level on Oct. 1, 2022, the Coeur d’Alene Press reports, and a handful of local cities and highway districts have sued him and the county over it.  

“This issue, if not addressed by the legislature, will be addressed by a judge in Kootenai County this spring,” Matheson said.  

Duce said he expects the litigation will be dropped if the matter is resolved through a bill this session.  

Is this a statewide issue yet? 

According to Duce, many other counties are interested in making the change soon.  

“There is a gap. Everyone is looking to fill that gap,” Duce said. “This interpretation helps to fill the gap for the county – but creates a larger gap for every single taxing district in the state.”  

Owyhee County Treasurer Annette Dygert clarified to Idaho Reports that 19 of the 27 treasurers who were present at a recent Idaho Association of County Treasurers meeting expressed interest in exploring the idea, but it was not a formal agenda item or proposal from the association.  

“In order for counties to be able to change, the board of county commissioners would have to agree and also the county prosecutor would have to be on board,” Dygert wrote in an email to Idaho Reports.  

Who deserves the money?  

Idaho cities are certainly concerned that the practice will spread.  

“Canyon County has historically remitted late fees and interest to the city,” said Nampa Mayor Debbie Kling. “If they chose now not to remit those fees, it’s an impact of about $175,000.”  

Others, however, argued it’s only fair that counties keep the penalties for late property tax payments. Counties administer, collect and distribute the taxes on behalf of all the other local jurisdictions.   

“This collection really is expensive for the counties. It’s never as simple as mailing out a letter,” Bonneville County Commissioner Bryon Reed said. He told the committee his county just last year started keeping the fees and interest on delinquent payments.  

“Bonneville County is using that revenue directly to reduce property tax dollars in our budget,” Reed said.  

Several people testified that it takes as long as four years to collect some delinquent property taxes. 

What other options do counties have? 

Cheatum and others argued that state law already allows counties to recoup their costs for collecting delinquent property taxes, so they should use that authority instead of taking revenue that has been going to cities and districts.  

“The cities can’t see the logic of not using the collection protocols and ability to fund those collection efforts that’s already in the statute,” said Garden City Mayor John Evans, legislative chair for the Association of Idaho Cities.  

Reed, however, said counties are not excited to charge additional penalties for collections on property tax bills that are already overdue.  

“In my opinion, it would be improper and redundant to charge another fee on top of that. Bonneville County never has,” Reed said. “It’s already too great a burden on the taxpayer.”  

Where do we go from here? 

Most lawmakers weren’t enthusiastic about encouraging additional charges either.  

“The timing of this bill couldn’t be worse,” said Rep. Charlie Shepherd, R-Pollock. “They’re paying late fees and interest, and we want to throw a collection burden on top of it? That’s just harsh.” 

Other lawmakers argued that counties keeping the revenue to trim their budgets will only shortchange the smaller taxing districts, leaving them to raise other property taxes to cover their losses.  

“It’s basically like cutting the bottom six inches off of your blanket and sewing it onto the top,” said Rep. Ned Burns, D-Bellevue.  

After a failed substitute motion from Burns to send the bill to the floor, HB 150 was held in committee with only Cheatum, Burns and Rep. Lauren Necochea, D-Boise, recording votes in opposition.  

“I do believe we need to make some adjustments. I don’t believe this bill is the right place,” said Rep. Dustin Manwaring, R-Pocatello.  

Lawmakers encouraged Cheatum and the other stakeholders who offered testimony to get together and work on a compromise bill to bring before the committee soon.  

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