Association of Idaho Cities executive director Kelley Packer joins Ruth Brown to discuss the upcoming 2024 legislative session, as well as some of the bills in the works relating to property tax budgets, city annexation, and water rights.
Read: Cities Prepare for 2024 Session
Ruth Brown, Idaho Reports:
Kelley let’s start with legislation the association plans to bring. What are some of your goals for 2024?
Kelley Packer, Association of Idaho Cities:
Well, we always try to be very conservative in the bills that we bring forward because we end up being inundated with legislation being brought forward by the varied stakeholders and legislators that impact cities that we end up finding ourselves engaged in, whether pro or con. In fact, last year we only brought one piece of legislation personally as an association and ended up weighing in on almost 84 pieces of legislation based around property taxes and libraries and all of the varied things. So this year we’re only bringing two.
One is around personal service contracts and it’s really just a cleanup bill. Personal service contracts, currently cities and other local jurisdictions – not just us, but across the board – have to file a public notice any time a personal service contract goes over $10,000. And that’s all public information right now on city websites. And with the Controller’s Office currently working on Transparent Idaho, with all of the counties’ information uploaded and you can find it there, and most of the cities’ is getting there. It should be done by the end of the year, and then they’ll get to the other taxing districts. So it’s going to be readily accessible. We had initially proposed when we talked to the Controller’s Office about just repealing that statute because we didn’t feel it would be necessary anymore with Transparent Idaho. But the Controller’s Office recommended that we go a more conservative route and just bumped the $10,000 limit up to $50,000 so it was still there, because it does apply to both the state and local taxing districts and it’s going to be a while before they get all of those other taxing districts on. And they just didn’t want to eliminate something that’s important to the public prior to having it available for them somewhere else. So we conceded and all of us worked together, and we’re going to ask the Legislature to move that up to $50,000 because it hasn’t been increased for over 20 years. And that seems, you know, reasonable with inflation. So that’s one, pretty simple.
The other one is one that we did bring towards the end of last session but didn’t have time to get it through, and had worked with Speaker Moyle and Chairman Monks on. Initially they said they’re open to it, and it was an exemption for local taxing districts that consolidate for long-term tax savings down the road. What we’ve found in Weiser, for example, the fire district there and the city fire department would like to consolidate. There just is not enough resources and employees to staff two, and it’s costly to have the equipment for two in that same area. And so they see that it would be a long-term savings for taxpayers if they could consolidate. However, when they do that, it bumps that tax in that fire district up over that 8% cap one time as they’re consolidating everything, and so they can’t do it. And so if we can get this done, then in that area taxpayers would probably see around about a $250,000 reduction in costs from the city and the need for property taxes to cover that. And then they’d have the one taxing for fire district that would take care of those service needs still. So that’s what we’re proposing, is that we get a one-time exemption for districts that consolidate, providing a long-term savings down the road from the other taxing district.
Brown:
For our listeners, you’re referring to the valuation tax?
Packer:
Yes. Sorry. Yeah. House Bill 389 that passed that creates an 8% cap, yes, on local taxing districts’ increases to their budgets each year, it would be that a tax levy exemption for that 8% cap.
Brown:
Let’s move on. Do you anticipate a new bill around city annexation, and what are cities’ concerns around that? That was an issue you faced last year.
Packer:
Well, ironically, we’ve faced it for a number of years. And two years ago there was a bill brought forward that would allow interested parties to basically say where they want to be annexed. And while we recognize the importance of private property rights, there’s also a very big importance around community standards, because you’ve got cities that are making long term investments in water and sewer infrastructure and roadways and so forth, which is why you have what’s called an area of impact. It’s still within the county’s footprint, but it abuts a city and that’s where they plan to grow next. And so they’re making these investments – at the taxpayers’ expense – to put in that infrastructure once they annex those folks in. But if you can now have somebody that’s already in that area of impact say, ‘no, we’d rather go with a different city, that’s also pretty close and they’re their infrastructure’s going to get to us faster.’ Well, then all that money that’s been invested from the others, the city that’s already identified that area, is lost. And that doesn’t make a lot of sense, right, to just throw that money away. And so we’re trying to find the right balance between pure property, individual property rights, getting to do what they want, and that community balance where everybody’s paying the price tag.
So two years ago, this one bill would have undone that and just said anybody can go anywhere they want, whenever they want, and let everything else just fall by the wayside. And that’s not healthy. So we promised to work with Senator Lakey to bring legislation last year that would find a better balance between all of those needs with the area of impact and annexation. And we did that and there was builders at the table, there was planners at the table, there was counties and cities and real estate and legislators and just everybody we could think of. And any time anybody weighed in with Senator Lakey, I applaud him. He did such a great job of taking that input, bringing it back to our big group and saying, does this work, does it work modified, does it not work, etc.. And we changed that bill over eight months a number of times, and then again probably four or five times during the legislative session, even with some additional changes because they would be helpful. However, it still ended up going down. Because we got it through the Senate, but then a member of House leadership held it up and would not give it a hearing because they wanted it to just be the pure personal property rights. And we’ve had conversations with them since to try to explain, and I think we maybe have it there. Senator Lakey, he’s talked about bringing that bill back, which we’re hopeful for, and we hope we can finally get that through with everyone recognizing the need to find a better balance for all, not just one. My personal property rights, which are very important to me, shouldn’t step over yours, for example, or step on yours. And so recognizing that, hopefully we can get that done. I have heard, but I’ve not seen the legislation, that the planners have brought a another one to go opposed to that one or to change it in a way that they’d like to see it go, because they were the ones that that still opposed Senator Lakey’s bill last year, but I haven’t seen that one. And I’ve also heard that Representative Young and Senator Van Orden are looking at possibly bringing their annexation, just annexation bill back as well. So you probably will see three bills touching on that topic or more. But right now our recommendation at AIC is that we support Senator Lakey’s from last year.
Brown:
A major property tax bill passed in 2023. That’s HB 292, which did several things to decrease property taxes for citizens. Are cities seeing an impact from that directly or indirectly yet?
Packer:
Actually, no. I think that one, I want to say thank you to Speaker Moyle, to Chairman Monks, to Chairman Ricks and to Senator Grow for working with us and letting us be at the table the whole time. Counties and us and other taxing districts were involved in helping to craft that. So we were able to early on say, ‘no, here would be a problem or this would be a pitfall.’ And so we have not had any negative impacts from that, at least to date. Our only real concern was possibly the Wayfair piece where it made it so that local taxing districts wouldn’t have access to some of those funds down the road. So we’re continuing to weigh that, to see if that does end up going and fleshing out the way they said it would and us still being benefited better by the H 292 bill that was passed last year, including that piece which was part of the negotiations, or not. If it doesn’t down the road, then of course, we’ll be back to the negotiating table saying that that Wayfair should come back. But right now, things look good. And we’ve heard a lot of great things about homeowners specifically seeing some serious tax relief. I would say, though, that House Bill 389 is still creating some serious, serious problems for our smallest jurisdictions.
Legislators’ intent was to hopefully rein in excessive spending at some of the bigger, in some of the bigger cities. And really, they haven’t been impacted the way the small cities have, which is a majority of the cities in Idaho. Out of our 199 cities, 165 of them have 5,000 or less people, and they’re the ones that are being decimated by House Bill 389. They’re not being able to meet their infrastructure needs and can’t allow growth to happen in their areas, which they detrimentally need in some cases.
So we are proposing that Chairman Ricks and Chairman Monks and Speaker Moyle and Pro Tem Winder work with us on, and hopefully provide, a different exemption maybe for those smaller cities. One of the things that I’m going to propose, and I’ve talked to the fire chiefs and some other taxing districts as well, is that we look at local taxing districts that are under 50,000 [population] being completely exempt from that 8% cap and going back to the model of the 3% cap plus annexation plus new construction plus reclassification, because that to me is truly allowing growth to pay for itself. I haven’t had a conversation yet specifically about that. I did with Chairman Monks about an option, but not that particular model yet. But that is what I’m going to propose to them this year is that they look at the metropolitan statistical area from the federal level, which is 50,000, and take all taxing districts that are under that. So that would impact still counties and cities and fire districts, and then everybody would have those bigger ones, the 50,000 plus, still be capped at 8%, but everybody else below that would still be able to work with growth and needs in their cities and communities.
Brown:
Earlier, you had mentioned some concern around some water rights bills that might be coming through. Do you want to touch on that at all?
Packer:
Yes, thank you. The Idaho Water Users Association and their executive director Paul Arrington, great group. They have always been very inclusive and have made sure that we’re always aware of what’s going and have taken our input from our cities as well as our association, and very grateful for them. But they’ve got a couple of bills that are coming out that we’re trying to work with them on language. Currently in their form as drafts, we would most likely oppose them. I have not got a formal position from my board yet, but that’s going to be my recommendation to them and we’ll see what happens. But we’re trying really to work with Paul and his group in getting the language right so that we can still help them meet the need they need, but not be negatively impacted by the current drafts that they have.
One is around self-help for irrigation districts, and then the other one is around groundwater districts. And it just, the groundwater district one, we believe they could fix in rule without a statute change. And the current statute change that they are proposing would give additional authority to the Idaho Department of Water Resources director that could be very detrimental for municipalities and other water users in those areas throughout the state. As well as the self-help one. So right now, yeah, we’re really worried about what’s being proposed in those two arenas, but hopefully we can work with them and figure something out.
Brown:
Kelley Packer, thanks for joining me.
Packer:
You bet. Thank you.