We have a lot of important votes to cast in the upcoming election. I hope everyone exercises their right to vote.
One of the items Sugar City residents will vote on is regarding the creation of a Sugar City Urban Renewal Agency (SCURA). After considering the pros and cons of an urban renewal agency, the city council approved sending the issue to the public for a vote. I’m generally in favor of Tax Increment Financing (TIF) districts, which is a standard economic development tool used by urban renewal agencies. I’m not an accountant or expert on these matters, but let me see if I can explain my understanding of a TIF district and why I would encourage you to vote yes on the issue in November. (The State of Idaho Code refers to TIF districts as “Revenue Allocation Areas,” but I’ll use “TIF districts.”)
The intent of a TIF district is to use the property taxes from a specified area to improve that area through residential, commercial, or public development projects, which, in turn, increases the property value, which in turn increases the revenue coming in from the taxes from the area, which, in turn, returns benefit to the residents and businesses in the area and city-wide and also creates lasting improvement in an underused area within city limits or an area in the city that residents and businesses would like to revitalize.
TIF districts do not add additional taxes to the district. So, for example, if a property owner inside the newly created TIF district paid $10 in taxes each year (we could only wish!) before the district was created, they would continue to pay $10 after the district was created—or, I should say, the TIF district itself is not a taxing entity that can set new tax rates for the district. Tax rates would continue to be set by the taxing entities in the area using the same process they always have (the city, county, library, school, cemetery, police, fire, etc.).
Once a TIF district is started, the current tax revenue from the area is the baseline. That money continues to be distributed as it always has. Then, from that point on, any increase in money that is the result of the increase in property value in the district is collected by the urban renewal agency. The urban renewal agency is then responsible to use that money for eligible improvement and development projects in the TIF district. Eligible projects include roads, bridges, utilities, public facilities, improvements for underused commercial or industrial areas, etc.
Here is a table from 2023 showing four urban renewal
districts being run in Rexburg. You can see the current value, the baseline value,
and the increment value. The tax from the increment value is what can be used by the their
urban renewal agency for improvement projects in the area. (https://tax.idaho.gov/wp-content/uploads/ptt/propertytax/filedownloads/2023_final_values/madison/MADISON%20SUMMARY%20OF%20TAXING%20DISTRICTS.pdf)
The TIF district comes with a built-in termination date, so they only function for a set period of time—in Idaho the maximum length is 20 years. After that, the tax distribution returns to the normal process. The idea is that the taxing entities will benefit long term from the investment in improvements made in the TIF district that probably would not have or could not have been made without the TIF funding.
There are some concerns with urban renewal districts, and you may have heard some stories of poor or even illegal management of TIF districts. I’m not concerned about mismanagement with the Sugar City Urban Renewal Agency. I’m very confident in the members of the Agency Board: Derik Taylor, Spencer Haacke, Chris Baldwin, Marc Stewart, Ian Luke, and Jade Koyle. And, of course, the agency has to hold public meetings and hearings and follow a standard legal process that can be watched over by the city council and residents in general.
There is also the legitimate concern that during the TIFF time period, as the property value in the district increases, the regular taxing entities don’t receive the additional tax money from the increases in property value because the increase above the baseline amount goes to the urban renewal agency instead. Again, I think the possible disadvantage here is more than compensated for in the benefits these taxing entities receive once the TIF districts sunsets—completes its set time period and the area reverts back to the standard tax collecting and processing. The benefit of the increased property value directly improves the funding stream for the various taxing entities within the area (e.g. school district, cemetery district, library district, police and fire districts, etc.). The basic idea is that each of these taxing entities are willing to invest in the improvements of the TIF district so as to improve the overall development of the area and receive greater benefit in quality of life and increased, consistent funding in the future.
It’s also possible for a property owner within a TIF district to see an increase in the value of their property as the overall area is improved. This increase in value would increase the owner’s property taxes—not that the tax rate increases, but that the value of their property increases. This is a concern of mine as I live in one of the probable proposed TIF districts near the new Sunpro store and fabrication plant. Since we moved in fifteen years ago, the assessed value of our property has increased dramatically. The issue of property taxes in Idaho is a big concern across the state. Our actual property tax rate for Sugar City hasn’t risen in years, yet the increase in assessed property value has caused us to pay more in taxes. I think the state legislature could work out some ways to rein in residential property taxes. I don’t think withholding my support for the Sugar City Urban Renewal Agency is a way to make that happen. I’m willing to see what TIF-funded investments could do to improve our city.
Members of the Sugar City Urban Renewal Agency will be making the rounds of city neighborhoods handing out a brochure regarding the agency. They’ll also be available for discussion during the upcoming Treats in the Streets (Thursday, Oct 8th 4:30-7:30pm). They are also working with the other taxing entities in the area to make sure they understand and are supportive. I think they may be holding at least one Q&A session before Election Day, so look for that to be announced if they do.
Well, I hope that is all as clear as mud. These kinds of things are a bit complex. I think through an urban renewal agency we can wisely use tools such as TIF districts to proactively plan for and manage the growth we are experiencing, ensuring that we maintain the quality of life we all appreciate here in our little corner of Idaho. Please take some time to consider this proposal and then get out and vote in November.
