A proposal to direct up to $200 million of federal COVID-19 money distributed through the CARES Act to property tax relief in Idaho has drawn the attention of cities and counties statewide. While a majority of the local taxing entities have expressed interest in the concept, some have declined the offer, others have placed conditions on their interest, and one north Idaho county has gone to court challenging the legality of the program.
According to a press release from Governor Little’s office last Monday, “fifty-four cities and 28 counties submitted letters of intent to participate in the Governor’s plan that leverages federal coronavirus relief funds to cover local public safety personnel salaries and gives cities and counties the opportunity to pass on the savings to property taxpayers.”
According to the Governor’s office, the submitted interest in the plan exceeds the total funds available, so a pro rata allocation could cover approximately 44-percent of local government submissions. Utilizing the numbers currently under consideration, Idaho property taxpayers in participating cities or counties could see a 10- to 20-percent one-time reduction in their property taxes this year.
“Our focus is to support our communities and our police, fire, and EMS personnel and ensure there are no reductions in public safety during these unprecedented challenges. I appreciate the cities and counties working with us to ensure the resulting budget savings are given back to the people of Idaho in the form of property tax relief rather than backfilling local government budgets,” Governor Little said.
While the initial concept of property tax relief is generally well received, strings attached to that relief make many cities and counties hesitant to accept the offer without further clarification and assurances.
Government entities like Gem County and the City of Emmett utilize property taxes as the primary funding mechanism for public safety – law enforcement and fire departments.
The City of Emmett has opted not to apply for the funds.
“Based upon an Attorney General’s opinion as reviewed by our city accountant, we did qualify in any event,” Mayor Gordon Petrie said. “We had no COVID-19 specific expenses for “First Responders”.”
Even if they did have those expenses, the long-term cost of accepting the funds might be devastating to future City budgets.
The total budgeted income the City of Emmett receives to its general fund in FY 19/20 from the General Fund property tax levy was placed at $1.5 million. The total expenditures for police and fire services from that general fund was placed at $1.65 million. If the entire budgeted amount for police and fire was eligible under the formulas for CARES reimbursement (which it is not), and the State was able to provide the projected 44 percent, it could amount to a $727,295 windfall – in exchange for foregoing a 3% increase in the overall tax budget for the coming year. That increase could amount to as much as $72,000.
The apparent trap in that trade off is that the $727,295 windfall would amount to an equal reduction in the budget for the year thus creating the tax savings for the property taxpayer. It, however, would also then be used as the basis for the following year’s budget, subject to the mandatory three percent increase cap in subsequent years. The one-year savings would translate into an on-going annual $700K plus hole in the budget to support police and fire services with no place to turn to replace the funding.
Inquiries to state government officials as to how to remedy that have not been answered.
Gem County has submitted a letter of intent, calling it a “conditional intent to participate in the State Property Tax Relief Program funded with CARES money.”
The letter emphasizes that the county has “NOT made a final decision in this matter and will require the answers to the questions laid out by Idaho Association of Counties addressing whether the use of the funds as proposes is both legal and fiscally sound before such a decision is made.”
According to the letter from the Gem County Board of Commissioners, they estimate that their eligible amount could be $1.7 million. Using the state estimate of having only enough for a 44 percent reimbursement, that could be a $748,000 one-time savings but the impact on future budgets remains in question.
Bonner County has submitted a conditional letter of intent, but has also filed suit in U.S. District Court. In a complaint for declaration, the county is contending that the very wording and intent of the CARES act should make the funds available to each city and county on a per capita basis and not tied to either public safety budgets, property tax relief, or requiring a foregoing of the potential 3% budgetary increase.
Resolving legal questions in a timely manner will be a major factor for cities and counties as most of them are all in the budgeting process for FY 20-21 and are required to have those budgets submitted to public hearing and acted upon before the end of August.
The City of Emmett’s budget has been submitted to public hearing, scheduled for 7 p.m., August 11 at Emmett City Hall.
No information has been provided as to how the funds will be divided if many of the letters of intent are withdrawn because questions remain unanswered or the answers are unacceptable to the conditional applicants. Messenger Index will track the funds actually accepted when the window to retract letter of intent has expired.