Caldwell City Council

Members of the Caldwell City Council confer during a meeting, Monday, Aug. 19, 2019.

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CALDWELL — In response to a new property tax law that limits city budgets, the Caldwell City Council voted Monday night to pause new residential development for up to 120 days, citing “imminent peril” to its citizens due to strains on public safety services.

The council discussed the new moratorium for about an hour and a half before voting to enact it. Council members chose to cut the maximum length from 182 days to 120 and can reduce it further.

Monday’s action was spurred by Gov. Brad Little signing HB 389 into law last week. The new law restricts city governments to recognizing only a percentage of new development in taxing districts rather than the full amount. As a result, cities have considered a pause since funding for city services would have less ability to keep up with the needs of growing populations.

The council voted 3-1 to pause approving new residential plats, new residential planned unit developments, new annexations where the proposed use is residential and new residential special use permits.

“I prefer the short pause to get our feet under us and figure out what we’re doing from here on out,” said Councilman Chris Allgood. “I think we need to figure out what’s going on, we need to know more about it. I just don’t think we should keep approving subdivisions while we’re figuring it out.”

Allgood didn’t vote on the measure because he was filling in for Mayor Garret Nancolas, who is recovering from a recent surgery. Councilman Jarom Wagoner cast the lone opposing vote. Councilman Mike Pollard, attending virtually, left the meeting partially through and thus didn’t vote. Councilmen Dennis Callsen, Rob Hopper and John McGee voted in favor of the moratorium.

HB 389, which was introduced and passed in three days as a lengthy and chaotic legislative session closed, limits local government budgets to reflect just 90% of the value of new construction and annexation within the taxing district each year, rather than 100% as under current law; and restricts local government budgets from reflecting increases from expiring urban renewal districts to just 80% of the amount that goes back on the tax rolls, rather than the current 100%. It also places a cap on local government property tax budget growth of 8%, including everything.

Other provisions include big new property tax breaks for businesses and developers; a 25% increase in the homeowner’s exemption; and a small boost to a tax break for needy seniors while also scaling back that program in 2022. The bill also includes an emergency clause, making all of its provisions without other specified effective dates effective retroactively to Jan. 1, 2021.

The bill says the budget limits “may result in curbed budget growth by as much as 23% in some cases.”

In opposition, Wagoner said he would have preferred more time to better understand the ramifications of a decision like this. He pointed out how the council approved hundreds of units of new housing via residential development projects earlier in the meeting since the moratorium was the seventh new business item on the agenda. The council didn’t reach that point until three hours into Monday’s meeting.

City Attorney Douglas Waterman began the topic’s discussion Monday with a presentation that explained a moratorium is allowed because of the “imminent peril” of citizens since the new law affects public safety services.

If there was imminent peril, “why did we just approve several hundred homes tonight?” Wagoner asked. Throughout the hour-and-a-half conversation on the topic, councilmembers criticized the Legislature and lamented the difficult position they felt they were put in.

“Man, I’m teeter-tottering back and forth,” Callsen said before the vote.

About three-fourths of Caldwell’s annual expenditures go toward police and fire services.

Callsen, a former fireman, and Allgood, a former police chief, pointed out how those two departments have already struggled to keep up with Caldwell’s rapid growth. Caldwell Finance Director Carol Mitchell also presented during the meeting and said she’s still crunching numbers on how the budget would look under the new law.

McGee emphasized that development will again pick back up, but not until more specific plans are laid out.

“With all of those questions up in the air, some sort of pause on this while we can figure out how to keep our streets safe, I think is pretty wise,” McGee said.

Greenleaf Mayor Brad Holton commented in support of the moratorium during the public hearing. Developer Tim Mokwa opposed the moratorium and argued soaring home prices will increase more as a result.

Lack of supply is a major driver of the rising prices. The median price of a single-family home in Canyon County in April was $399,856, a 46% increase from April 2020.

On Friday, Nampa held an emergency city council meeting to address the city’s response. No action was taken, and the topic wasn’t on the agenda at Monday’s city council meeting. A pause could be considered on June 7 once the city has more time to gather more information about the ramifications of both the new law and the council’s potential responses.

Meridian paused new annexations, except for small infill developments, in February when a different tax bill, SB 1108, was being considered in the Legislature. That bill, also relating to property taxes, similarly would have restricted city budgets. SB 1108 eventually failed, but Meridian kept its pause in place. Meridian planned to discuss the effect of HB 389 during its city council work session Tuesday.

In fast-growing cities like these throughout the Treasure Valley, local governments often discuss the idea of having “growth pay for growth.” That means existing residents aren’t tax burdened because of the services needed to keep up. To come closer to accomplishing that, city government leaders would prefer to capture 100% of new taxable value in order for city services to match the population growth.

Caldwell’s urban renewal district expires in 2022. About 22% of the city’s tax base is diverted to urban renewal. The district expiring could bring up to a billion dollars back on the city’s tax rolls. But the new law limits that to 80%.

Cities all over Idaho were watching Caldwell, according to Kelley Packer, executive director of the Association of Idaho Cities. Among cities that requested copies of Caldwell’s resolution on halting development are Emmett and Rathdrum. Others watching closely ranged from Nampa, Kuna and Star to a small eastern Idaho city that’s worried growth limits in bigger cities will overflow onto it, she said.

“One of two things is going to happen: Growth will be curtailed, or services will be compromised. This is not a threat. It’s got to be one or the other,” Packer said. “We can’t just grow if we can’t cover the service needs of that growth. And if we do, then service will be negatively impacted — it’s just one or the other.”

Even the state Tax Commission still hasn’t determined all the impacts. “Basically cities and counties and local districts have to start all over with their budget planning for this year,” Packer said.

Cities start their fiscal year Oct. 1, and most hold their final budget hearings in August; work already done on those budgets now must be redone to match the new rules.

Alan Dornfest, property tax policy chief with the Idaho State Tax Commission, sent a memo out to all Idaho county clerks, treasurers and assessors on Monday, noting various changes, some of which are still in the works.

“The levy rate to use when calculating new construction and annexation, that previously was the prior year’s levy rate,” Dornfest said. “It no longer is, so that is clearly wrong. … They cannot use that. And I can’t give them a new rate, because some of the parts are still moving parts as of this time of the year. So basically, my memo says that they can have a new rate at the end of July or first part of August. I understand some are unhappy about that — I don’t have a solution.”

Paul Schwedelson covers growth, Nampa and Caldwell. Follow him on Twitter @pschweds.

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