Officials ponder aid: a trade worth making?

Local government officials in Idaho have a little more than a week to decide if they’ll take part in a one-time property tax relief proposal funded with $200 million in federal coronavirus aid.

The idea came from Gov. Brad Little’s Coronavirus Financial Advisory Committee, which is guiding the distribution of the $1.25 billion Idaho received after Congress approved the Coronavirus Aid, Relief and Economic Security Act.

The committee initially recommended that $94 million be set aside to cover coronavirus-related expenses for cities and counties. Based on updated guidance from the U.S. Treasury Department, however, it now wants to use as much as $200 million to pay salaries and benefits for local public health and public safety employees, including law enforcement, firefighters and emergency management personnel.

The caveat is that, if local governments accept the money, they have to pass the savings along to taxpayers by reducing their fiscal 2021 property tax levies an equivalent amount. They would also need to freeze 2021 property tax collections — meaning they couldn’t take any part of the standard 3 percent increase in property tax revenues or tap any forgone taxes banked in previous years. The only allowable increase in 2021 property tax revenues would be from new construction and annexations.

Alex Adams, Little’s budget director and chairman of the coronavirus advisory committee, said the intent is to leverage the federal funds to provide one-time property tax relief for Idaho citizens, without creating a revenue windfall for local entities.

“This needs to be revenue neutral,” he said.

Based on the initial feedback, Adams said he thinks there will be strong participation in the program. The deadline to opt in is July 17.

Gabe Iacoboni, who serves as executive director of the Willow Center for Grieving Children in Lewiston, wrote a recent letter to the editor of the Lewiston Tribune urging local officials to accept the proposal.

“We elect our city officials to do the right thing for our community, our families and our bottom lines,” Iacoboni wrote. “They should take advantage of this opportunity and provide meaningful relief for all property owners in Lewiston.”

In a subsequent interview, Iacoboni stressed that his views reflect only his personal opinion.

Prior to moving to Lewiston, he lived in Boise and worked for the Legislature’s Senate Republican Caucus. He has a good grasp on local government finances, and watched closely as the Legislature struggled — and ultimately failed — to reach consensus on property tax relief during the 2020 session.

“I think there was a lot of disappointment when property taxes weren’t addressed,” he said. “This may be the governor’s way of addressing it without directly stepping on lawmakers’ toes. He’s trying to address an issue the Legislature left on the table.”

Little has also been hammered in recent weeks by far-right Republicans dissatisfied with his handling of the coronavirus pandemic. While he has largely ignored such criticism, he made a point of highlighting the property tax relief plan during the recent Idaho Republican Party state convention.

Several local officials said they’ve been considering the merits of the proposal. Some question its legality, given that Congress initially said the emergency relief funds couldn’t be used for noncoronavirus-related expenses, or for normal expenditures that were in the budget before March 1.

“This hasn’t been vetted by the feds as a legal use of the funds,” noted Clearwater County Commissioner Rick Winkel. “That’s a big red flag for me.”

If Clearwater County were to accept the money and later have to pay it back, he said, the commissioners couldn’t retroactively approve any part of the 3 percent property tax increase. They also couldn’t recoup any dollars that went toward property tax relief and, to top it all off, would likely have to come up with additional dollars to repay the federal funds.

“We’d lose three times,” Winkel said. “It’s a difficult decision. The state (proposed the program), and the governor immediately started talking about property tax relief before it was vetted. That makes us (county commissioners) look like heels if we don’t do it.”

Latah County Commissioner Dave McGraw had a similar perspective.

“It looks to me like damned if you do, damned if you don’t,” McGraw said.

While he’d love to provide tax relief, he said, the county also has a business to run. Revenues are already expected to be down next year, so passing up the opportunity to take even a bare minimum property tax increase might not be the most fiscally responsible step to take.

“We still have to run the jail and buy patrol cars and operate the court system,” McGraw said. “And Latah County doesn’t have a padded budget. We rewash the plastic utensils in our break room — I’m not even kidding.”

Nez Perce County Commissioner Douglas Havens said the commission discussed the option briefly and plans to meet with Auditor/Recorder Patty O. Weeks to explore it further. The Lewiston City Council is set to discuss the proposal during its 3 p.m. work session Monday.

Idaho County Commissioner Skip Brandt was leaning in favor of the governor’s proposal, although he still had questions.

“There’s a lot of gray out there,” Brandt said. “I’ve been on a couple of conference calls about it, and I’m still not clear what the rules would be or how much Idaho County would be able to get.”

Nevertheless, “anything we can get for our citizens, we want to grab it,” he said.

Moscow City Supervisor Gary Riedner expects the Moscow City Council to discuss the issue at its Monday meeting.

“It could be a great opportunity, if we’re able to take advantage of it,” Riedner said.

A question he has, though, is if the city freezes property taxes next year, would the 3 percent be added to its forgone taxes as it normally would — meaning it could be tapped in future years — or would it be lost forever?

“Alex Adams indicated it would go into the calculation of forgone taxes, but I want to see that in writing,” Riedner said.

In response to an inquiry from the Tribune, Adams said the 3 percent would qualify as forgone taxes. However, based on new legislation passed during the 2020 session, it wouldn’t accrue automatically; the council would have to approve a resolution specifically stating how much of it was being reserved for future use.

As for the legality of the overall plan, Adams said the U.S. Treasury recently issued new guidance indicating that all public health and safety payroll costs would, “as a matter of administrative convenience,” be presumed to be related to the coronavirus.

The state subsequently sent a letter to the agency outlining its plans for the $200 million. That letter, along with the lack of objection from Treasury officials, is the basis of the governor’s claim that the property tax plan is legal.

Latah County Commissioner Tom Lamar wasn’t particularly comfortable with that logic. Moreover, he thought the July 17 opt-in deadline was problematic.

Most cities and counties won’t start looking at their fiscal 2021 budgets until the end of July, Lamar said, and the public won’t have an opportunity to weigh in until August.

Consequently, “we’d be making the (opt-in) decision in July, but our public hearing isn’t until August 26,” he said. “So there are some serious timeline issues.”

If the state really wants to support property tax relief, he said, it should provide more support for public education, since voter-approved school levies account for a substantial portion of most local property taxes.

“They also need to look at increasing the homeowner exemption and circuit breaker,” Lamar said. “If they really want to help people in tough times, let’s come up with a plan that does that.”

The county is working with the Idaho Attorney General’s Office to try to get answers to its concerns, he said, but overall “this whole thing is very frustrating.”

“It feels like we have to say yes — but by saying yes to public health and public safety funding, we’re saying no to a lot of other things,” Lamar said.

Iacoboni was sympathetic to the position local officials find themselves in.

“I think they’re doing the best they can, in a situation where they don’t have all the information,” he said.

Nevertheless, he liked the way the governor structured the overall plan. Allowing local governments to add new construction to next year’s property tax revenues gives them some flexibility, while freezing the remainder provides needed tax relief.

“In my mind, he’s trying to thread the needle,” Iacoboni said. “As someone who just bought a home, I appreciate that.”

In many ways this whole discussion is an extension of the debate that began during the 2020 legislative session, when House Majority Leader Mike Moyle, R-Star, proposed a temporary property tax freeze.

Moyle said rising tax rates are driving longtime residents out of their homes. A temporary freeze would help prevent that, he said, while giving lawmakers time to research the issue in greater detail and come up with solutions.

During public hearings on the bill, individual property owners almost unanimously supported the plan, while city and county officials almost uniformly opposed it. The bill passed the House but subsequently failed in the Senate.

However, lawmakers agreed to create an interim study group to keep working on the issue. Its first meeting is scheduled for July 17.

In his perfect world, Iacoboni hopes the Legislature will at least eliminate the ability local governments have to tap forgone tax revenues from previous years.

“I know cities and counties would hate that, but I’m one of those people who likes finality,” he said. “They shouldn’t be able to make a decision and then come back and do it over. They should deal with the repercussions now.”

Given the continued disruptions from the coronavirus, though, Iacoboni questions whether lawmakers will stay focused on property tax relief.

“I don’t have super high hopes that they’ll be able to come up with something next session,” he said.

Spence may be contacted at bspence@lmtribune.com or (208)791-9168.