Since becoming a County Commissioner property taxes have been a hot topic. Initially, I thought it was a simple problem with a simple solution. I was wrong. I am a big fan of Occam’s Razor theory which states “the simplest explanation is usually the right one.” In the case of property taxes, there are a lot of moving parts which makes finding a simple solution very difficult.
Author Lena Eisenstein writes, “the purpose of local government is to provide an organized system where councils exercise their power and responsibilities to work together for peace, order and good governance. As part of their duties, they are expected to work toward improving social, economic, and environmental viability and sustainability for the benefit of their community. Effective local governments provide a quality of life for the people who live in their communities.”
A major part of fulfilling those duties is the assessment and collection of taxes. These assessed taxes are on property, sales of goods and services, and usage fees. It is important to note that not all options for collecting taxes are available to each community.
TAXES AND SERVICES
In each community, there are two primary sources of tax revenues: businesses and individuals. If a community has a strong business presence, it reduces the tax burden on individuals. If there isn’t a strong business sector the tax burden shifts toward the individuals.
Within each community, there is an expectation for levels of service. These services may include things like community planning, building and maintaining infrastructure, and emergency services. Communities also have expectations of maintaining or improving the quality of life and providing opportunities for economic growth.
A BRIEF HISTORICAL TAX REVIEW
Historically, Bannock County has had one of the highest property tax rates in the state. Recently, REDI CEO Teresa McKnight presented an economic development quarterly update to the Pocatello City Council. In the meeting, she stated she felt “property taxes in Bannock County were hindering potential growth in the area”. She also stated, “when people are considering moving from California to Idaho, property taxes are an area of concern.”
In reviewing historical tax rates, McKnight wasn’t completely incorrect in her assessment. But, in recent years the trend has been reversing. In the fiscal year 2020, the County Commissioners applied COVID funds toward property tax relief. This resulted in a 16% reduction in the levy rate. Bannock County’s property tax rate then reached its lowest level in years.
BANNOCK COUNTY AVERAGE PROPERTY TAX RATES
| YEAR | AVERAGE URBAN % | AVERAGE RURAL % | OVERALL AVG. PROP. TAX % | TAX RATE RANKING | STATE AVERAGE |
| 2005 | 2.340% | 1.423% | 2.151% | 1 | 1.387% |
| 2010 | 1.964% | 1.059% | 1.770% | 2 | 1.222% |
| 2015 | 2.159% | 1.154% | 1.924% | 1 | 1.341% |
| 2020 | 1.522% | 0.844% | 1.362% | 8 | 1.000% |
Source: Idaho State Tax Commission https://tax.idaho.gov/search-reports.cfm?ch=EPB00129
Despite the rate reduction, some individuals still experienced an increase in their taxes. This was due to an increased property tax assessment. For the last few years, Bannock County has experienced phenomenal growth in home prices. Increased production costs and limited supply have helped drive prices up.
In March of 2020, there were 90 homes sold at an average price of $229,528. In November, 80 homes sold at an average price of $254,066. This represents a 10.6% increase in eight months which could translate to a $340 annual increase in one’s property tax.
In Pocatello and Chubbuck, the Bannock County levy is approximately 24% of your tax bill. In Inkom, McCammon, Lava, Arimo, and Downey the County levy is 31%. At the County, taxpayer dollars expenditures look like this:
SOLVING THE PROPERTY TAX ISSUE
Unfunded mandates pushed by the state are one of the biggest expenses the County has. Examples of these mandates are the DMV, Public Defense, and portions of the District Courts. These are services the state dictates we provide, but the state doesn’t provide a funding mechanism. As you can see from the chart above, we spend approximately 14% of the budget on these mandates. This 14% of the County’s budget equates to $10.2 million dollars.
As Commissioners, we have been working with the other 44 counties in the state. We are seeking to push the legislature toward removing this burden from us. We have sponsored a resolution to send to the 2021 Legislature addressing this issue. We believe all 44 counties will pass similar resolutions. This will force the state to take action during the 2021 legislative session.
Looking Forward
In looking forward to the 2021 budget year and beyond, Bannock County faces several dilemmas. First, is finding a way to replace the COVID relief funds provided by the state. By holding the budget flat and applying the $5 million of relief funds, we reduced the impact on the levy by 16%. Because the COVID funds were a one-time event, the question is how, or can, we replace the $5 million?
Second, we are in a rising property value situation. State law requires counties to be within 90-110% of the current market value. Given the rapid rise in market values, assessments reaching market value will increase property taxes.
Finally, Bannock County has to find a way to grow our existing business base or attract new businesses. Without a growing business base, the individual taxpayer has to carry the majority of the tax burden.
In today’s competitive market place, attracting new businesses often requires tax incentives as enticements. While these incentives are good for the businesses, they don’t improve the tax base until they “fall off”. Sometimes these incentives can last as long as five years before falling off and increasing the tax base.
As Commissioners, we are searching for solutions to these problems; seeking for ways to be more efficient and effective with the dollars we have. Some of the internal issues we face are:
1. Employees that haven’t had pay raises in a couple of years.
2. Facilities being patch worked together for too long and in serious need of repair.
3. Ways to use technology to improve service levels.
Each of these issues requires the expenditure of funds. The trick is finding efficiencies to offset the expenditures while holding the budget steady. The government shouldn’t spend money to spend money. But wise investments in service and facilities should be a part of every budget cycle.
As we look forward to the future and the inevitable growth of Bannock County, we are working on a plan to guide our decisions. We want an environment with economic opportunities for all while affording the type of lifestyle we currently enjoy. Our goal is for Bannock County to shine, and we look forward to your input as we move forward together.