BoCo budget hearings slated for Aug. 23

Under new Idaho law, county opts to take forgone taxes over annual 3% increase, new construction

By Lyndsie Kiebert
Reader Staff

Bonner County commissioners will hold two public hearings Monday, Aug. 23 to discuss adoption of the fiscal year ​​2022 budget. Meetings are scheduled for 10 a.m. and 6 p.m. in the first floor meeting room at the Bonner County Administration Building, located at 1500 Highway 2 in Sandpoint.

The FY2022 budget — which excludes EMS operations, handled within their own budget — sits at a proposed $62.4 million, down from FY2021’s projected $64 million total.

The most notable change from last year’s budget is the means by which the county plans to fund that $62.4 million figure. Rather than increasing taxes by the annual 3% allowed by state law or taking taxes from new construction, commissioners are instead proposing to use $2.7 million in forgone taxes — revenue left untouched in years that the board opted out of the allowed 3% increase. As a result, taxpayers can expect to see a 9% increase on the Bonner County portion of their tax bill, which, for most, constitutes about half of the overall taxing district amounts. That averages out to about a 4.7% overall increase per tax bill, according to Bonner County Clerk Mike Rosedale.

“Also, with the new construction here that increase will be spread out over more properties, so the actual percentage will be a bit lower,” he said. “Probably not much.”

Rosedale told the Reader that the decision to use forgone taxes was driven by a change to Idaho law passed late in the historically long 2021 legislative session: HB 389, a bill enacting widespread property tax reform.

Under the new law, Rosedale said the county had “two mutually exclusive options”: use the 3% increase and “only a fraction of new construction,” or use “all of your forgone.”

“This would leave us with roughly only 75% or so of new construction relative to past years … all else staying constant,” Rosedale wrote in an email, explaining why Bonner County is opting to instead go for the forgone option. While commissioners waived the 3% increase last year and effectively eliminated those funds from ever being used as forgone, enough funds remained in the forgone fund for use in the 2022 budget.

Rosedale said the changes to Idaho Code came so late in the session that “many taxing districts are having a really tough time due to lack of training.” Critics across the state — including Rosedale — say the new formula is punishing municipalities that try to live on fiscally conservative budgets.

“On top of that, the Legislature has been debating removing counties’ ability to access their forgone in the future,” he said. “That has served to penalize all counties that have tried to live below their means and impose future austerity on them because of their good spending/levying habits of the past. This is crazy.”

Ultra-conservative free market lobby group Idaho Freedom Foundation gave HB389 mostly negative reviews — in large part because it did “almost nothing to reduce government spending.” In its legislative analysis, IFF stated that the bill doesn’t effectively limit taxing districts’ budgets, doesn’t put up any roadblocks for the creation of future taxing districts, and shifts the burden of property taxes from homeowners to commercial and rental property owners.

Even as he signed the bill into law in May, Idaho Gov. Brad Little signaled his mixed feelings, writing in a letter to legislators, “I am signing House Bill 389 because it provides some relief to Idaho taxpayers. However, I fear the long-term consequences may outweigh this temporary reprieve.”

An editorial in the Idaho Business Review in May called HB389 “poor policy, poorly written, bad for rural Idaho,” and zeroed in on the argument that the bill “prevents growth from paying for itself” — a point echoed by city and county officials from around the state, who are particularly concerned that jurisdictions can now only access 90% of new construction.

Rosedale said it is not yet clear whether the $1.2 million constituting new construction and the regular annual tax increase, which the county is passing on in 2022, will be counted as forgone next budget year.

Inflation is also setting the county up for an unsustainable future, he said, noting that “real inflation is roughly 12% calculated the way it used to be before Regan took office.” He said estimates place that figure closer to 20% next year due to the “trillions of stimulus flooding the markets.”

“With that in mind, think of the county like a boat,” he said. “We have a bilge pump that pumps water at the rate of 3% per year, while the hole in the bottom of the boat is letting in water at the rate of 12% per year, and will grow to at least 20% by next year. You do the math. This can’t continue for long.”

In all, the $62.4 million FY2022 budget is anticipated to be paid for with nearly $4 million in cash balanced forward, almost $30.5 million in proposed taxes (including the $2.7 million in forgone taxes), $3 million in grants and almost $25 million in “other” operating revenue.

Commissioners will consider adoption of both the larger budget and the nearly $5 million EMS budget at the Aug. 23 hearings. Those interested in viewing a copy of the FY2022 Bonner County budget can email [email protected] or call 208-265-1437 to learn how to secure a copy.

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