History of Urban Renewal
Laws relating to urban renewal were originally created to make it easier to remedy problem areas of the community
that are described in Idaho Code 50-2002.
Today, urban renewal districts are typically set up in areas that are already forecasted to significantly increase in
value. This is because the urban renewal district receives property taxes only on the amount the property increases
in value. The more the property value increases after the district is put in place, the greater the revenue that is
generated by the urban renewal district. Areas that would be attractive to urban renewal districts would be farm
ground that has been recently purchased for development.
How An Urban Renewal District is Created
A local governing body, such as a city, finds cause for an urban renewal agency per Idaho Code 50-2005. A notice
of public hearing to discuss this option is published in the local newspaper for at least 30 days and delivered to
the affected tax districts. Once the agency is authorized, the mayor acting on the advice and consent of the local
governing body, appoints a board of commissioners. The local governing body may designate themselves as the board
of commissioners at any time per sections 2 and 3 of Idaho Code 50-2006.
The creation of an urban renewal district does not go to a vote to the public.
How Urban Renewal Generates Income
Revenue for urban renewal is determined differently than taxing districts such as the county, city, or school
district. The amount of income received by taxing districts is based on their budget, which is capped.
(see Determining
Property Taxes).Urban renewal is not a taxing district so it does not have the authority to create
levy rates. This means the amount of income they can generate is not determined or capped by a budget. Instead urban
renewal adopts the total levy rate (the sum of all the taxing district levies). Urban renewal's revenue is calculated
by multiplying the adopted levy rate by the difference between the current net taxable value and the value of property
the year it went into an urban renewal district. The assessed value of the properties in an urban renewal district at
the time the district is put in place is called the Base value. The taxing districts that serve properties in the urban
renewal district can only levy property taxes on the base value during the life of the urban renewal district. See
section 4 of Idaho Code 50-2903.
The Increment value is the amount that the assessed value increases after the
urban renewal district is put in place. Urban renewal receives property tax dollars calculated on the increment value.
The table below calculates the increment value on an actual property that is located in an urban renewal district that
began in 2004. A table of actual tax bills for this property can be found at the bottom of this page.
Since this urban renewal district began in 2004, the 2004 value becomes the base. This means there isn't an
increment value the first year and urban renewal does not have income that year. Every proceeding year for the life
of the urban renewal district (typically 24 years) the 2004 value is subtracted from the current year's value to
calculate the increment. The larger the increment the more income that is generated for urban renewal projects.
The urban renewal district has the power to undertake and carry out any project or activity within its area of
operation. The decision of what projects are taken on by urban renewal is not taken to a vote per
Idaho Code 50-2007.
A public hearing is held before an activity may begin per Idaho Code 50-2008.
Notice of these public hearings are published in the legal section of the newspaper.
How Urban Renewal Affects Taxing Districts
Taxing districts still have the ability to collect their full budget requests. This includes the allowed 3% budget
increase and forgone amounts. This is because property taxes are budget driven not assessment driven. This means
the amount of taxes collected by taxing districts is determined by budgets not assessed values. Since taxing districts
only levy taxes on the base value, they are not able to collect on
occupancies. (new construction) located in urban
renewal districts. See Idaho Code 50-2908.
Occupancy taxes pay for growth such as added equipment and manpower needed for a fire department to adequately protect
new buildings in their area. Taxing districts are required to support all of the structures and population within
their districts regardless of the funds available to accomplish this. See
Required County Services . Urban renewal
districts often bring new construction and growth to the community. Taxing districts don't see the revenue created
by this growth until the urban renewal district ends which is typically around 24 years.
How Urban Renewal Affects All Tax Payers
Any given taxing district, such as the County, can cover properties both inside and outside of an urban renewal
district. The taxing district can only levy taxes on the base value of the portion of properties that are also in the
urban renewal district. This creates a tax shift and causes levy rates to increase at a faster rate (or in some cases
not decrease as much as it would have otherwise). This affect on the levy rate applies to all of the properties within
the taxing district whether or not they are located in an urban renewal district. This means each tax payer is
responsible for providing a larger percentage of the tax district's budget. When there isn't an urban renewal district
in place a taxing district levies taxes against the entire taxable value of every property in their code area. See the
table below.
When an urban renewal district is in place, the taxing district must subtract the increment value (of the properties
that are also in the urban renewal district) from the total assessed value of all of the properties within that taxing
district. See the table below.
The tables above illustrate the affect urban renewal has on levy rates. The assessed value of the individual
property and the taxing district budget are exactly the same in both instances above. Yet, the individual tax bill
increased. This increase would be exactly the same if the property were inside or outside of the urban renewal
district. It is possible for levy rates to decrease while an urban renewal district is active, but they will not
decrease as much as they would have if an urban renewal district wasn't in place. Urban renewal will never cause the
levy rate to decrease during its lifetime. The lifetime of an urban renewal district is typically 24 to 30 years.
The tables above displays a breakdown of actual tax bills of one property in an urban renewal district. Note: that
urban renewal does not have its own levy rate. It adopts the levy rate of the code area it is in.
Bonding
Urban Renewal districts have the ability to sell bonds using their future property tax income as collateral per
Idaho Code 50-2909.
In other words, the urban renewal district is borrowing money to increase their short term revenue. This
money is paid back with interest by the urban renewal district as revenue becomes available.
Urban renewal districts only levy taxes on increment value. There is only increment value when assessed values
increase. If the assessed values of property with in an urban renewal district decrease the district does not receive
income. This could cause the urban renewal district to default on these bonds. If this happens, the municipality, the
state, or any political subdivision can not be held liable. Nor will the bonds be paid out of any funds other than
those of the urban renewal agency. See Idaho Code 50-2012.
