At the same time, the need for new or improved schools, sewers, highways, fire departments and other services also grows. Those services are paid for by property taxes, which are on the rise in many parts of the valley. This perfect storm means that many people can’t afford to buy a home — while some homeowners can’t afford their property taxes.
On Idaho Matters, we’re taking a deep dive into property taxes — which is not an easy subject. That’s why we're talking with Alan Dornfest, Property Tax Policy Bureau Chief at the Idaho Tax Commission and Margaret Carmel, a journalist with BoiseDev to help us sift through the ins-and-outs of property taxes.
Property Taxes are hard to figure out. So, let’s start with the basics. Taxes. The taxes you pay are made up of the budget needs of five units of government: county, city, schools, highway districts, and all the others (think mosquito abatement, cemetery and sewer districts, libraries, fire districts, community colleges...I’m going to stop listing things now because I’m tired, but there’s a lot of them). And there are even more tax CODE areas.
So all the districts where you live make up the property tax budget. And you have to pay your share of that total tax bill to all those entities which is based on the assessed value of your home. Sounds easy, right?
There are a few other things that affect that assessed value and your property taxes each year. Districts raising taxes, Urban Renewal Districts, adding or subtracting school bonds and levies, the Homeowners Exemption, the Circuit Breaker (more on those later), lower interest rates and growth are just a few factors.
So how does growth affect your property taxes? Well, more growth means cities and counties and roads need to add more services. And growth is very likely increasing your property’s value. Every five year an appraiser from your county assessor’s office does a reappraisal on 20% of properties to figure out what a typical buyer would pay for it.
Erin Brady is the Appraisal Division Supervisor at the Ada County Assessor’s Office. She looks at pictures of your house and can go curb-side to see if you’ve made improvements and check the physical condition. Then she adds in two very big factors. The first? Location, location, location.
The other big factor for reappraisal is market data. That’s code for how much your neighbor sold his or her home for. Generally speaking, the higher the sale prices in your area the higher your assessed value. And over the past few years, growth in the Treasure Valley has pushed those values higher and higher. Low inventory and cash sales are two of the reasons why.
According to Boise Regional Realtors, only 239 existing homes were for sale in Ada County at the end of August. That’s a record low and a drop of 72% compared to August of last year. The median sales price for all homes sold in Ada County hit a record high of $400,000 last month.
All these factors are helping increase your home’s assessed value and likely hiking your property taxes as well.
This interview is part of our new series called "Growing Pains." Over the next week or so, we'll explore stories and issues surrounding the Treasure Valley's rapid growth and increasing unafforability. Subscribe to our podcast to hear every interview, and download the Boise State Public Radio app to send us a voice message using our Talk To Us feature.
Support for "Growing Pains" comes from Broadcast Society members Jennifer Dickey and Andy Huang. Member support is what makes these interviews possible. Support this coverage here.
GEMMA GAUDETTE: You're listening to Idaho Matters, I'm Gemma Gaudette. The Treasure Valley is a popular place to live these days, and more and more people are moving here and those folks need schools and sewers, highways and fire departments just to name a few.
And that costs more money, money that comes from property taxes, which are on the rise in a lot of parts of the Treasure Valley. Now, those people also need somewhere to live, and that's been driving up housing prices. This is a perfect storm. That means many cannot afford to buy a home and some homeowners can't afford the rising property taxes. On Idaho Matters, we are spending the next week exploring some of these themes in a series we're calling Growing Pains. And today we're going to take a deep dive into property taxes, which is not an easy subject, as our producer Samantha Wright found out...
RECORDED - SAMANTHA WRIGHT: Property taxes are hard to figure out.
RECORDED - BOB MCQUADE: Oh, is it ever? It's become much, much more complicated and it's not as easy to understand as it was 40 years ago. Of course, I guess that's just just about anything. It's become more complex, you know, through time.
RECORDED - SAMANTHA WRIGHT: Ok. Ada County assessor Bob McQuade, why are they so hard?
RECORDED - BOB MCQUADE: There's a lot going on.
RECORDED - SAMANTHA WRIGHT: Let's start with the basics. Taxes, the taxes you pay are made up of the budget needs of five units of government, county, city schools, highway districts and all the others think mosquito abatement, cemetery and sewer districts, libraries, fire districts, community colleges. I'm going to stop listing things now because I'm getting tired, but there's a lot of them and there are even more taxing code areas.
RECORDED - ALAN DORNFEST: Statewide, there's well over 3000 of these unique areas, all of which will have different tax rates.
RECORDED - SAMANTHA WRIGHT: Hold on, Alan Dornfest, property tax policy bureau chief at the Idaho State Tax Commission. We'll come back to you in a minute to explain just what that means.So all the districts where you live make up the property tax budget and you have to pay your share of that total tax bill to all those entities. And that's based on the assessed value of your home. Sounds easy, right? Well, there are a few other things that affect that assessed value and your property taxes each year, like districts raising taxes, urban renewal districts, adding or subtracting school bonds or levies, the homeowner's exemption, the circuit breaker. More on those later. Lower interest rates, growth. Again, I'm stopping, but you get the idea. Just to make things a little simpler, I'm leaving out things like commercial property, agriculture, depreciation, rail cars (rail cars?), timber, and sticking mostly with primary residential property. And that's code for the home you own and live in. So wait a minute, go back. Growth. How does growth, like all the growth in the Treasure Valley, affect my property taxes? Well, more growth mean cities and counties and roads need to add more services and growth is very likely increasing your property's value. Every five years, an appraiser from your county assessor's office does a deep dove or a reappraisal on 20% of properties to figure out what a typical buyer would pay for your house.
RECORDED - ERIN BRADY: It depends on so many things. Construction quality, location, land value condition.
RECORDED - SAMANTHA WRIGHT: Erin Brady is the appraisal division supervisor at the Ada County Assessor's Office. She looks at pictures of your house and can go curbside to see if you've made improvements or check the physical condition. Then she adds in two very big factors. The first is location, location, location.
RECORDED - ERIN BRADY: The North End is a really good example of that. That's a very desirable location. Sales in that area obviously show that. You can find the same or it physically comparable property in terms of age and condition and construction type in downtown Kuna or downtown Meridian or downtown Star, and it's not going to have the same type of value.
RECORDED - SAMANTHA WRIGHT: The other big factor for reappraisal and the one used to determine your home value the other four years is market data. That's code for how much your neighbor sold his or her home for. Generally speaking, the higher the sale prices in your area, the higher your assessed value. (That's not always true, but work with me here.) And over the past few years, growth in the Treasure Valley has pushed those values higher and higher for a lot of reasons. Here's two.
RECORDED - BOB MCQUADE: Something else that's really fueling. This is we have a lot of people moving in from the West Coast. They're cashing out on the home that they had before and they're coming to Boise or Treasure Valley, Ada County, Nampa, Caldwell and they're paying cash for homes.
RECORDED - ERIN BRADY: Just the record low inventory. Those two forces together are really driving things up.
RECORDED - SAMANTHA WRIGHT: The Boise Regional Realtors confirm that low inventory reporting there were only 239 existing homes for sale in Ada County at the end of August. That's a record low and it's a drop of 72% compared to August of last year. And it reports the median sales price for all homes sold in Ada County hit a record high of $400,000 last month. All these factors are helping to increase your home's assessed value and likely hiking your property taxes as well.
GAUDETTE: That's our producer, Samantha Wright. Let's take a deeper dive at what she just outlined with Margaret Carmel, a journalist with BoiseDev.com and Alan Dornfest, Property Tax policy Bureau Chief at the Idaho State Tax Commission. Welcome, both of you.
BOTH: Thank you. Thanks for having me.
GAUDETTE: So, Alan, let's start with you. You told Samantha in that interview that there are more than 3000 tax code areas and 1000 taxing districts in Idaho. So let's start with the taxing districts. Those are cities and counties and schools, correct?
ALAN DORNFEST: There are those three plus their special purpose, taxing districts. Samantha mentioned several of them earlier. They include things like fire protection districts, community college districts, sewer and water districts, cemetery maintenance districts and the like. There's about 26 or 27 different types of taxing districts. Now, to put that in perspective, 90% of the total tax is levied by what they call the big four: cities, counties, highway districts and school districts.
GAUDETTE: Ok, so you actually created a hypothetical county and we'll put that up on our website so folks can look at it. But can we talk about that and can you use it to explain what taxing code areas are?
DORNFEST: Yes. So I'm not seeing it, but I can sort of do it from memory. OK, so let's just take a simple example. Boise City is split, in a sense, into two school districts. Mm hmm. I live in East Boise and and I'm in the Boise School District. OK, that's a separate taxing district. People who live in West Boise are usually often in the West Ada School District. OK, and that's a different school district. So those two districts set their amounts that they want as budget items, go out to the voters for different voter approved levies and so forth, independently from each other. And that results in two different levy rates. So on its simplest level, everybody in the city of Boise pays one rate for the city of Boise while we're all in Ada County. So we pay one rate for Ada County as well as an add on rate. But we might pay one of two rates for schools, either the West Ada or the Boise rate. So that by itself, in the simplest manner, separates Boise into at least two tax code areas. Now they happen to be hundreds in Boise because we have sewer and water districts and cemetery districts and other things that overlap. So it's more complex than that.
GAUDETTE: So if I'm understanding this right, Alan, for example, I live in the East End as well. So what would show up, let's say, on my property tax and these districts would be quite different potentially than someone, let's say, who lives in Kuna, even though we both live in Ada County.
DORNFEST: Absolutely. So Kuna is a different city, it's subject to setting its own budget, there's a different school district, not even West Ada, it's the Kuna School District that's out there. I'm not sure if they have a fire department like Boise does or have a rural fire district that happens to overlap into the city. We have both models around the state and I'd have to look into the detail to see which it was. That's going to mean that the people there, while they pay the same county tax, you know, they don't pay the same city tax, they don't pay the same school tax, they may pay a fire district tax and so forth. So it's going to definitely be a separate tax code area. Again, these overlaps relate to the geography. Each of these taxing districts establish their own geography or had it established through, you know, some as far back as statehood and in some predating statehood. At any rate... But they overlap in different ways. So as a result, then we get all the thousand taxing districts, create more than a thousand unique areas when we add up all the tax rates. And that's what we call our tax code area system.
GAUDETTE: So it would be fair to say that all of my districts, right where I live in their changing needs, would then affect my property taxes.
DORNFEST: Yes, they would affect your property taxes as well as... but remember that your districts are only one side. So your districts create a budget, and that's the numerator in our property tax equation of calculating a rate, you have to come out with a rate to apply to your property value before you can know your property taxes. The denominator in the rate, what you divide by, is the value of all the property that subject to tax, including in most cases, as was said a minute ago, even railcars. So it's a much more complex scenario. And let me just say this. The amount by which an individual's taxes grow from year to year is A, not limited, but B, really related to that individual is one tiny slice of a pie, an overall pie being the amount of budget that the taxing district, the city or whoever needs. OK, and if that slice of pie grows because the value on that property grows faster than the value of other properties in that district, then the taxes go up for that slice for that particular property, OK? If all property increases at the same rate, like, let's say all property values double throughout the county, basically nobody's taxes would increase or increase only at the margin a tiny little bit. And that's an important distinction. You have to think of it as a zero sum game. Value increases themselves do not lend themselves to more tax, but they might for you if that value increase increases your amount of the pie size.
GAUDETTE: So, Margaret, I want to bring you into the conversation because you've done some great reporting on property taxes and what's been, you know, pushing them up. So let's look at just one of those districts, the city of Boise. Can can you take us back? I mean, 16 years ago when former Mayor Dave Bieter took office
MARGARET CARMEL: Right, so 16 years ago, former Mayor Bieter took control the city and throughout every year for his term, the city of Boise increased property taxes, the maximum 3% they were allowed. As well as taking additional tax increases for new construction. Now, one thing I do want to say is that whenever you look at your tax bill, the majority of the increase you're going to get every year is going to come not from what the city is doing, but from your increased VAT assessment, especially in these last couple of years, as values are going up double digits, especially in places like the Boise bench.
But, whenever you you look at OK, well, you know, if the city takes 3%, it's only an additional $40 a year. But if you do that every year for 16 years, there is an impact there. And that's not to say that the city's policies were totally the reason for this increase, because you're also seeing a tax increase, you're also going to pay taxes on the school district. You're also going to pay taxes and all these other things. But it does have an impact on affordability for folks, especially people on fixed incomes who are homeowners. And that became a big topic during the 2019 mayoral election.
GAUDETTE: Well, and so it's interesting, Margaret, because when you say, like let's say, you know, it just goes up $40, right. Every year, but that's 16 years. That's $640. And that's just that 3% increase. It's not everything else.
But do we know why the city council did not consider taking the full 3% or did they when former Mayor Bieter was in office?
CARMEL: So I can only speak to the fiscal year 2019 in fiscal year 2020 budget processes, because that's when I when I was working. But what I saw was the city council starting with the assumption that they would take 3%. You know, there really wasn't too much of a discussion of should we take this 3%, maybe not, at length. I know city council member Holly Woodings said that she brought it up one time. I don't recall that, but it wouldn't surprise me. My point is that this was not a conversation they had that I observed. And I think it was because, you know, Mayor Bieter was really, when he was mayor, he was trying to guide the city to do new projects, add new parks, new programing, build housing for the chronically homeless, increase they increase the living wage for certain employees, hiring new employees to do new projects, investing more in public transportation, and saving for the main library project, which is on pause. So I think his view was, OK, yeah, we're going to take this taxes and we're going to take that 3%. But the projects he wanted to accomplish for the city in his mind kind of outweigh -- he was looking to grow what the city was offering to citizens. And in order to do that, you need to increase taxes.
GAUDETTE: We need to take a quick break. Margaret and Allen will stay with us. And when we come back, we'll look at how tough those property taxes have been recently. Support for our Growing Pains series of conversations comes from Boise State Public Radio Broadcast Society members Jennifer Dickey and Andy Huang. This is Idaho Matters.