February 19, 2006 From www.thenewyorktimes.com

As Property Values Rise, Homeowners Feel Pinch
By RICK LYMAN

BOISE, Idaho — Charlotte Snow assails the rising property taxes on her 33-acre spread here in the windswept foothills above the state capital.

"I've got a tarp on my roof and plastic on my windows to keep the heat in," Ms. Snow said. "I never intended to live like this. But I don't have enough to pay my property tax bill, much less keep the place fixed up."

For several days this month, Ms. Snow sat and watched as a panel of Idaho legislators heard testimony about a battery of proposals, more than three dozen of them intended to ease voter anxiety about the state's skyrocketing property taxes. When her time came to testify, amid a parade of economists, homeowners, lobbyists and statehouse gadflies, she wept and begged the state to do something to save the rural life she had come to Idaho to enjoy.

"The whole question is, why do I have to sell my home because the taxes went crazy?" she said. "All I've got is a rundown barn in the middle of Idaho."

Nearly everyone complains about property taxes, but Ms. Snow seems to have a particular point. In the last year, when her land on the edge of Boise's creeping sprawl was reclassified to residential property from agricultural, her taxes rose to $10,871 from $2,200.

Soaring home prices, shifting population and sporadic budget crunches have combined to make property taxes one of the thorniest sources of voter anger and legislative angst in dozens of states. Call it the dark side of the real estate boom.

"There is a lot of interest in property tax relief across the country," said Bert Waisanen, who studies tax trends for the National Conference of State Legislatures. "A lot of states have either recently enacted or are considering a variety of mechanisms, often aimed at finding relief for senior citizens and low-income homeowners who get swamped by rising property values."

A handful of state legislatures are grappling with the matter now. In Texas, legislators are under a June 1 deadline set by the state's Supreme Court, which ruled that the current property tax system is unconstitutional. A mishmash of proposals are being considered by Indiana legislators to stanch rising voter anger over rising property taxes, including proposals to raise other taxes. In South Carolina, legislators are arguing whether to let voters decide in a November referendum what to do about rising property assessments.

In Nevada, where legislators voted last year to limit the annual rise in property taxes to 3 percent, school districts are at least thinking smaller. Just last month in Washoe County, which includes Reno, administrators shelved plans for a $95 million technical high school and the expansion of several existing schools until the full impact of the new law can be measured.

Two years ago, the Pennsylvania Legislature passed a law legalizing slot machines, whose revenue was to offset property taxes, but three-fourths of the state's school districts decided to opt out of the plan. So legislators found themselves squabbling again over the issue.

The revolt is not yet of the scope that led California voters to pass Proposition 13 a quarter-century ago, spawning a drastic reduction in property taxes. Idaho is one of the states where the complaints are fiercest, and the Legislature is expected to adopt some changes this year to defuse the grass-roots anger.

Tax experts speak of the "three-legged stool" on which state tax policies are based, a mix of income, sales and property taxes. What has happened, as a result of booming house prices, they say, is that the property tax leg of the stool has grown disproportionately long, putting a noticeable burden on homeowners. And what makes property taxes even more politically delicate is that they are often a state's prime source of public school financing.

"The larger the state's role in financing public education, the less terrible the tax revolt is, generally," said Myron Orfield, a law professor at the University of Minnesota who specializes in urban and regional growth. "Ohio, Pennsylvania and New Jersey, for instance, are very dependent on local property taxes for schools, and they have seen some of the fiercest revolts." In some places, the furor has been muted with the gains in home prices.

"Right now, I'd have to say, the number of tax revolts is not quite as widespread as they were a year ago," said David Brunori, a professor of public policy at George Washington University who specializes in state tax issues. "For one reason, the real estate market is cooling in many parts of the country."

Suggesting that certain types of taxes are palatable when designated for something tangible, voters in California, Colorado and Washington rejected ballot measures to roll back some types of tax increases or to limit state spending last November.

Still, in the handful of states where grass-roots tax revolts are brewing, Mr. Brunori said that they were boiling briskly.

Bill Goodnight, 66, a retired fish-and-game biologist, has kept scrupulous track of the taxes on his 100-year-old home on Boise's far northeast side. When he bought the house in 1989 for $59,500, he paid $454 in property taxes. The bill rose to $909 in 1995, $1,507 in 2000 and $3,005 last year, when his house was assessed at $225,000, increasing his tax payments by more than 560 percent.

"Taxes on businesses and developers haven't gone up nearly so fast," Mr. Goodnight said. "So we feel like they're making ordinary citizens subsidize the state's growth. Everything's geared to grease the skids for development. It's time we got things into better balance."

Kenneth Robison, a former Democratic legislator, has become one of the loudest proponents of easing Idaho's property taxes.

"In the last two years, residential taxes have increased nine times as much as taxes on commercial and other property," Mr. Robison said. "Since 1976, residential property taxes went up 1,094 percent compared to 320 percent for nonresidential properties. This is causing a major hardship for a lot of people in this state."

Growing unrest led to the introduction of several bills in last year's legislative session, but legislators decided to form a special committee to study the issue further.

"They thought if they just formed a commission, the issue would go away," said Chuck Thomas, a retired Boise resident who also testified before the committee. Instead, hundreds of angry voters showed up at a dozen hearings around the state last summer to harangue legislators, particularly in areas like fast-growing Boise and the resort areas of Ketchum and Coeur d'Alene, where home prices are rising fastest.

The result was the current jumble of proposals, mimicking the approaches taken in other states.

Already, Idaho has a $50,000 homeowners' exemption on owner-occupied dwellings, a figure that seemed sizable in 1982, when it was originally passed, but less so as property values rose. One bill on its way to the House floor would raise that exemption to $75,000; others have suggested raising it to $100,000.

Others want to cap the amount that taxes can rise in a given year at 5 percent, no matter how much the property's value goes up. Others talk about shifting some of the burden to the sales tax. And some Republican legislators are looking at the spending side, proposing a limit on local government growth, thereby limiting the need for higher property taxes.

Most of the opposition to altering the state's property tax structure has come from developers and business groups, worried that lower tax bills for homeowners will mean higher tax bills for them.

"The truth is, Idaho has some of the lowest property taxes in the country and our system is really pretty balanced and not in need of dramatic change," said Steve Ahrens, president of the Idaho Association of Commerce and Industry, which lobbies on behalf of the state's businesses. "But it seems pretty clear that something will come out of the Legislature this year, probably a mix of several approaches. Because there is no single silver bullet."

Copyright 2006The New York Times Company