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Lesson 7 of 9 · about 19 minutes

Urban Renewal and Tax Increment Financing in Idaho

You'll be able to

  • Explain the roles of Title 50, Chapter 20 and Chapter 29 in Idaho urban renewal
  • Compute an urban renewal agency's increment revenue from a base value, current value and levy rates
  • Identify which levies are excluded from capture (voter-approved bonds and supplementals since 2008, many fire and ambulance levies, some highway levies)
  • Compute how excluding increment value raises levy rates for property outside the area
  • Summarize the strongest arguments and evidence for and against tax increment financing

Urban renewal in Idaho redirects part of the existing property tax. When property inside a designated area gains value, the tax that most districts would have collected on that growth goes instead to an urban renewal agency, for up to 20 years, to pay for streets, utilities, parking and other projects in the area. That redirection is the whole mechanism, and the whole argument.

Two chapters of law

  • The Urban Renewal Law, Title 50, Chapter 20, lets a city or county create an urban renewal agency and adopt plans for deteriorated or underused areas. It sets the rules for plan amendments, such as the one-time boundary expansion of no more than 10 percent in 50-2033.
  • The Local Economic Development Act, Title 50, Chapter 29 (1988), adds the money: a "revenue allocation financing provision," Idaho's version of tax increment financing.

To create a revenue allocation area, the agency prepares a plan that must include, under 50-2905, the base value and the total value of the municipality, the public works planned, an economic feasibility study, a cost list, a fiscal impact statement for every taxing district both before and after bonds are repaid, and a termination date. The city or county must publish notice 30 to 60 days before final reading of the ordinance and send the plan to every affected taxing district (50-2906). The base of all revenue allocation areas in a municipality cannot exceed 10 percent of the municipality's current assessed value (50-2903(16)).

How the increment works

Base value ($80 million): taxes go to all districts Increment ($150 million by 2026) captured levies go to the agency 20202026 Value
The base stays frozen (with adjustments). Growth above it is the increment.

Each year, under 50-2908:

  1. The county computes each district's levy rate using the area's base value instead of its current value (also required by 63-803(4)).
  2. That rate is applied to all property in the district, including the full current value inside the area.
  3. Each district gets its tax from property outside the area plus its rate times the base value inside the area. The agency gets the rest: the rate times the increment.

Not every levy is captured. Under 50-2908(1), these are figured on current value and paid entirely to the district: voter-approved general obligation bond and plant facilities levies passed after 2007; school supplemental levies approved after 2007; school emergency levies approved after July 1, 2015; temporary voter overrides under 63-802(3); refund and judgment levies; and judicially confirmed obligations. Since July 1, 2020, highway district taxes in newly formed or expanded areas also go to the highway district unless the city or county creating the area maintains the roads. And the 2025 law HB 436 lets fire and ambulance districts opt out of existing areas and keeps them out of new areas created or modified after July 1, 2025, according to the Tax Commission, with a 2026 cleanup bill (HB 551) letting them count new construction when they are not feeding urban renewal.

Example: the Larkspur Riverfront area

The invented City of Larkspur adopted the Riverfront revenue allocation area in 2020. Its base value was $80,000,000. By 2026 its value is $230,000,000.

Increment = $230,000,000 - $80,000,000 = $150,000,000.

Captured levies (all regular operating levies; the city maintains its own streets; the ambulance district has opted out under HB 436):

DistrictLevy rateAgency receives (rate x $150M)
Quill County0.002100000$315,000
City of Larkspur0.003400000$510,000
Larkspur Library District0.000400000$60,000
Larkspur Cemetery District0.000050000$7,500
Total0.005950000$892,500 a year

Not captured: the Kestrel Valley School District's bond and supplemental levies (voter-approved after 2007) and the ambulance levy. Their full tax on the $230 million goes to those districts.

The effect outside the area. The city certifies $4,250,000. Its taxable value excluding the increment is $1,250,000,000, so the rate is $4,250,000 / $1,250,000,000 = 0.003400000. If the increment counted, the rate would be $4,250,000 / $1,400,000,000 = 0.003035714. A home outside the area with $255,000 of taxable value pays $867.00 for the city line instead of $774.11, or $92.89 more.

That $92.89 assumes the $150 million of growth would have happened without urban renewal. If it would not have, the comparison flips: without the agency, there would be no increment to share. This is the "but for" question again.

Limits and endings

  • 20 years. Under 50-2904, a revenue allocation provision may not last more than 20 years from the ordinance date. Exceptions cover bonds issued for a specific project (maturity no more than 20 years), refinancing to avoid default, plans adopted before July 1, 2011 with longer stated terms, and a provision allowing up to 20 more years for certain manufacturing projects on parcels the project owner controls. Adding land never extends the original deadline.
  • Base reset. Since July 1, 2016, a plan modification resets the base to current value (50-2903A), shrinking the increment, unless the change fits a listed exception or the agency certifies debt it cannot otherwise repay. Agencies must file an annual affidavit saying whether they modified a plan.
  • Budget. Each agency must adopt and publish a budget by September 1 (50-2903(5)).
  • Ending. When an area terminates, its increment returns to the regular rolls. The Tax Commission's 2026 training says districts may add 80 percent of the expired increment, times the new construction preliminary rate, to their budgets. (Under 63-301A(3)(f), that 80 percent rule covers areas formed after 2006; for older areas only increment above its December 31, 2006 level counts.) Statewide, increases for terminating urban renewal areas came to $10.3 million in 2025, the Tax Commission reported.

Example: when Riverfront ends

Suppose Riverfront ends with the same $150,000,000 increment and the city's new construction preliminary rate is 0.003244107. Extra budget capacity for the city: 80 percent x $150,000,000 = $120,000,000; $120,000,000 x 0.003244107 = $389,292.84. If the city takes all of it, outside homeowners get less of a rate drop than the full return of the increment would give them.

The debate, with the evidence

Supporters, including the Association of Idaho Cities, describe urban renewal as "an economic development tool" that has helped "revitalize downtowns," as AIC put it in a 2019 legislative update. Their strongest points: it lets a city pay for infrastructure that private development needs before the development exists; it does not raise tax rates by itself; and the tax paid by property inside the area is the same as anywhere else. Agencies can point to specific downtown and industrial projects that followed their investments.

Skeptics, including legislators who have repeatedly narrowed the law, argue that an appointed agency spends tax money that elected boards of schools, counties and fire districts would otherwise control, without a public vote. The Legislature has acted on that concern several times: the 2016 base reset, the 2020 highway district carve-out, the 2023 data center rule and the 2025 fire and ambulance opt-out each took increment away from agencies.

On the central empirical question, the best-known research cuts against the broad claim that TIF creates growth. Richard Dye and David Merriman, studying Illinois municipalities, found that value inside TIF districts grows fast, but that the non-TIF parts of municipalities using TIF grew no faster, and perhaps more slowly, than in similar municipalities without it. They also found effects differ by land use. That is Illinois, not Idaho, and it is research from the 2000s. It does not prove a particular Idaho project failed. It does mean that "look how much the district grew" is not evidence that urban renewal caused the growth.

Common mix-ups

  • Claim: Businesses in urban renewal areas don't pay property tax. What the evidence shows: They pay the same rates as everyone else in their districts. The difference is where part of the money goes.
  • Claim: Urban renewal takes school bond money. What the evidence shows: Voter-approved bond and supplemental levies passed after 2007 are excluded from capture under 50-2908(1).
  • Claim: Urban renewal is a new tax. What the evidence shows: It reallocates existing levies. It can raise rates outside the area, which is a real cost, but it adds no levy of its own.

Reporting angle

  • Start with the Tax Commission's Urban Renewal Registry and each agency's annual report: every revenue allocation area, base value, current value, increment, revenue and termination date.
  • Read the plan's fiscal impact statement and compare its projections with what actually happened.
  • Ask each taxing district how much revenue the agency receives from its levy, and what its rate would be with the increment included.
  • Check the agency's annual affidavit on plan modifications and any notices to the Tax Commission, county clerk and assessor. A modification without a base reset should come with a certified debt exception.
  • Track termination dates. A big area ending is a story about budget capacity: will districts take the 80 percent increase or let rates fall?

Research angle

Check yourself

1. What is the 'increment' in an Idaho revenue allocation area?

2. How long can a revenue allocation provision adopted today last, under 50-2904, outside its narrow exceptions?

3. A school district's voter-approved bond levy passed in 2015 applies to property inside a revenue allocation area. Who gets the bond tax from the increment value?

4. Why do levy rates for property outside a revenue allocation area tend to be higher than they would otherwise be?

5. What happens to an agency's base value when its plan is modified, under 50-2903A, unless an exception applies?

6. What did Dye and Merriman find in their Illinois research on tax increment financing, as summarized in Land Lines (2006)?

Terms in this lesson

Urban renewal agency
A public body created by a city or county under Idaho's Urban Renewal Law to carry out an urban renewal plan.
Revenue allocation area (RAA)
The part of an urban renewal area where property tax on value growth above a base is allocated to the agency. Idaho's name for a TIF district.
Base assessment roll
The equalized value of the area's property on January 1 of the year the ordinance is adopted, with adjustments, against which growth is measured.
Increment value
The amount by which properties in the area are worth more than their base values.
Tax increment financing (TIF)
The general name for funding public projects with the property tax on value growth in a district.

Full glossary

Sources