🏛️ Issues and Advocacy Training
Courses › Urban Renewal and Economic Development Groups

Lesson 3 of 9 · about 18 minutes

Who Carries the Cost of the Increment

You'll be able to

  • Explain why new construction inside a revenue allocation area stays off the new construction roll under 63-301A
  • Compute the budget growth a taxing district gives up when development lands inside an area
  • Apply the withdrawal test for fire and ambulance districts under 50-2906(5)
  • Compute the cost to other taxpayers under different 'but for' assumptions
  • Read real increment revenue figures from an agency's audited statements

The property tax course already shows the most visible cost of urban renewal: levy rates are figured on base value, so everyone else's rate runs a little higher. Work through that lesson's Larkspur example if you have not. This lesson covers quieter costs that show up in taxing district budgets, and then the assumption that decides whether any of these costs is real.

The cost hiding in the new construction roll

Idaho caps most property tax budgets at 3 percent growth a year, plus an allowance for new construction and annexation (63-802). The allowance is a levy rate times the value on the county's new construction roll: a preliminary rate for most districts, and the previous year's levy rate for fire and ambulance districts. The logic, explained in The 3 Percent Cap, is that new buildings bring new taxpayers and new demands for service.

Inside a revenue allocation area that logic is switched off. The last sentence of 63-301A(3)(f) says the new construction roll "shall not include new construction located within an urban renewal district's revenue allocation area," apart from narrow exceptions. The new warehouse still needs fire protection, police calls and road maintenance. The tax on its value goes to the agency, and the districts get no budget growth from it until the area ends.

Example: Millrace Industrial Park

The invented City of Millrace has an industrial revenue allocation area created in 2018. In 2026, a distribution company finishes a building that adds $50,000,000 of taxable value. The Millrace Rural Fire District serves the park, did not withdraw from the area, and had a levy rate of 0.001200 last year, which is the rate 63-802 uses for a fire district's new construction allowance.

Building outside the areaBuilding inside the area
Value on new construction roll (90% of added value)$45,000,000$0
Fire district budget growth allowed0.0012 x $45,000,000 = $54,000$0
Fire district tax on the building each yearShared through the levy0.0012 x $50,000,000 = $60,000, paid to the agency

Run it forward. If the area has 12 years left, and the district would have kept that $54,000 in its base (the base then grows with the cap), the district forgoes at least $54,000 x 12 = $648,000 of budget authority while answering calls at the building. The agency collects roughly $60,000 x 12 = $720,000 from the fire levy on that one building, before any change in value.

The company pays the same total tax either way. What changes is who gets to spend it.

Fire chiefs made this argument in 2025. Nampa Fire District Chief Kirk Carpenter told legislators that urban renewal formation could cost fire districts "hundreds of thousands of dollars" in their budgets, BoiseDev reported. The Legislature responded with House Bill 436.

The fire and ambulance opt-out, in numbers

The 2025 law treats new and old areas differently (50-2906(4) and (5)):

  • Areas created or modified after July 1, 2025: fire and ambulance districts are out unless they adopt a resolution consenting to be in.
  • Areas created before July 1, 2025: a fire or ambulance district may withdraw if the area has no bonds, contracts or other debt funded by increment "greater than" the increment revenue attributable to that district as of December 31 of the prior year.

The withdrawal calendar: request an accounting from the county by May 1; adopt a resolution of intent by June 1; the agency holds a special meeting within 10 business days and accepts or denies in writing, citing the debt; accepted resolutions must reach the county and Tax Commission by the fourth Monday of July to affect next year's levy.

After withdrawal, 63-301A(3)(k) lets the district add 80 percent of the increment value to its new construction roll in the withdrawal year, and 90 percent of qualifying new construction inside the area each year after that.

Example: Millrace Fire withdraws from a smaller area

Millrace also has the Depot Street area, created in 2021. The county's accounting shows $95,000 of 2025 increment revenue attributable to the fire district. The agency's only Depot Street obligation is a reimbursement agreement with $70,000 left.

  • Test: is $70,000 greater than $95,000? No. The agency has no statutory ground to deny, so it should accept by resolution.
  • Depot Street's increment value is $60,000,000. In the withdrawal year the fire district adds 80% x $60,000,000 = $48,000,000 to its new construction roll.
  • At the same 0.001200 levy rate: 0.0012 x $48,000,000 = $57,600 of added budget authority.

The industrial park area, with $9 million of bonds outstanding, fails the test. The agency can deny that request in writing.

Real agencies have already run this test. The Twin Falls Ambulance District asked to withdraw from all of the Twin Falls agency's areas after the 2025 law passed. The agency's board denied withdrawal from Areas 4-3 and 4-4 and Orchard Drive East, saying obligations funded by increment there exceeded the ambulance district's share, and accepted withdrawal from Old Towne-2 and Southwest, according to the agency's 2025 annual report.

Reading real increment numbers

An agency's audited statements show where its money comes from, area by area. Twin Falls' figures for fiscal 2025 (year ended September 30, 2025):

Revenue allocation areaProperty tax increment, FY2025Share
4-3 (Chobani area)$3,870,97477.0%
4-4 (Clif Bar area)$967,18719.2%
Old Towne-2$174,5523.5%
Orchard Drive East$14,9260.3%
Total$5,027,639100%

Shares: $3,870,974 / $5,027,639 = 0.770; $967,187 / $5,027,639 = 0.192; and so on. Two industrial areas, each built around one food plant, produce about 96 percent of the agency's tax revenue. That matters for every question in this lesson: the "but for" debate in Twin Falls is mostly a debate about two food plants. The fiscal 2024 total was $5,048,474, so revenue was roughly flat year over year.

The assumption that decides everything

Every cost above assumes the growth inside the area would have happened anyway. If it would not have, there is no increment to fight over, and the districts lose nothing; they gain the whole value when the area ends. Reality is somewhere between. A simple way to see the stakes is to treat the "anyway" share as a variable.

Example: Rail Spur over 20 years

Suppose the Rail Spur area captures a total of $18,000,000 over its life (all captured levies combined). The cost shifted to other taxpayers and districts is roughly the captured increment times the share of growth that would have happened without urban renewal.

Share that would have happened anywayCost to others over 20 yearsWho is right?
0%$0Supporters: the agency created the value
25%0.25 x $18M = $4,500,000
50%0.50 x $18M = $9,000,000
75%0.75 x $18M = $13,500,000
100%$18,000,000Skeptics: the agency diverted value that was coming

This model is deliberately crude. It ignores the value of whatever the agency built, which may be real, and the service costs of growth, which are also real. But it shows why both sides talk past each other: they are arguing about the first column without saying so.

Lesson 9 covers the research on that first column. Most studies of business incentives find that a minority of subsidized decisions were actually changed by the subsidy. An agency that writes a feasibility study assuming 0 percent "anyway" growth should be asked to show its work.

Common mix-ups

  • Claim: A new plant inside an urban renewal area pays for the extra fire and police service it needs. What the evidence shows: Its tax on captured levies goes to the agency, and 63-301A keeps its value off the districts' new construction roll until the area ends or the district withdraws.
  • Claim: Fire districts can now leave any urban renewal area. What the evidence shows: Only areas created before July 1, 2025, and only if the area's increment-funded debt does not exceed the district's share. New areas leave them out unless they consent.
  • Claim: If an area grew a lot, urban renewal worked. What the evidence shows: Growth inside the area says nothing about how much would have happened anyway. That is the whole dispute.

Reporting angle

  • Ask the county clerk or auditor for the annual breakdown of increment revenue by taxing district for each area. It shows exactly how much each district's levy sends to the agency.
  • Ask each fire and ambulance district whether it requested a withdrawal accounting by May 1, and get the agency's written denial or acceptance under 50-2906(5)(c).
  • For a new area, ask fire and ambulance districts whether they received a consent request under 50-2906(4) and how their boards voted.
  • Find the feasibility study in the plan and look for the growth assumption. Ask the consultant what share of projected value they assumed would occur without the project.
  • Numbers to check: the district's levy rate (from the Tax Commission's levy worksheets) and the value of new buildings inside areas, which the county assessor can provide.

Research angle

Check yourself

1. A $50 million warehouse is built inside a revenue allocation area that a city levy is subject to. What does 63-301A say about the city's new construction roll?

2. A fire district's levy rate last year was 0.0012. If $45 million of new construction value would have been on its roll, what budget growth does the district lose when that construction is inside an area instead?

3. An ambulance district asks to withdraw from an area created in 2019. The agency's obligations funded by that area are $9 million, and the increment revenue attributable to the ambulance district last year was $80,000. What happens under 50-2906(5)?

4. In fiscal 2025, the Twin Falls urban renewal agency reported $5,027,639 in property tax increment, of which $3,870,974 came from Revenue Allocation Area 4-3. About what share is that?

5. Over 20 years, an area captures $18 million. Analysts agree half the growth would have happened without urban renewal. Under the simple model in this lesson, what is the cost shifted to other taxpayers and districts?

Terms in this lesson

New construction roll
The county's list each year of value added by new buildings and certain other changes. Each taxing district's budget can grow by a levy rate times that value, on top of the 3 percent cap.
Preliminary levy rate
The rate most taxing districts compute from their prior budget plus the share of the 3 percent increase they choose, divided by current taxable value, and then multiply by new construction value. Fire and ambulance districts use the previous year's levy rate instead.
Withdrawal (fire and ambulance)
The 2025 process under 50-2906(5) letting a fire or ambulance district leave a pre-July 2025 revenue allocation area if the area's debts do not exceed the district's share of increment.
But for
The question of whether development would have happened without the public subsidy. It decides whether captured increment is a real cost to everyone else.

Full glossary

Sources