How Urban Renewal Redirects Property Tax

Editor's Note: We received feedback after our recent posts about Driggs and Victor's urban renewal districts that some people had no idea what an urban renewal agency was, or how it worked, or what it did. So we put this piece together explaining the current Idaho law and local situation.

An urban renewal agency is a public body a city or county creates under Idaho law to pay for streets, utilities and other public works in a defined area. Under current law, for up to 20 years, it keeps much of the property tax collected on rising taxable value within its district and spends it on projects listed in a plan the city or county approved. Victor and Driggs each have one.

Victor's agency received $98,252 in tax increment in the fiscal year that ended Sept. 30, 2025, its annual report shows. Its preliminary budget for the fiscal year that began Oct. 1 projected $205,000, with $95,000 from its north district. The Idaho State Tax Commission estimated that urban renewal agencies statewide received $76,079,249 in 2023, about 3.4% of all the property taxes Idahoans paid that year. Agencies in Teton County received $247,079 of that.

When a city or county adopts an urban renewal plan, the district's base is the taxable value of its property as of Jan. 1 that year. Any taxable value the district gains above that base is called the increment. Property owners inside the district pay the same levy rates as owners outside it in the same taxing districts. The tax on the base goes to the county, the school district and the other taxing districts, as it did before. The tax on the increment goes to the agency instead.

Meghan Conrad, an attorney with the Boise firm Elam & Burke, walked the Driggs Urban Renewal Agency board through the mechanics on Oct. 7. Increment "is not only new taxable development, but it also captures the inflationary increases that occur within the district as well," she said.

The increment excludes bonds and school levy overrides voters have approved since 2008. The increment excludes highway district levies for districts formed or expanded since mid-2020, unless the city maintains its own roads or the highway district agrees. Under House Bill 436, passed in 2025, fire and ambulance districts stay out of any district created or changed after July 1, 2025, unless they consent, and they may withdraw from an older one whose debts allow it. Victor's agency began negotiating to help buy a fire engine after Teton County Fire & Rescue gained that power.

An urban renewal district does not add a tax, and it does not raise any taxing district's budget, which state law caps. Taxing districts set most levy rates against taxable value that leaves out the increment, so each rate comes out higher than it would if the increment counted. The Tax Commission's 2026 training for county officials works an example: a district with a $1 million budget and $100 million in base value sets a rate of 0.01, and that rate applied to $25 million in increment sends $250,000 to the agency. "Total property tax raised is $1,250,000 even though levy rate was set to raise $1,000,000," the training says.

Boise's urban renewal agency, Capital City Development Corp., says on its website that "property taxes are not increased when an urban renewal district is formed," and that "the tax levy rate may rise slightly (perhaps insignificantly) for all property owners in a county." The Canyon County Assessor's office says urban renewal "causes levy rates to increase at a faster rate or in some cases not decrease as much as it would have otherwise," and that "this affects all properties, regardless of whether they are in an urban renewal district."

Teton County's levy rates sit far below the state's ceiling. "We're nowhere near the levy cap," county Clerk Kim Keeley told commissioners June 23, "because our values are so high." The limit the county runs into is the budget growth cap, about 3% a year, and new construction lets a budget grow past it.

New construction inside an urban renewal district also stays off the roll that lets other taxing districts grow their budgets, until the district closes. Conrad told the Driggs board, "There's a delay in the ability to recover a budget capacity increase. It's not like it doesn't happen. It's just delayed until the time of termination. So the impact is the delay. However, if there isn't any growth in your district, then there's not an impact."

What the money can buy

The money pays for public works, such as streets, water and sewer lines, parks, sidewalks and the land under them, and it can fund programs to repair and rehabilitate buildings. Idaho's constitution bars cities, counties and other local governments from lending their credit to any individual or company, which Conrad summed up for the Driggs board as "you can't just give money to a developer." On requests to put up a building for a developer, she said, "that's a question that comes up shockingly a lot, and we have to say no."

An agency that wants to pay, together with other state and local public money, for 51% or more of the cost of a city hall, library, fire station, courthouse or another public building listed in state law costing more than $1 million needs 60% approval in a city election first. Streets, pipes and parking don't count toward that cost.

Conrad described the Driggs agency's method: "you collect, you save. As soon as you have enough money, you can either partner with the city or, through owner participation agreements with developers, you reimburse." Victor's agency commits only what it can fund from current money or the increment it expects that year, its annual report says. In Conrad's example, a building finished in August 2026 reaches the tax rolls in January 2027, and the agency sees its first payment from it around January 2028. "When you talk about standing up a new district, you might not have any money for 3 or 4 years at all," she said.

Conrad reminded the Driggs board, "When we talk about doing projects, we always have to go back to the plan." "If you don't identify sewer projects at all, and then at 5, 7 years into your plan, it's like, well, wait a minute, that's what we actually need to spend our money on," she said. "If it's not identified, you're really out without doing an amendment."

Since 2016, changing a plan resets the district's base to current values. The law makes four exceptions, including a single expansion of up to 10% of the district's area. It also skips the reset when an agency certifies debts it couldn't otherwise repay.

Driggs' agency, created in 2004, runs a Main Street district that is set to end Dec. 31, 2028, and a Front Street district adopted in 2016. On Oct. 7, its board voted to begin creating a new downtown district and to close Main Street early.

Victor's agency, created in 2010, formed a downtown district in 2015 and adopted a north district in 2024. Its lawyers at Elam & Burke advised in a Feb. 17 memo that it may help pay for fire trucks and stations but "would not be permitted to allocate money directly to the Fire District's operating budget."

Who runs it

State law calls an urban renewal agency "an independent public body corporate and politic." The city of Victor's page for its agency says, "All decisions, budgets, and projects undertaken by the VURA are made by its Board, which acts independently in accordance with applicable state statutes." That separation, the page says, keeps the agency's debts outside the city's debt limits and budget.

In a city, the mayor appoints the commissioners, with the council's consent. A board has three to nine members serving terms of up to five years. Commissioners must live in the county and are not paid, though they can be reimbursed for expenses. Council members may serve, but they cannot make up a majority. Once a commissioner is seated, a council majority can remove them only for inefficiency, neglect of duty or misconduct in office, after a hearing. The agency files its budget with the council, must file an annual report with it by March 31, and must present that report at a public meeting.

The city council adopts each plan, and any change to one, by ordinance after a public hearing. The council can also serve as the agency's board itself for up to a year, or provide for an elected board. Since 2025, the council can dissolve the agency or end a plan early, and once either process begins, the agency can't take on new obligations. Agencies created after July 1, 2011, need voter approval to operate. Driggs' and Victor's agencies were both formed before that date.

Victor's board

Victor's agency has seven seats. The city's page for the agency lists six commissioners and one vacancy, and shows the terms of Chair Ian Everard and Commissioner Neil Albert expiring in September 2026. The City Council reappointed Everard on Oct. 14. The agency advertised its open seat in the local newspaper last year, and commissioners and the executive director reached out, but "there have been no applicants," its 2025 annual report says.

The agency has no permanent employees. Its board contracts for an executive director, accounting and legal work, and it meets at 9:30 a.m. on the first Monday of each month at 138 N. Main St., Unit 201.

Teton County residents can apply. The city's board application asks applicants to name the board they want, list three references, attach a résumé and disclose any conflicts of interest. Send completed forms by email to City Clerk Michelle Smith at [email protected]. The form says "selected candidates will be contacted for an interview," and the mayor makes the appointment with the council's consent. The city's page posts no deadline.

What to watch: The Victor Urban Renewal Agency's board meets in special session at 9:30 a.m. Monday, Oct. 19, at Victor City Hall and on Zoom, to consider an agreement to reimburse Teton County Fire & Rescue for a new fire engine and medic van and to hear an update on a proposed south district. Its next regular meeting is Dec. 7.

How Urban Renewal Redirects Property Tax, and Who Decides How It's Spent

What the money can buy

Who runs it

Victor's board

Sources