April 04, 2002 | By Keith Martin in Washington, DC

IDAHO has decided to let taxing districts use construction of a new merchant power plant nearby as an excuse to increase local budgets.

This could lead to an increase in property tax rates across the board in the taxing district, since the district will need to raise the additional money it is allowed to spend. State officials say any tax increases would probably be “immaterial.”

Property taxes in Idaho are collected mainly by counties. Property is assessed at full value, and property tax rates vary between 0.5% and 2.5%. Power plants, railroads and other utility property — called “operating property” — are assessed by the state, but taxes are collected by the taxing districts. Local governments are limited to a 3% increase a year in their budgets.

A town in northern Idaho expected to be “rolling in money” after a merchant power plant is built near the town, according to a state official. However, the town was disappointed to learn that the new power plant would have no effect on its budget since property tax collections on “operating property” are not included in the budget for purposes of calculating the 3% annual increase that is allowed. After a plea from the town, the state legislature made a special exception for merchant power plants. The governor signed the bill on March 27. Property tax revenues from merchant plants will be added in the future to budgets for purposes of calculating the 3% increase. The local government must then look at property tax collections from all assessed property to see whether rates need to change to match tax collections to the amount of the money it is allowed to spend in the coming year. Rates may not need to increase if assessed property values have gone up enough to bring in the additional revenue at existing rates. Any rate increase would apply to all local property owners.