Bill Description: House Bill 506 would raise the cap on a sales tax rebate incentive program for developers who fund highway improvements while also increasing the minimum commitment to participate in the program.
Rating: -1
Does it give government any new, additional, or expanded power to prohibit, restrict, or regulate activities in the free market? Conversely, does it eliminate or reduce government intervention in the market?
Idaho’s State Taxation Anticipated Revenue program, or STARs, rebates 60% of the sales and use taxes collected and remitted by qualified retailers (primarily new ones) within a large retail complex back to the developer. This reimburses the developer for the costs it incurs for major government-approved transportation improvements, such as new highway interchanges or significant highway upgrades.
To qualify, developers must spend at least $4 million on the retail complex construction and $6 million on the qualifying public highway project. (This is done via a formal agreement with the Idaho Transportation Board and/or local entities.) Rebates are capped at the project’s certified improvement costs or $35 million, whichever is less. Payments come from a dedicated state treasury fund, which is funded by diverting that 60% portion of incoming sales taxes from the site, with no interest paid and rebates stopping once the cap is reached.
The program functions very much like a privately fronted, sales-tax-based version of tax-increment financing, or TIF. (Urban renewal districts use a property-tax-based version of TIF as well.) It allows highway districts and local governments to spend unappropriated dollars on highway projects by using private funds upfront while leveraging future tax collections. It’s not a direct form of debt like bonding, but it still obligates future tax revenue to fund today’s spending.
House Bill 506 would amend Section 63-3641, Idaho Code, to increase the refund cap from $35 million to $100 million and increase the minimum cost of a qualifying transportation project to $10 million.
This change does two things. It increases how much future tax revenue can be obligated to a project, and it potentially crowds out smaller developers who might have less available capital to fund a highway project or propose a project that might not require improvements of that scale.
The program gives special incentives to large retail developments, and this bill would grow the incentives while limiting smaller developers’ access to them. The proposed change increases government manipulation of the market and, by obligating future tax revenue, effectively precludes other spending or potential tax cuts that could be funded if development were left to occur in a purely market-driven environment.
(-1)
