Flawed Idaho data center bill would effectively kill urban renewal district in Kuna | Opinion

A bad bill making its way through the Idaho House appears to be based on a gross misunderstanding of how Idaho’s urban renewal districts work.

And, if passed, it could spell the demise of an urban renewal district in Kuna meant to create a massive industrial park that includes a Meta data center.

The bill, House Bill 46, received approval from the House Local Government committee, whose members seemed confused about the bill and misunderstood how taxes are paid under an urban renewal district.

The bill conflates two separate issues — a sales tax exemption for a specific business category and urban renewal districts.

Three years ago, champing at the bit to bring a Facebook/Meta data center to Idaho, legislators passed legislation giving data centers a sales tax exemption on equipment purchased for their business.

It worked.

Meta announced last year that it had purchased land outside the city of Kuna and was planning to build a 960,000-square-foot data center.

The city of Kuna in November created a new Kuna East Urban Renewal District that included 1,800 acres for a new industrial park that included the data center.

Now, legislators want to screw all that up.

“Basically it makes our urban renewal district out there ineffective,” Kuna Mayor Joe Stear told me in a phone interview. “It’s ineffective until other users come on, which the whole purpose of (the urban renewal district) was to help get other users on.”

The bill brought by Rep. John Gannon, D-Boise, House Speaker Mike Moyle, R-Star, and Rep. Barbara Ehardt, R-Idaho Falls, would make data centers choose: either accept the sales tax exemption or be put in an urban renewal district.

The only problem is that neither has anything to do with the other; they’re completely unrelated.

But Gannon appeared to suggest that being put in an urban renewal district is a tax exemption similar to a sales tax exemption.

“They get one or the other,” Gannon said.

“You get one or the other,” Ehardt said. “It’s not a free ride in Idaho. And I think that’s important. It’s not a free ride in Idaho.”

But properties placed in an urban renewal district don’t “get” anything. It’s not a free ride. They still pay taxes; they just pay most of their taxes to the urban renewal district.

In short, once an urban renewal district is created, property taxes on the land within the district are frozen at the pre-urban renewal value.

As land within the district develops, the property value increases and consequently so do the taxes. But the increased amount in those taxes goes to the urban renewal agency instead of the various agencies, such as the city of Kuna, the school district, Ada County, the mosquito abatement district, etc.

Urban renewal agencies — governed by a board — spend those tax dollars on urban renewal infrastructure, such as curb, gutter, sidewalks, sewer and water lines, that benefits the urban renewal district and, most importantly, attracts and incentivizes other private investment in the district. Those private investments then add to the district’s property value and taxes.

Once the urban renewal district sunsets, all that additional value and tax revenue gets shoveled back to the city of Kuna, the school district, Ada County, mosquito abatement district, etc.

Without urban renewal, that land likely would just sit there, valued at $6 million, generating about $35,000 in taxes for years and years.

If the bill passes, yes, Meta’s property taxes would go toward the city, school and county, generating some tax revenue for those agencies.

But if the money doesn’t go toward the urban renewal agency, there won’t be any money to put toward infrastructure projects, which means any business that wants to locate in the industrial park would need to front the costs themselves and be reimbursed slowly over time.

David Wali, executive vice president with Gardner Company, which is developing the industrial park, said the bill, if passed, would present an obstacle to bringing data centers to Idaho moving forward.

“It would put another barrier up to attracting data centers to Idaho, whether that’s Kuna, Pocatello, Idaho Falls, or Coeur d’Alene,” he told me in a phone interview. “And generally, I’m looking for less barriers.”

Data centers, he said, are “almost ideal” for small communities like Kuna. They generate a lot of property tax revenue and don’t require a lot of services. Putting industrial centers in urban renewal districts is ideal because they require big infrastructure and involve a lot of upfront costs, he said. Having an urban renewal agency pay for those upfront costs attracts other tenants that are looking for move-in ready sites.

Kuna’s East Urban Renewal District plan identifies about $50 million in infrastructure improvements that would be funded by the tax increases.

That doesn’t include a water treatment plant and wastewater treatment facilities that Meta is putting in, itself, paying for itself and turning over to the city of Kuna to operate, Stear said.

“Meta has been very generous in their negotiation,” Stear said. “They’ve pretty much given us what we’ve asked for.”

Finally, this bill would change the rules midstream, a big no-no for those who favor small, predictable government.

The sales tax break attracted Meta to Idaho, and Meta negotiated terms with the city of Kuna when it developed and entered into the urban renewal district. The bill, if passed, would change all that.

“We can negotiate lots of different things with these data centers, as long as we know what the rules are when we start,” Stear said. “Had we known that they were going to do what they’re doing here, we might have been able to negotiate something different than we did, but we had no idea this was coming.”

Idaho Rep. Lance Clow, R-Twin Falls, who sits on the House Local Government Committee, had the right idea when he made a motion to hold the bill for a week or two, so the committee could get more information.

He rightly pointed out that no one from the city of Kuna or Meta — the only two entities in the entire state of Idaho actually affected by the bill — was even in attendance to testify on the bill.

But the bill passed the committee with a “do pass” recommendation. It’s been up for House floor debate twice, but has been delayed so far.

Whether Meta is in the urban renewal district or not, the company is still paying property taxes. Being in the renewal district not a tax break. It just determines which bucket tax revenue goes into.

If it’s not going into the urban renewal bucket, the urban renewal district is DOA.

Maybe that’s what the bill sponsors want.