Who Pays for Growth?

Whether or not Idaho fully eliminates the property tax, putting the question seriously on the table forces a review we’ve avoided for decades. Of the $2.1 billion that flows through local taxing districts each year, some is genuinely essential — schools, sheriffs, fire, ambulance. Some has accumulated as fiscal cruft nobody would defend today at a public hearing. The honest answer? Nobody knows the difference until forced to look. That forcing — line by line, citizens in the room — is a gift, even if the final policy is more measured than full elimination.

What follows is part of that conversation: how growth is currently paid for by the people who are already here — and why decades of university and nonprofit research say the prevailing economic development playbook is a bad deal for the taxpayers footing the bill.

by   JEFF PIERSON

Most people think their property tax bill is set by the assessor and the levy rates of taxing districts — schools, highway, fire, ambulance, county, city. That’s true on paper. But the real drivers of what you pay, and what your home and land are worth, often sit upstream of the assessor — in decisions made by your county commissioners and by the urban renewal boards they help authorize.

Three sets of tools, in particular, give commissioners and their appointees enormous power to quietly transfer wealth between neighbors, between sectors, and between generations: zoning and land use decisions — including conditional use permits, comprehensive plan amendments, and large-scale rezones; Revenue Allocation Areas, or RAAs, which are Idaho’s name for Tax Increment Financing under the Local Economic Development Act at Idaho Code §§ 50-2901 et seq.; and the long menu of subsidies and incentive packages — direct cash, infrastructure giveaways, fee waivers, property tax abatements, and special-rate utility deals.

Each of these tools is sold with the same general pitch: “we’re growing the tax base, creating jobs, and making the community better off.” The research from major universities and policy institutes paints a more complicated picture, and citizens deserve to see it.

$2.1BTotal Idaho property tax levied in 2021

22.8%Property tax share of all state & local tax revenue

20 yrsStandard duration of an Idaho Revenue Allocation Area

I.   ZONING — THE MOST DIRECT POWER OVER LAND VALUE

Zoning is the most direct way local government affects property value. When a parcel’s zoning is changed — say, from agricultural to industrial, or from low-density residential to commercial — the highest-and-best-use of that land changes, and so does its market value. A factory may pay more for ground than a storage facility; a 200-acre energy facility footprint will price differently than the same ground as irrigated farmland.

There is a second, quieter effect. Allowing incompatible uses next to existing homes tends to depress nearby home values, while protective zoning that keeps incompatible uses apart helps preserve them. In a hedonic-pricing study published through West Virginia University’s Regional Research Institute, the author concluded that zoning measurably affects residential property values and recommended that governments choose zoning options more carefully because of those effects.

There is also a third effect, easy to miss. When a county zones in a way that invites a industrial use — a 200-megawatt battery storage plant, a hyperscale data center, or renewable energy project— it isn’t just accepting one project. It is signaling to the market that this kind of land is now available, which can attract more applications, more speculation, and more pressure on the comprehensive plan over the following decade. Zoning isn’t paperwork. It is the most consequential property-tax decision most commissioners will ever cast a vote on.

II.   THE TIF MACHINE AND THE INCREMENT CAPTURE

Tax Increment Financing is the national term for the mechanism Idaho calls a Revenue Allocation Area, or RAA. The Idaho structure is two-layered. Under Idaho Code Title 50, Chapter 20 — the Urban Renewal Law of 1965 — a city or county may create an urban renewal agency and adopt urban renewal plans by ordinance under § 50-2008. Under Title 50, Chapter 29 — the Local Economic Development Act, §§ 50-2901 et seq. — that agency may attach a revenue allocation financing provision to the plan. The RAA is the financing provision; the urban renewal agency, whose members are appointed rather than elected, is the entity that captures and spends the money. Because the underlying mechanic is structurally identical to TIF as practiced in every other state — the same base/increment split, the same diversion from regular taxing districts, the same multi-decade lifespan — the substantial body of national TIF research applies directly to how Idaho RAAs operate in practice.

Here is the plain-English version. When an urban renewal agency adopts a revenue allocation area, the assessor freezes the taxable value of all parcels inside the district at their current value, the base value. For the next 20 years from the date the ordinance is approved — the maximum duration under Idaho Code § 50-2904, with limited extensions allowed only in specific bond-maturity circumstances — every dollar of property tax revenue generated by increases in value, the increment, is diverted away from the schools, county, highway, fire, and ambulance districts and into the urban renewal agency’s account, to be spent on subsidies and infrastructure inside the district.

Two consequences of that mechanic almost never get explained at public hearings. First, RAAs effectively cap what the regular taxing districts can collect. As the Canyon County Assessor’s office notes plainly, urban renewal limits the value that taxing districts can levy taxes on, which means levy caps are reached sooner — and unlike taxing districts, urban renewal agencies operate without an income cap. The increment they capture is essentially unlimited.

Public schools, cities, and counties together claim 82 percent of every property tax dollar in Idaho. When a Revenue Allocation Area captures the increment, every one of these recipients takes a smaller share.

“That is how a Revenue Allocation Area can raise your property tax bill even when your parcel isn’t in the district and your assessed value didn’t change.”

Second, the rest of us make up the difference. The schools, fire district, ambulance, and county still need to run. Their budgets don’t shrink because an RAA was drawn around a yogurt plant or a data center. The fixed budgets get spread across the non-increment tax base — meaning the rest of the property owners in the county pay a slightly higher share, or future levy elections become more necessary, to keep services running at the same level.

This is not a fringe critique. The Lincoln Institute of Land Policy — perhaps the most respected nonpartisan land-and-tax policy research organization in the country — published a comprehensive review by University of Illinois–Chicago economist David Merriman that examined more than 30 academic studies of TIF over several decades. Merriman’s conclusion was direct: in most cases, TIF has not accomplished the goal of promoting economic development. The Lincoln Institute also found that the biggest problem with TIF over the last two decades has been a lack of transparency, and that TIF frequently makes local financial decisions less visible by separating them from the normal budget process. A 2019 study by Hicks in Growth and Change using Indiana data went further, finding that TIF adoption is associated with capturing existing growth rather than creating new growth. The development would often have happened anyway, but now its property tax dollars get redirected to insiders for two decades.

The Idaho legislature has, in fits and starts, tried to rein in some of these abuses. In 2011, lawmakers required voter approval before any newly created urban renewal agency may contract business or exercise its powers (Idaho Code § 50-2006). In 2016, House Bill 606 added Idaho Code § 50-2903A, requiring urban renewal agencies to attest annually to whether they have modified their plans and resetting base values when material modifications are made — a response to agencies amending plans to expand or extend their increment capture. These reforms confirm the abuses were real enough to compel legislative response. They did not eliminate the underlying mechanic, which is the subject of this article.

III.   THE “BUT FOR” FICTION

Every state that authorizes TIF or its equivalents — Idaho included — claims to require some version of a but for test. The idea is that public TIF dollars should only be used when development but for the assistance would not occur, or would not occur at the same time, or at the same scale. In practice, the test is almost never applied with rigor.

The New School’s Schwartz Center for Economic Policy Analysis has documented that TIF districts are routinely formed not in blighted areas where private capital won’t go, but in underdeveloped areas that show the promise of future increased property values. A widely cited 1999 Wisconsin study found that 45 percent of Wisconsin’s 661 TIFs were used to develop open space — primarily farmland, not blighted urban cores. Lincoln Institute scholar Joan Youngman has noted that such areas may not be blighted or underserved at all; they simply offer dramatic increases in assessed value the moment they are reclassified from agricultural to commercial or industrial.

45%

Share of Wisconsin’s 661 Tax Increment Financing districts used to develop open space — primarily farmland, not blighted urban cores.

That is the sleight of hand. A but for finding is supposed to be a high bar — proof that without the subsidy nothing would happen. Too often it has been reduced to a checkbox on a staff memo, supported by the developer’s own pro forma, with no independent gap analysis and no published comparison to a no-subsidy scenario. As of 2018, only twenty-one states required anything more rigorous — a feasibility study or an independent cost-benefit analysis — before TIF dollars were committed. Idaho’s RAA process leans heavily on the urban renewal agency’s own findings, which means citizens who care about whether the subsidy is actually necessary have to do that scrutiny themselves.

IV.   SUBSIDIES AND THE RECRUITMENT GAME

Beyond zoning and RAAs, commissioners and their economic development partners have a long menu of subsidies they can support — property tax abatements, sales-tax exemptions, fee waivers, free site preparation, infrastructure built at public cost, dedicated water and sewer extensions, discounted utility rates, and outright cash grants.

Good Jobs First, a national accountability nonprofit that has tracked these deals since 1998, estimates that state and local governments give corporations as much as $90 billion a year in economic development subsidies, deals often negotiated behind closed doors and frequently failing to create good-paying, permanent jobs. Their research consistently finds that the dollars don’t disappear — they get shifted onto small businesses, working families, and homeowners through higher property tax burdens and reduced public services.

$658,000

Average public cost per job created in the largest corporate subsidy “megadeals” tracked by Good Jobs First.

“Most of the companies that take subsidies were going to locate somewhere in your region anyway.”

The Center for American Progress has summarized the academic literature this way: businesses’ state and local taxes account for less than 2 percent of the total costs of doing business, on average — meaning subsidies that reduce a company’s tax burden have only modest effects on location decisions. Wages, transportation, energy, water, workforce, and proximity to customers matter far more than tax incentives.

The data center boom has made this dynamic especially visible. Good Jobs First’s 2025 review found that data center subsidy programs are “endangering state budgets” — Georgia localities lost $136 million in a single year to data center subsidies, Iowa quietly transferred $150 million, and many states refuse to disclose the cost at all because so few companies have claimed the exemptions that disclosure would “violate taxpayer confidentiality.” That is not an economic development program. That is an opaque transfer of public wealth to some of the most profitable corporations on earth, with the bill quietly handed to the rest of us.

V.   THE MATH THAT CHANGES EVERYTHING

There is one body of research that ought to be required reading for every commissioner before a vote on a rezone or annexation, and it almost never is. For more than 30 years, the American Farmland Trust has conducted what are called Cost of Community Services studies — straightforward fiscal analyses that ask, for each acre of land in a community, how much revenue does that acre generate, and how much does it cost the local government to serve?

The findings are remarkably consistent across more than 80 studies in 19 states.

Residential land costs more in services than it generates in property taxes. Working farms, ranches, forests, and commercial and industrial uses pay more than they cost — they subsidize residential development.

“More rooftops do not lower your property taxes.”

Read those numbers again. Residential development, on average, costs more in services than it pays in taxes. Farms and open space pay more than they cost. The American Farmland Trust summary states it plainly: working lands generate more in public revenues than they receive back in public services, while residential development typically requires costly public services that have to be subsidized by revenues from commercial and industrial uses.

This is the iron law that nobody campaigning on “growing the tax base” wants to talk about. When residential growth races ahead of commercial and industrial growth — or when the commercial and industrial growth that does come is locked inside an RAA where the taxing districts can’t reach the increment — the rest of the residents make up the gap. That is how you end up with rising assessments, rising levies, and a county that always seems to need another bond.

VI.   THE HIDDEN COSTS OF GROWTH

When commissioners use these tools aggressively to recruit business and ride a growth wave, the predictable consequences include housing stress, infrastructure strain, service costs that fall on existing residents, pressure on land values that cuts both ways, and the loss of community character that brings people to public hearings in the first place.

Construction crews and new permanent workers need places to live. In small communities, a 300-, 500-, or 1,000-worker construction footprint can swamp the rental market and push starter-home prices out of reach for the people who already lived there. Baker Tilly’s review of large data center construction projects acknowledges that smaller communities may find housing a temporary construction labor force of this scale challenging — a corporate consultant’s gentle way of saying the housing crisis you didn’t have last year is the housing crisis you have now.

Roads, water, sewer, public safety, and emergency services were sized for the community as it was, not as it’s becoming. New subdivisions and large industrial users impose real costs that don’t get fully recovered through impact fees or property taxes — especially when the highest-value assets are inside an RAA. Heavy industrial uses near homes or farms can suppress nearby values; speculative pressure from new developers can push values up beyond what current residents can afford to be assessed at. Either way, the people who have lived there for generations are not the ones in control.

The hardest impact to put a number on is the loss of community character, but it is real, and it is legally relevant in Idaho. The Local Land Use Planning Act — LLUPA, at Idaho Code §§ 67-6501 et seq. — explicitly authorizes counties to plan for and protect character, agricultural production, scenic resources, and the public welfare. The right to say no — to a particular project, in a particular place, at a particular scale — is not an obstacle to economic development. It is a precondition for honest economic development.

VII.   WHAT CITIZENS CAN DEMAND

Before any major rezone, RAA formation or amendment, abatement, or subsidy package, citizens have the right — and arguably the duty — to ask hard questions in writing and in public hearings. Eight worth bringing to every microphone:

1.   Who did the but for analysis, and is it independent of the developer? If the only document supporting the gap finding is the developer’s pro forma, the answer is no.

2.   What is the projected fiscal impact on schools, fire, ambulance, highway, and county over the full 20-year life of the RAA? Demand a year-by-year table.

3.   What is the projected Cost of Community Services impact of the residential and commercial development the project is expected to induce in surrounding areas?

4.   What property tax shift will be experienced by parcels outside the RAA as a result of the increment capture?

5.   What is the per-job public cost of the subsidy package, including infrastructure, abatements, and foregone revenue?

6.   What happens if the developer leaves, downsizes, or sells? Are clawbacks, performance bonds, and termination rights written into the agreement?

7.   What is the cumulative effect of this decision combined with other recent zoning, RAA, and subsidy decisions in the county? No single project tells the whole story.

8.   What independent third party — a university, a nonprofit research center, the State Tax Commission — has reviewed the assumptions?

If commissioners can’t or won’t answer these questions in public, that itself is the answer.

VIII.   THE BOTTOM LINE

County commissioners hold quieter power over your property taxes than the assessor or the levy rate. Through zoning, Revenue Allocation Areas, and subsidy decisions, they can shift costs onto your tax bill, reshape the value of your land, and commit the community to 20-year obligations — often without ever raising a stated tax rate.

The prevailing economic development philosophy says more is always better, faster is always smarter, and subsidies are the price of being competitive. The university and nonprofit research — Lincoln Institute, Good Jobs First, American Farmland Trust, Center for American Progress, and decades of peer-reviewed studies — tells a more sober story. Most TIF deals don’t produce growth that wouldn’t have happened anyway. Most subsidies don’t drive location decisions. Residential growth doesn’t pay for itself. And working lands are a fiscal asset, not a problem to be solved.

A community that wants to protect its tax base, its land, and its character has every right to slow down, ask hard questions, demand independent analysis, and — when the deal isn’t right — say no. That is not anti-growth. That is the most pro-citizen economic development philosophy there is.

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FURTHER   READING

David Merriman, Improving Tax Increment Financing (TIF) for Economic Development, Lincoln Institute of Land Policy, 2018.   Lincoln Institute of Land Policy, The Hidden Costs of TIF.   Bridget Fisher, Flávia Leite, and Lina Moe, What is Tax Increment Financing (TIF)?, Schwartz Center for Economic Policy Analysis, The New School.   Michael Hicks, “Tax increment financing: Capturing or creating growth?” Growth and Change, 2019.   Good Jobs First, Subsidy Tracker; Cloudy with a Loss of Spending Control: How Data Centers Are Endangering State Budgets, 2025.   American Farmland Trust, Cost of Community Services Studies: Making the Case for Conservation.   Center for American Progress, The Realities of Economic Development Subsidies.   Idaho Code §§ 50-2901 et seq. (Local Economic Development Act); §§ 67-6501 et seq. (Local Land Use Planning Act).

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A   SHORT   GLOSSARY

BASE VALUE.  The assessed value of property inside a revenue allocation area at the time the area is created. Regular taxing districts (schools, county, fire, ambulance, highway) may only levy property taxes against the base value for the life of the RAA.

INCREMENT.  The amount by which assessed value inside an RAA exceeds the base value. The property taxes generated by the increment are diverted from the regular taxing districts to the urban renewal agency.

REVENUE ALLOCATION AREA (RAA).  Idaho’s name for a Tax Increment Financing district. The financing provision attached to an urban renewal plan, authorized under Idaho Code §§ 50-2901 et seq. (the Local Economic Development Act). Standard maximum duration: 20 years from the date the authorizing ordinance is approved (Idaho Code § 50-2904), with limited extensions only in specific bond-maturity circumstances.

TAX INCREMENT FINANCING (TIF).  The national term for the development-finance mechanism in which property tax revenue generated by rising assessed values within a defined area is diverted to fund development inside the area, rather than going to the regular taxing districts. Idaho’s RAA is structurally identical to TIF in other states.

URBAN RENEWAL AGENCY.  A separate public body authorized under Idaho Code Title 50, Chapter 20 (the Urban Renewal Law of 1965). Administers urban renewal plans and any revenue allocation areas attached to them. Members are appointed, not elected. Unlike taxing districts, urban renewal agencies operate without an income cap.

URBAN RENEWAL PLAN.  The project plan adopted by ordinance under Idaho Code § 50-2008 by the local governing body — a city council or board of county commissioners. The RAA is the financing provision attached to the plan.

“BUT FOR” TEST.  The accountability standard claiming TIF or RAA dollars should be used only when the proposed development would not occur “but for” the public assistance — meaning would not occur at all, would not occur at the same time, or would not occur at the same scale. In practice, the test is rarely applied with rigor.

COST OF COMMUNITY SERVICES (COCS).  A fiscal-analysis methodology developed and refined by the American Farmland Trust that measures, by land use category (residential, commercial/industrial, working lands), how much each dollar of revenue raised costs the local government to serve.

LLUPA.  Local Land Use Planning Act, Idaho Code §§ 67-6501 et seq. The statute authorizing comprehensive plans and zoning by Idaho counties and cities.

LEDA.  Local Economic Development Act, Idaho Code §§ 50-2901 et seq. The statute authorizing revenue allocation financing in Idaho.

FORGONE CAPACITY.  Under Idaho Code § 63-802, the difference between the maximum allowable property tax budget increase a taxing district could have taken in a given year and the amount it actually budgeted. May be reserved by formal resolution and recovered later, subject to statutory caps. If not reserved, that year’s forgone capacity is permanently retired.