Cities in Disguise 

If redevelopment agencies are arms of the cities, does that make it wrong?

After beating back the City of Boise's plans for public financing of a police station and then a parking garage, watchdog blogger Dave Frazier and a loose-knit group of tax hawks across Idaho have set their sights on urban renewal.

If you ask any city official, they'll say that urban renewal is completely separate from city government. But a pair of lawsuits in Nampa and Rexburg argue that urban renewal agencies are a mere costume change in a phone booth from the cities they serve.

Their argument: If it looks like a city department, acts like a city department and quacks like a city department, it's probably a city department. They call the agencies "alter egos" of city government.

"By any construction and reasonable interpretation of the English language, the Nampa Urban Renewal Agency is governed by the city," Frazier wrote in court documents.

Nampa redevelopment attorney Bill Nichols counters that Idaho redevelopment agencies are different from cities in at least one major way: They cannot levy taxes, and thus should be treated more like public health districts or housing authorities and be allowed to sell bonds.

It's an important issue for the agencies because if the lawsuits are successful, urban renewal agencies won't be able to build so much as a parking garage, let alone a streetcar system, without a supermajority of voters.

At issue are a $6.3 million park and pool in Rexburg and a $68 million police station and library in Nampa. Ken Hart, a Rexburg resident and retired professor at Brigham Young University-Idaho, has appealed the pool project to the Idaho Supreme Court.

Hart said he's not against the project, but thinks the agency and the city should ask voters. "The question is, should the city be allowed to borrow the money without a vote?" he said.

Pushing the Nampa case are Frazier, who publishes the Boise Guardian blog, along with Paul Alldredge, who runs the Caldwell Guardian, and three Canyon County residents. Frazier expects a decision on the case in a month or two.

These two cases have raised the hackles of redevelopment agencies across the state. On Aug. 11, Capital City Development Corp., Boise's urban renewal agency, voted to join the legal battle in Rexburg by filing a friend of the court brief.

"One of the major tools in our toolkit is the ability to finance infrastructure," said Phil Kushlan, executive director of CCDC. "You have to have the ability to generate upfront cash that you pay back over time ... We don't have cash resources so we have to issue bonds."

The Idaho Constitution forbids cities and counties from going into long-term debt without a two-thirds vote of citizens.

Frazier has worked to hold Boise to this standard in recent years. He successfully sued the city in 2002 and 2006 to keep it from building a police station and an airport parking garage without a two-thirds vote.

But the Constitution doesn't say whether the same rules apply to urban renewal agencies, which didn't exist when Idaho's constitution was written. Hart, Frazier and Alldredge argue that laws governing city spending should apply to a city's redevelopment agency as well.

Urban renewal agencies look and act a lot like city government:

• They're often composed of the same people. City councilors sit on most redevelopment boards.

• Cities appoint urban renewal board members just as they do city staff. The city council can even dissolve the urban renewal board and appoint itself as the new board.

• Cities form urban renewal agencies.

• Urban renewal agencies receive property tax dollars from cities and counties, and they spend the money on the same sorts of things cities spend tax dollars on, like parks and libraries.

But Seventh District Judge Brent Moss ruled that the Rexburg redevelopment agency is not an alter ego of the city of Rexburg because the city and agency have separate finances and the urban renewal agency can't tap into the city's resources to pay its debts.

Urban renewal agencies get their money by creating growth. They were originally meant for blighted areas where no one wanted to build. The agencies sell bonds based on anticipated property tax revenue and use the money to finance infrastructure and encourage developers to rebuild the area. Cities, counties and school districts give the agencies a portion of the property taxes they collect in the area based on the amount that property values rise.

It's this part that Frazier objects to, calling the tax disbursements a "de facto levy." The funds that urban renewal agencies receive are "otherwise destined to local public entities," he wrote in the Nampa lawsuit.

Nichols says it's simply not true that taxpayers make up the difference for funds diverted to the agency. The tax dollars that go to urban renewal agencies would never have existed without the urban renewal agency, Nichols said, and in any case, the Constitution caps city tax increases at 3 percent per year.

If anything, city taxpayers are getting more bang for their buck, Nichols said. "Part of what's going in is money that would ordinarily go to the county," he said. City taxpayers sometimes complain that their money goes to counties even though the county provides fewer services inside city limits than outside, he said. Urban renewal agencies are a way for cities to recapture some of those funds and use them inside the city.

If urban renewal agencies are really alter egos of the city, Frazier suggests the state statute that gives urban renewal agencies the power to issue bonds doesn't carry any weight because it's unconstitutional.

"The legislature can pass a law establishing the mathematical 'pi' as simply '3,' but that doesn't change the underlying mathematical law any more than declaring urban renewal agencies to be a body politic independent of cities changes the Constitution," he wrote in his lawsuit.

The Idaho Supreme Court ruled in 1972 that cities are not alter egos of urban renewal agencies because they don't have enough control over the agencies. But Frazier says that's no longer true. At that time, it was illegal for city council members to serve on urban renewal boards, and the agencies didn't receive property tax funds.

If the court determines that Rexburg and Nampa's urban renewal agencies are alter egos of the cities, it would probably reject the efforts to build the park, police station and library without a supermajority vote, a threshold that is difficult to reach.

If Frazier and Hart are successful, it would probably take a constitutional amendment to give urban renewal agencies the authority to issue bonds without a two-thirds vote. But a sizeable contingent of legislators has made it clear they're not fans of urban renewal. In the last two sessions, legislators have proposed new restrictions on urban renewal agencies that would prevent them from amending their plans, expanding their boundaries down major roads or collecting money from voter-approved school bonds.

Short of a constitutional amendment, urban renewal agencies would have to pay as they go and save up for major projects, Nichols said. Of course, land values in urban renewal districts would increase much slower without an urban renewal project to spur growth, meaning urban renewal funds would only trickle in.

"It's a difficult problem," Nichols said.

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