Mic, a general contractor and Kuna business owner, pulled me aside after the meeting to point out something regarding a column I wrote a couple of weeks ago about smaller house sizes in Kuna. I think it’s a good point that’s worth repeating. Mic said that smaller houses, valued at, say, $87,000, don’t pay nearly enough in property taxes to cover provided services. That’s why it behooves the city to require larger house sizes that generally have a higher assessed value, which in turn triggers higher property taxes. With smaller house sizes and not enough property tax to cover provided services, the end result will be higher taxes for everyone.
I pointed out that my column did say that I agree with allowing smaller houses temporarily, as a short-term fix but not a long-term solution. This fiscal year, for example, the city is expecting to collect about $1.4 million in property taxes. Nearly all of that — $1.24 million — goes toward police services. The city relies on building activity for a large chunk of its general fund revenue, which totals $2.8 million this year.
In 2009, smaller houses, which pay the same amount as large houses in building permit fees, have made up the bulk of single-family building permits. Had the city prohibited builders from building these small houses, the city’s coffers would have been considerably smaller. If the city were to disallow small houses in the coming 12 months, the city might see a fraction of building permits pulled. If that were to happen, the city could see its $300,000 in annual building permit revenue decimated. Then, come next year’s budget cycle, the city would be faced with either making hundreds of thousands of dollars in cuts or, you guessed it, raising taxes. More likely a combination.
So, as I suggested in my column, the city should allow some smaller houses now to capitalize on the market trend but not let it go on indefinitely.
That said, Mic pointed out that I should have taken it a step further. The city needs to come up with a formula for determining just how many small houses, medium-size houses and large houses are required in order to strike the proper balance, not only for the look and feel of the city but also for the financial impacts they have on the budget.
That’s an excellent suggestion. I would like to see Planning and Zoning Commission and City Council members have a tool like that the next time a developer comes before them requesting smaller houses.