Business
Ada Taxpayers Could Take Hit In HP Deal
March 16, 2017 
While it makes sense to consolidate State of Idaho offices in a single campus, Ada and Boise taxpayers will take a hit of at least $1.5 million per year in lost tax revenue currently paid by Hewlett
Packard.
HP built the 92-acre HP campus at 11311 W. Chinden Boulevard beginning in 1980.
Current state code has no mechanism to charge property tax on government-owned property–even if it is used for commercial purposes. That little wrinkle was one of the factors prompting the land board to sell more than 20 rental parcels in downtown Boise, including Ten Barrel Brewing on Bannock.
The state ran out of space when St. Luke’s Regional medical center bought the old Morrison-Knudsen Plaza at Broadway and Park Blvd. where the Tax Commission was housed along with Fish and Game. Again, another hit for taxpayers because the hospital is a non-profit and pays no property taxes.
With the government, CCDC, and hospitals owning everything it won’t be long before most of the land in the city will not produce any revenue.
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Comments & Discussion
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Mar 16, 2017, 7:02 pm
Don’t forget the tax loss on the MK Plaza as it converts to St Luke’s.
EDITOR NOTE–Eric, you gotta read the entire post!
Mar 17, 2017, 9:22 am
Great idea! . . .That way medical expenses can go higher and the hospital can pass the increases onto us the consumer!
Mar 17, 2017, 10:50 am
They even want to remove authority to charge for services.. Look for another 3% jump in levy rates..
Mar 17, 2017, 11:22 am
But how much will HP pay for the lease? That should offset the loss some. Also there is the potential of developing the parcels of land on both the East and West sides of the property that have been used for farming for years (leased to keep AG tax exemptions on those parcels).
BTW, that site would be better for CWI than the river complex!
EDITOR NOTE–Rent to the state does nothing to offset the tax loss to Boise/Ada taxpayers which includes the schools and ACHD. Others have also mentioned the CWI idea.
Mar 17, 2017, 11:48 am
What constructive solutions do people have? For starters I will preface it by saying I am in favor of the consolidation and substantial cost savings to the taxpayer by doing this deal. But what can we ask in return? Maybe a rollback or change to code so that its harder for an entity to obtain non profit status? Or maybe something like the (barely functional) federal PILT payments? I see many options and many that could work together but I am not as smart as many of you and truly interested in what solutions you would offer our elected officials.
Mar 17, 2017, 12:27 pm
Tax considerations aside it might be a long term deal for CWI rather than the re-submission of the $180 million bond this November
Mar 17, 2017, 10:58 pm
Wanted to mention that the HP campus construction began prior to 1980. I was hired on and began working in B81 in February 1978. At that time B82 was nearing completion. Another example, minor may it be, that you can not trust everything you read.
Mar 18, 2017, 2:56 pm
Interested208,
But “nonprofit status” is a federal function by our friends at the wonderful IRS. However, Idaho, (other states are also trying to deal with this problem) does have some possibles solutions.
For example, having a financial threshold of either profit, or assets to get any property tax relief. Individuals are also eligible for such a “property tax reduction” to be applied for every year. If individuals have the task, so could the (nonprofit) corporations.
Another test could be, agencies would have to get a X amount of their funding from the state or county. Simply being a nonprofit corporation with millions in the bank is not sufficient.
Lots of possibilities exist.
The problem is weak legislators afraid of making the tough decisions.
Every hospital, church, frat club, and every other eligible group will certainly cry to their members and their legislators even at the first word of reform.
The MINIMUM to be done is to require the county assessors to actually record the amount of property taxes forgone on each of the applicable properties.
Beyond the first year of ‘conversion’, we can’t even accurately identify the financial impact!
Mar 18, 2017, 9:57 pm
To Former HP Employee: the land on east and west side of the Chinden campus has supposedly been sold back to the original owners, the DeMeyer family. But Ada County Assessor records show HP as owner.
Mar 18, 2017, 10:10 pm
I think this tax issue is possibly a misdirection by those landlords who are getting rent from the State. This year the State pays a whopping $26 million statewide for rent. Of that amount 12.6 million is paid in Boise, and another 1 million or so in Meridian. (I have the data and will get that to the Guardian). The Tax Commission has been paying rent (now 1.8 million annually) for two decades at former MK Plaza. In the last 10 years the State has paid about 100 million in rent in Boise. I am trying to get the exact figure. Renting means a loss of increased equity value in the property, and renting is difficult for occupants because of remodeling or other unique needs. The Tax Commission for example houses all returns in a secure location at the former MK Plaza. The State will save money in the long run and operate more like most of us do. I can’t imagine where I would be financially if I rented homes the last 40 years! What other government rents so much? As for the tax loss, government is government. Overall the loss is much less than the huge gain by not renting. Also,it may not be 1.5 million because some of that property tax may be for HP owned business property which will continue to be taxed, not the real property and buildings. I am checking on that to get an exact figure. I hope we don’t get focused upon the loss of maybe $600K to Boise, $400K to West Ada but instead focus on the tremendous savings and logical investment. Sorry to be so long winded.
EDITOR NOTE–John, there are two issues here (a third if you consider pending bill). First, we have no problem with the purchase vs rent on the part of the state. But to serve as landlord for HP is simply WRONG! HP will not pay property real tax, unlike most other businesses in the city. The state just sold off 21 parcels downtown, only to buy the HP site. Second, citizen s of Boise lose out on revenue at the former MK site because St. Luke’s is tax exempt. So we citizens lose tax revenue on two major parcels. Even though the tax commission occupied the MK property, the commercial rental property was still taxed. The vindictive nature of the proposed bill to keep Boise from shifting the tax burden to home owners by lowering the city budget is insane.
Best solution would be to move the Tax Commission to Jerome, for instance, and see how those folks like losing out on several million in taxes and be forced to lower their local budget.
Mar 19, 2017, 12:18 pm
Well since the state would instead receive the money rather than the county maybe there is the possibility that the state could return some of that to the county.
Regardless, we need to face the reality that the future of HP in Boise is less certain and is likely to continue to decline, if not out and out disappear, so we are going to have to be prepared for that possibility and crying about the property taxes WILL NOT make them stay here.
The Boise site has many H1B workers from India (a lot) and much of the work has already been farmed out to HP sites overseas.
The server and services is a very tough business and the PC and printer business is no longer a growth business. The future of the site will depend on them developing new businesses rather than being able to rely on the old ones.
EDITOR NOTE–Our concern (bitch) is that HP will not pay property taxes because the state will be the landlord. I don’t mind the state being tax-exempt, but for them to rent commercial property does nothing but put Boise folks in the position of subsidizing HP. If they can’t make it without welfare, we don’t need them. Perhaps the remaining HP folks would be happy to take pay cuts to match wages in India. Regardless of the future, it should not fall to Boise taxpayers to keep HP viable.
Mar 19, 2017, 2:18 pm
Maybe it’s time to consider shifting police and fire costs as a tax under the general fund and create an enterprise fund where every Property, including churches, hospitals and yes state and federal government owned properties pay a reasonable fee for those services ?
Mar 19, 2017, 9:36 pm
It is not uncommon for HP to sell property and enter into a lease for a set period. Then they pay off the lease early, take a write off and close the facility.
Mark Hurd made this a habit and dumped about 75,000 employees and over 15 locations including most of Vancouver Washington.
Once HP gets out of owning the property they wander off. If this deal has any insider involvement by former HP execs (Von Hansen) Otter and the State better watch their backs.
(defamatory remarks were deleted from this comment)
What all this means is the State may not only lose the property tax revenue but lose all the income from lost HP jobs just because a few insiders want to play real estate speculator.
Mar 20, 2017, 6:53 am
Editor wrote:
“The vindictive nature of the proposed bill to keep Boise from shifting the tax burden to home owners by lowering the city budget is insane.”
BG, can you elaborate on this comment? I’m confused here and I guess I haven’t been following he bill you are referencing.
EDITOR NOTE–Here is the link to the bill. https://legislature.idaho.gov/wp-content/uploads/sessioninfo/2017/legislation/H0283SOP.pdf
EDITOR NOTE–I don’t have the number handy, but House introduced a bill to prevent Boise from raising taxes/budget when revenues are reduced due to the State owning tax-exempt land. If passed it would reduce city budget by the amount of revenue lost to state ownership. Will do more later in detail. Statesman Cynthis Sewell had a great piece Saturday. http://www.idahostatesman.com/news/local/article139310263.html
Mar 20, 2017, 9:40 am
My understanding is the IRS non-profit 501c3 rule exempts an entity from “corporate” income taxes and allows such an entity to issue tax-exempt bonds for low cost debt. The concept of not paying property tax or local sales tax as a 501c3 is the result of local laws. Local laws, to make it simple, often offer the property tax and sales tax exemption for any entity qualifying as a 501c3 by the IRS. I believe local government(s) in Idaho, could charge non-profits property taxes if they had the fortitude to do so, not all non-profits need to pay property taxes in my mind, but the large health systems and churches are really businesses trying to make as much money as possible and leverage their non-profit status to increase their net income.
Mar 20, 2017, 9:43 am
City of Boise needs to sell off the private golf courses they acquired. These golf courses can be operated as businesses and pay taxes. There is little difference in my mind between the State Land Board running storage businesses and the City of Boise buying and operating private golf courses.
City complains about tax-exempt entities not paying property taxes, but the City owns a lot of surplus land and actively acquires private land and takes it off the tax rolls.
EDITOR NOTE–The most egregious sin on the part of Boise City is the $23 million hangar they built for Skywest. IT costs us about $378,000 a year in lost revenue because it is government owned real estate. Shameful!
Mar 20, 2017, 10:25 am
I think that Glad 2 be Retired has an excellent idea. I also think that properties that require special attention (foothills, property next to fire-prone areas should pay a surcharge. Those 2 things would be a good start to correcting the inequities of property tax.
Mar 20, 2017, 11:06 am
It is too bad that government exempt properties do not fall under the same exemptions status as non-profits. Then they could be subject taxes if more than 3% of the property is used for commercial purposes under 63-602C. Or be subject to a “fee in lieu of property tax” similar to Fish and Game under 63-602A. Once the state is the only tenant, then they be granted the full exemption.
Mar 20, 2017, 11:50 am
HP has been trying to sell off/lease properties for many years (not just recently or during or after the recession). I have a copy of a commercial real-estate listing from 2007/2008 for Bldg 8 (the one Sykes is leasing now) that had the building up for sale. I recall Bldg 4 was also slated. No one else seems to want or need the buildings.
Another thing is HP cut their budget for building upkeep. The work used to be done by HP and then they outsourced it (Johnson Controls as I recall). The result was those Johnson employees complaining about the lack of resources (people and money) and then problems like buildings leaking when it rains (buckets inside Bldgs. 1 & 2 to catch rain are common).
I hope the State looks closely at that to make sure they don’t get caught with higher repair expenses than expected.
There is an old site master plan from 35+ years ago that showed Chinden eventually having 12 or more buildings as I recall. But then that was when HP actually made things here.
Mar 24, 2017, 3:52 pm
The State needs to make this a null deal with respect to property taxes and all the taxing districts who benefit from these taxes. It seems very simple on the surface for the State to make this right with the citizens of Boise.
If they don’t do this it is another deal just like the “Affordable Storage” deal done by the land board when they bought this property and didn’t pay the property taxes.
EDITOR NOTE–We agree and it is seems counter intuitive for the State of Idaho to get out of the leasing business on one hand (21 parcels in downtown Boise) and then go back into the private practice at HP.
Mar 25, 2017, 10:03 am
David, while I wholeheartedly agree with the premise of the article, don’t you have to weight the tax loss against the price the state pays for rental space all over the valley? Over time, wont the 2 different models end up washing? There should be an analysis completed to know all the details of this move.
EDITOR NOTE–There is absolutely no “wash.” The citizens of Boise will be subsidizing the state taxpayers. If ALL Idaho taxpayers lost a little revenue your premise would be true, but only Boise loses.
Mar 25, 2017, 10:17 am
Once again we are talking about allowing the State of Idaho to COMPETE with private businesses.
If they have lease out space to ANYONE then they are competing with private commercial property owners.
Mar 27, 2017, 4:55 pm
One question -WHO makes money on the sale? WHO is the broker or agent or persons that get paid for the sale?????????