Excluding Meta data center from Kuna urban renewal is penny-wise, pound-foolish | Opinion

Brian Frost, of Star Acre Property, a developer and investor in the Treasure Valley for 20 years, exemplifies the entrepreneurial spirit of recognizing an opportunity in the market and taking a risk.

In August 2022, he completed construction of a 17,000-square-foot light industrial building in eastern Kuna.

The building filled up quickly with local businesses, but he kept getting calls from businesses interested in industrial space.

So he bought more land adjacent to an industrial park centered around the new Meta data center. He’s planning 24 building sites, 2-3 acres each, catering to smaller, secondary businesses that would contract with businesses in the industrial park.

But that’s in jeopardy because Idaho legislators are considering a bill, House Bill 328, that would prevent Meta from being placed into the industrial park’s urban renewal district, meaning Meta’s tax dollars couldn’t be used to fund about $50 million in infrastructure improvements, things like water and sewer lines and roads.

If the bill passes, it would change the rules for people like Frost, who made an investment based on the conditions at the time.

“I hear a lot of questions about tax base,” Frost told the House Revenue and Taxation Committee on Feb. 27. “I’m your commercial tax base. I’m ready to go. I’m ready to move forward, but I can’t do it without urban renewal. The water, sewer and road improvements within the (urban renewal agency) makes the costs of developing my property feasible.”

Costs to develop raw land are high, he told committee members, adding that he purchased this land based on the urban renewal agency’s work.

“With a possible retroactive change, the potential impacts to my property are so great, I never would have purchased this land,” he said. “I’m certain to suffer a significant financial loss, and several local companies will not have new buildings and the ability to expand and hire more employees.”

A narrow majority of members of the House Revenue and Taxation Committee listened to Frost and several others and voted 8-7 against the bill.

Every single person who testified spoke against the bill — Kuna city officials, the Idaho Association of Commerce and Industry, the city of Meridian urban renewal district, developers, the Redevelopment Association of Idaho – the people with the most knowledge and those who are most affected all opposed the bill.

Bill dead, end of story, right?

In a sneaky legislative move the following week, on March 8, Rep. Jeff Cornilles, R-Nampa, who voted against the bill the first time around, opened the committee hearing with a motion to reconsider the bill, sheepishly saying he didn’t fully understand the bill the first time. Rep. Jerald Raymond, R-Menan, also said he had misconceptions about the bill the first time around.

Committee members passed the bill the second time around, and it ended up passing the House, 59-9-2, and is now before the Senate.

Regardless of whether the bill passes, Meta will still be paying full freight on its property taxes — it’s just a matter of which bucket it goes into.

Yes, House Speaker Mike Moyle, the bill’s cosponsor, is correct that if the bill passes, Meta’s property taxes will go straight to the “base” — the city, the county, mosquito abatement, etc.

But it won’t go to the urban renewal district, which means no $50 million in infrastructure improvements, which means less chance of attracting tenants to the industrial park, which means, in the long run, less property tax revenue.

“I think we’re going to cast a dark shadow over local jurisdictions’ ability to attract development to the state of Idaho,” said Rep. Richard Cheatum. He sits on the Pocatello City Council and the urban renewal agency there, so he understands the issue. “Urban renewal districts will produce property tax relief; it just takes time. You have to play the long game in development.”

Cornilles actually understood that point the first time around, pointing out that the Ford Idaho Center in his neck of the woods in Nampa and the whole area around Costco in Nampa were in urban renewal districts that spurred a raft of development that today produces “millions and millions of dollars” in property tax revenues to the city of Nampa.

David Lehman, with Meridian’s urban renewal agency, noted that in Twin Falls, the urban renewal district there made a $36 million investment in infrastructure improvements, which led to $600 million in private investment and “billions” in economic development.

As Rep. Lauren Necochea, D-Boise, rightly put it, preventing the city of Kuna from putting the data center in its urban renewal district is like “eating our seed corn.”

Meta is investing about $70 million of its own in water and wastewater treatment systems that it will be turning over to the city of Kuna to operate.

Moyle suggested that if Meta could pay for its own infrastructure, then other businesses could, too.

Well, Meta is a $125 billion company with $23 billion in net income last year. Meta can afford $70 million in infrastructure improvements for a new data center. That’s not the case with the smaller businesses that the industrial park is aiming to attract.

Smaller businesses like Star Acre Property and Brian Frost.

“As an economic development professional, it scares me that I can go into negotiations with a company doing my best for my city ... and the rules can change after,” Morgan Treasure, economic development director for the city of Kuna said. “And it causes an incredible amount of concern for the companies that we deal with, as well. The retroactive nature of this is almost as distressing as the impact it will have on Kuna specifically.”

The rules in 2021 were that a data center could take the sales tax exemption and be placed into an urban renewal district. If the Legislature passes this bill, it is changing the rules.

Just ask Frost.

Senators should recognize that passing this bill would change the rules, would seriously hurt if not outright kill Kuna’s East Urban Renewal District and would stymie any further growth in that industrial park.

Doing so may be penny-wise, but it’s certainly pound-foolish.