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Understanding Idaho Local Improvement Districts and Infrastructure Funding in Rexburg

Cities in Idaho, like elsewhere, need to maintain and improve infrastructure such as roads, sidewalks, and utilities to keep communities thriving. One way they do this is through Local Improvement Districts (LIDs), a system where property owners in a specific area pay for improvements that benefit their properties. But LIDs aren’t the only option, and some cities consider switching to a general fund model, where costs are shared by all taxpayers. This page explains what LIDs are in Idaho, explores other ways to fund city improvements, outlines what’s needed to shift from LID funding to a general fund, and discusses why spreading costs through a general fund might be better for residents. We’ll also look at how Idaho’s state and local laws could affect this change and apply all this to the City of Rexburg, considering its businesses, university, and residents.

What Are Local Improvement Districts (LIDs) in Idaho?

A Local Improvement District (LID) is a special area set up by a city or local government to pay for specific infrastructure projects. These projects might include:

  • Building new sidewalks
  • Paving or repairing streets
  • Installing water or sewer lines
  • Adding utilities like irrigation systems

In an LID, the people who own property in that area pay for the improvements through a special fee, called an assessment, which is usually added to their property tax bill. The idea is simple: if your property benefits from the project—like getting a new sidewalk in front of your house—you help cover the cost.

For example, imagine a neighborhood in Idaho where the streets are full of potholes. The city creates an LID to repave them, and every homeowner in that area gets a bill for $500, payable over a few years. That money goes directly to fixing their streets, not someone else’s.

Idaho law supports LIDs under various rules. For instance, Title 50, Chapter 17 of the Idaho Code covers LIDs for irrigation projects, while other laws apply to things like roads or utilities. This gives cities flexibility, but it also means the details can differ depending on the project.

Other Ways to Fund City Improvements

LIDs focus costs on specific property owners, but cities have other options to pay for infrastructure. Here are five common alternatives:

1. General Tax Revenue

  • What it is: The city uses taxes from all residents—like property or sales taxes—to fund projects.
  • Example: If a city collects $1 million in property taxes each year, it might use part of that to fix roads across town.
  • Pros: Spreads the cost so no one pays a huge amount at once.
  • Cons: Everyone pays, even if they don’t use the new improvement.

2. Bonds

  • What it is: The city borrows money by selling bonds and pays it back over time, often with tax money.
  • Example: A city issues $5 million in bonds to build a new water system, repaying it over 20 years.
  • Pros: Good for big projects without immediate cash.
  • Cons: Adds debt and interest costs.

3. Public-Private Partnerships (PPPs)

  • What it is: Private companies help fund or run projects, sometimes for profit.
  • Example: A company builds a toll bridge and charges drivers to use it, sharing some revenue with the city.
  • Pros: Brings in private money and skills.
  • Cons: Profit goals might raise costs for users.

4. Grants and Subsidies

  • What it is: Money from state or federal governments that doesn’t need to be repaid.
  • Example: A city gets a $200,000 federal grant to upgrade a park.
  • Pros: Free money for taxpayers.
  • Cons: Hard to get and comes with rules.

5. User Fees

  • What it is: Charges based on how much someone uses a service, like water bills or tolls.
  • Example: Drivers pay $2 every time they cross a new bridge.
  • Pros: Fair for those who use it most.
  • Cons: Can hit low-income people harder.

These options give cities choices beyond LIDs, each with its own strengths and weaknesses.

How to Switch from LID Funding to a General Fund Model

Moving from LID funding to a general fund model—where the city’s overall budget, funded by all taxpayers, covers infrastructure—takes several steps:

  1. Finish Current LID Projects: Any ongoing work, like a half-built sidewalk, must be completed.
  2. Pay Off Debts: If the LID borrowed money (e.g., through bonds), those debts need to be cleared or transferred.
  3. Dissolve the LID: The city must legally end the LID, which might mean holding public hearings or getting resident approval, depending on local rules.
  4. Set Up General Fund Financing: The city decides to use its budget—funded by property taxes, sales taxes, or other revenue—for future projects, adjusting taxes if needed.

For example, suppose a city has an LID that built a sewer line, funded by a $100,000 bond. To switch to a general fund, they’d need to finish the sewer, pay off the bond, and pass a local law to dissolve the LID. Then, they’d start using city-wide taxes for the next project, like a new park.

This process isn’t always simple because Idaho’s laws don’t spell out exactly how to dissolve every type of LID. Cities might need to adapt rules from other districts, like water districts, and ensure all financial loose ends are tied up.

Why a General Fund is Better for Residents

LIDs make sense in theory—whoever benefits pays—but they can be tough on residents. Here’s why spreading costs through a general fund might be better:

  • Less Financial Strain: LID assessments can be big. A $10,000 bill for new curbs and sidewalks might hit a homeowner hard, especially if they’re on a tight budget. With a general fund, that cost splits among thousands of taxpayers, maybe adding just $50 to $100 to each tax bill.
  • Wider Benefits: Improvements often help more than just the LID area. A new road might make it easier for everyone to get around, not just the nearby homeowners. Sharing the cost reflects that shared value.
  • Fewer Arguments: LIDs can spark fights—some property owners might say, “I don’t need this sidewalk; why should I pay?” A general fund skips those debates by making it a city-wide decision.
  • Better Planning: Cities can focus on what the whole community needs, like fixing a busy highway, instead of just small LID projects.

For instance, imagine a street upgrade in an LID costs $50,000, split among 50 homeowners ($1,000 each). In a general fund, if 5,000 taxpayers share it, each pays $10. That’s a lot easier for most families, and the improved street still boosts the whole city.

The downside? Taxes might go up for everyone, and some might grumble about paying for projects far from home. But overall, it’s often a fairer system.

Do State and Local Laws Interfere with Switching?

Idaho’s laws allow cities to create LIDs, but switching to a general fund involves navigating some legal gray areas:

  • LID Creation Laws: Statutes like Title 50, Chapter 17 let cities set up LIDs for things like irrigation or streets. These rules are clear for starting LIDs but less so for ending them.
  • Dissolving LIDs: There’s no single Idaho law saying exactly how to dissolve a general LID. Cities might borrow steps from other district laws—like paying off debts and holding votes—but it could require new local rules too.
  • Taxing Power: Idaho cities can raise taxes for general funds, so funding infrastructure this way is legal. But any tax hike or LID dissolution might need public input, like a city council vote or referendum.

For example, if a city wants to end an LID with a $20,000 bond debt, it might need to pay that off, hold a hearing, and pass a local ordinance—all while following state guidelines. It’s doable, but it takes careful planning to avoid legal snags.

How This Applies to Rexburg: Businesses, Universities, and Residents

Rexburg, Idaho, is a growing city with Brigham Young University-Idaho (BYU-Idaho) and a mix of businesses and residents. It uses LIDs for things like sidewalks and curbs, plus impact fees (charges on new developers) for other needs. Switching to a general fund could affect everyone differently:

Businesses

  • Now: An LID might charge a store owner $2,000 for a new parking lot nearby—a big hit for a small business.
  • With General Fund: That cost spreads out, maybe adding $50 to their annual taxes instead. It’s more predictable, helping businesses budget and grow, though higher taxes could offset some savings.

Universities (BYU-Idaho)

  • Now: As a big property owner, BYU-Idaho might face a $10,000 LID assessment for campus-area upgrades.
  • With General Fund: That cost splits across the city, easing the university’s burden. It could use the savings for student programs, though slightly higher property taxes might nibble at its budget.

Residents

  • Now: A homeowner in an LID might pay $800 for new streetlights—a tough pill for someone on a fixed income.
  • With General Fund: That drops to maybe $8 per taxpayer city-wide. Renters, including students, might see rent rise if landlords pass on tax increases, but it’s less shocking than a big assessment.

Students and Growth

  • Rexburg’s student-heavy population doesn’t pay property taxes directly but contributes through sales taxes or rent. A general fund using sales tax could tap them too, while better infrastructure—like smoother roads to campus—makes the city more appealing. Plus, impact fees on new housing could fund growth without overloading current residents.

For example, if Rexburg builds a $100,000 sidewalk near BYU-Idaho under an LID, 100 nearby owners might pay $1,000 each. In a general fund, 10,000 taxpayers split it at $10 each—easier on homeowners and fairer since students use it too.

Why Rexburg Might Gain from a General Fund

Switching could help Rexburg plan better—like fixing busy streets for all, not just LID zones—while easing costs for businesses, the university, and residents. It’d need budget tweaks, maybe raising taxes or leaning on impact fees, but the benefits of shared investment could outweigh the hassles. Idaho laws allow it, though Rexburg must carefully dissolve LIDs and settle debts. For a growing college town, this could be a smart move to keep up with its needs.

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