Before the city of Caldwell implemented its moratorium on residential growth last week, Tim Mokwa testified in opposition at the Caldwell City Council meeting.

Mokwa, a land development manager for Hayden Homes, asked the council not to make the same mistake as Gov. Brad Little, who signed HB 389 into law in mid-May. Mokwa pointed to Little saying the bill, designed to provide property tax relief, could have unintended consequences.

Caldwell was considering pausing new residential development because of the new limits on city budgets.

“I’m opposed to a moratorium. I think it’s bad for the city,” Mokwa told the council members. “... The low inventory number is a major factor in the exponential growth of home values. Those taxable values are going to go up exponentially even more so with a moratorium in place.”

Mokwa is among the many developers and builders at a crossroads because of Idaho’s new property tax law. It raises the homeowners’ exemption by 25% (to $125,000) but restricts how much city governments’ budgets can increase each year. That could have a big effect on fast-growing cities, like many throughout the Treasure Valley, and the services they provide, most notably public safety services.

Because of uncertainty around their budgets, cities have pondered what to do next. Caldwell, citing “imminent peril” due to strains on public safety services, implemented its moratorium for a maximum of 120 days. Nampa Mayor Debbie Kling said in a statement last week Nampa isn’t considering a moratorium, but is figuring out how to handle the budget changes.

The new law caps annual city budget increases at 8%. It also restricts the amount of new annexation and construction value that can be recognized in city budgets at 90%, rather than the previous 100%. Capturing as much of that new value as possible is key to accomplish cities’ desire of having “growth pay for growth” and not burdening existing taxpayers as much. The new limits could result in less effective city services. Caldwell estimated that 75% of its property tax revenue is spent on police and fire.

Jon Hastings, president of the Idaho Building Contractors Association, sent a letter Monday to mayors and city and county officials asking them to better understand the implications of a pause on residential development before putting one in place the way Caldwell did.

“Careful consideration of such actions better ensures Idaho’s communities will grow in a manner responsible to, and for the benefit of all Idaho citizens,” Hastings’ letter read.

Hastings said he’d be willing to work with cities to brainstorm how to fund infrastructure needed for new residential developments. Hastings and other builders said they understand the bind cities are in given the new constraints on their budgets. But they disagree with a pause until more details are ironed out.

“There isn’t a complete understanding of the fiscal impacts and economic impacts that the bill might bring to the front,” said Bill Rauer, executive officer for the Building Contractors Association of Southwestern Idaho. “When a municipality or county feels compelled to stop further development, there’s a ripple effect on economic impact that isn’t always clear to those officials or the public. At this period of time, it’s really a tough thing. The most sure way to ease home prices is to provide more inventory.”

During last week’s meeting, Caldwell Finance Director Carol Mitchell said she’s still working through projections on how the new law affects the city’s budgets. While the builders argue nothing drastic should be done until the details are complete, Caldwell councilmen argued approving new development should wait until then.

John Cotner, president of the Snake River Valley Building Contractors Association, said he believes Caldwell “overreacted” and other cities shouldn’t “react too harshly.”

“It’s a simple supply and demand economic lesson,” Cotner said. “If they restrict more residential living, they’ll only increase property values. They’re going to see property values go up even higher and rental rates will go up too because they’re choking off supply.”

In April, the median price of a home in Ada County was $481,208 and the price in Canyon County was $399,856, according to the Intermountain Multiple Listing Service. Prices have risen sharply in recent years and especially in the past year. The lack of supply of houses is the major cause, builders say.

The city of Meridian had paused new annexations into the city since March, when the Legislature considered a different property tax bill with similar budget restrictions. Though that bill failed, Meridian kept its moratorium until last week, when it was lifted.

During Caldwell’s meeting when the moratorium was voted on, councilmen repeated that they want the pause to be as short as possible. The maximum length was shortened from 182 days to 120 days. It could end up being shorter.

Councilmen raised the point that public safety services have already been stretched thin because of Caldwell’s rising population, now an estimated 63,760. The budget caps could make it even harder to keep up with the need for those services.

“While the city appreciates concerns raised by the development community and shares developers’ frustrations about HB 389’s impact on the current housing market,” a Caldwell press release said, “the city is obliged to address the fact that HB 389 jeopardizes the city’s ability to grow services at a rate that keeps up with residential growth.”

Caldwell’s pause covers new residential plats, new residential planned unit developments, new annexations where the proposed use is residential and new residential special use permits.

Nampa, meanwhile, scheduled a special meeting Monday night to further discuss how to respond to the new law. Last week, Kling said in a statement the city is not considering a moratorium on new residential development.

Further analysis is taking place before Nampa makes any decisions.

“That’s what we’re encouraging,” Cotner said. “Do your analysis first.”