BOISE - Despite hearing several hours of testimony mostly of opposition, the Senate Local Government and Taxation Committee narrowly approved a bill Monday to eliminate as much as $120 million annually on business equipment.

Under the legislation, the personal property tax would be phased out over five years as long as the state's general fund increases by 5 percent annually. Supporters say that growth will carry the bill but even if the revenue doesn't meet the benchmark, the tax would be eliminated by 2015.

"There's no other way to get rid of it than to get rid of it," said Committee Chairman Brent Hill, R-Rexburg, who tipped the committee's vote 5-4. "What is fair about business paying personal property if they're the only people paying it?"

The bill, sponsored by the Idaho Association of Commerce and Industry, has been pushed since the personal property tax on agriculture equipment was removed in 2000. Supporters say businesses will use the money to invest in their businesses, hire more employees and make Idaho more competitive.

"I'm just asking trust us, trust us to get it done right," said Sen. Jeff Siddoway, R-Terreton, who conceded legislators will likely revisit the issue in a year. "I think the way we're easing into this makes it less injurious to those affected."

Just five people testified in favor of the bill, while nearly two dozen officials from cities, counties and school districts, voiced opposition. The bill would freeze personal property tax values to their numbers of 2008 values, which the officials said could devastate budgets, force tax shifts and raise levy rates in school bond elections.

Two Democrats and two Republicans opposed the bill. Senate Assistant Majority Leader Joe Stegner, R-Lewiston, said the bill is an unfair tax shift, lacked a way to measure effectiveness and force future legislators to worry about the fiscal impact.

"I find this bill to be crafted by the people who will benefit from it," he said. "It's a good deal for those with personal property taxes and a very bad deal for everybody else."

The bill passed the House 39-31 last week. It now heads to the full Senate.

The tax revenue varies across Idaho. In Power County, personal property tax amounts to 40 percent of the county's tax revenue, according to the Associated Taxpayers of Idaho. Some say the bill will actually help counties like Jerome County, where the personal property tax decreased from 20 percent of all property tax collected in 1999 to 12 percent two years ago.

The measure takes effect in the 2010 fiscal year, but equipment bought after Jan. 1, 2008 would qualify retroactively and county values would be frozen. But while local governments would be reimbursed, those waiting for expected revenue would lose out.

In Burley, several manufacturing plants totaling $170 million in taxable value are in development. But with frozen values, the city couldn't get replacement money because the plants aren't on tax rolls yet, causing the city to miss out on about $790,000 annually, said Burley City Administrator Mark Mitton.

"If the taxes become exempted in this mechanism you're basically screwed," he told the committee.

Doug Manning, a former Burley mayor now overseeing economic development, dismissed IACI President Alex LaBeau's assertion that Idaho will grow more competitive.

"Never has anyone asked me if there was a personal property exemption (in Burley)," Manning told the committee.

Jared S. Hopkins may be reached at 420-8371 or jhopkins@magicvalley.com