August 19th, 2014 Property Tax Relief Shell-Game Continues It’s no secret that many of us have been critical of the way the state legislature has ap

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August 19th, 2014


Property Tax Relief Shell-Game Continues


It’s no secret that many of us have been critical of the way the state legislature has approached property tax relief over the past eight years.

To rehash the problems: the state should not have gotten into the business of buying-down property taxes to begin with. However, that is ground long lost to bad public policy.

From the point that the state interjected itself into the property tax buy-down business, the cost of the approach has gone from just over $100 million in 2007-09 to over $800 million during the current 2013-15 budget cycle.

The difference in the 2013 legislative session came when the legislature integrated much of the property tax buy-down program into overall all long term permanent education funding.

Over half of the $850 million for property tax relief in 2013 was simply a continuation of the previous buy-down program. But to make the education lobby happy, they took those dollars and converted them to permanent education funding. Legislators, wanting to be able to point to something that was explicitly called property tax relief, added a new 12.5% property tax credit that would show up on your property tax bill saying the state paid part of your bill.

Now today comes word that the appointed state tax commissioner is leading the charge to once again double-down on this scheme, now claiming that the total value to taxpayers of this property tax relief is well over $1.3 billion.

North Dakota State Tax Commissioner Ryan Rauschenberger today released a comprehensive three-part property tax relief plan. The plan will boost state funded property tax relief from $857 million to $1.357 billion in the next biennium. "As Deputy Tax Commissioner, I worked closely with legislators in the two last sessions to champion state funded property tax relief," said Rauschenberger.

"The plan we released today will build upon the success those programs provided and reduce the total local property tax burden by over 50 percent."

But there may be a snag in that calculation that is designed to make you think you are getting more property tax relief than you really are.

See, a few weeks ago there was a news article about how the interim legislative education committee is expecting there to be a need to increase education funding by $200 million simply due to population growth in the Bakken oil impacted parts of the state.

Interim Education Funding Committee Chairman Sen. Tim Flakoll, R-Fargo, told committee members the average student count per day could grow by more than 10,000 during the next biennium. He said that could mean approximately $200 million in new spending on per-student funding just to hold even in providing services.

“There’s many moving parts,” Flakoll said. “(But) that adds up to a significant amount of money.”

The press release from the tax commissioner just happens to use the same $200 million figure when related to increased education funding, but the tax commissioner makes it sound like that money will cause property taxes to go down when in reality those new dollars are actually simply education spending already required of the state by law based on the education funding formula passed in 2013.

On the surface, it appears that this $200 million is being counted twice – once as education funding and once as property tax relief. Because there is the expectation this increase is needed due to enrollment growth, these dollars cannot be counted as both.

The problem with the state-funded property tax scheme has always been that the amount of state spending on the property tax relief has always been more for show than to create a benefit for the property owner.

Back in 2012, when a group of citizens tried to abolish property taxes I, in my role with the North Dakota Taxpayers Association, took a neutral stance on the idea because putting the legislature in charge of the primary funding for local government would have been a costly and inefficient plan.

Opponents of the plan pointed to the $1.7 billion it would cost the state to replace the property tax revenue. At the time the state was “only” spending just under $400 million in the name property tax relief, with only a portion of that really making it down to taxpayers.

Now, only two years later, the Republican State Tax Commissioner is running on a plan that he says is $1.35 billion worth of property tax relief when including the continuation of dollars previous declared education funding.

How much of that $1.35 billion actually reduced property taxes?

Who knows!

But it certainly makes for a great headline.

Rather than seeking headlines, we need good public policy that actually addresses the problem.

During the Measure #2 discussion in 2012, we proposed several reforms for property taxes:

1. Eliminate all discretionary local property tax exemptions once current agreements have expired, and replace all state-mandated exemptions with a single, flat, universal exemption of at least $75,000 for every property – residential, commercial, and agricultural.

2. Standardize the property assessment process by putting the state tax department in charge of training and overseeing all property assessments statewide, and prohibit the use of private property assessment companies whose motive for compensation is a track record of higher tax revenues.

3. Eliminate the automatic tax revenue increases created by higher property values. When a local government wants more property tax dollars beyond those created by new construction, they should have to go on the record as raising your taxes.

4. Freeze property values for taxation purposes after 15-years of consistent owner-occupancy.

5. End the practice of foreclosure for tax reasons entirely, replace with a wage garnishment process.

6. Either assess multi-unit residential properties based on the revenue they generate just as agricultural land is assessed based on production values; OR eliminate agricultural land taxes altogether, and tax farm residences the same as town residences.

The public must demand that if money is being spent in the name of reducing property taxes that the result be lower property taxes. If that’s not the end result, the plan is nothing more than the political equivalent of a used car sales pitch.

"Property tax relief" that does not make its way to the property owner's bill is not really property tax relief.


-Dustin Gawrylow, Managing Director

North Dakota Watchdog Network

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