When a rural school district bonds for a construction project, it can pit local farmers against the townspeople. Because commercial and residential property tax bases in many rural communities are shrinking, agricultural landowners are increasingly left to pick up the financial slack.
Farmers support education in their community, said Rep. Paul Marquart (DFL-Dilworth), but the increased property tax burden puts them in an unfair position when it comes to supporting building projects.
“You have low commodity prices and increased property taxes, and this creates animosity in the community,” he told the House Property Tax and Local Government Finance Division Wednesday. He said agricultural land makes up 80 percent or more of the property tax base in some school districts.
Marquart sponsors HF2987 that would create a school building bond agricultural credit that would be calculated based on the school debt tax rate and the property’s net tax capacity. A Department of Revenue analysis of the bill shows a $53.5 million impact to the state’s General Fund in the 2018-19 biennium.
The bill was laid over by the committee. There is no Senate companion.
“This speaks to the bigger systemic problem regarding property taxes related to school funding,” Rep. Jerry Hertaus (R-Greenfield) said. “Our property tax system is so antiquated, because of the carve outs that have been created over the years, [so] we end up pitting one group of people against another.” He said property taxes should be delinked from education, with the state taking on a greater financial role.
Similar provisions to Marquart’s bill are included in HF848*/SF826, last year’s omnibus tax bill that awaits conference committee action.