Under current law, farmers with large swaths of land can pay far more for debt service on school levies than someone residing in a single-family home in a small community, even though both families have the same number of children in a district school.
HF2495, as amended, aims to bring school property tax fairness to farm families across Minnesota, said Drazkowski. The bill’s sponsor notes some farmers now pay upwards of 10 times more than residents in town for school construction levies.
Assistance was provided last year, as the School Building Bond Agricultural Credit was enacted to reduce the debt service levy paid by agricultural landowners by 40 percent.
“We want that to be step one,” Drazkowski said, noting many farmers are still paying six times as much as in-town residents. “We see this as step two to getting to that fairness between the people on the farm and people in town. … When you look at the costs, you want it to be equal because the burdens are equal coming from the farm families as they are from the people in town.”
The issue was discussed Tuesday at a joint meeting of the House Education Finance Committee and House Property Tax and Local Government Finance Division. No action was taken.
Drazkowski said the bill, which has no Senate companion, is “certainly not done yet.”
Under the current proposal, levies beginning with projects approved after June 30, 2021, would be spread on a tax base that excludes all agricultural lands — except for the house, garage and one acre of a farmer’s property.
To make up for lost monies, the bill would redefine the existing referendum market value tax base that is used for school operating levies to include seasonal recreational property, such as cabins, at 25 percent of its market value, and commercial/industrial property over $150,000 in value at 125 percent of its value. Seasonal property is currently excluded from this tax base, while commercial/industrial property is assessed at 100 percent of its value.
“(This) brings the farmer’s school construction levy amount down significantly, and the people in town, theirs will go up slightly,” Drazkowski said.
“Some of us will maintain that for these referendums in the past, many of the people in town haven’t been paying for the share that they’re voting for, and they’re actually voting for referendums that get to be paid by farmers who are paying 10 times as much. This has caused, in rural communities all across Minnesota, a great deal of conflict and also provided for school finance officials the frustration at times with getting very necessary bond items passed simply because ... (farmers) are in a position they just can’t afford what in many of these cases is being put in front of them.”
Isolated small school districts could have a harder time gaining sufficient resources for construction under the plan; therefore, a grant program would be created to help make school buildings affordable for these school districts.
Rep. Jerry Hertaus (R-Greenfield) expressed concern that the bill could create a situation where seasonal property owners end up paying for projects they did not vote for.
The change, which would not affect projects approved before June 30, 2021, would also be put in place for county and city referendum levies approved after that date.
“The advantage of this too … is we will have one tax base going forward for both construction and operating referendums that will create more simplicity,” Drazkowski said.
Rep. Diane Loeffler (DFL-Mpls) expressed concern about the tax burden shift to more homeowners.
“What new problems will we be creating for homeowners and business owners?” she said. “… I would prefer a more targeted approach that really targets ag-related school districts only and doesn’t shift the tax base of the entire state.”
Marquart said the current system has resulted in less success passing levy referendums in Greater Minnesota.
“It creates an education funding inequity among school districts in allowing students to have a top-notch education opportunity,” Marquart said. “… It’s almost coming to where you live as to whether you can have a top-notch school facility.”
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