Farm families look for relief from school building levies

The only home Leora Johns has known sits on the nearly 250-acre farm that has been in her family for nearly a century. The property lies along a county road about 6 miles outside of downtown New Ulm.

Johns, 90, said her family hasn’t farmed on the land since her husband died in 1989. But she continues to live off modest income she generates by renting the land to local farmers.

“I consider it my retirement account,” she said.

That retirement account, along with Johns’ ability to keep the farm in her family’s name, has been jeopardized in recent years as the property has realized a disproportionate increase in taxes.

In the last two years, the property taxes on her farm have increased by 36 percent, Johns told the House Education Finance Committee on Wednesday as she testified in support of proposed legislation that would reduce property tax burden on family-owned farms for levies related to school, city or county building projects.

“The current capital bond levy system is especially unfair to elderly widows like myself who wish to preserve the family farm,” Johns said.

HF596, sponsored by Rep. Steve Drazkowski (R-Mazeppa), is referred to by supporters as the “House, Garage and 1 Acre” bill. It would change the configuration of property tax base formula for family farms when school districts, counties and cities approve construction levies. Drazkowski said it would bring some fairness and equity to families that own and live on farms.

The committee held the bill over for possible omnibus bill inclusion. Its companion, SF576, sponsored by Sen. Lyle Koenen (DFL-Clara City), awaits action by the Senate Finance Committee.

Rising property value, decrease in farming revenue

Johns’ property tax crisis is complicated further by the fact that voters in the New Ulm School District recently voted to approve a bonding referendum to build a new high school. Under the current funding formula, a large percentage of the property taxes generated for the project would be generated on the backs of family farms, she said.

HF596 would reconstitute the formula so that one-half of school and non-school levies for debt obligations approved by voters after June 30, 2015, must be levied against referendum market value, with the other half levied against net tax capacity. Such a formula change would restore fairness to the way farm families are taxed on their properties, said Duane Alberts, who owns and operates his family farm in Pine Island.

“Farm families invest everything they have and make within the school districts in which they live and work,” Albert said. The school taxes that residents who live in town pay are based only on the house they own and their small garage, he added.

“All we are asking is that farm families be taxed the same way.”

While the Minnesota Farm Bureau backs the bill at a time when the price of commodities like corn and soybeans have decreased and the value of agricultural land has increased, school districts remain concerned about the pushback they would receive from residential property taxpayers, particularly in rural areas.

“The last thing we want to do is have a rural problem that takes ag land taxes and the outcome of fixing that problem is pushing it back on the rural schools,” said Grace Keliher, director of government relations for the Minnesota School Boards Association.

Committee members from both sides of the aisle expressed support for the bill, but some suggested lawmakers and education leaders may need to explore broader-based solutions in order to balance the need to lessen the increased burden family farms take on when rural school districts aim to improve or expand facilities.

“Maybe we need to go to a different model like some other states do where you tax land based on production of the land,” said Rep. Paul Marquart (DFL-Dilworth).

Fran Miron, who owns and operates a farm with his wife in Hugo, said his property lies in multiple school districts, which further complicates the tax burden compared to residential property owners. 

“The taxable assets that farmers have don’t necessarily reflect on their ability to pay,” said Miron. “We are experiencing steeply declining revenue from decreased commodity prices that challenge farmers’ ability to meet the increased tax burden.”

The bill’s provisions would create a balance among voters in a school district, Miron said, where regardless of whether they lived on a family farm or a residential property, they would have more equally shared responsibilities with regard to construction-based property tax levies.