By Rep. Paul Anderson
The subject of property taxes and who pays them is a topic that always seems to create discussion. We have heard the explanation of how local property taxes are made up of a three-legged stool, with the three legs of revenue being agricultural land, residential homes, and commercial/industrial property. In recent years, because of the rapid escalation in farmland values, there has been a shift to more of the total property tax bill falling onto that category.
With the farm economy humming along with high commodity prices and profit margins comfortably in the “black,” at least for crop farming, there wasn’t much sympathy as taxes on ag land increased by large amounts. That scenario has completely changed in the past year as commodity prices have plummeted to less than one-half their peak values, and profit margins have disappeared. And even as land prices stabilize and begin to drop somewhat in value, it will take several years for that to show up in lower property taxes. As a result, farmers are looking at their tax statements and realizing that this is now a significant input cost, one that is adding to their negative cash flows for the upcoming year.
One idea that’s been suggested for relief from these high property taxes, which can range up to $50 or $60 per acre in southern Minnesota, pertains to how we fund voter-approved referendums in our school districts. Currently, when voters approve an operating levy, only the house, garage, and one acre of a farm are figured into that tax. However, when a construction or CAPITAL referendum is passed, the entire farm acreage is subject to that levy. A bill we heard last week in the Property Tax Division would change the way these capital referendums are calculated and make them similar to operating levies, in which only the house, garage, and one acre would be taxed.
The change would be good for farmers, but it would have serious implications for our rural school districts and their chances of ever passing a capital levy again. According to figures supplied to us in committee, the differences between Net Tax Capacity and Referendum Market Value are large, especially in districts where farm land makes up the largest share of property value. The following numbers represent the loss of tax base if only the house, garage, and one acre are used instead of the net tax capacity.
Alexandria, 36 percent; Osakis, 56 percent; New London-Spicer , 40 percent; Melrose, 49 percent; Paynesville, 52 percent; Sauk Centre, 48 percent; Albany, 25 percent; Minnewaska, 59 percent; Belgrade-Brooten-Elrosa, 73 percent; and Long Prairie, 40 percent.
Some districts farther west have an even greater dependence on ag land for their valuation. Wheaton, for example, would lose 91 percent of its tax base if the referendum market value were used for capital referendums. Herman-Norcross would also lose 91 percent, while Campbell-Tintah would lose 95 percent of its taxable base under this proposal.
The bill was amended in committee to soften the impact of this possible change. An amendment to House File 596 was passed to allow 50 percent of ag land to be exempt from future capital levies. It was laid over for possible inclusion in the division report.
-30-