Posted 2/01/12 (Wed)
By Kate Ruggles
Farmer Staff Writer
In this coming June 12, 2012 election, North Dakotans will be given the ability to completely eliminate their property taxes as they vote for or against Measure No. 2.
But don’t get too excited, because such an important decision requires much consideration.
Currently, property taxes are what fund local schools and services like police and fire departments, park and water districts and infrastructure projects. Therefore, the question becomes what will happen to those things in the absence of property taxes?
Supporters of the bill believe that a property tax elimination will leave those services and municipals unaffected.
If passed, Measure No. 2 would amend North Dakota’s Constitution to eliminate property taxes and mandate the State of North Dakota to replace property tax revenues to the local schools and governments with allocations from various state level taxes and other revenues, without restrictions on how they may be spent.
One of the main supporters of Measure No. 2, Charlene Nelson, stated in an interview with Joel Heitkamp on Tuesday, Nov. 22, 2011, that she believes eliminating property taxes will encourage businesses to move into North Dakota, thus diversifying its economy and making it reliant on more than oil and agriculture.
Nelson’s main problem with property tax is that she believes it is regressive in that it discourages businesses from expanding and making long-term investments. She also believes the regressive nature of property taxes punishes people and communities for improving their homes and neighborhoods.
According to the web site established by Measure No. 2 supporters, they feel the issue of property taxes has been mismanaged by the state and believe there should be better ways of funding local government that don’t punish homeowners.
Now while that all sounds well and good, there are two sides to everything.
Opponents of Measure No. 2 are uncomfortable with the loss of property tax revenues to local governments, citing a very real possibility of losing local control as one of the main reasons.
Those in opposition feel that should local government lose revenues from property taxes, it will lose the ability to meet the needs of its community and make decisions beneficial to its community, as every municipal entity will be forced to petition the state to approve funding for projects it would have otherwise received without condition through property tax revenues.
And even though the measure states that property tax revenues would be replaced with funds from state sales taxes, individual and corporate income taxes, oil and gas production and extraction taxes and other state resources, opponents are not certain that these alternative revenue sources can serve as a reasonable guarantee for property tax replacement.
According to Watford City Mayor Brent Sanford, currently the bulk of Watford City’s budget is supplied by oil production taxes, and only $200,000 comes from property taxes. Therefore, for the time-being, Watford City would be okay if this measure passed.
However, Sanford agrees that removing property tax revenues will move local decision-making to the state level and hamper the local government’s decision-making abilities.
“If people think it is hard relying on the state for highways and the highway patrol, imagine how hard it will be to rely on the state for policing, deputies, Social Services, snow removal, water main breaks, county road maintenance, schools and all that local government provides,” states Sanford.
Watford City City Auditor Laura Anderson states that the uncertainty about the future of property taxes has already impacted local city government and its ability to fund and carry out projects.
“A freeze has been put on any state and local municipal entity’s ability to issue a municipal bond until Measure No. 2 has been voted on,” states Anderson.
The reason that creates a problem for city and county governments and local schools is that it hinders their ability to raise money and fund projects.
Anderson states that for big projects, like Watford City’s Main Street improvement project, local governments have the ability to issue a municipal bond and guarantee that bond will be repaid.
With the future of property taxes up in the air, the city can’t guarantee those revenues; therefore, their ability to guarantee the bond is also up in the air.
Steve Holen, McKenzie County Public School District No. 1 superintendent states that the concern regarding Measure No. 2 involves the loss of local control and the ability of a school district to adapt its operations to the current environment and general priorities of the local community.
“Through its ability to levy local property tax revenue, the local school board can implement programs and initiatives that are important for its school district patrons and students,” states Holen. “The inability to generate any revenue locally greatly diminishes the ability of a school district to react to its issues in a timely manner and the state becomes fully responsible for understanding and responding to the individual needs of every North Dakota school district and political subdivision.”
Thus, Holen states, the passing of Measure No. 2 will essentially create one large school district in North Dakota with uncertain effects on equity and adequacy regarding school district funding.
“With our current enrollment increases, if Measure No. 2 passes, the school district would not have the option of a local bond issue to support any new construction and the funding of such initiatives would be at the full discretion of the General Assembly,” states Holen. “The ability to reflect the priorities and the needs of the school district and community in a construction project would be eliminated as the state would ultimately be responsible for the financing.”
To conclude, Sanford feels that with the level of difficulty Watford City and other oil-impacted communities has faced getting the North Dakota State Legislature to understand the circumstances local governments have been dealing with, moving those services to the state level will only further hamper local communities.