The sustainability of “property tax relief” program using state tax dollars to reduce local property taxes is now at 0% as the State House yesterday voted to repeal the 12% property tax credit.
Senate Bill 2206 was amended to repeal the 12% credit and takeover about half that much of the property tax bill which covers local social services.
As we told you earlier this week, the legislature is looking to swap out the 12% property tax program with a temporary takeover of county social services (which accounts for 6-7% of the property tax formula.
Senate Guts Property Tax Reform Bill
Also yesterday, the Senate gutted House Bill 1361 which would have put limits on local government’s ability to increase your property taxes without a vote of local residents. Combined with the actions in Senate Bill 2206, this will guarantee property taxes will go up higher and faster than they have for the last decade.
How Fast Will Property Taxes Go Up?
Unless something changes in the legislature in the next week, North Dakotans can expect the following effects in 2018:
On average because of valuation increases and local government not reducing mill rates as fast and as much as values increase, property tax bills naturally go up by 4-6% each year for most property owners.
Add that to the 6-7% increase that will occur because of the 12% property tax credit repeal, and the increase will be at least 10-13% for most people in 2018.
But it gets worse, local governments will say that due to other reductions in state funding, they will have to increase mill levies to make up that difference. In some cases, that will add another 5% to the increase.
Meaning that in 2018, most property owners can be looking increases of 10%-18% on average!
What Can Be Done?
Earlier this year, Governor Burgum asked for ideas about property tax reform.
It is now clear that the legislature is going to abandon most efforts to reform property taxes, and stop bailing out local governments with the property tax credit – which will result in much higher property taxes for everyone.
There are several ways to reform property taxes, as have been discussed before:
- Eliminate all discretionary local property tax exemptions, and replace all state-mandated exemptions with a single, flat, universal exemption of at least $75,000 for every property — residential, commercial, and agricultural.
- Standardize the property assessment process by putting the state tax department in charge of training and overseeing all property assessments statewide.
- Eliminate the automatic tax revenue increases created by higher property values. When a local government wants more property tax dollars beyond those created by new construction, they should have to go on the record as raising residents’ taxes.
- End the threat of eviction by prohibiting local and state government from seizing private property from citizens. Instead, use wage garnishment as a means of recovering property taxes owed.
- Freeze property values for taxation purposes after 15 years of consistent owner-occupancy.
- Either assess multi-unit residential properties based on the revenue they generate (just as agricultural land is assessed based on production values), or eliminate agricultural land taxes altogether, and tax farm residences the same as town residences.
- Require votes of your local officials to raise your taxes by more than 3%.
- Require school boards, park boards, and county commissions to approve all exemptions the cities give away in the name of economic development.
- Require local government to go to a vote of the people prior to approving any incentive that has a fiscal impact exceeding $100,000, $1 million for the duration of the incentive, or lasts more than 5 years.
It is now very clear, that it will be up to the people, via initiated measure, to fix property taxes. The legislature does not have the fortitude to stand up to local government.