Assessments could replace ND property taxesBISMARCK, N.D. — North Dakota's local governments will face pressure to use special assessments to raise money if voters abolish property taxes, lawmakers said Monday as they questioned a proposed constitutional amendment that would eliminate taxes on land.
By: Dale Wetzel, Associated Press
BISMARCK, N.D. — North Dakota's local governments will face pressure to use special assessments to raise money if voters abolish property taxes, lawmakers said Monday as they questioned a proposed constitutional amendment that would eliminate taxes on land.
The assessments, often referred to as “specials,” are mostly used to finance street, sewer and water projects that benefit specific tracts of land. The owners of those properties pay the assessments, instead of all property owners in an entire city or county.
Robert Hale, a Minot businessman and attorney who is a sponsor of the constitutional amendment, on Monday told a legislative committee that is studying the proposal that special assessments for government services provide more accountability than general property taxation.
Special assessment projects often require a vote by the people who are asked to pay the bill, Hale said.
“The point is that people are able to vote whether they want to do it or not. That's the difference,” Hale said in an interview. “If a community wants to vote to put in a swimming pool in their neighborhood, they can go ahead and do that, but they're voting on it. They're controlling it.”
Supporters of the amendment gathered more than 28,000 petition signatures to put the issue on the statewide ballot. It will be listed as Measure 2 during the June 2012 primary election.
The legislative committee is exploring the measure's potential impact on local governments, and the policy changes that may be necessary if the amendment is approved.
It has drafted a lengthy list of queries for Attorney General Wayne Stenehjem's review, including questions about when the measure would take effect if approved by voters. The measure's own text says it will take effect Jan. 1, 2012, even though it will not be voted on until June 2012. That has left local officials asking whether they may have to refund property taxes that had already been paid.
Terry Traynor, assistant director of the North Dakota Association of Counties, said the amendment could result in a revenue loss of up to $2 billion every two years, if the measure applies to taxes on oil and coal production that are levied instead of property tax.
The amendment directs the Legislature to craft a way to replace the money, which could result in steep increases in North Dakota's taxes on sales, income and motor vehicles, Traynor said.
Sen. Dwight Cook, R-Mandan, said local schools, which rely on property tax income for a significant share of their budgets, cannot fall back on special assessments because they do not have legal authority to levy them.
Cook and Rep. Wes Belter, R-Fargo, said special assessments are also calculated differently than property taxes. A large, undeveloped lot could be hit with a bigger specials bill, simply because of its size, than it would pay in property taxes, Cook said.
Belter said there was “no question in my mind that there will be a tremendous push for doing things through special assessment” if voters approve the constitutional amendment.
Scott Wegner, a Bismarck attorney who works in municipal finance, said approval of the amendment would not result in the immediate disappearance of property taxes.
Property levies that were approved as part of a plan for paying off government bonds will stay in effect until the debt is retired, regardless of whether voters endorse the amendment, Wegner said.
Rep. Chuck Damschen, R-Hampden, said he was concerned that voters would perceive the measure as offering them a tax cut, when he said it is likely to force state taxes upward.
“This really is not going to be a net tax cut, and if people believe that, or are told that, it's really misleading,” Damschen said. “That revenue isn't going to just appear (elsewhere) when we abolish property tax.”