Rep. Craig Headland, R-Montpelier, chair of the House Finance and Taxation Committee talks with his vice char, Rep. Jared Hagert, R-Emerado, before a public hearing on property tax reform on Jan. 14, 2024. (Michael Achterling/North Dakota Monitor)
Local government leaders told lawmakers Tuesday they’re ready to work on property tax reform, but expressed concerns about the state capping their budgets.
The House Finance and Taxation Committee took testimony on a bill that incorporates Gov. Kelly Armstrong’s plan to put most homeowners on a path to paying zero property tax.
Gov. Kelly Armstrong, left, and House Majority Leader Mike Lefor, R-Dickinson, talk before a hearing on property tax reform held by the House Finance and Taxation Committee on Jan. 14, 2024. Both testified in support of the proposal. (Michael Achterling/North Dakota Monitor)
Rep. Mike Nathe, R-Bismarck, the lead sponsor of House Bill 1176, said the extensive property tax relief and reform proposed is a response to what voters want.
“They are demanding we do something and we do something now,” Nathe told the committee.
The bill increases the primary residence tax credit from $500 to up to $1,550 beginning this year. It also limits local property tax budgets to a 3% increase each year. The bill would allow political subdivisions to carry over unused increases and go to voters to seek additional increases.
Matt Gardner, executive director for the North Dakota League of Cities, said mayors across the state support the bill and want to be part of making it “workable.”
He suggested a cap that is tied to the rate of inflation, citing rising costs cities have faced in recent years.
“Paving a road, or buying a firetruck, a squad car, those types of costs, you know we don’t really control those costs and that’s a form of the market,” Gardner said.
He also reminded lawmakers that a majority of North Dakota cities have fewer than 1,000 residents and the bill needs to work for communities of all sizes.
Matt Perdue, government relations director for the North Dakota Farmers Union, spoke in favor of the bill but raised concerns about creating inequities between agricultural and residential property owners.
He advocated for providing similar property tax relief to farmers and ranchers.
He also raised concern about the budget caps potentially having negative impacts to rural communities.
“We’re going to continue to be strong advocates for investments in rural infrastructure and services, and we think that’s even more important in an environment where we are constraining our political subdivisions’ ability to meet those needs,” Perdue said.
Amy De Kok, executive director of the North Dakota School Boards Association, also expressed support for property tax relief, but emphasized that school districts have unique obligations.
“Our schools are legally required to provide educational services to every student who enters our buildings, regardless of their needs or abilities, regardless of the costs that are associated with providing those services and regardless of the district’s current financial situation or resource constraints,” De Kok said.
She recommended some changes that would help schools do long-term planning.
Members of the House Finance and Taxation Committee hold a public hearing on property tax reform on Jan. 14, 2024. (Michael Achterling/North Dakota Monitor)
Committee Chair Rep. Craig Headland, R-Montpelier, acknowledged that finding a solution is not going to be easy, but indicated that property tax reform is likely to include some kind of limits on local government spending.
“Our hands are somewhat tied in what the public is demanding from us,” Headland said.
North Dakota voters in November defeated a ballot measure that would have abolished property taxes based on assessed value. However, lawmakers have repeatedly heard from voters that they expect lawmakers to provide property tax relief during this session.
The bill is estimated to cost the state $535 million for 2025-27, based on an update presented Tuesday. It would be partially funded with earnings from the Legacy Fund, the state’s oil tax savings account.
Armstrong and other proponents say the property tax relief could eventually be fully funded with Legacy Fund earnings, reducing the cost to the state’s general fund. If the bill passes, the legislation would still need to be revisited again in future sessions.
The tax commissioner’s budget request also includes an additional $70 million to fund the homestead and disabled veterans property tax credit and the renters’ refund.
Committee members took no immediate action on the bill.
Rep. Jared Hagert, R-Emerado, committee vice chair, said additional property tax proposals are still being rolled out by lawmakers. The committee will hear another property tax bill, House Bill 1168, at 9 a.m. Wednesday.
“We’re looking forward to hearing the other bills and giving them just as much attention,” Hagert said.
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