NDAREC opposing property tax ballot measure
by Kent Brick, NDAREC
As an election year, 2012 presents North Dakotans with several significant ballot choices.
On the June 12 primary ballot, one significant choice to be presented concerns Measure 2. This is an initiated measure which, if passed by a majority of voters, would amend the state’s constitution to prohibit political subdivisions from levying taxes on the assessed value of property. This proposed elimination of property taxes in North Dakota has triggered extensive study on the part of many governmental and business interests in the state, including the Legislature’s Property Tax Measure Review Committee.
The board of directors of the North Dakota Association of Rural Electric Cooperatives is among groups that have devoted considerable attention to Measure 2 and what it would mean if it’s approved by voters. At its July 2011 meeting, the NDAREC board of directors decided to oppose Measure 2.
“We feel the sweeping prohibition contained in Measure 2 is an unsatisfactory approach to addressing property tax issues,” said Robert Grant, NDAREC board president. “We are also greatly concerned about the loss of local control over funding of vital services which the passage of Measure 2 will produce.” Grant, from near Berthold, represents Mountrail-Williams Electric Cooperative, Williston, within NDAREC, the association of 21 electric cooperatives statewide.
The measure begins with this title language: “The initiated measure would amend sections 1, 4, 14, 15 and 16 of article X of the North Dakota Constitution and repeal sections 5, 6, 7, 9 and 10 of that same article, eliminating property taxes, poll taxes and acreage taxes, effective January 1, 2012. The measure would replace the lost revenues with allocations of various state-level taxes and other revenues, without restrictions on how these revenues may be spent.”
Also at the beginning of measure is this language amending section 1, Article X to read: “The legislative assembly shall be and all political subdivisions are prohibited from raising revenue to defray the expenses of the state or political subdivisions through the levying of a tax on the assessed value of real or personal property.”
Among NDAREC’s Measure 2 concerns are the following:
• While the vote on the measure will take place in June 2012, the measure states that it would take effect six months earlier, on Jan. 1, 2012. With the Legislature not scheduled to meet again until January 2013, there are many questions as to where the revenue will come from to continue providing local government services.
• Initial estimates indicate that to replace lost revenue by eliminating assessed property taxes would require doubling the 5 percent state sales tax or tripling the current individual and corporate income tax rates in the state, or some combination of both.
• According to a key provision in the measure, the Legislature would need to devise a formula to fully fund the “legally imposed obligations” of counties, cities, townships and other political subdivisions of the state. This would represent a significant shift in local control over expenditures to the state Legislature. Further, many programs such as senior services, road maintenance, fire protection, public health services, extension, recreation, and school busing are not statutorily required; therefore the Legislature would have no obligation to continue to fund them. Even such things as the level of law enforcement and the number of schools are not specified by statute and could be legally reduced.
• The measure only applies to assessed property taxation and does not address in lieu property taxes such as the coal conversion and oil production taxes, as well as those paid by electric cooperatives and telecommunications companies. In a report for the Property Tax Measure Review Committee, the North Dakota Legislative Council addressed this issue.
The council said the approval of the measure would eliminate some, but not all, in lieu property taxes. The council said in lieu property taxes established by measuring factors other than assessment and imposition by the State Board of Equalization would continue to be collected, including the in lieu property taxes paid by electric cooperatives. It said elimination of property taxes for investor-owned electric utilities and the continuation of in lieu property taxes for cooperatives would create a “significant change” in the competitive positioning of these industry sectors.
NDAREC is among many groups in the state declaring opposition to Measure 2. Included in the groups opposing Measure 2 is the North Dakota Association of Counties. That group – upon examination of an interim legislative committee, political subdivision audit and N.D. Legislative Council reports – and its deliberations, has developed these key reasons for opposing Measure 2:
• The measure is projected to eliminate $852 million in property tax revenue for 2012; in addition, there are $524 million in payments of in lieu of property taxes currently supporting local government, all or some of which may not be collectible depending on future legislative or court action.
• This nearly $1.4 billion in revenue lost annually is used by local government for senior programs, teachers’ salaries, school busing, fire protection, law enforcement and jails, road and street maintenance, land records, public health, extension service, parks and recreation, and numerous other local services – many specifically requested by citizen vote.
• The state lacks sufficient funds to replace the lost revenue. Increasing the state general fund spending from $3.5 billion to near $5 billion, or much higher, will require very significant increases in state taxes.
• Shifting the authority and responsibility to tax and appropriate funds for all local budgets will shift considerable control of, and accountability for, local services from elected school boards, township officers, city and& county commissions, to state legislators, who are elected in districts representing many local jurisdictions.