Property tax reform bill draft would consolidate levies, set levy limits for counties and cities
BISMARCK — A task force created by Gov. Jack Dalrymple to reform North Dakota’s property tax system is fine-tuning a draft bill that would set levy limits for cities and counties while giving them more flexibility in how property tax dollars are spent.
But whether the reforms will reduce property taxes overall for the state’s residents, “it’s impossible to say,” said Mark Johnson, executive director of the North Dakota Association of Counties and a non-voting member of the Task Force on Property Tax Reform.
“I think we’re looking more for transparency and we’re looking more for them to better be able to understand the system,” he said. “But it will make each individual county do more prioritization of where they really want to spend the dollars they have, and I think that’s more responsive to citizens than just levying for the sake of levying.”
Dalrymple created the task force by executive order in December, about 18 months after North Dakota voters rejected a ballot measure that would have abolished property taxes. Sponsors have talked about bringing back a similar measure if more isn’t done to reform property taxes, saying the more than $850 million in relief approved by lawmakers for the 2013-2015 biennium didn’t go far enough and merely shifted the K-12 school funding burden from local districts to the state.
The 14-member task force was directed to analyze all mill levies for political subdivisions other than school districts and look at ways to consolidate some levies, find alternate funding sources for others and repeal unused levy authorities. Members reviewed 186 levies in all.
“We are not leaving anything untouched in terms of investigating the opportunities for reform,” Dalrymple told the Legislature’s interim Taxation Committee on Wednesday.
For counties, the task force proposes consolidating 17 levies with specific purposes into a single general fund levy authority “with full flexibility to prioritize the use of those funds,” Dalrymple said. Four levies would be rolled into a single road-and-bridge levy, and five levies would be consolidated into a single levy for building projects.
Many county levies wouldn’t be touched, including those for extension services and historical societies, Dalrymple said.
In exchange for the added flexibility, county commissions would be subject to an overall mill levy limit in the general fund and roads categories, and a cap also would be placed on the number of mills allowed through voter authority, Dalrymple said.
The proposed reforms for cities are similar: 20 levies for specific uses such as ambulance services, forestry and weed control would be consolidated under a general fund levy, and seven levies would be rolled into a single capital improvements levy. A mill levy limit would be imposed on city councils, along with a higher limit for voter-approved levies.
Deputy State Tax Commissioner Joe Morrissette said the consolidation will make property taxes simpler and easier for taxpayers to understand.
“It would limit future growth, but I don’t think it’s the kind of reform where people would suddenly see a drop of a certain percentage in their tax statements,” he said.
For cities, consolidating the 20 levies into a single general fund levy would shrink the maximum number of allowable mills from 136.87 to 105 — a level that was exceeded by 28 cities in 2012, Morrissette said, citing the most recent figures available.
For counties, rolling the 17 levies into a single general fund levy would cut the maximum allowable mills from 97 to 60, a level surpassed by four of the state’s 53 counties in 2012.
The current bill draft would protect cities, counties and other local taxing authorities that exceed the proposed levy caps by giving them four years to reduce their levies, Morrissette said.
Johnson, of the Association of Counties, called the levy limits a compromise that tries to put “structural discipline” into the mill levy system while giving counties maximum flexibility to prioritize their spending.
“If we had our preference, we’d just assume have the Legislature give us the authority to levy and leave us alone to figure out what to do, but they just don’t want to seem to want to do that,” he said, adding Dalrymple deserves recognition for the thorough review and that task force members “want to come out of here with a unified voice.”
There is an exception to the levy limits: If lawmakers adopt the task force’s recommendations, cities and counties with voter-approved home rule charters won’t necessarily have to follow them, depending on the charters’ language. As of January, 132 cities had home rule charters, though Morrissette and Dalrymple said they don’t always address levy limits.
“If the local voters wanted to exceed those limitations, they could still do that,” Morrissette said.
Voter-approved mill levies also would have to be re-approved every 10 years under the current bill draft.
“People forget about it and everybody loses track of whether they really need it or not,” Dalrymple said. “I think it’s a good principle that every 10 years that be offered up to the voters for renewal at their discretion.”
Johnson said he’s nervous that smaller jurisdictions with less economic development and voters who are more reluctant to impose new taxes on themselves could suffer.
Dalrymple had previously floated the idea that the state could foot more of the bill for social services, but he said that won’t be among the task force’s recommendations. Counties are allowed by law to levy up to 20 mills for social services. Dalrymple said that while his office has asked the state Department of Human Services to develop a potential reimbursement system for counties for a variety of caseloads — a plan that, if workable, could eliminate the 20-mill levy — the task force won’t advance the plan in its bill.
“That idea will have to come forward from legislators,” he said.
The task force is expected to meet one to three more times to finalize the bill for the 2015 session, which begins in January. Its next meeting is 10 a.m. Thursday at the Capitol.