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Retroactive tax ban worries officials

FARGO -- Administrators for local entities that rely on property tax funding aren't sure what will happen if a ballot measure next June retroactively strips them of levy authority midway through the year.

But they're fairly certain it wouldn't be pretty.

"It would be very disruptive," said Roger Gress, executive director of the Fargo Park District. "We've never seen anything as dramatic as this."

The proposal, commonly known as Measure No. 2, will appear on primary election ballots on June 12, 2012. It would eliminate property taxes in North Dakota - a major source of local funding - and direct the Legislature to draw up a plan for replacing the funding through other means.

Those means are not yet clear, and this week, the issue took on another wrinkle when North Dakota Attorney General Wayne Stenehjem issued an opinion stating the measure, if it passed, will be retroactive to Jan 1, 2012.

That would require cities and schools, for instance, to refund whatever property taxes were collected after that date, budgeted funds that could already be spent.

State representative Dan Ruby of Minot, one of the members of the measure's sponsoring committee, had sought clarification as he originally expected the measure to land on the Nov. 2010 ballot and take place the year after passage.

But Stenehjem said that doesn't matter because wording of the measure is unambiguous, even as he acknowledged "there may be difficulties and problems created by the effective date."

Jim Larson, finance and human resources director for the Park District, said those difficulties would be so vast he can't begin to contemplate a remedy.

"I do not have a solution for how we could even operate," he said.

Levying property taxes constitutes about 60 percent of parks funding, he said.

Rick Buresh, superintendent of Fargo Public Schools, said losing levy authority in June would trigger "uncertain times" for the district.

"It could be very problematic in that we might have to refund money to taxpayers," he said.

About 42 percent of the district's revenue comes from property taxes, he said. While the measure directs the Legislature to replace that money -- a move that would likely require a special session next summer -- "it would be a lot of change from long-established practices in a very short time," he said.

He also said getting by without replacement funding would mean "some pretty drastic cuts." The district is studying options for contingency plans if the measure passes, he said.

Like all state and city officials, Buresh is barred by state law from officially endorsing a position on ballot measures.

Connie Sprynczynatyk, executive director of the North Dakota League of Cities -- an organization that's discussed the measure with Fargo officials, as well as others -- is bound by no such restrictions.

She said the measure is "probably the least practical idea since the Edsel," referring to a famously failed line of Ford cars.

"I think it will cause a budget nightmare for everyone," she said.

Beyond her opposition to the measure itself - she says it would force the state Legislature to handle hundreds of local budgets in unworkable fashion -- she said the retroactive timing of the measure will wreak havoc on budgets statewide.

"All you have to ask yourself is, 'How would this work on June 13?'" she said. "Every time I start thinking about how to implement it, my head spins."

On Wednesday, Charlene Nelson, a Casselton woman who is chairing the ballot measure campaign, told a legislative committee in Bismarck the measure would cull about 12,000 workers from state payrolls, create a corresponding increase in private-sector employment, and trigger a bonanza of new investment.

Attempts to reach Nelson for comment Thursday were unsuccessful.

Critics say the loss of that tax revenue would force the state to raise taxes elsewhere, but Nelson, citing a study by a Boston think tank, said an increase in income tax and sales tax collection caused by the economic benefits of the measure would be enough to make up the difference.

The Associated Press contributed to this report.

Marino Eccher is a reporter at The Forum of Fargo-Moorhead, which is owned by Forum Communications Co.