Property tax increases coming in ND after legislative changes, auditors say
BISMARCK—Officials in the state's largest counties are predicting property tax increases under changes enacted during the most recent legislative session.
But Gov. Doug Burgum said the state is boosting funds for property tax relief and argued the ultimate responsibility for the tax rests with local governments.
The North Dakota Legislature this year eliminated the 12 percent property tax credit and instead implemented a two-year pilot program for the state takeover of county social services costs, suspending county authority to levy 20 mills for those programs.
Proponents said the change, which passed with bipartisan support, created property tax relief and reform while eliminating a "subsidy" for local government spending that continued to grow as the state faced revenue shortfalls. But the pilot program comes with a lighter price tag than the 12 percent buydown, which was created in 2013.
Cass County Auditor Michael Montplaisir predicted an 8.5 to 9 percent increase on residential property tax bills under the legislative changes, assuming everything else stays the same.
"At this point, we don't really know," he said. "We haven't gone through the budget process."
Kevin Glatt, the Burleigh County auditor, said he expects tax bills on residential property in the city of Bismarck to rise by about 7 percent under the legislative changes alone. Grand Forks County Auditor Debbie Nelson estimated the same figure for all property types in the city of Grand Forks.
Still, Glatt supported the move because he said social service programs are mandated by the state and federal governments and shouldn't be funded locally.
"When the county could make limited policy decisions, it didn't seem appropriate that they would have to fund it," Glatt said.
Others have been less receptive to the change. Grand Forks City Council President Dana Sande issued a blunt warning after Burgum signed Senate Bill 2206, creating the social services pilot program.
"I want Grand Forks citizens to know their property tax bill is going up in 2018," he wrote on his Facebook page.
'Real property tax relief'
Property tax bills will ultimately depend on valuations and the budgetary needs of the local governments that levy them, but they have also been a sticky issue at the Capitol in recent years. And this session, lawmakers struggled to balance the books on reduced state tax revenue.
Continuing the buydown at 12 percent was expected to cost $275 million over the next two years. The Legislature set aside almost $161 million for the pilot program.
Still, overall spending on property tax relief is estimated to rise by almost $50 million in the next biennium to $1.36 billion, almost a third of the state's general fund budget, according to a Legislative Council report provided by Sen. Ray Holmberg, R-Grand Forks. That increase comes even as legislators slashed total general fund spending by almost a third this year.
But Holmberg, chairman of the Senate Appropriations Committee, agreed with the assessment from local government officials.
"People's property taxes will be going up some," he said. "But now the state has the opportunity to start looking at efficiencies in county social services."
In his first state of the state address in early January, Burgum said lawmakers should find an "off-ramp" to the property tax buydown, which he said was "tax money coming in and then being redistributed in an attempt to lower other taxes," according to prepared remarks.
In an interview, Burgum pushed back against suggestions that changes at the state level would result in higher property taxes.
"When the state is doing over $1.3 billion of relief across K-12 and social services and the state's putting more money into that than we did the last time, the math would indicate that if property taxes are going to go up, it's because of something that's being done at the local level not something that's being done at the state level," he said.
Charlene Nelson, who led an unsuccessful bid to eliminate property taxes in North Dakota a few years ago, sharply criticized state leaders for failing to adequately address tax increases. She predicted another effort would come about, but she was unsure of specifics.
"What we will propose will be true, meaningful, real property tax relief that every single citizen in this state will feel," Nelson said. "That's why this is going to be in front of the voters again, because our legislators have proved themselves utterly incapable of fixing this problem."
Rep. Craig Headland, R-Montpelier, who chairs the House Finance and Taxation Committee, said local governments should look to cut their budgets just like state agencies were forced to do in recent months.
"If they do that, I don't see any reason why property taxes need to go up for anybody," he said.