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Estimate: $812M to make up lost ND property taxes

By Dale Wetzel
Associated Press / April 3, 2012
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BISMARCK, N.D.—Local governments will lose $812 million that the state must replace if North Dakota voters scuttle property taxes, the Tax Department estimated Monday.

Property tax foes said the number does not include the economic benefits of abolishing the tax, which they said effectively blocks a person from owning a home even after the mortgage has been paid.

The figure was requested by a legislative committee that is studying the potential impact of Measure 2, a proposed constitutional amendment that would abolish property taxes. North Dakota voters will decide the measure's fate in the June primary election.

The amendment says the Legislature must draft a method to pay for "the legally imposed obligations" of local governments, using statewide sources of tax revenue.

Lawmakers asked for the Tax Department review to get an estimate of how much money they may be required to provide to make up for the loss of property tax revenues.

North Dakota state government operates on a two-year budget, which means lawmakers may have to funnel more than $1.6 billion over two years to local governments.

The state now has a $4 billion general fund budget over two years. Lawmakers say it is likely that state income or sales taxes, or both, may have to increase to provide the replacement funds.

Supporters of the amendment say the money could be supplied without raising taxes, if lawmakers reduce state spending growth and cut waste. They also argue that abolishing property taxes will provide an economic boost, resulting in more state tax collections.

"They'll buy different things, or they'll save different things. They'll have (money) to put into something else," said Susan Beehler, of Mandan, who spoke in favor of the measure at a committee hearing Monday. "That is the real benefit."

Opponents of the measure say that depriving local governments of one of their main sources of revenue will make it more difficult to finance needed projects.

Rep. Lonny Winrich, D-Grand Forks, a member of the legislative committee that requested the Tax Department estimate, said local governments would have to find different ways to repay newly issued general obligation bonds if they could not use property taxes as collateral.

"It seems to me that the major problem is one of ... how the private bond market might react," Winrich said. "It's more a question of uncertainty ... There are a lot of areas of uncertainty."

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