Property tax probe
Property values are leveling off or declining slightly in Minot while the city’s overall tax base continues to grow, Minot city assessor Kevin Ternes told the Legislature’s Interim Taxation Committee Tuesday.
The committee heard from Ternes, Ward County Auditor Devra Smestad and Gov. Jack Dalrymple on property-tax issues in the course of a day-long meeting in Minot.
The taxable value of all property in Minot is up 10 percent this year, which compares to a 28 percent increase in 2013, Ternes said.
“So we can see our increase in taxable valuation has slowed. The trend is slowing,” he said. “The increase is mostly as a result of new construction and annexation.”
Market studies show that home prices have stabilized, and some houses are selling for a little less than they would have the previous year, he said. The median sales price in 2013 was $232,000 or about $7,000 less than in 2012.
Because assessments are tied to market prices, about half of Minot homeowners will see a small reduction in their home assessments on their next tax bills, Ternes said.
“We are not raising any assessments,” he said.
However, commercial property is selling for about 15 percent more than assessed values. These properties will see increases in assessed values to stay in line with those prices and comply with state law, Ternes said.
Smestad said commercial property values in the county’s assessment jurisdiction are up 20 percent. The county has hired a contractor to re-assess commercial property over the next two years. Agricultural land, taxed using a different formula, is not seeing much change in assessment, she added.
“There has been a gradual shift in property-tax assessment from residential to commercial,” Ternes said. In 2004, commercial property accounted for 38 percent of Minot’s total property value. This year, commercial property makes up about 46 percent of total valuation. Commercial property includes housing with four or more units.
Ternes also made the case that, contrary to some complaints, property taxes have not doubled in Minot.
In 2003, the average home in Minot was assessed at $79,000, and the homeowner paid $1,600 in taxes. In 2013, the average home was assessed at $190,000, and the taxpayer paid $1,874 in taxes after state property tax relief.
“The bottom line is the taxes have gone up on the average home $274 in 10 years. Whether that’s outrageous or whether that is reasonable is in the eye of the beholder,” Ternes said.
He suggested it may be reasonable given federal price index calculations showing that it would take $2,000 in 2013 to have the same purchasing power as $1,600 in 2003.
Rep. Jim Kasper, R-Fargo, voiced his concern that not everyone falls into the average and some North Dakotans likely are seeing their taxes double.
“The numbers look good because of what the Legislature has done, not because of what political subdivisions have done with budgets,” he said. “Money spent is tripling in some instances.”
Sen. Dwight Cook, R-Mandan, committee chairman, said some political subdivisions are doing a lot to decrease budgets while others are not. When it comes to property taxes, the political subdivisions and the state must work together to keep costs down, he said.
A separate report from the State Tax Commissioner’s office showed that total taxes on all property in 2013 was down in dollar spending by 3.76 percent from 2012. Dollars levied on real estate excluding railroads, pipelines and utilities was down 4.34 percent. Rural agricultural property taxes were down 5.66 percent and rural residential property taxes were down 6.8 percent, while urban residential property taxes declined 5.4 percent.
Ward County’s consolidated dollar levy for all political subdivisions was up 0.16 percent, due in part to a huge tax increase for the Rice Lake Recreational Service District to support its flood fight. Tax dollars levied tended to be up in western North Dakota, including a 69 percent in McKenzie County. In oil-impacted counties, the higher taxes are spread over many more taxpayers due to the region’s growth.
Smestad said budgets are going up because the cost of doing business is going up. Ward County has sought to maintain zero growth in its mill levy, but state laws make it difficult by allowing or requiring certain mill-levy levels for various programs.
She explained that Ward County must levy four mills for its library to obtain a state match for half of those collections. As property values increase, the amount generated per mill also increases. Rather than levy for a windfall of $50,000, the county commission levies less than 3 mills for the library and gives up the state aid, she said.
Levies for fairs, senior programs, Garrison Diversion Conservancy District and other special interests are considered county levies. So when different entities take their full state-allowed mills regardless of their budget need, it leaves little new revenue for general county expenses and social services in a budget based on no levy increase, Smestad said. Her recommendation was to replace laws on mill-levy requirements with limits on dollar-levy increases.
Dalrymple reported to the committee that his task force on property tax reform has identified 13 different county-imposed levies that can be consolidated, along with merging four road levies and five construction levies.
“The obvious advantage is to force county commissions to set priorities and not rely on each separate levy as a justification for spending in a specific area,” he said.
Cities, park districts and townships also have numerous levies that could be consolidated and capped, he said. Public votes would be required to raise a cap.
“Overall, we do expect to save people money on property tax,” Dalrymple said. “I really believe we have an opportunity to bring forward some significant improvements in our property tax system that are long overdue.”