North Dakota Measure To Eliminate Property Taxes Just the Beginning, Advocates Say

PHOTO: Wallace and Evelyn Feltman walk to the ballot box after filling out their ballots at the Alerus Center, Grand Forks, North Dakota, June 12, 2012.Eric Hylden/Grand Forks Herald
Wallace and Evelyn Feltman walk to the ballot box after filling out their ballots at the Alerus Center, Grand Forks, North Dakota, June 12, 2012.

North Dakotans take their angst against property taxes to the polls today, an issue gaining traction in other parts of the U.S., though opponents of a measure to eliminate the tax say the state isn't as cash-rich as it seems.

Measure 2 proposes to eliminate North Dakota's property taxes, which amount to $812 million annually, retroactive to Jan. 1 of this year. If the measure passes, the state would be the first to eliminate local property taxes, the mainstay of cities and towns.

"People shouldn't have their homes held hostage," said Charlene Nelson, 52, chairwoman of the organized effort behind Measure 2, Empower the Taxpayer. "The state has more than enough revenue to pay for K through 12 education as well as government services without kicking people out of their homes."

It is one of four measures on a ballot for which polls close at 8 p.m. central time on Tuesday, including a proposal to change the University of North Dakota's "Fighting Sioux" logo and nickname.

The issue of increasing property taxes is contentious in many parts of the country as local governments tried to raise additional revenue during the downturn. The National Taxpayers Union reported 30 percent of properties in the U.S. are assessed at higher values than they are worth. Counties in New York and New Jersey have the 14 highest median real estate taxes paid in the country.

The debate on lowering or eliminating property taxes is gaining traction in states like Pennsylvania, North Carolina and Texas.

Nelson said her group and state legislators have considered reforming property tax policy, including mimicking California's Proposition 13, which decreased property taxes. Nelson also supported a bill in 2009 that ultimately failed.

"Every solution we looked at only created more inequity, created more confusion and complication and didn't address so the fundamental core issue of property taxes," she said. "The issue of a property tax really was unfixable."

Nelson said the state has "more than enough" money with its $5 billion state surplus without the additional revenue from property taxes. Nelson said there are better ways to fund local governments.

"It all comes out of taxpayers' pockets – right or left. The question is should our homes be at risk, and we say they shouldn't."

The measure states that property taxes must be replaced with revenue from state sales taxes, individual and corporate income taxes, oil and gas production, tobacco taxes, lottery revenue and other sources.

Groups like the North Dakota Chamber of Commerce oppose the measure, calling it "draconian" and "ill-advised."

Previous constitutional measures, some that passed as early as 1920, left the state with only about a $730 million surplus as of June 30 last year, lower than what property taxes fund in one year, according to North Dakota's Chamber of Commerce.

Andy Peterson, president of the North Dakota's Chamber of Commerce, suspects the measure will fail three to one, in part because of residents' cautiousness toward spending.

"It's a very conservative state and we like it that way," said Andy Peterson, president of the North Dakota's Chamber of Commerce. "It's just the culture here."

Even the state's oil boom hasn't affected the state's tight-fisted culture, Peterson said.

Thirty percent of all the state's oil revenue is allocated into a legacy fund for a "rainy day" that the state has yet to define. Until then, the state can only spend the interest earned in the fund with a supermajority in the legislature -- and that's only until 2017.

"It's a volatile industry. We've been through booms and busts before," he said.

Supporters of Measure 2 argue that after the legacy fund, about $1 billion in oil revenue would still be available each year.

But Jon Godfread, the North Dakota Chamber of Commerce's vice president of governmental affairs, says the measure would take away control from local governments -- whose main source of revenue is property taxes.

"We think local government is the best government because it's closest to the people," Peterson said.

If property tax revenue dries up, the state's 2,100 units of local government will have to come to the state legislature "begging for money."

That will be challenging as the state has a biennial legislature that meets 80 days every two years.

"We're all for tax reform and lowering the tax burden but unfortunately this measure goes too far," Godfread said. "What we feel is there will be tax increases elsewhere."

Nelson said there would be no need to raise taxes elsewhere.

"If taxes are raised it will be a political decision and not an economic one. It will be to appease special interest groups that want unlimited access to family budgets," she said.

Even if the measure fails as polls predict, Nelson said she will continue working on the issue.

"If it doesn't pass," she said, "we've just begun."