WORTHINGTON, Minn. - With voters in the Worthington Public School District voting overwhelmingly against a $79 million facilities bond referendum just months ago, it seemed fitting that Lt. Gov. Tina Smith would visit Thursday to garner support for an agriculture property tax credit in Gov. Mark Dayton's proposed tax bill.
"We're here today to draw attention to how important it is to communities like Worthington and literally dozens of communities around the state," Smith said in her opening remarks. "This is to us a basic matter of fairness. How can we make it possible to both support our fantastic local school districts and also not have a disproportionate burden of property taxes fall on our agriculture property owners?"
Smith called the current situation a perfect storm.
Farmers are suffering from low commodity prices, high land values and, for many, crushing health care costs. The prospect of their property taxes increasing by hundreds or thousands of dollars sent many to the polls in November to vote down building bond referendums like one in Worthington.
"The farm economy has been struggling for the past few years. Rising property tax bills are not what's needed across the state," said Minnesota Agriculture Commissioner David Frederickson. Noting that property taxes have increased by 114 percent for Minnesota farmers in the past decade, Frederickson said a majority of levy referendums in rural Minnesota failed in 2016, while the majority of levy referendums posed to city dwellers passed.
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Of the 335 school districts in Minnesota, 283 derive at least some of their income from property taxes on agricultural land.
"As a former farmer and former teacher, I can appreciate the circumstances farmers find themselves in," Frederickson said. "They know how important it is to support their local schools yet they fear the property tax levies have fallen disproportionately on them."
Tax credit
The governor's proposal for an agriculture property tax credit would reduce an ag land owner's property taxes by 40 percent in school districts where building bonds are supported.
"This bill proposes about $40 million per year - up to $100 million in a biennium - to provide that 40 percent credit to farmers across the state," said Minnesota Department of Revenue Commissioner Cynthia Bauerly. The credit would be applied directly to a farmer's property tax bill and, Bauerly said, would be an efficient way to reduce their property taxes.
More than 290 school districts in Minnesota already have levies in place where tax relief would be offered to agricultural land owners, Bauerly said. The bill has bipartisan support in both the House and Senate.
Bauerly said the governor's proposal also calls for additional money to be added to the debt service equalization aid formula, a formula offered to school districts to help pay for and reduce some of the costs associated with bonding.
"The governor is proposing about $60 million over the next four years to help schools also afford these important investments in their educational facilities," she said.
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Mike McCarvel, a farmer from rural Brewster, said the governor's tax bill and proposed relief for farmers would not only help landowners in the Worthington school district with funding future building projects, but also assist farmers in other area districts.
"It will provide $94,000 in tax relief to Heron Lake-Okabena, $414,000 in tax relief to Jackson County Central and $275,000 to Windom," McCarvel said. "This is not an issue just of one district - it covers all rural Minnesota and would be greatly appreciated."
'Get this done'
In Worthington, Independent School District 518 Superintendent John Landgaard thanked Smith and the two commissioners visiting and creating awareness to the inequitable tax system that exists in Minnesota.
"We experienced firsthand this fall what it means related to a bond referendum and in our case the vitality of growing our district and building a community together," he said. "It ultimately, in our case, created controversy, division and all because we have an inequitable tax system that does not provide the basics for our tax base, which is agriculture."
Landgaard called attention to the failed tax bill from the 2016 Legislature, which not only supported agriculture, but business and homeowners as well.
"I really want to encourage these folks to put pressure on our legislature and our governor to get this done ... tomorrow," he added. "It's time to take this step and get this piece done. This is just one step in probably a multiple of steps to correct the tax system in Minnesota."
Linden Olson, an ISD 518 board member and director of the Minnesota School Boards Association, said he has spent a considerable time studying the inequity that exists between school districts across the state. He called for a complete overhaul of the present use of local property taxes to fund school districts, particularly related to bonding for capital purposes.
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"Basic school funding has not changed much in the nearly 100 years since the original funding mechanism was conceived," Olson said. "There have been plenty of adjustments and Band-aids applied - so many that the school funding explanation put out by the Minnesota Department of Education is about 60 pages long."
Olson, who obtained cost comparisons between school districts on a $15,000 per pupil bond under existing laws, including debt equalization funding, said the cost to a landowner with land valued at $7,000 per acre non-homestead, ranged from a low of $1.41 per acre to a high of $29.79 per acre. On a 160-acre homestead with a house valued at $117,000, the cost to landowners ranged from $105 to $2,753.
"Such wide differences in cost on the same value property make it extremely difficult, if not impossible, to get much support from the ag community for school bond referendums in districts where the property values per student are low and the cost per acre for ag homestead property is high," Olson said.
He also noted that city taxpayers, when asked to support a needed school bond referendum - while also faced with increased taxes imposed by city and county governments without voter approval - "find voting 'no' on school referendums a convenient way to express their resentment at taxes that are increasing faster than their incomes."
McCarvel said Dayton's proposed tax bill provides a real opportunity for Minnesotans.
"We need to look to our legislature to act on this legislation to provide the tax relief for farms and landowners, to be willing to provide the environment for our children and grandchildren to be successful in rural schools," McCarvel said. "Hopefully they will live here, work here and raise their families here so we have a prosperous, growing community that provides for the people in rural Minnesota."
