Lawmakers hunt cabin tax compromise

ST. PAUL -- Minnesota school district leaders ask voters to increase their own property taxes more often than ever, saying revenues are not rising as fast as expenses.

ST. PAUL -- Minnesota school district leaders ask voters to increase their own property taxes more often than ever, saying revenues are not rising as fast as expenses.

However, winning those votes is becoming difficult as property taxes of all types continue to rise and voters are reluctant to push up their taxes further. It is especially difficult in areas with lots of cabins because their owners don't pay those so-called excess levies, leaving homeowners -- who can vote -- with bigger tax bills.

The quandary ends up taking its heaviest toll on northwoods homeowners, Rep. David Dill, DFL-Crane Lake, said. However, all Minnesota lakes areas are affected.

In Dill's district, cabins comprise up to 50 percent of local tax bases. The result is homeowners bear the brunt of an excess levy, Dill said.

A $500-per-student levy hike, Dill said, would mean a $340 annual increase on his property tax bill. When homeowners realize that they would end up paying so much more, it is tough to convince them to approve an excess levy.


Dill and Sen. Tom Bakk, DFL-Cook, are among lawmakers looking at ways to change that.

Bakk is working on a proposal to increase state payments in districts with lots of cabins, thus reducing homeowner property taxes. It would not mean more money directly for schools, Bakk said, but lower taxes should help districts convince voters to approve excess levies.

Details have yet to be worked out.

"It depends on how much property tax reform we do," Bakk said.

Dill said the solution is complex. "And I haven't figured it out."

One option could be to return cabins to excess school levy tax rolls. But, Dill noted, that would likely rub cabin owners the wrong way.

"That won't be a popular solution at all," he said.

Another choice is for the state to pay for the local excess school levies as Bakk suggested. Cabin owners and community residents in cabin country would benefit under that approach. However, such a plan would shift the tax burden to taxpayers across the state.


By how much? Dill said he didn't know.

"But it's going to be expensive," he cautioned.

Rep. Paul Marquart, chairman of the House property tax panel, said he had not heard of the cabin tax proposal, but it could fit into the Legislature's priority of lowering property taxes.

However, Marquart warned: "You are only going to have a limited amount of dollars" for the state to spend in lowing taxes.

Charles Kyte of the Minnesota Association of School Administrators he is interested in Bakk's proposal, but also questioned state funding.

"I think the Bakk idea is not bad, but it is missing pieces," Kyte said. "It does not have a way to create additional revenue."

A cabin owners' representative agreed the idea deserves exploration.

"That seems like win-win to me," said Jeff Forester of the Minnesota Seasonal Recreational Owners Coalition.


State law allows cabin owners -- who still pay basic school property taxes -- to escape the voter-approved tax since they don't send kids to schools in districts where they have cabins. That has forced a rift between cabin and home owners, Forester said.

"The cabin owners become the greedy ones, become the fall guys," he said.

But with something like the Bakk proposal, cabin owners end up not paying as much for schools they don't use and homeowners pay lower taxes, added Forester, who owns land on a Lake Vermillion island.

Kyte used the Breckenridge area to illustrate the problem. When lawmakers removed cabins from excess levies in 2001, they also decided the levies would not be applied to farmland. When those two types of land were removed, 80 percent of the Breckenridge school district's land no longer could be taxed for excess levies.

"You had to raise it on less than one fourth of the tax base it used to have, which means you had to quadruple the tax on the rest of the land," Kyte said.

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