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House bill would limit increases in total taxes raised by local governments

FARGO -- City, parks and school officials from both Fargo and West Fargo oppose two state House bills that would put a 3 percent limit on the total dollar increases in property taxes those entities could collect from one year to the next.

The bills, House Bills 1290 and 1465, have both been approved in the House and start winding their way through the Senate today, as the Legislature ends its crossover break.

Rep. Jim Kasper, R-Fargo, the lead author of HB 1290, said the tax system needs reform to make sure local governments don't try to capture more revenue after the state takes on a bigger share of property taxes.

"I think we're going to be sending back a billion with a "B" of property tax reduction, if you add up all the bills that we think will pass," Kasper said.

HB 1290 sets a 3 percent limit on the increase in dollars collected in property taxes from year to year by a taxing entity. To go beyond that for one year requires a public vote with 60 percent supermajority approval.

HB 1465 also sets a 3 percent limit on the increase in property taxes collected. That can be doubled with public notice and a hearing. The limits can also be suspended for a set amount of time by a vote of 55 percent of voters.

Both bills have exceptions for new property.

Currently, HB 1290 would be "a wash" in terms of revenue for the Fargo School District because the growth of taxable valuations is low, but in the western Oil Patch, there are double-digit increases in property values, said Broc Lietz, business manager for the school district.

When the economy is churning, expenses rise, Lietz said.

"If the state of North Dakota sees growth, we'd certainly want to capture the value of that," he said, particularly since Fargo could return to the times when property values rose 6 percent to 8 percent a year.

"I think it's a question of local control. Let the local taxpayers decide" their tax rates, Lietz said.

Mark Lemer, business manager for the West Fargo School District, said there are already limits in state law on school taxes. The general fund levy limit is 110 mills, he said.

"They restrict the ability to tax and they (state lawmakers) want to take it further and further," Lemer said.

Lemer said the requirement for a 60 percent supermajority vote in HB1290 to go over the 3 percent cap on property taxes collected only lasts for a year. "The practicality makes it less than reasonable," he said,

West Fargo City Administrator Jim Brownlee said the 3 percent limits would mean his fast-growing city would have a hard time paying for enough police or street department workers.

"I can't imagine a Williston or Dickinson, who are having explosive growth, how they would manage to keep even," Brownlee said.

Jim Larson, the Fargo Park District's finance director, said the cap on dollars would force the district to limit the services as the city grows, or add or increase fees.

"We see the current system works very well with the economy as it fluctuates," Larson said.

Fargo's Finance Director Kent Costin said the property tax caps for both bills don't take into account taxing to handle natural disasters -- like floods -- or judgments against a government. He said the city will keep watching the Legislature to be sure any bill approved doesn't "become so restrictive so we can't deal with things as they come to hand."