Facility Fallout

Bills Introduced to Change School Building Debt Service Tax Bases

By February 8, 2015 No Comments

by Sam Walseth, Director of Legislative Action

A group of legislators and farm organizations held a news conference on Thursday to introduce the HF 596 and SF 576 bills, which would change the local government tax base for all future school building debt service levies from Adjusted Net Tax Capacity (ANTC) to Referendum Market Value (RMV). This is being commonly referred to as a move to “House, Garage and One Acre.” View a report on property trends.

Led by Rep. Steve Drazkowski (GOP-Mazeppa) and Sen. Lyle Koenan (DFL-Clara City), the news conference featured the Farm Bureau and the Farmer’s Union. Each organization is calling for this change in the wake of rapidly rising property tax burdens on agricultural production land compared to that of residential and commercial properties.

The groups reported that in the last 10 years, farms have seen a 132 percent increase in property taxes, while property taxes during the same time have increased by 24 percent on residential homesteads and by 55 percent on commercial/industrial property.

Same or Fair?

Representatives from the farm groups said they want farm families to have the “same or fair” property taxes that their city cousins have on their homes and commercial properties. Some believe there’s a big difference between “same or fair,” and that will need to be sorted out before the proposed legislation is truly viable. Sen. Koenan noted this legislation is just a first step forward in striving for fairness. He added that farm families need to be protected from unwelcome surprises when school districts pass expensive bonds.

From a rural school perspective, the issue is complicated. A switch in tax bases for construction levies with no other changes would likely stop all future rural school bond referenda in their tracks. Debt Service Equalization (DSE) as it exists today (about $20 million statewide) is already far away from providing equity to rural communities. A tax base swap with the same level of DSE would be a disaster for many school districts. Even if the state added another $30 million to DSE to keep the same number of districts on the program throughout the tax base transition, there would still be tax shifting going onto commercial/industrial and homesteads. And let’s not forget the impact this tax base shift would have on school districts with lots of Seasonal & Recreational property.


The dilemma is that the current situation isn’t healthy for rural schools, either. We’ve heard over and over how difficult and contentious it can be to pass bonds for school facility needs. We know that all of the stakeholders and community members in rural school districts need to work together to support the education of our kids.

MREA is reaching out to various farm organizations and their legislative advocates to discuss alternative solutions that could solve a rural problem. We don’t think the answer is going to be zero taxes on agricultural production land. Nor will chasing ANTC equalization be a solution, since roughly 100 districts have ANTC/pupil wealth way above 125% of the state average, which is a level at which the School Facilities Task Force report recommends capital levy equalization be set.

View more background and maps on this issue.