MREA is gaining support for a facility fallout solution that would address the deferred maintenance funding inequities in Minnesota. The inequities between the Alternative Facility school districts (large metro primarily) and all others is well documented. Legislators of all stripes have at the tip of their tongue the $2.79 per square foot versus $0.58 per square foot differential in spending power between the two categories of districts. View printer-friendly brief on Ag2School
MREA received official support from Minnesota Farm Bureau and released reports by school district outlining the impact of Ag2School long-term maintenance on revenue, the equalized levy for Ag2School, and the impact of Ag2School when coupled with HF 968/SF 1619 as an example of how levies can be decreased statewide and Long Term Maintenance Revenue increased. Read letter of support from the Farm Bureau.
View the Impact
Long-Term Maintenance with HF 968 SF 1619
Long-Term Maintenance Property Taxes
Tax Equity Current & 2 Alternatives
* These district runs have been updated as of March 23, 2015 (See details in footnote).
Gaining widespread support to advance a long-term maintenance requires a new approach. MREA developed a well-rounded two-part plan called “Ag2School Facilities” and began presenting it at the Capitol in March. This encompasses two solutions: Ag2School Long-term Facility Maintenance and Ag2School Tax Equity for school bonds. View a graphical presentation of the issue and solutions.
Part 1: Ag2School Long Term Facility Maintenance
HOW IT WORKS>> The focus of this solution is transitioning from ANTC (Adjusted Net Tax Capacity) as a tax base for school long term maintenance to RMV (Referendum Market Value). This would include a high level of equalization ($880,000 RMV/RPU) to buy down the impact on homeowners while lowering the impact on the farm community since RMV levies are on House-Garage-One Acre. Rural businesses are treated better under RMV since the commercial/Industrial tax base is at a lower rate on RMV than on ANTC. When Ag2School is combined with HF 968/SF 1619, which exempts the first $150,000 of business value from the state property tax, business property taxes go down in 318 school districts.
WHAT’S THE IMPACT>> The state’s equalization share to increase current maintenance levy authority to $470 per pupil from the current average of $220 per pupil would be $67 million in fiscal year 2017. Combined with the $15 million needed for Ag2School Tax Equity, this legislative package totals $82 million in one fiscal year starting with FY ‘17.
Part 2: Ag2School Tax Equity for School Bonds
HOW IT WORKS>> Under this plan, the general school debt service tax rate stays the same and only agricultural land changes in its property class. This plan calls for the state to smooth out the impacts of school bond taxes on agricultural production land in a manner similar to an insurance pool for crop insurance. Agricultural production land would be assessed a state tax rate to produce a pool of revenue (about $20 million each year). That would be coupled with $15 million each year from the state’s general fund to produce a 40 percent credit beginning in 2016 back to farmland that is taxed by local school districts for facility bond payments.
WHAT’S THE IMPACT>> The tax impact on an acre valued at $10,000 is 9 cents. An acre with valued at $5,000 would be 4.5 cents. This delivers major reductions in taxes for the farmers with school building debt taxes beginning in 2016. From the schools perspective, this proposal doesn’t ask homeowners and business to pay more in the future than what current law would otherwise require. Currently, 282 school districts have some building debt. The net impact of a 40 percent credit and the statewide ag land tax would reduce the school debt service property taxes paid by agricultural land in 235 school districts and 97 would see an increase. The median net impact is a $113 decrease per $1 million of ag value.
View a graphical presentation of the issue and solutions. View the slides handout.
* Note: MREA released new district runs dated March 23, 2015 and a new print friendly fact sheet. Previous versions can be disregarded. The new runs have the same statewide effects as earlier data and make five revisions:
- Report revenue to school districts in APU’s, not ADM’s.
- Add enhanced equalization for districts which have over 30% seasonal recreation property similar to what HF 1641/SF 1323 do for LOR.
- Change the equalization factor to $670,000, midway between Tier 1 and Tier 2 equalization.
- Make miscellaneous corrections resulting in reporting less tax impacts for Ag2School Long Term Maintenance on businesses and homeowners than in previous runs.
- In the Ag2School Tax Equity 40% credit, increase the state participation to $30M and lower the state-wide ag tax approximately $5 million statewide. This is 2.3 cents on $10,000 acre land or 1.2 cents on $5,000 ag land.