School bond taxes may be cut for farms
It sounds like good news for farmers and school districts – the Minnesota Legislature passed the Agriculture School Building Bond Credit Sunday night, giving farmers a big break in taxes associated with school bond referendums.
The credit will reduce those taxes by 40 percent on ag land – not homestead property, but just agriculture land that is taxed for school building bonds.
This would not just be for upcoming referendums, but for existing ones as well, such as in Lake Park-Audubon, which not only has a large farm-related tax base but also built a new school there in 2010-11.
One of the authors of the bill, Rep. Paul Marquart, who represents District 4B including Detroit Lakes and Lake Park-Audubon, says farmers paying on a school bond referendum like that will begin to see their credits next year.
And while Governor Mark Dayton still needs to put his stamp of approval on the tax bill (which this new credit is a part of), Marquart isn’t expecting any surprises.
“He’s got 14 days to sign it,” Marquart said Monday. “The leadership met with the governor this morning, and there’s no indication he’s going to veto anything, so that’s a good thing.”
This would be a huge win for farmers, who say they are taxed disproportionately for school building projects, a sentiment shared by Marquart.
“Last year was a record year for the number of school building bonds in Minnesota,” said Marquart. “So this was the perfect storm where there were rising values on farm land – so rising taxes for them – a large number of schools doing the bonding bills, and commodity prices are really low. It left farmers in an unfair position.”
Marquart says this is the single most talked about concern his constituents have brought to his attention lately, and so getting this passed is what he calls a “win-win”.
Farmers have a reputation for voting “no” on school bond referendums because of the tax structure, which in some communities makes the difference between a pass or a fail.
For the Detroit Lakes School District, area farmers estimate there were likely only around 50 to 100 of them that voted last week, which would not have swayed the election this time around. However, if or when the time comes for the school to go back to the community with a different referendum to address crowding issues, the new credit may have the power to sway a few more votes to a “yes.”
The bill went in asking for a 50 percent reduction on the taxes, but Marquart says because the budget surplus went down after the February forecast, things had to be looked at very carefully.
At 50 percent, the credit would have cost Minnesota roughly $53 million in lost taxes; now at 40 percent, it is projected to cost the state around $44 million per year in lost taxes. The overall bill cut taxes by $258 million.
Small business owners have had the same exact argument as farmers when it comes to paying more on school bond referendums. They get hit twice – once for their residential properties and again for their business.
They say they don’t have the big lobbyists that the farmers do, so their interests haven’t been taken into consideration as much. However, there is a little something in that tax bill for them this time, too.
Small business owners will be tax exempt on the first $100,000 of their business’ property tax. Typically the statewide property tax is around 40 percent of a business owner’s property tax bill, so for businesses with a $100,000 or less property, they will now pay nothing to the state.