Measure 4 would eliminate property taxes, take away local control

By Chris Aarhus, NDFU

Neal Messer knows he could personally and professionally benefit from not paying property tax. As a farmer and owner of a real estate company in Dickinson, there’s no question it’s good for his pocketbook.

“I’m in two industries highly influenced by property taxes,” Messer said.

Neal Messer of Dickinson is a county commissioner for Stark County. Despite being a farmer and owning a real estate business, he’s opposed to Measure 4 because it takes away local control. Photos by Chris Aarhus, NDFU.

But as a Stark County commissioner, he also believes some form of property tax must be assessed locally to meet the needs of each community.

That local control could be undone by Measure 4, a constitutional measure that would eliminate property taxes in North Dakota. Measure 4 is officially on the ballot and will be decided by voters on Nov. 5. 

Former state legislator Rick Becker chairs the sponsoring committee that put forward the ballot initiative, which would amend and repeal sections of Article X of the state constitution relating to finance and public debt. It would prohibit the legislature and local subdivisions from “the levying of any tax on the assessed value of real or personal property.” Full language of the measure can be found on the North Dakota Secretary of State’s website. 

Any replacement funding handed down from the legislature would be frozen at 2024 levels. The North Dakota Legislative Council estimates the state would have to find $1.3 billion to replace the lost revenue.

North Dakota Farmers Union (NDFU), per its policy and action, opposes the elimination of property tax and is part of the Keep It Local coalition working to defeat the measure. Last December, NDFU members passed a special order at the state convention directing the organization to work toward property tax relief, but to oppose any effort to eliminate property tax.

“NDFU opposes efforts to eliminate property tax,” the special order reads. “Eliminating property taxes will force political subdivisions to rely on the state for funding critical needs. This will disproportionately harm rural communities and lead to declining services and infrastructure.”

COUNTY

Messer doesn’t argue for the status quo — he believes property tax reform needs to happen.

“I’m all in on reform, and that’s why I want to be part of the solution,” he said. “A lot of this is not anti-property tax — they want property tax reform.”

He understands the complaints, because he hears them regularly as a county commissioner. One big complaint is that a homeowner never really owns their property with property tax. 

“My argument has always been that owning personal property or real property comes with an enormous set of rights and responsibilities,” Messer said, “and property tax is one of those components. This is not unique to county government. Right here in Dickinson not long ago, the IRS was auctioning off a piece of property because the individual didn’t pay his income tax. The IRS sold it. It’s part of taxation.”

Messer said another complaint is that homeowners feel the valuation of their property is too high and rises too fast.

“They paid $250,000 for their house, their valuation goes up 5% every year and five years later, all of a sudden it’s valued at $300,000,” Messer said. “That increase does them no good until the day they sell it. The comparison for the valuation of a property should be an arm’s length transaction, and we don’t do that. We kind of bury (properties) in a pool and increase (all) valuations by 4.5%. That’s not how we should be doing it. We need to change that.”

But is that enough to consider eliminating property tax completely? Messer doesn’t think so. After all, this is revenue that stays in communities, he said.

“Property tax is the only tax that is 100% controlled locally,” Messer said. “If you go buy a hamburger from a restaurant and pay sales tax, (most of) that goes to Bismarck. They put it in a pot, stir it up and distribute it. Same with income tax.

“With property tax, it never leaves without us having the ability to control it. We have 3,100 political subdivisions in this state, and they’re all unique. Without a doubt, the best way to spend that money is at the grassroots level.”

Messer said Stark County levied $6.7 million in property tax dollars in 2021, the first year he took office as a commissioner. For 2024, the county levied $5.5 million.

“We’ve fought hard to be fiscally responsible,” Messer said. “There are political subs who are doing what we’re doing and being responsible, and some that aren’t. But they’ll get rewarded for not cutting their assessments (if the measure passes), and we’ll get penalized because we were fiscally responsible, if at some point we have to potentially come back up.”

Messer said voters should have all the information about who pays property tax, and that it’s not just homeowners. Marathon Oil, for instance, pays $1.6 million in property tax each year, he said.

“They’re a great company, and they have great involvement with the community, but do you think they’re just going to take that savings and then arbitrarily send it back to Stark County? No, and we shouldn’t expect them to. They’re a for-profit company. So why would we eliminate property tax for everybody?”

If the measure passes, the legislature would likely have to tap the interest earned on the Legacy Fund to make up the difference, Messer said. That doesn’t sit right with him, as the Legacy Fund is funded through oil and gas taxes. All of North Dakota’s oil and gas activity is in the western half of the state, and more than 75% of the activity happens within just four counties — Dunn, McKenzie, Mountrail and Williams.

“So, what we’d be doing is funding this constitutional measure on the backs of four counties,” he said. “What if oil goes downhill? What if oil drops to $30 a barrel for an extended period of time? We’re basing a lot here on a single revenue stream.”

FIRE

Carrington Fire Chief Ken Wangen has the responsibility of making sure his 32 volunteer firefighters have what they need to serve their community. 

For the past two years, Wangen has been quoting the cost of a new mainline engine and preparing to build it into the budget. Inflation isn’t just hitting consumers in grocery stores, though. It also affects local government when it comes time to buy fire trucks, snowplows and school buses.

“We bought our truck new in 2001 for about $180,000,” he said. “If I was to replace it now with the same truck without the same equipment, it’s going be over a half-million dollars.”

A common refrain from those supporting the measure is that local officials are not being good stewards with taxpayer dollars. Wangen encourages citizens to look at the budgets of their local subdivisions.

“There isn’t some magic fund pulling money out,” he said. “Every one of these entities puts together a budget.”

Carrington Fire Chief Ken Wangen.

Wangen’s concerned that future large costs like a fire truck will have to essentially be lobbied for in Bismarck, rather than taken to the Carrington community.

“If this turns into one big lump sum, our volunteer-based fire department will have to go to Bismarck and justify it to state legislators,” Wangen said. “And when we all start fighting over money, the larger population centers always win.”

It’s an issue that raises concern with both Wangen and Messer. If state government is deciding where these dollars will be allocated from Bismarck, how do rural communities compete with larger communities?

“I have a friend on the Slope County Commission in southwest North Dakota, and he has access to three legislators,” Messer said. “My buddy on the Cass County Commission has access to 36 legislators within 50 miles of his house. You can say these legislators will be unbiased and fair, but their phones will be ringing off the hook to serve their own constituents.”

If the measure passes, Messer said funding could be the first domino to fall, and eventually, local services could follow.

“They’ll have to tighten their budgets, and, inevitably, you will force these rural districts to consolidate,” Messer said. “The consolidation of the local political subs and the elimination of a lot of them is very real.”

If that happens, Carrington might end up covering for smaller departments like Sykeston, Wangen said. And in the case of fire emergencies, the clock is everything.

“Houses can be gone in 10 minutes,” he said. “If we start losing fire departments, it’ll be scary.”

Wangen acknowledges the pain may not be immediate, as local governments can likely weather inflation with budgets frozen at 2024 levels. However, it won’t be long before Carrington is competing with Fargo and Bismarck, he said.

“Four years down the road, where else will you be able to cut?” he said. “Then I have to go back to the legislature and fight for funding, and Fargo has the population that they have to protect. We can’t compete with that. We don’t have the clout.”

SCHOOLS

Needing to find money in the budget for big-ticket items isn’t unique to fire departments. For schools, replacing an HVAC system takes meticulous budget planning. 

Amanda Olson serves on the board for the Anamoose Elementary School and said the school is looking at repairs to its gymnasium’s heating and cooling system. That repair is one of several that will likely use up a large chunk of the small school’s building fund the next few years.

“It’s a modest building fund, but that money is going to be depleted soon,” said Olson, who farms with her husband and daughter near Anamoose. “Some of our heating infrastructure is from the 1960s. We need to be able to maintain and repair that system, as a new heating and cooling system could cost our district hundreds of thousands of dollars to replace brand new.” 

As a school board member in a rural community, Olson said she knows she’s not alone. Rural facilities are often much older than their urban counterparts.

Amanda and Kellen Olson of Anamoose holding their daughter Mia. Submitted photo

“Many of our school buildings were built 50, 60, 70 or even 100 years ago,” she said. “It’s a difficult decision. How do we spend responsibly but still maintain a comfortable environment for children and staff? If we could afford a brand-new system, we would do it. It’s not feasible right now, and it won’t be even considered if we don’t have a property tax base to use.”

It’s not uncommon for schools to be a small town’s largest employer, and that’s the case for Anamoose. Olson said a funding hit to their school could put it at risk if the measure passes.

“I believe many rural schools would consider consolidation to help alleviate rising costs,” Olson said. “If a school closes in a small town in North Dakota, it’s very difficult to keep that town thriving. Shutting down a school means loss of jobs, which means loss of population, and so much more.”

Like Messer and Wangen, Olson doesn’t believe using Legacy Fund earnings to replace property tax dollars is a good idea, adding, “It sounds risky to me to base funding from something not concrete.”

Olson said she can’t support eliminating property taxes with no real blueprint for how local governments will be funded going forward.

“If there is no solid backup plan, it’s just gambling,” she said. “As farmers, we know that gamble and aren’t willing to do that with our daughter’s future. My husband and I, as landowners, are proud that our property taxes are used to fund education and the future well-being of our daughter Mia. And we know our property taxes are spread around to support our community.” 

SOLUTIONS

Messer said the legislature does need to find a solution to make sure North Dakotans get more property tax relief.

Proposals range from doubling the recent property tax credit of $500 — which Messer doesn’t believe is enough — to eliminating property tax up to a certain valuation.

North Dakota has 17 active oil and gas producing counties. An oil and gas producing county is a county that has had oil and gas production in the last five calendar years. Four counties are considered core oil and gas producing counties. Core counties must be top oil and gas producers and, when combined, account for at least 75 percent of North Dakota’s oil and gas production. If Measure 4 passes, legislators could need funding from Legacy Fund earnings to help bridge the gap, putting the responsibility on a handful of counties. Information and graphic courtesy of North Dakota Job Service.

“My idea is up to $250,000, and if you owned a house that was valued at that or lower, you’d pay no tax,” Messer said. “If it was worth $300,000, you’d pay tax on $50,000.”

While Messer admits he’s not sure if the numbers even work for something like that, he believes some form of it would have various benefits.

“It would help lower-income families,” he said. “And if you were dead set against paying property tax, you might think about moving to a smaller community where you would pay zero.”

The point, Messer said, is to provide the help where it’s needed — for North Dakota families. NDFU has been heavily engaged in property tax reform discussions, but has yet to endorse any specific proposal.

“A large oil company or Bill Gates (with his farmland) — they can pay the tax, as they should,” Messer said.

North Dakota isn’t the only state tackling high property tax.

Colorado has three measures on property tax going before the voters. One would cap revenue growth for property tax at 4%. Another would cut residential and commercial assessment rates, with the state reimbursing local governments the difference. A third would expand the disabled veterans property tax credit. New Mexico and Virginia also have ballot measures to expand property tax credits to veterans.

In Florida, a measure would require the state’s homestead tax credit to be adjusted for inflation. 

In Georgia, a measure would increase the personal property exemption from $7,500 to $20,000 per person (North Dakota does not tax citizens on the value of their personal property).

In Wyoming, voters will decide on whether to put primary residences in a separate property tax category from rental property.

In Arizona, homeowners would receive a full property tax refund if the local municipality doesn’t enforce laws against illegal camping or loitering in a measure meant to target the state’s homelessness problem.

In total, eight states are trying to find a solution with the upcoming ballot. Only one is trying to eliminate property tax altogether.

“It’s an answer, but it’s the wrong answer,” Wangen said.

Measure 4 petition title

This initiated measure would amend sections 1, 14, 15, and 16 and repeal sections 4, 5, 7, 9 and 10 of Article X of the North Dakota Constitution. It would prohibit political subdivisions from levying any tax on real or personal property except for the payment of bonded indebtedness incurred before the end of the thirty-day period following the date this amendment was approved by the voters, until such debt is paid, and would require the state to provide replacement payments to political subdivisions of no less than the amount of tax levied on real property during the 2024 calendar year. 

It would limit the debt of a political subdivision to an amount not to exceed two and one-half percent of the full and true value of the real property in the political subdivision, except that an incorporated city, by a two-thirds vote, could increase the indebtedness of the city one and one-half percent beyond the two and one-half percent limit and a school district, by a majority vote, could increase the indebtedness of the school district two and one-half percent beyond the two and one-half percent limit. 

It would allow an incorporated city, without regard to the existing indebtedness of the city, to become indebted in an amount not exceeding two percent of its full and true value for water and sewer projects. It would require a political subdivision incurring indebtedness to provide for annual revenues to pay the debt payments when due and would prohibit a political subdivision from issuing general obligation bonds secured with tax levied on the assessed value of property on or after January 1, 2025.