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Tax relief bill could be deal maker for school referendums

REGIONAL — As the legislative session inches toward Monday’s deadline, rural school superintendents have their eyes on a tax credit that would provide 40 percent property tax relief to farm property for taxes paid on school bonds.

The tax credit, dubbed “Ag2School,” has bipartisan support from Gov. Mark Dayton and both the House and Senate. However, it’s packed in the omnibus tax bill, which is as partisan and contentious as it gets. On Monday, Dayton vetoed the GOP’s tax bill, which called for a $1.1 billion tax cut.

In rural school districts, where farmers pay a large percentage of property taxes for school bonds, the tax credit could be key in getting support for bond referendums.

Just ask Mountain Lake Public Schools Superintendent Bill Strom. Nearly 80 percent of Mountain Lake residents voted against the school district's $29 million bond referendum in 2012 to demolish outdated parts of the school building, as well as repair and upgrade existing school sites and facilities.

As the school district is home to many farms, about 80 percent of the bond would have been covered by agricultural producers, a huge spike in property taxes that simply wasn’t going to be popular. That’s where the tax credit could come into play.

“It would be a deal-maker,” Strom said. “It would be a significant help for the school district in getting something done.”

Strom is watching the legislature eagerly, as the school district has serious needs that won’t be addressed properly without tax relief.

“We’ve had to fix things in the building that would have been improved by the referendum, and that’s put a burden on the general fund,” Strom said. “We cannot sustain that burden to continue to fix the building and maintain a fiscally sound district.”

He added the next bond referendum will likely be significantly less than the $29 million proposal from 2012.

It’s been getting more difficult every year to pass a school bond referendum in Greater Minnesota. In 2015 and 2016, only 41 percent of referendum questions passed in rural Minnesota, compared to 81 percent of metro-area questions, according to the Minnesota Rural Education Association.

Worthington’s bond referendum was defeated handily last November. It was rejected by a large majority of farmers within the district, who would have paid an estimated 53 percent of the levy.

District 518 Superintendent John Landgaard said Worthington’s agricultural community wasn’t opposed to education, but didn’t feel the tax structure was fair.

“In some respects, I can’t disagree with them — they’re paying a greater portion of the bond referendum than others,” Landgaard said.

The tax credit could provide an incentive. Landgaard said it was “step one” in making the tax structure more fair for rural Minnesotans. 

“It allows those who own agricultural properties the opportunity to consider voting in favor of it,” Landgaard said. “In some cases, some people didn’t feel they could consider it due to the cost. 

The bill would also impact farmers currently paying for school bonds. For example, farmers in Rock County’s Hills-Beaver Creek school district are still paying for a $9.9 million bond referendum passed in 2010. The credit would save farmers in the district approximately $245 in taxes per $1 million in agricultural land value next year.

This week, Dayton followed up his veto with an offer of $400 million in tax cuts, while Republicans countered by offering to lower their proposed cuts from $1.1 billion to $875 million. However, that still leaves the two parties hundreds of millions apart in their respective tax bills.

“Our people in political offices in St. Paul need to quit playing politics and do what’s right for Minnesota, particularly for rural schools,” Landgaard said. “This one piece of the tax bill is extremely important to rural districts.”