North Dakota News: Legislators debate tax increment financing
By REBECCA BEITSCH Bismarck Tribune | Posted: Wednesday, August 25, 2010 12:30 am
Worried that developers might be cashing in on multiple tax credits, the Legislature’s Interim Taxation Committee heard testimony on a bill that would ban cities from overlapping districts that receive designated tax money for economic development.
The bill would stop cities from overlapping tax increment finance districts, which set property taxes aside in a special fund to spur development, and renaissance zones, which offer income and property tax credits for investment in the area. The TIF programs are run by cities while the renaissance districts are overseen by the state.
The districts and zones cover certain geographical areas that Jerry Hjelmstad with the League of Cities said do overlap in certain North Dakota cities, though no one takes advantage of both in each instance.
The issue divided many legislators, though not along party lines.
“This is a classic case of double dipping that developers could use,” said Sen. John Andrist, R-Crosby.
But Rep. Jim Kasper, R-Fargo, said the two urban development programs provide valuable tax incentives for private businesses, not a system ripe for abuse.
Democratic Rep. James Dotzenrod of Wyndmere agreed.
“I’d be prepared to vote for this if after 10 years of experience, we’ve got a problem,” Dotzenrod said. “All I’m asking for is the proponents of this bill to give me some examples.”
Legislators also spoke of drawing up new requirements to bring TIF districts to a close, either after the goals in the development plan were achieved or after a certain number of years.
Bismarck’s TIF districts have remained the example commonly referred to by legislators for the longevity of a district first established in 1979.
Over time, the property taxes set aside for development in that district have grown to over $16 million, about 41 times more than the next highest TIF district fund. Because that money would otherwise be dispersed to local tax-levying districts, almost half, or
$8 million, would go to Bismarck schools. The money is currently resting in one fund until a lawsuit challenging the constitutionality of such programs is settled.
Bismarck’s renaissance zone is entirely within a TIF district. The city did put some restrictions on using money from both programs at the same time, but the TIF program has come to a halt due to the lawsuit.
The committee also moved forward a bill to continue property tax relief after a lengthy discussion over whether to do so through the same mechanism as in a 2009 bill which allows local jurisdictions to reduce property taxes while the state subsidizes school funding or through an income homestead tax credit which was passed in 2007.
The committee decided to once again to pursue tax relief through education. Giving money to schools for property tax cuts would cost about $340 million over two years, an increase from last year’s bill because it includes types of property that were accidentally neglected in the current version.
Sen. Tracy Potter, D-Bismarck, who sponsored the bill that would bring relief through income tax, said he will not push his bill outside of the committee.
Also proposed was a bill that would set up a system for taxing potash in North Dakota. The plan would function largely like the oil and gas tax and would charge about 5 percent by ton. Estimates show the tax would bring in about $16 million to the state per year.
(Reach reporter Rebecca Beitsch at 250-8255 or 223-8482 or rebecca.beitsch@bismarcktribune.com.)
