Tax break?

Reducing levy cost city while saving taxpayers

City of Minot

Editor’s note: This is the second article in a three-part series on the City if Minot’s proposed budget.

Minot residents are feeling the consequences of a $51 million tax break over the past several years, according to the budget message of Minot city officials.

City leaders cite a series of events that have combined to impact the proposed December 2018 property tax bill. Between mill levy reductions, donations to outside causes and decline in sales tax collections, the city has lost about $105.6 million in operating revenue in the past seven years, according to information from the city.

The mill levy reduction refers to the significant drop in levy from 107.33 mills in December 2010 to 76.67 mills in December 2011. The levy remained at between 76.05 mills and 84.29 mills for six years before rebounding to 106.65 mills in December 2017.

By reducing the mill levy for those six years, the city gave up $51 million in tax revenues, the city reports.

To examine how this played out for an actual property, the Minot Daily News obtained valuation data for a 1,320-square-foot home, built in 1975, with a basement and garage. The valuation increase from 2010 to the peak year of 2014 was 23.5 percent, after which time there was a 10.4 percent decline in valuation to 2017. No home improvements occurred during that time that would have influenced valuation.

The sample homeowner would have paid $4,337 in property taxes to the city between 2011 and 2017 after the 12 percent state discount that was in place from 2013 through 2016.

If the city had held the mill levy steady at 107.33 mills to avoid losing $51 million over the six years, the sample homeowner would have paid $5,943. The homeowner would have seen taxes go up and down over those years, with the ultimate result of a gradual increase of $100 between 2011 and 2017. The homeowner, who would have received a bill of $943 in December 2010, would have seen the following December bills, with the state discount:

– 2011: $947

– 2012: $1,009

– 2013: $986

– 2014: $1,024

– 2015: $999

– 2016: $978

– 2017: $1,043

So while the taxes at 107.33 mills might not have seemed particularly painful, Minot property owners also might have grumbled about not seeing any benefit from the state tax break.

Instead of the above figures, though, the actual bills to the city would be, in rounded figures:

– 2011: $677

– 2012: $792

– 2013: $699

– 2014: $743

– 2015: $717

– 2016: $709

– 2017: $1,037

The 2019 estimated tax is $1,216.

Simply levying 107.33 mills consistently isn’t how taxation is done, however. A political subdivision’s mill levy reflects the relationship between overall property valuations and the amount of money the subdivision needs from property taxes to meet its budget obligations.

If the city had been collecting more from taxpayers over the past several years, it would have to show a need for that money. So how might it have been spent? City Manager Tom Barry has suggested the city’s $88 million debt could be a lot less.

Lower levies also don’t always mean smaller tax collections, particularly during growth periods as Minot was experiencing.

Figures provided by the city indicate the following (Shown by budget year rather than tax statement):

– 2011: 107.33 mills generated $12.7 million.

– 2012: 76.67 mills generated $9.4 million.

– 2013: 84.29 mills generated $12.4 million.

– 2014: 76.05 mills generated $14.5 million.

– 2015: 77.9 mills generated $16.45 million.

– 2016: 77.05 mills generated $17.6 million.

– 2017: 77.81 mills generated $17.87 million.

– 2018: 106.65 mills generated $22.6 million.

If valuations fall, levies need to go up to raise the same amount of money, so a combination of falling valuations and need for more tax money can create a notable rise in mill levy. Major contributors to Minot’s proposed levy increase for 2019 are falling valuations and a decline in revenue other than property tax. Flood protection and the Northwest Area Water Supply project also are usurping more of the sales tax that has helped offset property taxes.

In his budget message, Barry mentioned the $21.6 million that voters approved for community facilities as another draw on funds that could have gone over the years to city services rather than to improvements to sports facilities, museum and zoo attractions and social service facilities such as those of the Minot Commission on Aging and Domestic Violence Crisis Center.

He noted the city also donated more than $18 million over seven years to community organizations, from Companions for Children to Minot Air Force Base retention.

In total, that’s about $40 million from city revenues that went out as contributions, he points out. However, some of the funds in the $40 million went to community facilities that are city responsibilities, such as the municipal auditorium, city hall and recreation complexes.

The city council diverted sales tax collections for community facilities to flood protection in 2018. For 2019, council members propose to continue the practice and also to continue diverting sales tax money to flood protection that otherwise would go to the MAGIC Fund, the city’s economic development fund.

The city council will hold a public hearing on the proposed 2019 budget Sept. 18 at 6:30 p.m. in City Hall.