One of Gov. Doug Burgum’s final actions on legislative bills Tuesday was to line-item veto a provision that would have clawed back local property-tax dollars to reimburse Trinity Health for past taxes on its medical complex construction project.

Wayne Stanley, superintendent at South Prairie School, described the last-minute addition of the tax exemption to the Office of Management and Budget bill as pork barrel politics that would have cost his district about $1.4 million. In addition to the $991,119 in property-tax collections that the district would have had to repay, removal of the Trinity land from the district’s property valuation would have cost the district about $420,000 in lost state aid, he said.

Gov. Doug Burgum previously signed a separate bill that allows a property-tax break for hospitals and nursing homes under construction. That bill only applied to projects going forward, though.

“The amendment that got thrown in at the final hour in a conference committee without a hearing was ‘let’s make it retroactive,'” Burgum said. “I don’t have a problem with a tax exemption on the property tax for those entities going forward, but when you start going retroactively, then we end up having, mechanically, to do a clawback.”

Those clawbacks affect not just cities, counties, parks and schools but many groups that receive those tax dollars, from the State Fair to veterans, he said. There’s also no mechanism in law to determine how those clawbacks are to occur, he said.

“The hallmark of a strong and fair economy is a stable tax and regulatory environment,” Burgum wrote in his veto message. “Passing retroactive tax laws sets a dangerous precedent. Local political subdivisions have been following existing tax laws, and it’s unfair to them to change the tax rules to enable a clawback after the taxable period has been closed for nearly 1-½ years.”

Stanley said his district was facing more than 10 years of reduced tax collections to be able to pay back the money. South Prairie and other local taxing entities had provided information to the governor in opposition to the retroactive tax exemption.

Stanley also questioned whether the two senators who serve on Trinity’s board of directors, Sens. David Hogue and Karen Krebsbach, should have abstained from voting on the conference committee report that included the property-tax exemption.

Hogue responded that as a volunteer on Trinity’s board, he sees no financial gain, which is the trigger for recusing oneself from voting. He added he was disappointed with the governor’s veto.

“This is a tax that should never have been imposed in the first instance because the constitution provides that the churches and the hospitals are not taxed. Yet the political subdivisions have made the argument that when it’s under construction, it’s not a hospital – therefore, we can tax it,” Hogue said. “From my perspective, it’s about fairness. When you shouldn’t have been imposing the tax in the first place, maybe the right thing to do is to give that money back.”

Krebsbach said there’s no winners in the issue, with political subdivisions distressed over repaying money that taxed entities never should have had to pay. As far as the veto, she said, it is disappointing but she understands the pressure the governor faced in hearing arguments from both sides.

Rep. Randy Schobinger, R-Minot, said he opposed both the bill allowing tax exemptions going forward for hospitals construction projects and the OMB bill provision to make it retroactive, because of the tax impact on property owners in his district. He said he didn’t want to vote against the OMB bill, which contained many good provisions, so chose not to vote when it came up at the end of the session.

“So it’s interesting to see the governor vetoed it. And I’m glad he did,” he said.

Also not voting in the House were Reps. Jeff Hoverson and Larry Bellew. Reps. Lori VanWinkle and Dan Ruby voted against the OMB bill as did Sen. Bob Paulson in the Senate.

The retroactive provision that applied to Trinity also applied to a project in Grand Forks, Hogue said. Other smaller hospitals in the state with construction projects might have been impacted, too.

Trinity will be eligible for a tax exemption on next year’s tax bill for the first four months of 2023 under the separate legislation. Trinity received a 50% valuation reduction from the Ward County Commission that reduced the taxes paid last year. The OMB bill provision would have made a tax exemption retroactive to cover taxes paid by Trinity this year.

Trinity paid $2.57 million in taxes on its southwest campus property this year that would have needed to be recouped under the OMB provision. In addition to South Prairie School’s tax collections, the City of Minot collected $811,791, Minot Park District $341,433 and Ward County $419,112 and North Dakota medical school $7,030. The Ward County amount included various taxing boards that are separate from county government, such as First District Health Unit, soil conservation and Souris River Joint Board.

Burgum also vetoed two other sections of the OMB bill. One section involved a change to the definition of Legacy Fund earnings, which would have allowed the Legislature to withdraw an additional $70.5 million to spend. The other section limited the scope of work of the Capitol Grounds Planning Commission, which Burgum said would impair its ability to adequately maintain the property.