Minnesota could be the big winner in North Dakota property-tax vote

  • Article by: PAUL LEVY , Star Tribune
  • Updated: June 12, 2012 - 7:33 AM

They'll vote on the citizen-driven proposal in Tuesday's primary.

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Keith Colville, who supports the abolition of property taxes in North Dakota, during a debate on the issue at a school auditorium in Edgeley, N.D., May 8, 2012. On June 12, 2012, voters in North Dakota will consider a measure to abolish property taxes in the state.

Photo: Jim Wilson, New York Times

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It's the most important citizen-driven measure on Tuesday's primary ballot in North Dakota, the state's tax commissioner says, even bigger than the debate over the University of North Dakota's "Fighting Sioux" nickname.

North Dakotans will be asked whether the state should abolish property taxes. And the winner could be Minnesota.

Banning property taxes would cost North Dakota $812 million in annual revenue -- money used to fund schools and local government, said Cory Fong, North Dakota's tax commissioner. Should voters abolish property taxes, that revenue would likely be replaced by raising North Dakota's sales taxes, Fong said Monday.

"That creates a competitive advantage to Minnesota," said Brad Schlossman, CEO of West Acres Development, in Fargo, N.D. "If sales taxes go up in North Dakota and you live near the Minnesota border, where would you rather shop?

"People of leadership positions are overwhelmingly against abolishing property taxes," Schlossman said. "But the concern is that somebody at the ballot box will say, 'Oh, I can click on this and my property taxes will go away.'"

Proponents of the ban say North Dakota's recent oil boom, which has given the state big surpluses, will more than make up for lost property tax revenue. Elimination of the tax also would pull in new residents, creating the chance for a population increase to match the state's economic surge, said Charlene Nelson, chairwoman of Empower the Taxpayer, the citizens' group instrumental in getting the property-tax question on Tuesday's ballot.

Nelson acknowledges that banning property taxes appears a long shot, if recent polls mean anything.

"But if you go by the number of yard signs, we'll win, 3-1," she said.

But many of those signs say "no," Fong said.

Fong has been the most outspoken opponent of the property tax ban -- so vocal that he was sued by the measure's proponents. The suit was dismissed last week by the North Dakota Supreme Court.

Power shift

Eliminating property taxes would shift the power to fund local government to the state Capitol in Bismarck, Fong said. And ultimately, he said, it would be replaced with sales taxes that would "create an uptick for some cities in Minnesota."

Nelson says that if "you abolish the taxes, you become a magnet for new business."

But there is little talk of Minnesota businesses crossing the state line to get a property-tax break, should the measure pass, said Craig Whitney, CEO of the Fargo-Moorhead-West Fargo Chamber of Commerce. Representing 2,000 members on both sides of the state border, the chamber is the largest local one in either Minnesota or North Dakota, Whitney said. It also is one of 85 chambers statewide that have formed a coalition opposing ridding North Dakota of property tax.

"I did attend one Moorhead regional event and when a Clay County commissioner brought it up, there was little talk of people on the Moorhead side of wanting to move," Whitney said.

"I do think it's going to fail. It's drastic, draconian action."

Eliminating property taxes in North Dakota could create a "short-term negative impact" for Minnesota communities near the North Dakota border, said Scott Huizenga, city manager in East Grand Forks, Minn. But the sales tax that could result "doesn't just level the playing field, it benefits us in Minnesota."

Empower the Taxpayer began the push against property taxes six years ago, long before North Dakota's recent oil boom. North Dakota's recent fortunes have not altered the group's reasoning.

"Right now, North Dakota relies on two kinds of economy -- oil and agriculture -- and both of those are very volatile," Nelson said. "North Dakota has seen boom and bust cycles. People are leery of another bust.

"By turning the state tax-free, we're turning the entire state into an economic independent zone. We won't be relying on just oil and agriculture. We'll be able to weather the changes in the economic market."

About the Sioux

Voter turnout is expected to be unusually high for a primary -- mostly because of the debate over the University of North Dakota's "Fighting Sioux" nickname, which has been a lightning rod of controversy for years. The NCAA says the nickname is offensive. Some UND alumni fear it hurts recruiting and say schools have refused to play UND because of the nickname.

But supporters of the nickname have petitioned to keep it.

Last November, the legislature voted to repeal state law requiring UND to use the "Fighting Sioux" nickname and logo. Tuesday's ballot question asks voters whether they want to approve the bill that was passed or reject it. So a "no" vote is a no to the law and a "yes" to the nickname.

"We've got a few things going with this primary," Fong said. "But , in my opinion, the tax issue will define how we go forward."

Paul Levy • 612-673-4419

  • $812M

    Amount of annual revenue North Dakota would lose if voters abolish property taxes. The revenue might be replaced by raising sales taxes, which could potentially benefit Minnesota.

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