Tax matter becomes a constitutional debate for Outdoor Heritage Fund

Buying land has been one way the Outdoor Heritage Fund has been used to protect, enhance and restore Minnesota's fish and wildlife habitat.

Hunters and other outdoor recreationalists like the access that public lands provide and have supported the purchases. But others believe the state already has enough public land and express concern about the not-so-hidden costs of taking land off the property tax rolls.

The state gives counties payment-in-lieu-of-taxes — PILT — annually for each acre it buys. These days, that amounts to about $31 million each year, and is growing as the state adds acres. The money comes from the state's general fund, paid for by all taxpayers — because all residents benefit from the public ownership.

But a controversial bill in the Minnesota Legislature would use Outdoor Heritage Fund dollars to pay property taxes for wildlife lands bought with Legacy Amendment money.

Supporters say it's only fair that the fund pay for the true cost of acquiring land, while opponents say the measure is unconstitutional and that those dollars were meant to benefit wildlife.

"It's one of the costs of buying those lands,'' said Rep. Steve Drazkowski, R-Mazeppa, chief author of the House bill. "I don't think the average person knew we'd be buying land with the [Legacy Amendment] dollars.''

And, he said, citizens likely didn't know they would have to pay taxes on those lands from the general fund.

"Did people, when they voted for this, expect a property tax increase?'' Drazkowski asked. He has charged the Lessard-Sams Outdoor Heritage Council — which recommends spending Legacy Amendment dollars — with buying too much land.

So far, about 32,000 acres requiring PILT payments have been proposed for acquisition with Heritage Fund dollars. That would cost about $1.1 million annually in PILT payments

"The amendment says 'protect, enhance and restore' and they have defined 'protect' to mean buying land,'' Drazkowski said.

David Hartwell, a Lessard-Sams Council member and former chairman, said he believes the bill would violate the constitutional amendment.

"It's clearly using the money to pay taxes, not to protect, restore or enhance habitat,'' he said. "If they do it, they'll end up in court. Sporting groups and land conservation groups won't tolerate this. It's not a question of if they sue, it's when.''

Drazkowski isn't persuaded: "I think it's very constitutional. If public policy concludes that one way to protect land is to buy it, let's pay for the entire cost of doing that.''

Lance Ness, who represents a coalition of 25 state hunting, fishing and conservation groups, said his members support PILT payments but believe that money should continue to come from the state's general fund.

"We think what they're trying to do is unconstitutional,'' he said. "We believe these projects benefit all Minnesotans.''

The question of whether the Lessard-Sams Council could use some of the $100 million in annual sales tax revenue to make PILT payments for land it acquires arose shortly after the council was formed. In 2009, the council's acting executive director asked the attorney general's office for an opinion.

A deputy attorney general responded, saying the office couldn't give a formal opinion on a hypothetical question but did say courts "look skeptically upon expenditures from dedicated funds that could be characterized as support in unrelated programs.''

"Counties could use that money to pay for fire protection, libraries, bridges or roads,'' she said. "I think it's unconstitutional.''

She has additional concerns because Drazkow- ski's bill also would tap the Environmental and Natural Resources Trust Fund, funded by lottery dollars, to make PILT payments on lands that fund purchases. The LCCMR makes recommendations to the Legislature on how to spend that money — $46.3 million in 2015 — which is intended to protect, conserve and enhance Minnesota's "air, water, land, fish, wildlife, and other natural resources."

Drazkowski said that in many cases PILT payments aren't adequate, and thus local taxpayers end up helping pay for the land acquisitions. He said his bill would guarantee that counties are compensated fairly for their loss of property taxes.

Matt Hilgart of the Association of Minnesota Counties, which represents all 87 counties, said his organization supports the legislation.

"Our main goal is consistency and dependability of the property tax system,'' he said. "PILT hasn't always held its end of the bargain up. This bill guarantees that we'll get the proper amount of property tax dollars owed.''