Funding plan to reimburse lost property tax revenue moves forward

A new funding system supporters say would more fairly compensate counties for property tax revenue lost to state land purchases was approved by the House Legacy Funding Finance Committee Monday.

Sponsored by Rep. Steve Drazkowski (R-Mazeppa), HF586 would require when land is purchased with money from two specific state funds, a county would receive a one-time payment equal to 30 times the property taxes assessed on that land before it was acquired.

That payment would go into an account managed on behalf of the counties by the State Board of Investment. Annual payments would be withdrawn from the account for counties to reimburse their local governments for land-related services such as maintenance work.

Rep. Steve Drazkowski

The bill was referred to the House State Government Finance Division. Its companion, SF1005, is sponsored by Sen. Justin Eichorn (R-Grand Rapids) and awaits action by the Senate Environment and Natural Resources Finance Committee.

Money for these payments would come from the Environment and Natural Resources Trust and the Outdoor Heritage funds. When dollars from these funds are used to buy land, they would also provide money for the new account.

Kent Sulem, general counsel and government relations director of the Minnesota Association of Townships, said the new payment system would make all parties “whole” and “remove hostility” from the land acquisition process.

“There are no winners and no losers,” Sulem said. “We’re not stopping acquisition, we’re just recognizing the costs of that acquisition.”

But Bob Meier, deputy director of the Department of Natural Resources, said the bill would create a “very complicated” payment system that would hamper how those funds could be used. Because the payments are to be used for land-related services, they could not be used for other purposes such as road repairs or public safety.

“We do not support the bill, nor do we see the need for it,” Meier said.

The state currently relies on the Payment in Lieu of Property Taxes program to reimburse local governments for lost revenue. But critics argue this system is inconsistent and doesn’t always fully compensate counties for land removed from the tax rolls.

HF586 would not replace PILT. When a payment is made from the new fund, that property would not also be eligible to receive PILT. However, payments could be prorated. If 25 percent of a land parcel is purchased using money from one of the funds, for example, only that percentage would be used to calculate the payment. The other 75 percent of the land would still be eligible for PILT.