(Note To Readers, Legislators, and Media: This article is meant to be a strictly factual article without judgement and opinion. As the alternative bills on property tax reform are introduced, I will provide similar summaries, then offer a compare/contrast of the bills. I am taking this approach because the biggest challenge the legislature will face is the arguments over which plan is better, rather than the details. This would cause the legislature to bog down. It is my intention to help legislators and the public determine what these proposals actually do and what provisions of each proposal make the most sense and offer the most bang for the buck to the taxpayers, within the context of the framework for property tax reform I have previously outlined.)
Day 4 of the 2025 Legislative Session commenced the biennial ritual of a nearly-three-hour long hearing to discuss property taxes. For those that have observed for more than a few years, it is a lot like the movie Groundhogs Day.
House Bill 1176, a comprehensive property tax reform bill, proposes a 3% cap on property tax levy increases, expands the homestead tax credit, and creates a new property tax relief program funded by the Legacy Fund. The bill aims to provide significant property tax relief, especially for seniors and low-income homeowners, while addressing concerns about the impact on local governments’ ability to provide essential services.
The bill’s sponsor, Representative Mike Nathe, highlighted the importance of the bill in providing both property tax relief and reform. He emphasized the 3% cap on property tax levy increases, the homestead tax credit for seniors over 65, and the primary residence tax credit funded by the Legacy Fund.
Governor Kelly Armstrong expressed strong support for the bill, emphasizing the importance of property tax relief for North Dakotans. He highlighted the bill’s focus on sustainability and its potential to provide significant property tax relief.
Tax Commissioner Brian Kroshus provided an overview of the bill’s fiscal impact, emphasizing the importance of considering factors such as new housing starts and inflation. He presented various scenarios to illustrate the potential impact of the bill on homeowners with different property values.
Supporters of the bill, including AARP North Dakota, the North Dakota League of Cities, and the North Dakota Farmers Union, highlighted the importance of property tax relief for seniors, low-income homeowners, and rural communities. They emphasized the need for a sustainable and equitable property tax relief program.
Opponents of the bill, including Mike Blessum from the Minot City Council, raised concerns about the potential impact of the 3% cap on local governments’ ability to provide essential services. They also argued that the bill does not do enough to address the root causes of high property taxes.
The hearing concluded with the chairman acknowledging the challenges in finding a solution that works for everyone and emphasizing the need for collaboration among all stakeholders.
HB 1176 As Introduced By Representative Mike Nathe
Representative Mike Nathe introduced House Bill 1176, a comprehensive property tax relief and reform bill, emphasizing its extensive nature and the need for immediate and sustainable relief. His submitted testimony can be read here.
The bill includes creating a new primary residence category, increasing the homestead credit thresholds, and providing a renter refund. It also proposes a two-year property tax relief program, with potential future adjustments based on Legacy Fund earnings. The bill includes a 3% annual property tax levy limit, with provisions for public votes to exceed this limit.
Governor Kelly Armstrong
Governor Kelly Armstrong showed up to support HB 1176 as the vehicle for his property tax reform bill in North Dakota, emphasizing its importance based on public feedback.
He highlighted the need for a 3% cap on existing property tax budgets to address past ineffectiveness of 20 Mills for social services. Armstrong proposed using the Legacy Fund's stream for sustainable property tax relief, ensuring no one pays more than their current taxes. He advocated for a primary residential credit to eventually reach zero property taxes, prioritizing relief for seniors and low-income residents. Armstrong emphasized the bill's durability, sustainability, and the necessity to avoid saddling future legislatures with untenable expenses.
Technical Details: Joe Morrisette and Brian Kroshus
Joe Morrison from the Office of Management and Budget testified in support of House Bill 1176, focusing on the financial implications. The bill assumes 155,000 qualifying residences, with $483 million allocated for tax credits, including $310 million from the general fund.
The legacy streams fund, expected to generate $173 million, would be redirected to property tax relief. Morrison clarified that the numbers could change, and the bill assumes a 6.5% rate of return and stable oil tax revenues. He also discussed the homestead tax credit program, noting that the Armstrong budget assumes full spending of the $72.4 million appropriation, addressing potential turnback issues.
Joe Morrisette’s complete testimony can be read here.
State Tax Commissioner Brian Kroshus also discussed how his office has handled the existing primary residence tax credit, and how they will implement this new approach.
Kroshus, discussed the impact of House Bill 1176 on property tax credits. He noted that the initial count of 155,000 qualifying homes did not include homes in trust, which could increase the number to 3,500-4,000. North Dakota's average new housing starts are 2,606 per year, leading to a fiscal impact of $165,000 homes. The primary residence credit is $1,550, with an additional $19 million for homestead credit expansion. Renters will receive $2.5 million in relief. The bill also includes a $600 renters refund and a new primary residence certification process.
Kroshus’ testimony can be read here.
Local Government Criticism
Matt Gardner, Executive Director of the North Dakota League of Cities, discussed the impact of property tax reform on the state's 355 cities, emphasizing that 307 have populations under 1,000. He highlighted that over 76% of North Dakota's 800,000 residents live in cities, which manage $4 billion in property and maintain over 10,000 miles of streets.
Gardner argued against a fixed 3% property tax cap, suggesting CPI plus 2% would be more flexible. He also stressed the need for voter involvement in emergency funding and growing community needs. Committee members discussed the importance of understanding city budgets, reserves, and the impact of caps on smaller cities.
Aaron Birst from the Association of Counties supports the bill, highlighting the positive relationship with county government and the merits of the 1550 program for property tax relief. He acknowledges the effort required to change property tax relief delivery methods and emphasizes the need for perspective, noting North Dakota's relatively low property taxes.
Birst disagrees with the notion that no action has been taken, citing significant reforms, such as the removal of 20 mills from social services. He suggests bifurcating the issue, sending tax relief to appropriators for analysis and offering administrative support. Birst points out the varying financial impacts of a 3% levy across different county budgets and offers expert assistance to address these complexities.
Dr. Amie Copas, Executive Director of the North Dakota Council of Educational Leaders, testified before the committee about the unique school funding model in North Dakota. She highlighted that schools are excluded from municipalities under Century Code Section 40, making them distinct from other political subdivisions. Schools operate on a per-pupil funding model, with property tax mills reduced from 185 to the current 60 mills, plus an additional 10 mills for educational purposes and 12 miscellaneous mills for specific needs.
Copas emphasized that schools are capped at zero for growth, relying solely on per-pupil payments, and stressed the need for the committee to understand these differences when discussing funding caps.
Measure 4 Activist Criticism: Mike Blessum
Mike Blessum, an Alderman from Minot, testified before the Finance and Tax Committee on property tax issues. He highlighted that Minot lowered its property tax levy by 20% despite a large budget and significant local spending on flood mitigation and the NOS project.
Blessum criticized proposed property tax reforms, particularly the buy-down regime and caps on local subdivisions, arguing they could be detrimental. He suggested eliminating carve-outs like Renaissance zones and moving away from valuation-based taxation to square footage to reduce costs. He also proposed reducing the state's sales tax rate from 5% to 4% to generate $400 million for local communities.
Blessum suggests eliminating carve-outs like Renaissance zones and TIF districts to level the playing field for all citizens.
He proposes moving away from valuation-based taxation to a system based on square footage to reduce the impact of property valuation increases on taxpayers.
He proposes reducing the sales tax rate from 5% to 4% to generate $400 million for state taxpayers.
No decisions on HB 1176 were taken.
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