Local view: Taconite tax structure reflects sound planningI read with interest the Nov. 26 article, “IRRRB leader pitches idea to keep North Dakota oil tax money local,” which was about a presentation made by Iron Range Resources and Rehabilitation Board Commissioner Tony Sertich to the oil-rich communities of western North Dakota.
By: Doug Gregor, for the News Tribune
I read with interest the Nov. 26 article, “IRRRB leader pitches idea to keep North Dakota oil tax money local,” which was about a presentation made by Iron Range Resources and Rehabilitation Board Commissioner Tony Sertich to the oil-rich communities of western North Dakota. The event provided a terrific opportunity to celebrate and showcase the great foresight and sound fiscal planning that went into establishing Minnesota’s system of sending a significant portion (according to the article, at least 63 percent) of the taxes generated through taconite production back to the areas of Northeastern Minnesota’s Iron Range where the ore is produced or processed.
Sertich noted it is only fair that that tax money stays in Northeastern Minnesota.
But what the article did not address was that it is not just fair that that money goes back to the producing region, it also is fiscally essential. Those production taxes are paid to the state in lieu of property taxes that otherwise would be assessed against mining properties and facilities. Because those production-tax collections are imposed in lieu of local real property taxes, they truly do belong to the people of Northeastern Minnesota — to the same extent that the alternative real property tax revenue would belong to the local schools, towns, cities and counties of Northeastern Minnesota.
The crowning gem of Minnesota’s production tax revenue distribution system is the trust fund it established and continues to fund with a small portion of the production taxes paid in good production years. That trust fund — called the “Douglas J. Johnson Economic Protection Trust Fund” or, simply, the “DJJ Fund” — creates a trust fund for the future benefit of the ore-producing regions of Northeastern Minnesota. Over several decades of prudent investing and good stewardship practices, the value of that DJJ Fund has grown to almost $151 million.
Essentially, the taconite- producing areas of Northeastern Minnesota are saving a portion of their annual production-tax revenue for a future when, as will happen with the Bakken oil fields, the irreplaceable natural resources are depleted and those Northeastern Minnesota communities will need financial resources to cushion their transition into a new economic reality. Commissioner Sertich reportedly noted in his address that the tax revenue generated from Minnesota’s taconite mining activities pale in comparison to the wealth being produced in the Bakken energy fields.
Maybe North Dakota communities also should study how Norway has dealt with its North Sea oil fields bonanza. The Petroleum Fund of Norway (now called the “Government Pension Fund-Global”), as of Sept. 30, had an estimated total value of $783.3 billion. Talk about a cushion for the future of a country with a population roughly the same as the state of Minnesota.
The DJJ Fund may be relatively small in comparison to the Norwegian trust fund, but it reflects the same sound planning for the future of the ore-
producing regions of Northeastern Minnesota that is evident in the Norwegian plan — and all too often lacking in most other areas of government fiscal planning.
Doug Gregor of Eveleth served 23 years as an assistant attorney general in Minnesota, providing legal services and advice on behalf of the Minnesota Attorney General’s Office to the IRRRB and its commissioners. He retired in October 2012.