Help for cash-strapped governments in Minnesota — if it passes
ST. PAUL -- Two environmental funds approved by Minnesota voters could be tapped to pay for schools, roads and other local needs under a plan working its way through the Legislature.
ST. PAUL - Two environmental funds approved by Minnesota voters could be tapped to pay for schools, roads and other local needs under a plan working its way through the Legislature.
Pushing a plan that even some supporters acknowledge is constitutionally tenuous, a bipartisan group of lawmakers want to divert money from the Outdoor Heritage Fund and the Environment and Natural Resources Trust Fund to pay local governments whenever the state buys up local lands for preservation.
Supporters say the change is needed for rural areas dealing with decreasing property tax revenue; opponents say the plan violates the state constitution and betrays the intent of voters.
“I don’t know whether it’s constitutional, but we’ve got to try,” said Rep. David Dill, DFL-Crane Lake, who is among DFLers joining Republicans to support the bill in the GOP-controlled House.
Rep. Dan Fabian, R-Roseau, also supports the plan and said the controversy underscores the conflict between rural opponents of government-owned land and those who want to buy property to protect it from development, farming, mining or other uses.
“I respect the desire of many people to acquire land, but I want your people to respect the feeling of people who live where I live,” Fabian told opponents at a recent hearing.
“This affects our schools, our townships, our hospitals, our garbage. When you speak to people where I live, I don’t think they envisioned the scope of what’s going on.”
Meanwhile in the Democratic-Farmer-Labor Party-controlled Senate, Majority Leader Tom Bakk, DFL-Cook, said he supports the idea, increasing the likelihood it could reach the desk of Gov. Mark Dayton.
The bipartisan alliances friendly to the proposal has opponents already preparing to urge Dayton to reject it - and for a court battle if that fails.
“They can rest assured we’ll be pressing the governor for a veto,” said Garry Leaf, executive director of Sportsmen for Change and a supporter of the outdoor funds.
“This is fundamentally another way to dilute the spending that goes into the environment,” said Jeff Broberg, co-vice chairman of the Legislative-Citizen Commission on Minnesota Resources, a panel that reviews projects applying for money from the Environment and Natural Resources Trust Fund.
Broberg described the plan as an attempt “to rob” the two funds. “Our constitutional purpose is pretty clear, and this doesn’t pass the smell test,” he said.
Count the Department of Natural Resources among those who oppose the plan, also on the grounds it’s unconstitutional, said Bob Meier, the agency’s lobbyist.
The two funds were established in constitutional amendments approved by voters for the restoration, protection and enhancement of wildlife and natural habitat. The 2008 Legacy Amendment led to the creation of the sales-tax funded Outdoor Heritage Fund. The lottery-funded Environment and Natural Resources Trust Fund was created as a result of a 1988 amendment.
Both are used to buy privately owned land, and often the land is turned over to the state to become wildlife management areas, scientific and natural areas, or other land protected and managed for habitat and public use by the DNR. Once the land is owned by the state, it no longer produces property taxes for local governments.
To compensate for the loss revenue, the state has a formula to reimburse local governments, known as payments in lieu of taxes, or PILT. Those payments come out of the state’s general fund, which generates income from a host of sources, including sales and income taxes.
The new proposal would shift that burden from the general fund to the two environmental funds. Each fund would pay 30 times the amount of property taxes due on the land. That money would go into a new account, and local governments could draw money from it as if they were still taxing the land.
It remains unclear what that would cost the funds and how much local governments would be paid if the plan took effect. That’s because no one is sure whether the PILT system pays more - or less - to local governments than the taxes that would be paid if the properties remains in private ownership.
“I don’t think anyone can pinpoint it,” said Susan Damon, an attorney for the DNR who coordinates current state payments to local governments.
“There has never ever been a statewide comprehensive study of whether the acquired lands PILT payment is a better deal for the counties than if it had remained on the tax rolls.”
Kent Sulem, a lobbyist for the Minnesota Association of Townships, which supports the plan, said the current system isn’t working.
“It’s not a good model,” he told lawmakers this week, noting that the state has changed its PILT formula numerous times since it was established in 1979. “The formula falls behind, then it catches up, and then it falls behind.”
Legislative researchers are trying to estimate how much the plan would cost the environmental funds.
Since 2009, the two funds have been used to acquire more than 30,000 acres. That has translated to an average of $164,000 to $194,000 in annual payments from the general fund, which currently is budgeted to hold $38.4 billion.
“I think it’s unfortunate that over such a small amount of money, over such a great good that’s being done for the state, we’re having this argument,” said David Hartwell, former chairman of the Lessard-Sams Outdoor Heritage Council, which reviews projects being considered for Outdoor Heritage Fund financing.
But to the Outdoor Heritage Fund, the change could be significant. Hartwell said that if the proposed plan does actually generate roughly the same revenue as the PILT system, the fund could be on the hook for about $100 million over the next 20 years - the period before the amendment’s 25-year tax hike expires.
In other words, the Outdoor Heritage Fund, which spends about $100 million annually, could effectively be cut short by a year.
The lawmaker leading the push, Rep. Steve Drazkowski, R-Mazeppa, said buying and removing land from the tax rolls forces local governments - counties, townships and school districts - to rely on remaining private property owners more to fund local services.
“I don’t think that any Minnesotan who voted for (the amendments) thought they would have to pay additional property taxes,” Drazkowski said at a recent House committee hearing on the plan. “The goal is this would provide for maintenance of the property.”
But property maintenance wasn’t listed on the ballot questions for either amendment, and opponents are armed with a letter from the state attorney general’s office showing skepticism toward the idea.
In 2009, Deputy Attorney General Christie Eller researched the issue on the request of Bill Becker, then the executive director of the Lessard-Sams Outdoor Heritage Council.
Eller wrote, in part:
“A court might be willing to sustain the constitutionality of payments to reimburse local governments for activities that directly ‘restore, protect and enhance wetlands, prairies, forests and habitat for fish, game and wildlife.’ On the other hand, a payment that simply supports the cost of local government generally would seem more arduous …”
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How it works now
* The Outdoor Heritage Fund (or Environment and Natural Resources Trust Fund) pays for the purchase of land to protect wildlife habitat; the land eventually is transferred to the state.
* Land is removed from local property tax rolls.
* The state general fund reimburses local governments for the “lost” tax revenue.
How it would work
* The Outdoor Heritage Fund would buy land, which eventually is transferred to the state.
* The land would come off property tax rolls.
* The fund would pay 30 times the amount of annual property taxes into a new fund.
* Local governments would withdraw “lost” tax revenue annually from the new fund.