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In a region rich with natural resources, but poor in wealth, a couple hundred bucks of additional property tax relief for homeowners would be more than welcome.
“We’re asking for a bit of support,” Ron Pittman, a Cherry Township supervisor told the Minnesota House of Representatives Property Tax Division committee Wednesday in St. Paul. “We need a little tax relief and this bill deserves your support.”
Legislation authored by Rep. Dave Lislegard, DFL-Aurora and Sen. Grant Hauschild, DFL-Hermantown, would increase the Taconite Homestead Credit that owners of occupied homes and farms receive each year on their property tax statements.
The proposal would permanently increase the Taconite Homestead Credit to $515 to all eligible homes and farms in the Taconite Relief Area from an average of $298-$315 per homeowner.
The additional relief would become effective for property taxes payable in 2025.
“This is a very, very big deal to northeast Minnesota and the core Iron Range, which has been struggling,” Lislegard told the committee.
The Taconite Homestead Credit, funded by Taconite Production Tax revenue, has been frozen since 1998. Lislegard, chair of the committee, told legislators that communities across the Iron Range don’t have much tax capacity despite being located near taconite plants.
“When you look at the Iron Range and the communities as a whole and how it is structured, some of the poorest communities are within the Taconite Relief Area and they produce the majority of the wealth,” Lislegard said. “Production tax in lieu of property taxes is something that was created rightfully so, because when you have all these different locations and mines, people from all over the Iron Range work there and if it was strictly property taxes, only certain communities would benefit.”
The Taconite Relief Area is defined by school district borders. The homestead credit applies to homeowners in school districts such as Chisholm, Hibbing, Ely, Mountain Iron-Buhl, Mesabi East, Rock Ridge, St. Louis County, Nashwauk-Keewatin, Greenway, Lake Superior, and Cook County.
All of those school districts are within the Taconite Relief Area.
Funding for the increased relief would come from Taconite Property Tax Relief Fund.
For calendar year 2024, 42.6 cents per ton from the Taconite Production Tax paid by Iron Range mining companies goes into the fund, according to the Minnesota Department of Revenue.
Mining companies pay the production tax in lieu of property taxes.
Each year, money is deposited into the property tax relief fund from production taxes based on annual iron ore pellet production.
For calendar year 2024, $15,031,781 will be deposited into the fund for distribution, according to the Minnesota Department of Revenue.
The Taconite Property Tax Relief Fund showed a balance of just over $9.3 million in 2022, according to the Minnesota Department of Revenue.
That’s up from just over $8.1 million in 2021 and $6.7 million in 2020.
Since 2019, just over $11 million has been distributed each year from the fund. Lislegard cited to the committee the low tax capacity per-person in communities on the Mesabi and Vermilion ranges.
Cross Lake, for example, has a tax capacity of $9,298 per person, Lislegard said.
Meanwhile, Chisholm has a tax capacity of $350 per person, Eveleth $357, Aurora $416, and Virginia $481, Lislegard said.
“We produce the most, but we are the poorest communities,” Lislegard said. “What this bill intends to do is focus on this area.”
If the Taconite Property Tax Relief fund balance or Taconite Production Tax payments aren’t enough to make the homestead credit payments, the deficit is made up from the Douglas J. Johnson Economic Protection Trust Fund.
That fund, also funded by taconite production taxes, is overseen by the Minnesota Department of Iron Range Resources and Rehabilitation.
If the homestead credit bill is approved, the amount amount of property tax refunds issued by the state each year to homeowners within the relief area would be fewer due to the increased aid, saving general fund money, according to legislative analysts.
The House bill advances for possible inclusion in the Property Tax Division report.
The Senate version of the bill has been referred to the Senate Taxes Committee.
