North Dakota Property Tax Amendment, Measure 2 (June 2012)

Property Tax Amendment
Type	Constitutional amendment
Origin	Empower the Taxpayer Committee
Topic	Taxes
Status	Defeated d

The North Dakota Property Tax Amendment, Measure 2 was on the June 12, 2012 statewide ballot in North Dakota as an initiated constitutional amendment where it was defeated.

Measure 2 proposed eliminating property taxes throughout the state, starting in 2012. The measure was proposed by a group called Empower the Taxpayer in March 2010 and approved for circulation by the North Dakota Secretary of State in late March. Specifically, the measure required the legislature to replace local governments' property tax income with state tax revenue. A similar proposal was rejected in 2009 by the North Dakota Legislature.

On April 29, 2011 the Secretary of State Al Jaeger confirmed that supporters collected sufficient signature to qualify the proposed measure for the statewide primary ballot.

Election results

The following are official election results:

Measure 2
Result		Votes	Percentage
d No		131,903	76.54%
Yes		40,438	23.46%

426 of 426 precincts reporting

Results via the North Dakota Board of Elections.

Text of measure

The measure as appeared on the ballot read:

This initiated constitutional measure would amend sections 1, 4, 14, 15, and 16 of Article X of the North Dakota Constitution and repeal sections 5, 6, 7, 9, and 10 of that same article, eliminating property taxes, poll taxes, and acreage taxes, effective January 1, 2012. The measure would require the Legislative Assembly to replace lost revenue to cities, counties, townships, school districts, and other political subdivisions with allocations of various state-level taxes and other revenues, without restrictions on how these revenues may be spent by the political subdivisions.

YES – means you approve the measure as summarized above.

NO – means you reject the measure as summarized above.

Constitutional changes

Measure 2 would amend Sections 1, 4, 14, 15, and 16, and would appeal Sections 5, 6, 7, 9 of Article X of the North Dakota Constitution.

Note: Use your mouse to scroll over the text below to see the full text.

Section 1, Article X The legislative assembly shall be and all political subdivisions are prohibited from raising revenue to defray the expenses of the state or political subdivisions through the levying of a tax on the assessed value of real or personal property.

Section 4, Article X All taxable property except as hereinafter in this section provided, shall be assessed in the county, city, township, village or district in which it is situated, in the manner prescribed by law. The property, including franchises of all railroads operated in this state, and of all express companies, freight line companies, dining car companies, sleeping car companies, car equipment companies, or private car line companies, telegraph or telephone companies, the property of any person, firm or corporation used for the purpose of furnishing electric light, heat or power, or in distributing the same for public use, and the property of any other corporation, firm or individual now or hereafter operating in this state, and used directly or indirectly in the carrying of persons, property or messages, shall be assessed by the state board of equalization in a manner prescribed by such state board or commission as may be provided by law. But should any railroad allow any portion of its railway to be used for any purpose other than the operation of a railroad thereon, such portion of its railway, while so used shall be assessed in a manner provided for the assessment of other real property.

1. Taxes upon real property which were used before 2012 to fund the operations of counties, cities, townships, school districts, park districts, water districts, irrigation districts, fire protection districts, soil conservation districts, and other political subdivisions with authority to levy property taxes must be replaced with revenues from the proceeds of state sales taxes, individual and corporate income taxes, oil and gas production and extraction taxes, tobacco taxes, lottery revenues, financial institutions taxes, and other state resources.

2. The legislative assembly shall direct as much oil and gas production and extraction tax, tobacco tax, lottery revenue, and financial institutions tax as necessary to fund the share of elementary and secondary education not funded through state revenue sources before 2012. The state cannot condition the expenditure of this portion of elementary and secondary education funding in any manner and school boards have sole discretion in how to allocate the expenditure of this portion of the elementary and secondary funding provided.

3. The legislative assembly shall direct a share of sales taxes, individual and corporate income taxes, insurance premium taxes, alcoholic beverage taxes, mineral leasing fees, and gaming taxes and any oil and gas production and extraction taxes, tobacco taxes, lottery revenues, and financial institutions taxes not allocated to elementary and secondary schools to counties, cities, and other political subdivisions according to a formula devised by the legislative assembly to fully and properly fund the legally imposed obligations of the counties, cities, townships, and other political subdivisions. The allocation of the amount determined by the legislative assembly must be provided to the governing bodies of counties, cities, townships, and other political subdivisions. How counties, cities, townships, and other political subdivisions choose to allocate the expenditures of this revenue is at the sole direction of the governing bodies of counties, cities, townships, and other political subdivisions.

Section 14, Article X 1. Notwithstanding any other provision in the constitution, and for the purpose of promoting the economic growth of the state, the development of its natural resources, and the prosperity and welfare of its people, the state may issue bonds and use the proceeds thereof to make loans to privately or cooperatively owned enterprises to plan, construct, acquire, equip, improve, and extend facilities for converting natural resources into power and generating and transmitting such power, and to acquire real and personal property and water and mineral rights needed for such facilities. 2. The state may issue general obligation bonds for this purpose to an amount which, with all outstanding general obligation bonds, less the amount of all money on hand and taxes in process of collection which are appropriated for their payment, will not exceed five percent of the full and true market value of all of the taxable property in the state, to be ascertained by the last assessment made for state and county purposes: but nothing herein shall. The provision does not increase or diminish the limitations established by other provisions of the constitution on the amount of bonds therein authorized to be issued. 3. The state may also issue revenue bonds for the purpose of providing part or all of the funds required for any project undertaken under subsection 1, payable solely from sums realized from payments of principal and interest on money loaned for such project, and from other similar projects if so determined by the legislature legislative assembly, and from the liquidation of security given for such payments. Revenue bonds issued for any project shall not exceed the cost thereof, including all expenses reasonably incurred to complete and finance the project, but shall not be subject to any other limitation of amount. 4. The full faith and credit of the state shall be pledged for the prompt and full payment of all bonds issued under subsection 2. Its obligation with respect to bonds issued under subsection 3 shall be limited to the prompt and full performance of such covenants as the legislature legislative assembly may authorize to be made respecting the enforcing of the provisions of underlying loan agreements and the segregation, accounting, and application of bond proceeds and of loan payments and other security pledged for the payment of the bonds. All bonds authorized by subsections 1 to 3, inclusive, shall mature within forty years from their respective dates of issue, but may be refunded at or before maturity in such manner and for such term and upon such conditions as the legislature legislative assembly may direct. Any such bonds may, but need not be, secured by mortgage upon real or personal property acquired with the proceeds of the same or any other issue of general obligation or revenue bonds, or upon other property mortgaged by the debtor. Pledges of revenues and mortgages of property securing bonds of any issue may be prior or subordinate to or on a parity with pledges and mortgages securing any other issue of general obligation or revenue bonds, as determined by the legislature legislative assembly from time to time in conformity with any provisions made for the security of outstanding bonds. 5. The legislature legislative assembly shall pass such laws as are appropriate to implement this amendment. 6. If any subsection of this amendment, or any part of a subsection, or any application thereof to particular circumstances should be held invalid for any reason, such invalidity shall not affect the validity of all remaining provisions of this amendment which may be given effect without that which is declared invalid, as applied to any circumstances and for this purpose all subsections and parts of subsections and applications thereof are declared to be severable.

Section 15, Article X The debt of any county, township, city, town, school district or any other political subdivision, shall never exceed five per centum upon the assessed market value of the taxable property therein; provided that any incorporated city may, by a two-thirds vote, increase such indebtedness three per centum on such assessed market value beyond said five per centum limit, and a school district, by a majority vote may increase such indebtedness five percent on such assessed market value beyond said five per centum limit; provided also that any county or city by a majority vote may issue bonds upon any revenue-producing utility owned by such county or city, or for the purchasing or acquiring the same or building or establishment thereof, in amounts not exceeding the physical value of such utility, industry or enterprise. In estimating the indebtedness which a city, county, township, school district or any other political subdivision may incur, the entire amount, exclusive of the bonds upon said revenue-producing utilities, whether contracted prior or subsequent to the adoption of this constitution, shall be included; provided further that any incorporated city may become indebted in any amount not exceeding four per centum of such assessed market value without regard to the existing indebtedness of such city for the purpose of constructing or purchasing waterworks for furnishing a supply of water to the inhabitants of such city, or for the purpose of constructing sewers, and for no other purposes whatever. All bonds and obligations in excess of the amount of indebtedness permitted by this constitution, given by any city, county, township, town, school district, or any other political subdivision shall be void.

Section 16, Article X Any city, county, township, town, school district or any other political subdivision incurring indebtedness shall, at or before the time of so doing, provide for the collection of an annual tax revenues sufficient to pay the interest and also the principal thereof when due, and all laws or ordinances providing for the payment of the interest or principal of any debt shall be irrepealable until such debt be paid.

Fiscal note

This is the fiscal note prepared by the North Dakota Secretary of State's office:

"The fiscal note prepared by the Tax Department states the measure will repeal ad valorem property taxes effective January 1, 2012. The amount of property taxes that would be eliminated upon successful passage of the measure would total $812,225,000 for 2012. The estimated fiscal impact assumes the effective date of the measure would initially impact and repeal 2012 property taxes that would be due and payable in 2013. The estimated fiscal impact reflects only one year of the 2011-13 biennium. The impact for subsequent bienniums would reflect a two-year period. Based on the historical property tax growth of 7.7 percent, per year the estimated fiscal impact of the measure for the 2013-15 biennium would be $1.8 billion."

Support

In November 2009, Robert Hale, a Minot, North Dakota resident announced that he was in the process of forming a committee, known as the Empower the Taxpayer committee, to propose the measure. According to Hale, the ballot language was similar to that of Rep. Dan Ruby's proposal during the 2009 legislative session. The proposed legislation called for amending the North Dakota Constitution to remove property taxes as a sources of state revenue. The measure is also sponsored by Charlene Nelson of Casselton, North Dakota.

Supporters

• Robert Hale
• Charlene Nelson
• Empower the Taxpayer committee
• North Dakota Policy Council

Arguments

• In response to arguments that removal of the property tax may lead to questions about other types of taxes that are intended as property tax substitutes, sponsors of the proposed amendment said that issue could be resolved by "specifying that some types of taxes are not based on their property value."

• Supporters of the measure also argued that eliminating property taxes may make the state more attractive to businesses, which may lead to increased revenue for the state. "This would remove the property tax disincentive across the state. I believe that we would see many industries taking a very, very serious look at this state as a place to settle," said Hale.

• Charlene Nelson, chairman of the sponsoring committee for the constitutional amendment, responded to concerns over the details of the amendment, specifically, what the phrase ‘legally imposed obligation' means, saying, "It is a constitutional measure. It can’t contain every single detail. The details are determined by statute. The constitution is the principle, the details are the law."

• In an article for the Grand Forks Herald, Brett Narloch, executive director of the North Dakota Policy Council, used data from a Beacon Hill Institute study on the effects of eliminating property tax in the state to highlight the measure's possible positive impacts on the state's economy. According to the study's findings, private employment would increase by more than 13,000, private investment would see an increase of $980 million, and there would be a $1,430 rise in disposable income per capita. The authors of the study believe the positive benefits, from eliminating property tax, to the private-sector economy are certain. Narloch further stated that the measure would create a fairer business climate, thus helping to diversify the state economy.

Campaign contributions

The following information was obtained from North Dakota Secretary of State website.

PAC info:

PAC	Amount raised
Empower The Taxpayer	$21,760.41
Total	$21,760.41

Opposition

Opponents argued that it is dangerous to "eliminate an entire source of revenue" and that the proposal is misleading. The proposal, they argued, may appear like a tax cut but may instead force other state taxes upward in order to compensate.

Opponents

State Chamber of Commerce President Andy Peterson spoke out against the measure saying, "This is an extremist measure and we think it should go away," Peterson said. "Can I say this any more directly? This is not the right thing for North Dakota."

• Wahpeton Finance Director Darcie Huwe
• Williams Count Auditor Beth Innis
• North Dakota Public Instruction Superintendent Wayne Sanstead
• Rep. Charles Damschen
• Fargo Moorhead West Fargo Chamber of Commerce
• Keep It Local North Dakota
• Former North Dakota Governor Ed Schafer
• Sen. Terry Wanzek
• North Dakota League of Cities
• Association of Counties
• AFL-CIO, Farmers Union
• Association of Realtors
• Petroleum Council
• Bankers Association

Arguments

• In response to the proposed measure Wahpeton Finance Director Darcie Huwe said, "This will be monumental. Property tax is one way for local governments to kind of control their destiny, with their ability to raise bulk revenue to provide local services. And if we lose that ability or diminish that ability to raise local revenue that provides local services, I think you end up with a disconnect between funding and priorities." If property taxes were eliminated as a source of revenue, local governments would have to depend on the state to replace the source, said Huwe. "In what form and how would it come and would it be the same amount and what would control how much that amount would be... a lot of big unknowns that aren't necessarily defined in the proposed legislation," she said.

• According to Williams Count Auditor Beth Innis eliminating the property tax would have a serious impact on citizens and could cause an increase in sales taxes or income taxes in order to compensate for the lost revenue. In particular, Innis said she believes the elimination of property taxes would impact people with low or fixed incomes.

• North Dakota Public Instruction Superintendent Wayne Sanstead said, "It has ramifications that could be severe for certainly, I'd say, school districts, but all political subdivisions." Sanstead argues that the legislature has taken strides to reduce property taxes. "We're down around 30 percent now. It's a lot less than it was when I came into this office, and I'm happy about that, but the first is, to eliminate totally, that`s a whole different kettle of fish," said Sanstead.

• Rep. Charles Damschen said that he is concerned that voters may assume that the proposed amendment means a tax cut. Damschen argues that it may in fact force state taxes upward. "This really is not going to be a net tax cut, and if people believe that, or are told that, it’s really misleading. That revenue isn’t going to just appear (elsewhere) when we abolish property tax," he said.

• Fargo Moorhead West Fargo Chamber of Commerce President and CEO Craig Whitney said, "To eliminate an entire source of revenue for nearly 3,000 political subdivisions without an approved methodology to replace that funding is dangerous. Instead, we need to explore alternative, sustainable revenue sources in order to lower the tax burden on property owners."

• According to Keep it Local North Dakota arguments making the claim that abolishing property tax would lead to an increase in local control are false. The group contended that it could lead to a full time legislature because the burden of funding local governments would fall to the state.

• Brian Paulson, assistant fire chief for the Jamestown Rural Fire Department, presented concerns that volunteer organizations, like local fire departments, would have to lobby the Legislature for funding.

• Michael Leachman, an analyst for the Center on Budget and Policy Priorities in Washington, D.C., argued that eliminating property taxes will increase the state's dependency on a "fickle money source," in reference to the oil revenues the state collects and the increase in these revenues amendment supporters hope to create. Speaking to the Associated Press about a study done by the center, Leachman said, "That would leave the education of your state's children, your future workforce, vulnerable to a highly volatile industry."

Campaign contributions

The following information was obtained from North Dakota Secretary of State website.

PAC info:

PAC	Amount raised
Keep It Local North Dakota	$579,140
Total	$579,140

Media editorial positions

See also: Endorsements of North Dakota ballot measures, 2012

Opposition

• The Minot Daily News argued against the measure in a May 19 editorial saying, "We're all for lowering property taxes, but Measure 2 is not the way to accomplish that goal. It's simply a bad idea."

Polls

See also: Polls, 2012 ballot measures

• A May 3-8, 2012 poll by Forum Communications revealed that 74% would vote against the amendment, while 26% would vote for it. A total of 500 likely primary voters were polled. The margin of error was +/-4.3%.

• An early-June 2012 poll by Mason-Dixon revealed that 70% would vote against the amendment, 21% would vote for it, and 9% were undecided. A total of 404 likely primary voters were polled. The margin of error was +/-5%.

Date of Poll	Pollster	In favor	Opposed	Undecided	Number polled
May 3 - May 8	Forum Communications	26%	74%	0%	500
Early-June	Mason Dixon	21%	70%	9%	404

2012 measure lawsuits
By state
Arizona • Arkansas • Colorado • Florida • Maryland Michigan • Massachusetts • Minnesota Missouri • Montana • Nevada North Dakota • Ohio • Oklahoma Oregon • Rhode Island
By lawsuit type
Ballot text Campaign contributions Constitutionality Motivation of sponsors Petitioner residency Post-certification removal Single-subject rule Signature challenges Initiative process

Lawsuit

Empower the Taxpayer, et al. v. Cory Fong, et al.

On Wednesday, February 15, 2012, Empower the Taxpayer and Charlene Nelson, chairwoman of the initiative campaign, filed a lawsuit against Tax Commissioner Cory Fong (R) and several other top public officials. The lawsuit claimed that these officials are using public money and resources to campaign against Measure 2 and, thereby, violating North Dakota laws that prevent public resources being used for political activity. Robert Hale, a member of Empower the Taxpayer, said, "Elected officials, government entities and organizations funded with taxpayer dollars are actively and intentionally engaged in lies, misrepresentations, deceptions, mischaracterization and fear-mongering." Fong responded to the allegations saying, "I think I was elected as tax commissioner ... to have comments and analysis of important measures that affect our tax system. This measure obviously impacts our overall tax system."

On February 21 District Judge Bruce Romanick denied the plaintiffs' request for a court order telling public officials to stop speaking against the measure. Judge Romanick said the lawsuit provided no sworn statements that back up its allegations, statements which are needed to secure the court order requested.

Judge Romanick set an April 3 hearing for the lawsuit.

The lawsuit was thrown out by Judge Romanick on April 12. The decision was quickly appealed to the North Dakota Supreme Court.

The state supreme court took up the case and heard arguments from lawyers during the week of June 4.

• Romanick's ruling can be found here.

Path to the ballot

See also: North Dakota signature requirements

2010 effort

Amendment supporters were required to collect a minimum of 25,688 valid signatures by August 4, 2010 in order to place the measure on the 2010 ballot. However, if valid signatures were submitted after the August 4th deadline, the measure would have been placed on the June 2012 statewide ballot. According to reports, supporters failed to file the required signatures by petition deadline day on August 4, thus failing to qualify for the 2010 ballot.

2012 success

Following the failure in 2010 to collect enough signatures the petition remained valid until March 29, 2011, thus allowing for supporters to attempt to place on the 2012 ballot. According to new census numbers, the minimum number of signatures needed to qualify increased to 26,904.

Reportedly, supporters of the proposed measure submitted an estimated 27,800 signatures, giving Secretary of State Al Jaeger until April 29 to verify and validate the signatures.

On April 29 Jaeger reported that the measure had more than 28,000 valid signatures thus qualifying the measure for the statewide ballot.

Timeline

The following is a timeline of events surrounding the measure:

Event	Date	Developments
Filing	Mar 2010	Measure was proposed by Empower the Taxpayer and approved for circulation by the secretary of state.
Signatures	Apr. 29, 2011	North Dakota Secretary of State Al Jaeger confirmed that supporters collected sufficient signatures.

See also

• 2012 ballot measures
• North Dakota 2012 ballot measures

Articles

• North Dakota property tax initiative qualifies for June 2012 ballot
• Petition signatures submitted for North Dakota property tax initiative
• North Dakota man proposes eliminating property taxes for 2010 ballot

External links

• Initiative text
• Initiative timeline

Support

• Empower the Taxpayer Campaign website

Opposition

• Keep it Local North Dakota campaign website

Additional reading

• The New American, "North Dakota Homeschool Mom Choreographs Ending Property Taxes," January 12, 2012
• KFYR-TV, "School District & Governor Raises Questions about Measure 2," November 16, 2011 (dead link)
• Associated Press, "Proposal to abolish ND property taxes stirs debate," October 18, 2011 (dead link)
• Associated Press, "Lawmakers to study ND measure that would abolish property taxes," May 10, 2011
• KFYR-TV, "ND Considers Abolishing Property Taxes," July 22, 2010 (dead link)
• The Bismark Tribune, "Petitions seek to put six measures on ballot," April 1, 2010
• Williston Herald, "Proposal would abolish property taxes," March 23, 2010 (dead link)
• Grand Forks Herald, "Leon Mallberg, Dickinson, N.D., letter: To reverse Measure 2, pass a new amendment," April 25, 2012 (dead link)

Editorials

• The Daily Caller, "North Dakotans hope to right property-tax wrong," December 13, 2011
• The Dickinson Press, "Replacing property tax money is hard," May 15, 2011
• The Bismark Tribune, "Property taxes pay for services to roads, streets, schools; may be the best way," April 22, 2010
• Jamestown Sun, "Readers say they’ll vote to keep property taxes," May 9, 2012