Lower property taxes in Wadena County? Commissioner believes he may have the winning formula
Property taxes are disproportionately high in Wadena County compared to others in the state, in fact about four times as high as those in Rock County, that little square in the southwest corner of the state.
That’s a fact that many area residents dwell on at least once a year when payments are due and many consider heavily when deciding where to live or own a business.
Wadena County Board Chair Bill Stearns thinks he and a team of others may have come up with a solution to have the state pay for at least a portion of the cost. He’s now pushing hard at the state level to see that funding come through for the handful of counties whose taxpayers are struggling under the weight of a heavy burden.
Commissioner Stearns borrowed a statement from a recent convention he attended and used it to impress the importance of this type of tax relief during a recent visit with Sen. Paul Gazelka. “Even if only a few of our counties are hurting we cannot consider the state of the state healthy,” he had written across the formula sheet.
Stearns said conversations have been going on for years over how to bring the tax rate down in a county with one of the highest poverty levels. They attempted to increase the multiplier in county program aid for a number of years, but were never successful, Stearns said during the regular County Commission meeting Tuesday, Sept. 10. Sen. Gazelka told Stearns a solution might be to get more counties in on tax relief, rather than just a few.
What he, Auditor/Treasurer Heather Olson, Assessor Lee Brekke and County Coordinator Ryan Odden, came to was a formula that sets the maximum tax rate at 60%. That would lower the tax rate for 16 counties.
The theory behind this is that a county should not have a tax rate over 60 percent. Even though the median tax rate is closer to 43%, it would still be a nearly 26% drop for Wadena County. This formula showed two options, with or without the bond payment included, which means the payment back to Wadena County would be $2.1 million, not counting the bond amount.
“So this would cost the state $16 million, not a lot of money in a $46 billion budget,” Stearns said.
If the counties were to include the bond payments, it would double to a $32 million total payment. But the bond payments are local options that the county decided to purchase, so those costs are less likely to be included in the reduction, in theory.
Stearns explained how the preliminary levy is due Sept. 30 and final levy is due Nov. 30 if a county were to file a request for County Property Tax Disparity Payment.
The commissioner of revenue would notify the county filing for the disparity payment if it qualifies and what the dollar amount will be on or before December 30. The commissioner would subtract the payment amount from the final levy filed on November 30 and send the state assessor and the state auditor the final levy after the payment is subtracted. On or before July 20, the commissioner of revenue would send the tax disparity payment to the county.
“So what this does, if they enacted it, it would lower all property tax on all parcels in Wadena County by 27%, because the payment has to come off the tax levy,” Stearns said. The county government would tax the residents at the lowered amount, expecting the state to send the other portion later in the year, so residents would not have to pay the amount up front, just to receive a rebate later.
“That’s the goal,” Commissioner Sheldon Monson said.
It's a goal Brekke feels would have a substantial impact on the county taxpayers. Based on a $200,000 homestead property, it would be a reduction of about $500.
"That would be helpful for anyone," Brekke said. He hopes the AMC and Legislature get behind the plan.
Stearns added that this does not take away from county program aid. It also does not effect other taxes coming from school districts, city and townships. Stearns is on the schedule Friday morning to speak before the Association of Minnesota Counties (AMC) Legislative Conference.
“Six people have five minutes to make their presentation, so wish me luck,” Stearns said.
It sounds good for Wadena County, and the 15 other counties currently over that 60% threshold, but as Commissioner Jon Kangas pointed out, it would place a larger burden on the state as a whole.
“On the one hand you could look at it as larger government,” Kangas said. “But this would be a huge benefit to Wadena County.”
But why does Wadena County have such a high tax rate?
As Stearns puts it, the glaciers were not kind to Wadena and Todd counties. In other words, there are not a lot of lakes here, while our neighbors enjoy the abundance of money that infiltrate through million dollar lake homes and the businesses that cater to those lake communities. There's also only marginal farm lands compared to the more rich farm lands of the Red River Valley. At this point, swamps don't add a great deal to property values.
"The bottom line is we have a low tax base," Stearns said.
Wadena County has one of the lowest taxable market values, just under $1 billion. Only Mahnomen, Red Lake and Lake of the Woods counties have a smaller tax base. The smaller the tax base, the more taxes that must be imposed on taxpayers in order to pay for the services that in many cases, the county is mandated to provide its residents.
Thanks to information gathered by county assessor Brekke, Stearns presented findings that showed Wadena County was No. 2 out of 87 counties for the highest county tax rate, at 87.8%. That’s just under Kanabec County, which sports 96.5% tax rate, the highest in the state. On the flip side, Rock County had a tax rate of 21.5% in 2018, the lowest in the state and about one-fourth the tax rate of Wadena County.
Neighbors of Wadena County showed the following tax rates for 2018: Todd County 74.6% (fifth highest tax rate); Hubbard, 41%; Otter Tail, 41.5%; Cass 31.3%.
What does Rock County have that Wadena County doesn’t? It turns out Rock County is a little smaller and has less people, but those people make more money. Age characteristics are nearly identical.
Size: Rock County, 482 square miles vs. Wadena County, 536 square miles.
Population (2018 estimate): Rock County, 9,414 vs. Wadena County, 13,773.
Persons in poverty: Rock County, 9% vs. Wadena County, 15.7%.
Median household income: Rock County, $56,753 vs. Wadena County, $45,018.