Once again, we are reminded non-taxable government agencies are the largest landowners in northeastern Minnesota. Of Cook County’s 2,137,600 acres, for instance, 91 percent is owned by government agencies; leaving 9 percent taxable.
Because the majority of local governments are largely financed by property taxes, this inability to tax the property values from non-taxable government agencies unquestionably affects Cook County’s tax base.
It stands to reason, when the federal government controls a significant share of a county’s property, the revenue-raising capacity of that county is compromised.
Congress has created various payment programs designed to compensate for these lost tax revenues.
Over the years we have witnessed significant fluctuations in these government payments as a result of actions taken by individual government agencies or legislators. When federal or state units of government experience changes in their revenue sources, or re-align their priorities, something–or, probably more accurately, someone–has to give.
And, unfortunately–at least here in Cook County–taxpayers are asked to pick up the tab. After all, present leadership keeps preaching “we have tax capacity” …the valuation of property based on market value and class rates, on which property taxes are determined. An opinion evidently not shared by the Forest Service, given the findings of the recently appraised fair market value of BWCA lands.
In 1948, Congress passed the Thye-Blatnik Act to buy resorts and private lands in this wilderness area. To help assuage the pain, the Act provided for in-lieu-of-tax payments to Cook, Lake and St. Louis counties equal to three-quarters of one-percent of the appraised fair market value of BWCA lands. A new market value study is required every 10 years. The previous appraisal, completed in 2009, increased Cook County’s annual payment from $704,250 to $2,025,000; however, Congress started “sequestering” about 7 percent of these funds beginning in 2014.
The most recent appraisal, completed in 2018, reduced the estimated value of these lands by 39 percent over the previous market estimate (anyone else experiencing a 39 percent reduction in their land value in recent years?).
As a result, Cook, Lake and St. Louis counties can expect to lose about $2.3 million in federal payments in-lieu-of-taxes (PILT) next year.
While Cook County will take a $751,000 hit, our neighbors to the west, Lake County, will bear the brunt of these lost revenues–a $1.3 million reduction–about 4.5 percent of the county’s roughly $29 million budget. St. Louis County stands to lose $250,000, which isn’t as significant as the other two counties, given St. Louis County’s overall 2019 budget of $394 million, but as taxpayers are painfully aware, every dollar someone else contributes is one less they are asked to foot.
The $751,000 loss to Cook County amounts to a 2.9 percent reduction in the county’s overall 2019 revenue budget of $26 million.
Reductions to the three counties affected: St. Louis 16 percent, Lake 53 percent, Cook 39 percent.
“There’s no question these reductions will affect levies in the three counties with Lake [13 percent potential levy increase] and Cook [8 percent potential levy increase] being impacted the most if these counties have to backfill all that,” indicated John Ongaro, director of Intergovernmental Relations for St. Louis County.
Ongaro went on to explain, “There was a significant change in methodology from 2008 to this last go around. In 2008 the Forest Service looked at 100 parcels with water features, this time they only looked at 10; which significantly reduced the value of the lakeshore portion. There seemed to be more of a disproportionate sampling of parcels we gave them to look at. They appear to have chosen parcels that had less value over those that had gained value.
“We believe we are making a very good case as to why their appraisal is fundamentally flawed.
“Some of us believe the Secretary of Agriculture has the authority to reject the present appraisal and authorize a new one.
“All we are looking for is a hold harmless agreement and a second appraisal being done. I feel relatively optimistic that we are going to be able to put together a powerful argument in support of a second appraisal.”
While we’re on the subject, it’s interesting to note comments made by the county administrator and commissioners during a June 20, 2017 Committee of the Whole meeting related to intergovernmental funds:
“The Cook County financial position is unique in that we have a significant reliance on state and federal funds …in all honesty, when people say we’ve only got 9 percent of the county that’s privately owned that’s paying taxes, it’s really, really, really misleading ’cause the federal government is paying their share. They really are. And it’s also really misleading because our tax levy rate is really low on the privately owned parcels. That conversation doesn’t have any bearing on the situation.” – County Administrator, Jeff Cadwell
“When we want to start blaming the State and Feds, that’s irresponsibility.” – Commissioner, Myron Bursheim
“We’ve also had people ask us if we could stop taking the state and federal money and do what we want? We actually have enough room in our levy to no longer take state and federal money and do what we want.” – Commissioner, Heidi Doo-Kirk
Need I say more?
(See April 8, 2017 issue of the News Herald, “Superior National Forest” for additional information on this subject.)
Former Cook County Commissioner Garry Gamble is writing this ongoing column about the various ways government works, as well as other topics. At times the column is editorial in nature.
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