Growing school tax credit to bring more relief for farmers

Kristine Goodrich
The Free Press, Mankato, Minn.

An increasing state property credit for farmers means the State of Minnesota would now pay for half the cost of building a new school in the Maple River School District.

Farmers in other area districts that have new schools will see a decrease in a portion of their property taxes.

The tax bill approved by state lawmakers this spring included an increase in the Ag2School tax credit.

The credit went into effect last year and reduces the burden of school building tax levies on agricultural property owners.

Agricultural property is exempt from most school levies, but not from levies that are used to repay debt that financed new schools or building improvement projects. That leaves farmers picking up substantial portions of building project bills in comparison to city dwellers.

Districts like Maple River, in which much of their tax base is agricultural land, have had an especially hard time gaining support for proposed building projects.

The initial tax credit reduced the school building tax on farm land by 40%. The state gives school districts 40% of what agricultural land owners would otherwise be paying toward the district’s debt payments. The credit does not apply to farmer’s homesteads; farmers still pay the same rate as other homeowners for their house and surrounding acre of land.

Now the credit will be gradually increased to 70%. The credit will grow to 50% next year, 55% in 2021, 60% in 2022 and 70% in 2023.

Maple River Supt. Dan Anderson said the growing credit improves equality.

“For years, metro districts have been moving forward while rural districts like ours have fallen behind due to the inequity in funding sources,” he said. “With this tax credit our students finally have a chance to learn in the same quality facilities as their peers in larger districts, while maintaining the benefits of living in a smaller community.”

Fred Nolan, executive director of the Minnesota Rural Education Association, said a credit increase was a “major priority” as his organization lobbied on behalf of rural school districts at the Capitol this past session.

The organization calculated estimated savings for farmers in each school district next year when the credit grows to 50%. Locally, farmers in the Tri-City United, Cleveland, Waseca and St. Peter districts all will see the greatest savings — of $74, $67, $61 and $60, respectively on land valued at $500,000. Voters in those districts approved building referendums in recent years.

The Rural Education Association has not yet estimated the amount of savings farmers will see when the credit reaches 70%.

The credit for now will mean only a few cents savings for farmers in the Maple River district because the district has very little debt. But that could change, as district leaders are considering another referendum seeking to build a new school. Three requests have failed since 2015.

The district recently sent a survey to property owners to gauge support for another referendum.

Nearly three-fourths of the Maple River School District’s tax base is agricultural land.

With the credit increase to 70%, Anderson said the state would pay for half of a new school.

But that doesn’t mean farmers would be contributing half of what they are asked in prior referendums. The 2015 referendum sought $48 million. To build that same school today would cost around $63 million, Anderson said.

“Construction costs will continue to go up and the challenges of our facilities will not go away,” he said. “The fact remains we must do something to address our aging buildings and the high cost of operating three sites.”