Special assessments or infrastructure tax?

North Dakota House Bill No. 1474 proposes alternative revenue sources for infrastructure repair and replacement projects typically funded through the special assessment process.

Could special assessment revenue in North Dakota be replaced with revenue from an alternative local funding source?

It’s a question under consideration by state legislators and local leaders. Representatives from cities including Bismarck, Grand Forks, Fargo and Williston, North Dakota, recently gave presentations regarding state House Bill No. 1474.

The bill was presented early in North Dakota’s 66th Legislative Assembly for the consideration of alternative revenue sources for infrastructure repair and replacement projects typically funded through the special assessment process. Calling for a study on potential alternatives as well as the protocol for special assessments, the bill passed in both the state Senate and House.

Draft language in the proposal included amending the North Dakota Century Code, specifically pertaining to the power of municipalities. What could happen is the addition of language allowing a home rule city (or one that has a home rule charter for local governance) to levy and collect an infrastructure tax in lieu of general special assessments.

“The tough thing is, for smaller cities where you have fewer customers, you won’t have the same economic potential,” Wahpeton Finance Director Darcie Huwe said.

Having the authority to implement an infrastructure tax in lieu of general special assessments on most residential and commercial utility bills requires a vote of the people.

“Future infrastructure repair and replacement projects would be repaid by city funds collected monthly on utility bills,” Huwe wrote.

The current system has benefitted properties being identified, with allocation of debt service costs as a lien or assessment on individual properties certified onto individual property tax bills annually.

New construction projects, also known as greenfield development, would continue to be special assessed under the current rules.

Wahpeton certified $2.45 million in new project general special assessments for infrastructure repair and replacement projects in 2019, Huwe wrote.

“The estimated impact on city utility bills if this debt was serviced via an infrastructure tax collected on the city utility bills is approximately $5 per month per utility account,” she said.

Using that revenue source and the formula Huwe provided, a year’s worth of projects in Wahpeton would take 25 years to pay off.

“It could be a useful tool, but it would have to be used strategically,” she said.

In 2019, the North Dakota Legislature called for a study regarding alternate local funding sources over special assessments. Presentations from cities were heard by the state Taxation Committee, whose members include state Sen. Jim Dotzenrod, D-District 26, Rep. Sebastian Ertelt, R-District 26 and Rep. Alisa Mitskog, D-District 25.

“We do have people who are already servicing pretty significant debt,” Huwe said. “We have to ask, ‘Is this fair to our already existing special assessment payers?’”

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