CHICAGO — North Dakota voters overwhelmingly rejected a ballot measure Tuesday to abolish property taxes, allowing local governments to breathe a sigh of relief, since the measure had posed a challenge to their fiscal and debt management.
If the measure had won approval, the state would have become the first to eliminate the ability to levy a property tax at all levels of government. The proposal would have required the state to compensate local governments for about $800 million in lost tax revenue annually.
The ballot initiative known as Measure 2 was led by opponents of the property tax system, which they called unfair and too complex due to various exemptions. Critics of the measure countered that such a move would strip local governments of their fiscal control.
Those pushing the measure said the lost property tax revenue easily could be offset by North Dakota’s oil boom, which is hauling in an unprecedented level of tax dollars from the Bakken Shale formation in the western part of the state.
Moody’s Investors Service had warned in a special report that the elimination of property taxes would have posed a series of challenges to local governments and school districts, which would have to scramble to provide services and maintain operations.
“The passage of Measure 2 would be a near-term credit negative for local government entities in North Dakota. … Cities and counties are largely dependent on property taxes for operations and while home rule-entities retain the flexibility to implement or increase revenue streams, the loss of property tax revenues would likely require reductions in services and the use of general fund reserves,” the report read. It also could have driven up borrowing costs because local governments would face limited bonding choices.
In anticipation of the ballot measure, the state’s public finance agencies and many local governments had slowed new-money issuance, since, if passed, the measure would have been retroactive to Jan. 1.