County bristles at possible utility tax breaks

Carlton County joined a chorus of county-based officials from across the state Tuesday, calling on the state department of revenue to pump the brakes on proposed changes to tax collections on utility companies.

“Currently these types of properties are responsible for nearly 20 percent of all taxes paid in the county,” board chair Susan Zmyslony wrote in a letter to the Minnesota Department of Revenue. “So it is a great concern to us as to how any changes could affect our county.”

The state legislature directed the department in 2021 to review utility taxes, and the outcome is a proposal that would replace property-based taxing with taxation of the companies’ gross operating revenues.

Zmyslony’s letter highlights state analysis that shows 75 percent of utility companies would pay less under the new method.

“Our county would like to be viewed as a stakeholder in these conversations and be involved in any decisions regarding changes or viable solutions,” Zmyslony wrote.

Auditor/treasurer Kevin DeVriendt was frank during Tuesday’s county board meeting in Carlton, saying the department of revenue failed to invite any entities other than utility companies into the discussions.

“Of course they’re on board with that,” DeVriendt said of utilities accepting a method that could amount to a giant tax break.

The state could make counties whole by filling the gap early on, he said, “but I don’t see that being a long-term solution.

“Most likely it will shift to our agricultural, residential and commercial properties in our county to make up the deficit,” he continued. “In my opinion, it’s unfortunate they would make this shift or change to help the largest companies, and (the) highest taxpayers in our county, it could have a dramatic effect on them.”

County assessor Kyle Holmes also weighed in during the board meeting.

“We don’t necessarily oppose it, but we don’t support it in its current form,” Holmes said. “We don’t have figures. We need to know how it’s going to impact the county and its bottom dollar before we can sign off.”

Holmes said the discussion to date has been led by power companies, pipelines and railroad operators, and that it’s raised the awareness of every county in the state.

“Every assessor’s office and just about every auditor’s office is writing a letter at this point,” he said.

In her letter, Zmyslony said Carlton County awaits a side-by-side comparison between the old method and new one, and estimates for future comparisons.

She noted the difficulty in assessing gross revenues versus a fixed factor like property.

“A change to a method that only factors in gross revenues is also difficult to understand how that would be more stable with ever-changing global, national and state economic changes,” Zmyslony wrote.

Like DeVriendt, Zmyslony’s letter also noted the potential burden it could have on ag land owners, and residential and commercial property owners.

“The potential shift … will compound the taxation problem for those sectors,” she wrote.

Approved unanimously by the board and featuring the names of all commissioners, the letter was sent April 9 to Jon Klockziem, the state’s property tax director.

Klockziem told the Republican Eagle of Red Wing last month that he couldn’t say for certain if the proposal would put more tax burden on local residents and entities, but that department of revenue staff was considering an idea to partner the tax change with transition aid so local governments wouldn’t have to put the burden on residents if they experience a drop in tax revenue — the very idea DeVriendt doubted would be a lasting solution.

The directive to reconsider utility taxes stemmed from the industries’ repeated challenges to property taxes. An example of that was reported at Tuesday’s meeting, at which DeVriendt noted Minnesota Energy Resources Corp., a natural gas provider, settling in tax court recently to have its Carlton County taxes refunded by $131,291 in 2023 and $96,224 in 2024.

DeVriendt explained that the county will front the 2023 refund to the utility before prorating reductions in tax payments to schools and other taxing jurisdictions within the county.