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Erik Burgess, Published January 21 2013

Moorhead eyes tax break for undeveloped farmland

MOORHEAD – A small bump in taxes for the majority of homeowners here is on the table for discussion at tonight’s City Council meeting.

In a non-voting meeting tonight, council members will discuss the possibility of lowering taxes significantly on 29 undeveloped parcels of farmland within the edge of city limits.

To compensate for the lost tax base, taxes on the majority of homes will go up a fraction of one percentage point. An owner of a $140,000 home would see their taxes increase 83 cents. Taxes on a $200,000 home would go up $1.30.

The council tonight will discuss utilizing a state statute that allows the city to designate undeveloped areas as “rural” zones, which then can be taxed at a lower rate than those deemed “urban” parcels.

Parcels can be taxed at a rural rate if they are not reached by some city services, like sewer and water, and are not platted.

Twenty-nine such parcels near the city limits would apply for the lower taxes. If the new rural tax zone is put into effect, they would see their tax rate drop by a little less than half. The 29 parcels are of varying sizes, but all of them are bare land used for farming, said Mayor Mark Voxland.

Eleven of those parcels are owned by Proffutt LTD Partnership, the Ronald D. Offutt Co. or Offutt himself. Offutt is founder and chairman of the Fargo-based RDO Equipment Co. and the namesake of the newly opened Offutt School of Business at Concordia College. Proffutt is the real estate arm of his business.

Voxland said lowering taxes on these rural parcels is an attempt to keep the property owners within the city limits to avoid the lengthy and costly process of deannexation and to make it easier for those landowners to develop once more city services extend that far.

“That property tax is kind of eating them a little bit,” Voxland said. “We want to keep that annexation. We don’t want them to flirt with the idea of deannexation.”

The concept of starting a rural tax zone was brought to the attention of city staff when one rural property owner filed to “detach” from the city on account of the property taxes.

In his petition for detachment from the city, Michael Astrup says that real estate taxes are higher in the city of Moorhead than in the township of Moorhead. Council documents show that tax rates in Moorhead Township are about 13 percent of what they are in the city. When reached at home Monday evening, Astrup said he had no comment. At least three of the parcels that would be affected by the new rural zones belong to Astrup.

Voxland said the 29 parcels have all been annexed into the town over the past 10 to 15 years, but development has been slow to reach those far-reaching parts of the city.

He said many of the parcel owners don’t live in the city of Moorhead, so it doesn’t make sense to tax them for services they aren’t using, such as parks, libraries and buses.

“They brought their land in (into the city limits) expecting to be developed. It hasn’t quite happened yet,” he said. “So they’re paying a little bit more in property tax. How can we help them?”

The rural tax rate would still cover services such as street plowing, fire and police.

“I’m not sure where the council will go on it,” Voxland said. “It makes sense to me that they would lower the property tax rate.”

If the council adopts the new rural zones on or before Aug. 1, they would go into effect next year. If they adopt them after Aug. 1, they would go into effect 2015.


Readers can reach Forum reporter Erik Burgess at (701) 241-5518