IIW Minnesota

Ag2School Tax Credit Passed: Now What?

Until now, the likelihood of a school bond referendum passing depended greatly on where the school district was located in Minnesota. In metropolitan areas, school referendums pass at a higher rate than those in rural areas. Those rural school districts now have an increased opportunity to more easily fund their facility needs with the passing of a new agricultural tax credit.

Here’s a look at how it works, why it matters and steps for schools to take now:

WHAT IS IT?

The Minnesota Legislature during the special session in June passed the long-awaited Ag2School 40 percent tax credit for agricultural property and timber land. The goal is to make it easier for schools to provide much needed improvements to their facilities without burdening their local farmers.

HOW DOES IT WORK?

Through this credit, the state now picks up a much larger share of cost for school facility projects. In some highly agricultural communities, farmer have paid up to 10 times the amount of other residents in their school district, according to the Minnesota Farm Bureau.

Starting Jan. 1, 2018, farmers will see 40 percent taken off of their share of a school bond in their community. This applies to both current and future referendums. The Minnesota Council on State Government reports that an estimated 240,000 parcels will quality for this credit.

A farmer that once paid $25 per acre, for example, now will receive $10 from the state as a credit on their property tax bill.

This stacks up to $40 million in tax relief across the state in 2018 alone, according to the Minnesota Rural Education Association (of which IIW Minnesota is a member). That includes more than $225,000 in aggregate relief (each) in 68 school districts and more than $100,000 in aggregate relief in another 79 school districts.

WHY DOES IT MATTER?

For those who have worked on school facilities, it makes a lot of sense and can go a long way in creating better learning environments for students across Greater Minnesota. Until now, farmers foot the majority of the school referendum bill in rural school districts.

The tax credit comes as Minnesota schools face rising technology needs, increased security and safety concerns and the challenges of maintaining old buildings.

About half of the state’s schools were built before 1976, and 25 percent are between 54 and 125 years old, a MREA report released earlier this year.

The future also will bring a greater need to make more room for early learning and kindergarten programs as Gov. Mark Dayton and others continue to seek to get the state’s children into quality programming earlier and continue to advocate for universal preschool.

WHAT STEPS SHOULD WE TAKE NOW?

This is the time for schools to evaluate their educational and resultant facilities needs, engage their communities in creating a vision for the future, understand the impact of Ag2School in their community, and begin preparing for a possible bond referendum.

New election rules, also approved last legislative session, now limit the dates of special elections to five dates in February, April, May, August and November. The April date will be tricky in 2018 (and I recommend avoiding it) given its alignment with Tax Day.

In most cases, the first and best option will be a vote in May 2018, but schools would need to get started today. Typically, effectively preparing for a referendum vote takes about a year.  View a timeline outlining what to do when.

Working with a seasoned facilitator who can help guide you through the visioning process, create plans and estimate costs can help accelerate results. Get started with a facility assessment.

AN E-12 SCHOOL HERO

Ag2School is positioned to be a real hero for E-12 education across rural Minnesota as it provides a win-win for schools and those providing the funds to create spaces that educate and inspire our youngest residents and future leaders.