Committee hears step-by-step explanation of how North Dakota property taxes are calculated

BISMARCK — Members of the state House and Senate Finance and Taxation committees received an educational briefing detailing how North Dakota property taxes are calculated, including examples of how changes in taxable valuation affect mill levies and individual bills.

The presentation, given mainly by a tax practitioner identified as Linda Veil and by Shelley Myers, State Supervisor of Assessments, outlined the two-part calculation that drives property taxes: the dollars a political subdivision needs to fund its budget and the subdivision’s total taxable valuation. "The amount of tax to be levied and collected is calculated by dividing the dollars needed to fund a budget ... by the taxable valuation of that political subdivision," Veil said. She added that the resulting mill levy, when applied to a property's taxable value, "equates out to the tax bill."

Why this matters: The committee was shown how a single budget target produces different mill rates depending on the taxable valuation base. Presenters said that rising valuations can reduce mill rates but that local elected officials must still vote to set or lower levies. Committee members raised questions about whether and how legislative relief can be "backfilled" by local jurisdictions.

Most important facts

- Mill levy basics: Presenters explained that a mill equals one one‑thousandth of a dollar (0.001). The mill levy is the levy dollars divided by the taxable valuation and is typically expressed as mills per $1,000 of taxable value. Using the example in the briefing, an ABC County general fund needing $2,148,912 with estimated non‑tax revenues of $1,302,142 required an $888,770 levy; dividing that levy by the county's taxable valuation of $31,816,772 produced a 27.93 mill rate.

- How valuation classes work: Under North Dakota practice described by presenters, counties compute "true and full" values, then assess at 50 percent of that value to produce assessed value. Taxable value is computed by class: for residential property taxable value is 4.5% of true and full value; commercial and agricultural property use 5.0%. The presenters used an ABC County example with true and full values of roughly $169 million residential, $90 million commercial and $329 million agricultural, for a combined true & full total of about $653 million and a taxable value around $31,816,772 after the statutory class rates are applied.

- Effect on a homeowner: Using the 27.93 mills example, a $300,000 residential home (50% assessed value = $150,000; taxable value = 4.5% of true and full = $13,500 in the example) would pay about $377 toward the county general fund (taxable value × mill rate / 1,000). Presenters stressed that a single property’s total tax bill is the sum of many levies (county general fund, road and bridge, school, city, fire district, state medical center, etc.). One combined example in the briefing showed a total consolidated levy of 247.93 mills and an effective tax rate for that property of roughly 1.13%.

- Timing and budget process: County and local subdivisions set preliminary budgets and certified levies by early August and must publish estimated‑tax notices by August 31. Public hearings for political subdivisions are required between Sept. 7 and Oct. 7, and final levies must be certified to county auditors by Oct. 10. Presenters emphasized that budgets are set in dollars (total expenditures) rather than as a preliminary mill rate; the final mill rate cannot be computed until final valuations are certified (centrally assessed values typically certified in July).

- Maximum levy and base‑year worksheets: The county auditor uses a statutory worksheet that compares two ceilings — the statutory maximum mills for a fund (for example, 60 mills for county general fund) and an adjusted base‑year calculation (a 3‑year look‑back adjusted for new and lost valuation). The higher permissible dollar amount of those two is then compared to what the political subdivision actually certified; the certified dollar amount controls the final levy calculation.

- Assessments and equalization: Shelley Myers described the assessment cycle and roles: assessors use sales comparison, cost, and income approaches as appropriate; all property in North Dakota is assessed as of Feb. 1 and assessments are finalized in March; counties prepare sales ratio studies and local boards of equalization review assessments; the State Board of Equalization then equalizes statewide values (counties found above 100% of market value are lowered; below 90% are raised).

- Centrally assessed property and payments‑in‑lieu: Myers explained that certain large systems — pipelines, railroads, wind farms, investor‑owned electric and gas companies, and air transportation facilities — are centrally assessed by the State Board of Equalization (unitary appraisal, with North Dakota share allocated). Some newer or specified wind projects and generation facilities are taxed as payments‑in‑lieu under Chapter 57‑33.2; the briefing summarized per‑unit rates used for distribution, transmission and generation taxes (for example, statutory per‑megawatt‑hour and per‑kilowatt charges described in statute and administrative schedules).

- Relief programs and exemptions: The presenters summarized state relief programs administered locally — Homestead Property Tax Credit (expanded 2023 income limits and revised caps), the renter’s refund, and the disabled veterans credit — and outlined farm‑structure exemptions and pathways for retired farmers in current code. Veil noted the state reimburses counties for credits (homestead, renter, disabled veteran) but not for local exemptions.

Committee questions and discussion

Committee members raised several recurring concerns during the briefing: how "backfilling" occurs when local jurisdictions choose revenues and reserves; the frequency and cost of revaluations (assessing cycles vary by county; some counties try for a 5‑year cycle, while other properties had not been reviewed for long periods); whether smoothing or multi‑year averaging could reduce valuation shocks for property owners; and whether mills could be removed from public notices in favor of dollar amounts. Veil said the statutory and administrative frameworks currently use mills as the calculating mechanism but noted conversations have occurred about showing dollars and encouraging decision‑makers to discuss dollars rather than mills.

Context and next steps

Presenters provided committee members with sample budget worksheets, maximum‑levy schedules and copies of an estimated tax notice and the final tax statement. They also pointed committee members to the North Dakota Tax Department’s schedule of levy limitations and the state property‑tax website (ndpropertytax.com) for county listings and sample bills. The educational session concluded with an invitation for further technical questions; the committee recessed to hear a second presenter on assessments.

Ending note

Both presenters urged committee members that understanding the linkage between budgeted dollars and taxable valuation is essential to interpreting year‑to‑year changes in property tax bills, and that local elected officials retain authority to adjust mill levies in response to changing valuations or policy choices.