REGIONAL- District 3 Sen. Grant Hauschild, DFL-Hermantown, is walking a bit of a property tax tightrope this legislative session as he pushes forward one bill that would bring relief to small, family-owned resorts, while at the same time seeking to redirect more funding to school districts with high percentages of seasonal recreational properties.
Resort relief
Last week, Hauschild presented his bill for small resort property tax relief to the Senate Tax Committee. The measure would redefine the values used for calculating the tax on resorts that are Class 1c properties, increasing the amounts for each of three tiers used to determine rates. For example, the first $600,000 of tier one properties are currently taxed at 0.5 percent, but Hauschild’s bill would raise that to $1.5 million of market value, a change that would lower property taxes for many small resorts. Increasing the tier two ceiling to $4.5 million would have the same effect for many resort owners whose properties currently fall into tier three.
Minnesota was once home to more than 3,000 family-owned resorts, according to Hauschild, but today, fewer than 600 remain statewide.
“Minnesota’s lakes and great outdoors are our greatest resource,” Hauschild said. “They attract countless visitors, support local economies, and offer families lifelong memories. But our small, family-owned resorts – the very businesses that help make these experiences possible – are disappearing.”
Rising property taxes, increasing operational costs, and development pressures have made it harder for small resort owners to stay in business. These mom-and-pop resorts are not only a gateway for middle-class families to enjoy the outdoors but also a key driver of rural economies, providing seasonal and year-round jobs in their communities, Hauschild said.
“My grandparents’ cabin was right next to a family-owned resort, and I grew up watching families return year after year to experience the magic of Minnesota’s lakes,” Hauschild said. “These resorts aren’t just businesses – they are part of our state’s identity and an essential way for working families to connect with the outdoors. We need to do everything we can to support them.”
By reducing their tax burden, the measure aims to help preserve these businesses, ensuring that future generations can continue to experience Minnesota’s lakes in an intimate, family-friendly setting, he said.
With bipartisan support, the tax relief measure was successfully amended onto a mini-omnibus bill which passed out of committee and is now headed to the Senate floor for further debate.
Cabin property taxes
Another bill authored by Hauschild that failed to pass last year is back on the table this year. It’s a measure that would create a new state aid fund for school districts based on the amount of seasonal recreational property in their taxing districts.
Property taxes aren’t only collected by counties, they’re collected by the state as well, and in 2001 the state exempted seasonal recreational properties from local school operating levies. Instead, the state levied a general school tax that directed revenues to a single state fund that was disbursed to districts across the state. The following year, faced with a $2 billion budget deficit, the Legislature shifted those dollars into the general fund, where they have remained, and school districts cannot tap those seasonal properties for their local operating budgets. Districts with high percentages of seasonal recreational properties have lost out on hundreds of thousands of dollars in revenue as a result.
Hauschild’s bill, and a companion bill in the House, would set up a seasonal tax base replacement aid fund to try to restore some of the financial balance to districts that continue to feel the effects of the 2001 change.
The bill wouldn’t increase or decrease the taxes currently levied on seasonal properties, Hauschild told KAXE News in February, but instead would take money from the general fund and transfer it to districts where voters pass a supplemental operating levy locally. The seasonal tax base replacement aid, based on the percentage of seasonal recreational property in a district, would reduce the cost of the operating levy for local taxpayers.
Hauschild argued to the Senate Education Finance Committee last week that the issue is one of equity.
Hauschild asked committee members to imagine a young, single father living in a rural northern Minnesota community with rising property taxes who is being asked by the local school district to fund an operating levy just to keep class sizes down, a father who also sees wealthy Minnesotans from the Twin Cities or people from out of state opening up million dollar homes on a nearby lake, homes that as seasonal recreational properties aren’t a part of the local school district’s tax base and won’t contribute toward solving the school’s budget crisis.
“So, I just want to make this point that this is truly an equity issue, and we don’t talk enough about equity issues when it comes to rural versus some of our most wealthy parts of our state, and we need to have that conversation,” Hauschild said. “This bill corrects a wrong in state policy, where some of our most rural school districts are losing out because high-end cabins and second homeowners are not paying towards the local operating levies for the school districts where their second home is.”
When the legislation was being considered last year, ISD 2142 St. Louis County Schools Finance Director Kim Johnson explained the potential impact for her district.
“An operating referendum has to be voted on by all of the voters,” Johnson said. “If we were to go out for an operating referendum, the state would pick up 44 percent of the cost and give it to the district and therefore the taxpayers would not have to pay for that. This is a big deal.”
Ely Superintendent Anne Oelke testified remotely last week in support of the bill.
“The money generated by non-residential taxpayers should be directed back into our districts rather than redistributed back to the state general fund,” Oelke said. “The passage of this bill is necessary to close the funding gap.”
Hauschild’s bill was forwarded on to the Senate Tax Committee.