A $1 billion property tax reform bill promoted to head off another ballot measure encountered skepticism Monday from members of the House Finance & Taxation Committee.

House Bill 1586 would provide up to a $5,000 property tax credit on primary residences, including those held in trusts, and would require local governments to pursue collection of delinquent taxes on primary residences through means other than foreclosure.

“I believe our citizens are desperately seeking relief from unfair taxation, and I believe this bill provides substantive relief for our citizens and could be passed right along with any other tax reform bill,” said Rep. Lori VanWinkle, R-Minot, the bill’s primary sponsor.

Co-sponsor Rep. Jeff Hoverson, R-Minot, said the primary residence credit needs to be substantive, and the current $500 and the proposed $1,500 in the governor’s plan are not.

“Closer to $5,000 will probably hit the mark. That would be substantial enough that we wouldn’t have to have another measure,” he said, referring to Measure 4, the property tax elimination initiative rejected by voters in November.

“Let’s do it well enough that we don’t have to have another measure, because we will,” he added. “They’ve got the pathway. They’ve got the resources now. It would be round two, and it will be a lot easier for them to do it again.”

Committee members were less concerned about what Measure 4 supporters might do and more focused on whether the bill would have the positive economic impact suggested by the sponsors.

“We’re talking about revenue replacement. It’s nothing more than taking the tax from somebody and applying it to the next person. The data shows that doesn’t add anything to the economy,” Committee Chairman Craig Headland, R-Montpelier, said.

Hoverson responded that government revenues would increase as homeowners circulate the tax credit through the economy. He agreed increased revenue would not cover the full $1 billion cost, indicating state budget cuts would be needed to account for the remainder.

He also suggested legislators pay attention to Measure 4 proponents.

“I do think as a legislative body we should consider the people who put the measure on the ballot because they are the reason we’re even having this discussion,” Hoverson said. “I don’t believe we would be looking at property tax relief were it not for them.”

The portion of HB 1586 that replaces foreclosure with liens on tax delinquent residential property drew opposition from the North Dakota League of Cities and Association of Counties.

Stephanie Engebretson, deputy director and staff attorney for the league, said it could act as an incentive not to pay taxes, allowing a lien to grow and not be paid off until a property changes hands.

Linda Svihovec, research analyst with the Association of Counties, cited 2010 data showing of 637 properties foreclosed on by counties, only eight were occupied homes.

Having previously administered property taxes in McKenzie County, Svihovec said, she oversaw a number of foreclosures, especially after the first oil boom, but no one ever was evicted from a home. Most homeowners eventually paid or banks stepped in to protect the asset.

“Maybe eight out of 637 is more than we’re comfortable with, but again, to reiterate what the League of Cities is saying, you’re disincentivizing anybody from paying property taxes if there’s no threat of foreclosure,” she said.

VanWinkle said the bill’s foreclosure provision respects the time, sweat and tears homeowners put into providing a home for themselves or their families.

“To allow that to be able to be seized because of property tax, I believe, is a direct violation of our constitutional rights to land, liberty and the pursuit of happiness,” she said.

The committee also heard on Monday House Bill 1474, which includes taxing residential property by square footage, credits for installation of solar, wind and geothermal energy and a two-year partial tax credit on new residential property. Headland suggested the change to square footage as a basis for taxation be studied during the interim. No action was taken.

The committee took testimony on House Bill 1353, which limits increases in local government property tax levies to the Consumer Price Index or 3%, whichever is less, unless 60% of electors vote for a higher levy.

Minot City Council member Mike Blessum, representing himself, testified against a cap.

“It’s a local control question,” he said. “The parent entity at the state, putting that thumb on the scale with us, is not constructive to what we are trying to do locally.

“As far as the minutiae around CPI, 3%, all of those things, again I’m a little bit ambivalent,” he said. As a council member drafting a budget, he noted, “I don’t intend to be anywhere near those numbers anyway.”

Headland stated the committee would begin taking action on property tax related bills after today’s bill hearings.