Local governments are contesting a proposal that would limit growth of their property tax revenues, saying it would hamstring North Dakota's faster-growing cities and might force cuts in essential services.

The measure, introduced by Rep. Jim Kasper, R-Fargo, "threatens city governments' ability to do our job, and to do it fairly," Fargo City Commissioner Linda Coates said Tuesday at a hearing before the North Dakota House Finance and Taxation Committee.

Kasper said his proposal was in response to public pressure on the Legislature to do something about rising property taxes, even though the state does not control them. The committee did not take immediate action on his bill Tuesday.

"We are elected as legislators to establish the policy for the state of North Dakota in all areas … one of which is the formula for property taxes," Kasper said.

His bill would put a 2 percent cap on annual increases in the tax value of property, and limit valuation growth in home improvements by 4.5 percent. Increased property values that resulted from public projects, such as a new sewer line or street, would not be allowed.

His bill limits local governments' property tax revenue growth to 4 percent annually. If a city, county or other governing unit wants to collect more property taxes, they may do so only if 60 percent of their voters endorse the idea in an election.

Local property tax rates are applied against the property's value, and rising values allow cities, counties and other local governments to benefit, because they may collect more tax revenues without adjusting the property tax rates.

Kasper's legislation includes a substantial increase in the state's homestead tax credit program, which provides money to counties to offset the property tax bills of people with disabilities, and elderly North Dakotans with low incomes.

Under the existing program, recipients' benefits are reduced as their incomes rise, and they lose eligibility if their annual incomes go above $14,500. Kasper's proposal raises the income ceiling to $37,500 annually.

Kevin Ternes, the Minot city assessor, said the bill's restrictions on property valuation would lead to different values for similar homes, depending on when they were built and what the builder claimed was his cost.

Coates said the Fargo City Commission handles taxpayer money frugally, but said the demands of a growing city would outstrip the revenues that Kasper's proposal would allow.

"I have never had one phone call asking for less services," Coates said.

James Brownlee, the West Fargo city administrator, said the bill's 4 percent limit on property tax revenue growth "would be devastating to us."

"If our city grows 25 percent … we have more roads to plow, more police officers to hire," Brownlee said. If the 4 percent cap prevailed, he said, "we would have no choice but to cut services to our citizens."

Kasper's measure is the most sweeping of a collection of property tax bills the North Dakota Legislature will be considering this session.

Gov. John Hoeven has his own proposal, and a legislative study committee has introduced a bill aimed at cutting the property tax rates of local school districts.

Lynn Bergman, of Bismarck, applauded Kasper's bill, saying its intent of restraining local governments' spending growth was justified.

"We can't just throw money at cities, counties and park districts and others, and expect them to be responsible to the citizens," Bergman said. "They have shown in the past, especially the recent past, a willingness to raise sales taxes to continue to match the budgets that they prepare, to whatever income is coming in. That has to stop."

The bill is HB1449.