Rep. Richard Johnson proposes refunds for excess interest on municipal special assessments

Rep. Richard Johnson, the chief author, told the House Tax Committee on March 12 that House File 238 would change how interest is calculated on municipal special assessments and require refunds when property owners are charged more interest than accrued.

The bill’s author, Rep. Richard Johnson, said the change would stop an unusual practice in which homeowners who prepay assessments receive no interest refund, even though private loans typically adjust interest when paid early. He told the committee the bill preserves local governments’ ability to finance improvements while protecting taxpayers from being overcharged.

Clifford Bujold of Lake Elmo, a homeowner who testified in support, described the mechanics and gave a numeric example comparing current statute to a simple-interest calculation. He said a $10,000 assessment with a 6% annual rate can result in a homeowner paying hundreds of dollars more under the current approach if they make partial or early payments. “State law must not enable or justify an unjust practice,” Bujold told the committee, urging statutory changes so citizens receive refunds when they prepay assessments.

Members asked whether the situation is common and whether municipalities profit from the interest differential. One member said the speaker’s municipal finance director confirmed the practice had occurred locally. House Research advised the committee that, constitutionally, the interest charged on a special assessment should have a reasonable relationship to the interest a locality incurs on bonds or other debt used to finance the project.

Rep. Johnson said he had checked with municipal leaders in Cottage Grove and Lake Elmo, who raised no objections, and that the bill carries no fiscal note because it would not materially affect city budgets in his view. He moved that House File 238 be laid over for possible inclusion in the omnibus tax bill; the committee agreed to lay the bill over for further consideration.

Next steps: the committee laid House File 238 over for possible inclusion in the omnibus tax bill; no amendment or final vote on the bill was taken at the hearing.

Speakers quoted or paraphrased in this article are listed in the committee record.