Production Tax Distribution

Cities and towns within the Taconite Assistance Area (or Taconite Tax Relief Area as noted) receive several types of aid from the Production Tax.

Cities and Towns Where Mining is Located (“Mining and Concentrating”)

Cities and towns with mining facilities that are mining or producing concentrate receive 4.5 cents per taxable ton. Fifty percent of the amount is distributed to cities and towns where mining is conducted; the remaining 50 percent is distributed to cities and towns in which concentrate is produced. The distributions are determined on a mine-by-mine basis.

If mining and concentrating take place in a single city or town, the entire 4.5 cents per taxable ton is distributed to that municipality. If a mining facility is mining in more than one city or town, the 50 percent portion is split based on either a percentage of taconite reserves or a four-year production average. Most mines are mining in two or more areas.

If a mining facility produces concentrate in more than one city or town, the 50 percent portion is split based on hours worked in each area.

Cities and Towns Affected by Mining (“Mining Effects”)

Cities and organized towns receive 4 cents per taxable ton if their boundaries are within three miles of a taconite mine pit that was actively mined in at least one of the prior three years. If a city or town is located near more than one qualifying mine, it receives aid from only the mine producing the largest taxable tonnage.  When more than one city or town qualifies for aid based on one facility’s production, the aid is apportioned among the municipalities in proportion to their populations. The money must be used for infrastructure improvement projects. 

Taconite Municipal Aid Account

The Taconite Municipal Aid Account receives 12.5 cents per taxable ton, which is distributed to cities and towns (12.2 cents per taxable ton) and to the Range Association of Municipalities and Schools (RAMS) (0.3 cents per taxable ton).

Cities and towns first receive the amount they were entitled to receive in 1975 from the Occupation Tax, reduced according to the percentage aid guarantee. The remainder of the aid is then distributed by a formula using levies, valuations, population and fiscal need factors.

Special City/Township Fund.  Additional aid from the Taconite Municipal Aid Account is distributed to a city or town if more than 75 percent of the city’s assessed valuation consisted of iron ore on Jan. 2, 1980, or if more than 75 percent of the town’s assessed valuation consisted of iron ore on Jan. 2, 1982. This special aid is calculated based on certified levies, net tax capacities and population. Currently, only the City of Kinney and White Township qualify.

Township Fund

The Township Fund receives 3 cents per taxable ton, escalated in the same proportion as the Gross Domestic Product Implicit Price Deflator (GDPIPD). The money is distributed to towns located entirely within the Taconite Tax Relief Area on a per capita basis. The maximum amount a town can receive is $50,000. If a town would receive more than $50,000, the portion that exceeds $50,000 is redistributed among the towns receiving less than $50,000.

Taconite Railroad Aid for Cities and Towns

Counties within the Taconite Assistance Area receive several types of aid from the Production Tax. 

County Fund​

Counties with mining facilities that are mining and producing concentrate receive 10.525 cents per taxable ton, subject to adjustment by the aid guarantee. Fifty percent of the amount is distributed to counties where mining is conducted; the remaining 50 percent is distributed to counties in which concentrate is produced. The distribution is determined on a mine-by-mine basis.

If mining and concentrating take place in a single county, the entire 10.525 cents per taxable ton is distributed to the county. If a mining facility is mining in more than one county, the 50 percent portion is split based on either a percentage of taconite reserves or a four-year production average. Most taconite mines are mining in two or more areas.

If a mining facility produces concentrate in more than one county, the 50 percent portion is split based on hours worked in each county.

The total distribution is reduced by the amount of aid received by a county that has a mine-owed power plant within its boundaries that provides the primary source of power to a mining facility in another county. One cent per taxable ton is distributed to the county in which the power plant is located.

County Road and Bridge Fund

Each county receives a portion of the aid that is deposited in the County Road and Bridge Fund. The distribution is 10.525 cents per taxable ton subject to adjustment by the aid guarantee and is determined using the same criteria as the County Fund above.

Taconite Railroad Aid for Counties

Counties receive a set amount of aid equal to what they received in 1977 from the Taconite Railroad Gross Earnings Tax, which was repealed starting in 1989.

School districts within the Taconite Assistance Area receive a total of 32.15 cents per taxable ton from various school funds. They also receive additional aid from the Taconite Referendum Fund, Taconite Railroad Aid, and grants from Minnesota Department of Iron Range Resources and Rehabilitation (IRRR) funds.

Regular School Fund

A total of 24.72 cents per taxable ton is split among the 15 school districts in the Taconite Assistance Area. Each school district receives the amount it was entitled to receive in 1975 from the Occupation Tax. This amount may be adjusted by the aid guarantee. The remaining amount in the fund is distributed using an index based on pupil units and tax capacities. Generally, districts with larger tax capacities per pupil unit tend to receive a proportionately smaller amount of this fund. Eleven cents per ton of this distribution is not subject to the 95% levy limitation as determined by the Minnesota Department of Education.  

Taconite School Fund

School districts that have mining facilities that are mining or producing concentrate receive 3.43 cents per taxable ton. Fifty percent of the amount is distributed to districts where mining is conducted, and 50 percent is distributed to districts in which concentrate is produced. The distributions are determined on a mine-by-mine basis.

If a mining facility is mining in more than one school district, the 50 percent portion is split based on either a percentage of taconite reserves or a four-year production average.

If a mining facility produces concentrate in more than one school district, the 50 percent portion is split according to hours worked in each district.   

School Building Maintenance Fund

Certain school districts receive 4 cents per taxable ton from mining facilities within their vicinity. The money must be used for building maintenance and repairs. The distribution is based on pupil units.

• Keewatin Taconite proceeds are distributed to the Coleraine and Nashwauk-Keewatin districts.
• Hibbing Taconite proceeds are distributed to the Chisholm and Hibbing districts.
• ArcelorMittal and Minntac proceeds are distributed to the Mountain Iron-Buhl, Virginia, Mesabi East and Eveleth-Gilbert districts.
• Northshore Mining proceeds are distributed to the St. Louis County and Lake Superior districts.
• United Taconite proceeds are distributed to the St. Louis County and Eveleth-Gilbert districts.

This additional money is not subject to the 95 percent levy limitations as determined by the Minnesota Department of Education.

Taconite Referendum Fund  

The Taconite Referendum Fund receives 21.3 cents per taxable ton. School districts receive money from the fund based on the following: 

1. Districts receive the difference between $175 per pupil unit and a local property tax of 1.8 percent of the district’s net tax capacity in 2011. A district receiving money must reserve the lesser of $25 or the amount received per pupil unit for early childhood programs or outcome-based learning programs.
2. Districts receive additional aid from the fund based on a formula using pupil units, net tax capacity, and a referendum revenue allowance.

School districts receive the aid on July 15. If any money remains in the Taconite Referendum Fund, it is distributed to the Taconite Environmental Protection Fund (TEPF) (two-thirds) and the Douglas J. Johnson Economic Protection Trust Fund (DJJ) (one-third).

Taconite Railroad Aid

School districts receive a set amount of aid equal to 62 percent of what they received in 1977 from the Taconite Railroad Gross Earnings Tax, which was repealed starting in 1989.

School Bond Payments

Production Tax revenues are used to make school bond payments for school districts within the Taconite Assistance Area. Most are funded 80 percent by Production Tax revenues and 20 percent by local efforts. The 80 percent portion is paid in equal shares from the TEPF and DJJ.

The Taconite Property Tax Relief Fund provides homestead credits to homeowners on the Mesabi and Vermillion ranges located within the Taconite Tax Relief Area. The fund also provides aid to counties and school districts with qualifying power plants. The fund receives 34.8 cents per taxable ton. Beginning with distributions in 2018 (based on the 2017 production year), the amount will be indexed based on the Gross Domestic Product Implicit Price Deflator (GDPIPD).

Homestead Credits for Homes and Farms

A credit of 66 percent of the property tax, up to a maximum credit determined each year, applies to owner-occupied homes and farms located in cities or towns in which:

• the assessed valuation of unmined iron ore was at least 40 percent on May 1, 1941, or
• there was a taconite mine, processing plant, or power plan on January 1, 1977, or
• there is currently a taconite mine, processing plant, or power plant.

If a home or farm is not located in a qualifying city or town, but is located in a school district containing a qualifying city or town, the credit is 57 percent of the tax, up to a maximum credit determined each year.

St. Louis County acts as fiscal agent for the fund. If the fund balance and Production Tax collections are not sufficient to make the payments, the deficit is covered by the Douglas J. Johnson Economic Protection Trust Fund.

Counties with a Qualifying Power Plant

If a county has a mine-owned power plant within its boundaries that provides the primary source of power to a mining facility in another county, the county in which the power plant is located receives 0.1875 cent per taxable ton from the Taconite Property Tax Relief Fund (subject to adjustment by the aid guarantee).

School Districts with a Qualifying Power Plant

If  a school district has a mine-owned power plant within its boundaries that provides the primary source of power to a mining facility in another school district, the school district in which the power plant is located receives 0.4541 cent per taxable ton from the Taconite Property Tax Relief Fund (subject to adjustment by the aid guarantee).

The Minnesota Department of Iron Range Resources and Rehabilitation (IRRR) administers various funds and grants funded by Production Tax revenues. For more information, please contact the IRRR.

Minnesota Department of Iron Range Resources and Rehabilitation (IRRR)

The IRRR is a State of Minnesota development agency located in Eveleth, Minnesota. IRRR’s mission is to promote and invest in business, community and workforce development for the betterment of northeastern Minnesota. The IRRR receives 6.5 cents per taxable ton escalated by the Gross Domestic Product Implicit Price Deflator (GDPIPD). The distribution is guaranteed at a certain rate. It also receives a set amount each year of $1,252,520, which is the amount it received in 1977. The funds are used for general operating expenses and community development grants.

Taconite Economic Development Fund (TEDF)

The TEDF (also known as the Mining Reinvestment Fund) provides grants to mining companies for certain operating or capital improvement projects. The Production Tax distribution to this fund is currently 25.1 cents per taxable ton. No distribution is made if industry production falls below 30 million tons.

Taconite Environmental Protection Fund (TEPF)

The TEPF was created to reclaim, restore and enhance those areas of Minnesota adversely affected by mining taconite and iron ore. The fund receives 5 cents per taxable ton to provide grants to mining companies for certain projects. It also receives two-thirds of any remaining Production Tax revenues after initial distributions are made, including two-thirds of any excess Taconite Referendum Fund money. The TEPF partially funds grants to school districts for health, safety and maintenance improvements.

Douglas J. Johnson Economic Protection Trust Fund (DJJ)

The DJJ receives 3.35 escalated cents per taxable ton. It also receives one-third of any remaining Production Tax revenues after initial distributions are made, including one-third of any excess Taconite Referendum Fund money. The DJJ partially funds grants to school districts.

Iron Range Higher Education Account

The Iron Range Higher Education Account receives 5 cents per taxable ton to be used for higher education programs conducted at educational institutions in the Taconite Assistance Area. The Iron Range Higher Education committee and the IRRR must approve all expenditures from the account.

IRRR Education Revenue Bonds

The IRRR was authorized by the Minnesota Legislature to issue the following revenue bonds to make grants to school districts. The bonds are paid from Production Tax revenues.

• $38 million in revenue bonds were issued in 2009 to make grants to school districts in the Taconite Assistance Area for various building projects. The exception is the St. Louis County school district (ISD 2142), which must use its grant to reduce its debt service for a bond passed in 2009. The revenue bonds are paid from Production Tax revenues prior to calculating the remaining amount after distributions are made, up to a maximum of 10 cents per ton. Any amount more than 10 cents per ton is paid by the DJJ.
• $15 million in revenue bonds were issued to make grants to school districts in the Taconite Assistance Area to pay for health, safety and maintenance improvements. The bonds are funded in equal shares from the TEPF and the DJJ.

Iron Range School Consolidation and Cooperatively Operated School Account

This fund was established by the 2014 Minnesota Legislature and is administered by the IRRR. The fund will receive the following distributions starting in 2015 (based on 2014 production):

• For production years 2014 through 2022, the fund receives 10 cents per taxable ton. (Starting in 2023, the amount will be reduced to 5 cents per ton.)
• For production years 2014, 2015 and 2016, the fund receives two-thirds of the amount generated by the increase in the tax rate due to the change in the (GDPIPD). This amount is cumulative over the three years.
• The fund receives 6 cents per taxable ton each year from the Occupation Tax.

Hockey Hall of Fame

The City of Eveleth receives 0.2 cents per taxable ton to support the Hockey Hall of Fame, provided that an equal amount of donations is received. If the distribution amount exceeds the donations received, the excess amount is distributed to the Minnesota Department of Iron Range Resources and Rehabilitation  (IRRR).

Range Association of Municipalities and Schools (RAMS)

RAMS receives 0.3 cent per taxable ton from the Taconite Municipal Aid Account to provide an area-wide approach to problems that demand coordinated and cooperative actions.