Meade County property owners appeal valuations
June 6, 2013
Morris Linn, Wasta, SD, rancher and farmer was one of fifteen or more Meade County landowners who appealed the county's valuation for property tax purposes at a recent meeting of the board of equalization.
Linn said that his assessment would raise his taxes by 75 percent overall. In Elm Springs township, where he resides, assessments increased by 118 percent. During the appeals process, the board of equalization (county commissioners) asked Linn if he had any state land leases and also if any of his private land was timbered. He responded that state (school) land composed less than 10 percent of his taxable property. "They said they could lower the taxes on the state land and they did," Linn said. "If you rent ground from the state you pay taxes as well as rent," he explained, going on to say that the taxes on that property have been going up "quite a bit" in the last couple of years.
But even after Linn explained that he did have some wooded areas, "rough country that you wouldn't farm," within his private property – along the Belle Fourche River and also Elk Creek – there was no change made to the valuation of that property.
Linn said, "Nobody seems to know just exactly where they're getting all their numbers from. They keep saying its coming down from the state and that they can't do anything about it but I think they can. There's a number that they're using for productivity but they don't seem to be able to tell you where that number comes from or how they arrive at that productivity figure."
“They keep saying that they are going off soil type and topography but that’s been the same here for the last one hundred years. Nothing’s changed; you can only still raise so many pounds of beef and so many bushels of wheat on the same acreage.”
Morris Linn, Meade County rancher
Recommended Stories For You
He added, "They (the county representatives) keep saying that they are going off soil type and topography but that's been the same here for the last one hundred years. Nothing's changed; you can only still raise so many pounds of beef and so many bushels of wheat on the same acreage."
The cattle rancher and small grains farmer said he doesn't know how he can improve his bottom line enough to pay the increased taxes. "The worst thing is that if they get our assessment up there and then raise the mill levy again that will compound our problem," Linn said. "They will probably double our taxes if they raise our mill levy."
Linn said that something is going to have to change with the valuation method or the school funding method. "They're going to have to figure out some other way to pay for school and everything like that because they can't be coming off the backs of all the ranchers and farmers of the state," Linn continued. He added that he's concerned that the productivity language of the law must be flawed if, used correctly, it allows for such dramatic increases from year to year when production on the property doesn't change.
"Evidently there is someone at the state who needs more money and we're the ones paying for it," Linn continued.
Mud Butte rancher Bill Kluck points out the fact that that property taxes are already being paid by less and less diverse operations. "We've lost so much of our agriculture in Meade County – we've lost our dairy industry, we've lost our hog industry and we're in the process of losing our sheep industry so more and more taxes are having to be paid by less and less production as it is."
Kluck said that ranchers and farmers finally convinced the state legislature in 2009 that commodity prices weren't keeping up with tax rates. This was the driving force behind the 'production-based' tax structure. However, his taxes have continued to climb and Kluck wonders where the increased production is to justify the increased taxes.
"Maybe it isn't the fact that the taxes are too high, it is that they are out of proportion with what we're making," Kluck said. "Ranchers and most farmers were hoping that this production-based tax would put our taxes more in line with our income capabilities but if the assessors don't consider the production, we end up with tremendous increases in our taxes with no corresponding increase in cattle prices or other commodity prices."Kluck adds that he believes homeowner and commercial taxes may need to be lowered too, but the action would require the county and state to reconsider their expenditures.
According to Kluck, the county commissioners and director of equalization have explained that Meade County taxes increased by 20 percent as a whole, which doesn't seem accurate considering the fact that his own taxes went up 88 percent and many others increased from 70 to 120 percent. "I know there were a few cases where they stayed the same or even went down but not very many," he said.
"The burning question is this: how are they arriving at a production-based tax that has increased my own taxes ten percent per year for three years and then over eighty percent this year?" Kluck said. "Even if it is twenty percent across the board (for the entire county) this year, how do they justify that? If they are using rental rates, those are actually dropping," Kluck points out. "The NRCS will tell you that soil types don't change so they aren't basing their figures on that, and even the capitalization rate has dropped according to the state's statistics."
Kluck said it appears that market or sales value is being included in the calculation method. He said that SDCL 33.29.6 – directs the director of equalization to use the "Olympic average" of calf prices times carrying capacity, but he does not believe this method is being utilized. "That is the only part of the law that has a gauge to measure your increased – or decreased – income or profits or whatever you want to say, from year to year, because it will fluctuate up and down."
Landowner Duane Keffeler worries that the school district, Meade 46-1 may have reached their debt limit and he wonders if, by raising the county's property valuation as a whole, the school district gains borrowing power.
The Union Center, SD, rancher said he had planned to appeal some of the assessments made on his property but because of a snowstorm on the day of the board of equalization's meeting he submitted his appeal via mail and has not heard back.
"Really it doesn't matter how high property taxes are as long as you can pay them. They are a penalty type tax, meaning it doesn't matter how much your income is, you still have to pay them. But I hate to see them get too high because when it gets to where you can't pay them it's a tough deal. I don't like debt, I don't like to leave things for the next generation to pay for," said Keffeler, who added that his calf check was nearly identical from 2011 to 2012 but that his expenses, which are mostly out of his control, probably increased 15 to 25 percent. "If you bought anything, even just a tire in the past year, you know what I'm talking about."
County Commission Chairman Robert Heidgerken shares many of the same concerns. "There are problems with this whole system," he said, adding that the county's job of implementing the state's formula is a challenge to say the least. "This is terrible, for us to administer and for landowners to understand how it works. It's way too complicated," said Heidgerken, who added that he personally spent a couple of weeks studying the state's formulas and still has questions.
Heidgerken said that they heard "dozens" of appeals and they were able to lower taxes in some cases for accessibility or creek channels but with just 15 minutes for each landowner appeal it was hard for the commission to have time to determine if and what adjustments were appropriate.
A rancher himself, Heidgerken empathizes with the landowners dealing with drastic tax hikes. "Even though it's a production based system I think their (the state's) goal is to get it to market value and nobody can afford the taxes on market value. Recreation, development and investment – that's what's driving the value of land in Meade county, not production," he said. Plus, he said, farmers from the Eastern side of the state may look at some of the soil types of Meade County grasslands and assume they can farm it for higher profit margins over cattle production. "But they've got crop insurance money backing them and that would be another case of investment driving the market."
Heidgerken said that the current use of the land isn't taken into consideration, so farmland and grassland with the same soil type are valued at the same dollar figure.
"The state said we had to raise our average values and they're telling us that we're still undervalued and will have to raise them again next year," he said.
Heidgerken said the governor appointed a task force to study the situation and he's hoping to meet with them at some point to explain his concerns with their calculation methods. "The commission isn't necessarily asking me to do this but I personally feel like I owe it to the taxpayers of this county," he added.
About 66 percent of the of the county's property taxes are used to support the school, Heidgerken said, and the remainder funds other county needs. "That's where we've got a real heartache. We've got lots of gravel roads that need more gravel, a road grader that's nine years old that needs to be replaced, a courthouse that the judges are after us to remodel. We've cut our discretionary funding and even cut some employees which was hard but our budget still hasn't gone down much." He believes the mill levy might go down slightly this year, which would take a little pressure off taxpayers.
"The fairest thing would be to go to an agricultural income tax," said Heidgerken.
Kluck said that change is needed if the ag industry is even going to survive. "If we don't stop this thing, agriculture is shot." Kluck said that although more and more of western South Dakota land is being turned by a plow, the livestock industry is still king. "According to the 2012 NASS book, livestock still makes up almost 64% of our county's ag economy."