SD landowners question property tax assessments
May 13, 2013
Meade County cattle and sheep rancher Bill Kluck contacted the governor's office earlier this spring after reviewing the 2013 property tax assessment sent to him. He requested that the statewide tax increases be tabled due to the already challenging conditions ag producers face in what looks to be the second year of extreme drought across the state. Kluck is concerned that assessments are not being made in accordance with current state law and he encourages others to follow suit and ask Governor Daugaard to put the tax hikes on the table until some further investigation and discussion can be done.
Kluck helped organize a meeting held March 15, in Union Center, SD, featuring a panel of county commissioners, Galen Neiderwater, Bobby Berlotto, Robert Heidgerken and Linda Rowsch, legislators Larry Rhoden, Dean Wink and Gary Cammack and the Meade county director of equalization Kirk Chafee. Serving as the moderator, Kluck opened the meeting with a presentation regarding the founding fathers' vision for property and property representation in our nation. "I don't think this issue is just about taxes but about equal representation. When our founding fathers laid the foundation for this country and the states, they were adamant that land mass be fairly represented. Somehow we need to get back in line with this way of thinking," Kluck said. "When I spoke to the group in Union Center I tried to share some details about this issue."
According to Kluck recent changes in state law now require county assessors to value South Dakota ag land based on soil type and the resulting production capability, not on sale or market value. "It's very interesting that they are not doing this, but instead they keep on with the old method which was market value," Kluck said. "We've got a letter that the state Department of Revenue sent to the county assessors explaining the appeal rights of property owners. South Dakota property must be assessed equitably in relation to other property, says the letter, adding that in an appeal, each property owner should ask: "could I sell the property for this amount?"
The director is also told in the letter to show "sales of similar properties" to those landowners who appeal their property tax increases.
“Obviously our climate has not put us in a position to pay higher taxes this year. My productivity has not increased enough to justify a nearly 100 percent tax hike in the past 12 months. If anything, it has gone down with the drought conditions.”
Bill Kluck, Meade County cattle and sheep rancher
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Assessor Kirk Chafee explained to the crowd of over one hundred landowners just how land value is determined. He said because of recent law changes that this is the first time land with the same soil type has been assessed in a similar manner to other land in the County with the same or a similar soil type. He reported that the average value of land in the county is $227 per acre and the highest assessment he made was $676 per acre. He added that a half million acres in Meade County was valued at $100 per acre or less.
Kluck said that discussion in the meeting turned at one point to the increases that landowners have seen on their assessments this year. "The highest one that was reported was a 559 percent increase," Kluck said.
It concerns Kluck that a wealthy buyer from out of state can out compete a local producer, buying land for $1,000 per acre, far above where it would be agriculturally profitable, and pay the same rate in taxes as the rancher down the road who bought his land for $60 per acre a few years ago. "The landowners who bought this land at a reasonable price, or inherited it or whatever are subsidizing all the outside interests currently buying land at an inflated rate," said Kluck.
"I'm also worried because the total dollar amount per head has continually increased to the point that it is taking the profit down to a level that producers, especially young producers, cannot enter into the business. Even many older producers are wanting to quit but the only people buying or able to buy are outside investors that are not interested in furthering agriculture," he said. "Please remember that ag is the only positive trade balance that we have as a nation, so it is crucial that we as a nation keep the industry viable."
Kluck reports that in the last 26 years, his own taxes have gone up about 335 percent and ag land in the county has increased about 235 percent in the same amount of time, while national ag statistics (NASS) reports that the average calf price has risen 72 percent in the same time period. "We can't afford to keep doing this," said Kluck. "If we would have yet another year of drought, our production will drop even more. The county won't have anything left to tax." Kluck also explained that last year, after three years of increased taxes, he paid about $62 in taxes for every cow-calf pair his land can support. "This year I'll be paying over $100 per cow if my assessment holds. That is more than I can stand," said Kluck."
The laws relating to soil type and productivity are 10-6-33.28 and 10-6-33.29, according to Kluck. He said that 10-6-33.31 details the methods by which assessors can determine productivity.
"We can fix the problem by using what the law actually says in 10-6-33.28," said Kluck. "With an adjustment on crop acres so that we include non harvested acres such as summer fallow in the yield report and then by implementing 10-6-33.29, which requires that we use AUMs (animal units per month), grazing season data and statewide cow and calf prices, we can get a lot closer to where we need to be."
Another Meade County rancher, Pat Trask, reviewed a previous lawsuit in which it was determined that it is the right of the County Commission and township boards – not the state – to determine property values. By law, he said, taxes must be equal and not "confiscatory."
Meade County Commission chairman Robert Heidgerken explained that county expenditures had risen at about the same rate as inflation the past few years.
State Senator Larry Rhoden mentioned that some farmed acres such as summer fallow are not being taken into account in the crop land production formula. He told the group that he is checking to find out more about that.
State Representative Dean Wenk was also concerned. He questioned why agriculture's share of the county budget had risen from 19 percent to 25 percent.
Comments from the floor included a resident who had visited with the Department of Revenue. She was told Mr. Chaffee had raised the assessments all he could this year, but it would take more years to get the levy up to sales values, which was the state's required goal.
One gentleman asked why we couldn't just have an income tax, since taxing productivity was taxing income, said Kluck.
"I think some people may have thought I was promoting a statewide income tax," said Kluck. "That is not the case, and I'm not pointing fingers at anyone but there is a problem. My taxes had already gone up 10 percent, then another 15 percent, then another 10 percent in the past three years and now this year my assessment puts me at almost another 100 percent over last year. I don't blame the county, if anything, this is an issue that needs to be addressed at the state level. We just need to implement the laws as written. I don't understand why the state is setting the benchmark at the sales or market value when the law says they should use soil type, climate and other physical factors."
"State law 10-6-33.31 says the location, size, soil survey statistics, terrain and topographical conditions including the climate, accessibility, and surface obstructions which can be documented are supposed to determine property taxes. Especially considering that climate is part of the equation, I believe the county should have standing when dealing with the state. Obviously our climate has not put us in a position to pay higher taxes this year. My productivity has not increased enough to justify a nearly 100 percent tax hike in the past 12 months. If anything it has gone down with the drought conditions."