General education taxes going down for South Dakota ag property

Farm Forum

PIERRE – As a whole, owners of farm and ranch land in South Dakota will be paying slightly less in general-education taxes in 2014 than they did this year, the state task force on agricultural land assessments learned on June 12.

Meanwhile, the general-education taxes will rise by about $6 million overall for owner-occupied homes and about $9 million overall for commercial property.

But that is an incomplete picture, said several current and past legislators who are farmers and ranchers and serve on the task force.

They said all property taxes need to be considered in a comparison of the burden placed on the three classes of real estate.

“We’re looking at about 30 percent of the pie,” said Jim Terwilliger, who made the presentation to the task force. He is the economist in the state Bureau of Finance and Management.

Terwilliger said he can provide a full picture at the panel’s next meeting July 25.

Rep. Jim Peterson, D-Revillo, said his property taxes totaled about $7,000 before the reductions passed in 1995 and they now are about $13,000.

He said capital-outlay and other school levies have gone up. The same point was made by former legislator Paul Dennert, D-Columbia.

“Instead of one little piece, I want to see all of the education funding, all of it,” Peterson said. “Let’s have it all.”

The shifting balance within the general-education levies results from a 2009 law that severed the relationship for agriculture property and owner-occupied homes.

The result is agriculture property provides a flat 18.45 percent of the general-education effort regardless of whether the values rise or fall for agriculture property as a whole.

The mandatory percentage from agriculture was intended as protection for homeowners and business owners.

The Legislature was converting agriculture property to a productivity-based system for assessments, using eight-year averages based on soil types and actual revenue production in each county.

That was a replacement for the longtime method of basing assessments on sale prices of similar properties.

The fear in 2009 was that agriculture property would decline in overall assessed value. Instead the productivity values have rocketed higher amid good years of production and high prices for crops.

They’ve gone up so fast that many counties can’t keep up under the restrictions on annual increases in state law.

Agriculture owners will pay about $500,000 less in general-education taxes in 2014 – an estimated $52.9 million next year versus $53.4 million this year.

Owner-occupied homes meanwhile will provide an estimated $102.5 million in 2014, compared to $98.1 million this year.

For commercial property, the general-education taxes will total about $143 million in 2014. They were about $134.1 million this year.

What’s happening is agriculture property is going up in value and paying about $500,000 less for 2014 while owner-occupied and commercial values are flat but face about $15 million in general-education tax increases, said Rep. Mark Mickelson, R-Sioux Falls.

“It didn’t make sense to me,” Mickelson said.

Legislators and lobbyists knew in 2009 that the current situation might happen, according to David Owen, representing the South Dakota Chamber of Commerce and Industry.

“Very much predicted, the time is here,” Owen told the task force.

Task force member Curt Everson of Pierre, who is the chief executive for the South Dakota Bankers Association, said the broader numbers that Terwilliger will bring back will be helpful.

“It’s difficult to have the debate without all the facts,” Everson said.

Terwilliger’s analysis presented on June 12 indicated that without the 2009 law, agriculture property would be facing for 2014 about $12.6 million more in general-education taxes while owner-occupied would be about $5.5 million less and commercial about $7.7 million less.

The general-education levies for 2014 will be $2.090 per $1,000 of value for agriculture property, which is down considerably from $2.573 in 2010. The owner-occupied levy will be $4.296, up from $4.012 in 2010. The commercial levy will be $9.200, up from $8.656 in 2010.

“The reason for that is ag valuation has been growing at a faster rate,” Terwilliger said.

The task force’s chairman, Sen. Larry Rhoden, R-Union Center, asked the members to keep in mind the ever-changing nature of agriculture prices, weather and harvests.

“Give our (productivity) system time to work before we get too wrapped around the axle on anomalies in the economy,” Rhoden said.