Land assessments a topic for discussion

Farm Forum

HOT SPRINGS — It’s often said that the only sure things are death and taxes, but when it comes to agricultural land, the process to determine the latter is often a confusing web.

Michael Houdyshell, the director of the S.D. Department of Revenue’s Property and Special Taxes Division attempted to shed a little light on the processes used to determine ag-land values.

For nearly two hours on Oct. 28 at the Mueller Civic Center, Houdyshell and Fall River County Assessor Susie Hayes explained how ag land is assessed in the state, how some of the values are determined and how that process has changed in the past few years.

Land values for taxation at one time were adjusted based on sales of like properties in the area. But state law determined that any sale that was for 150 percent of the assessed value of the property should be thrown out. As land prices escalated, fewer and fewer transactions were kept in the mix.

Houdyshell noted that according to a codified law starting in 2009, “agricultural land shall be assessed based on its agricultural income value on a per-acre basis.” Cropland income value is determined differently than non-cropland value and the whole equation is subject to a wide range of soil types and averages that assist Hayes and her staff in determining value for property.

“This is what it is,” Houdyshell told the approximately 75 people in attendance at the informational meeting. “It’s the system we have to live with.”

Houdyshell said that his department contracts with SDSU, the U.S. Department of Agriculture (USDA) and the National Agricultural Statistics Services (NASS) to complete surveys of farmers and ranchers in each county that show acres planted and harvested, yield and statewide prices for cropland; while determining cash rent, amount of pasture acres, cow/calf prices and grazing date for non-cropland.

Those statistics are averaged for a 10-year period with the highest year and lowest year tossed out. For cropland, a 35 percent landlord’s share is divided by a 6.6 percent ‘capitalization rate’ to determine that county’s average cropland value. A similar, although slightly different process is used for non-cropland.

After allowing for a limited increase or decrease in value, ag properties are weighted by the rating of soils found in the area. This is where the local Assessor’s office comes in.

Using a soil table provided by the Agricultural Sciences department at SDSU, different types of soil are given different values – the higher the rating the higher the value. The example that Houdyshell showed had a range of .260 for a non-crop soil to a .820 for cropland soil.

“The soil ratings are specific to every county,” Houdyshell said following the meeting. “How it works is the most-productive soil in the county is assigned a 1.00 rating and each county has a 1-rated soil. Then all of the other soils are rated depending on each soil’s productivity in comparison to the 1-rated soil.”

For example, he said, if a soil is 80 percent as productive as the 1.00 soil, it receives a rating of .80. If a soil is 63 percent as productive as the 1.00 soil, it receives a rating of .63 and so on for all soils in the county.

He added that there are more than 5,000 soil types in the state, and those types tend to be concentrated geographically.

Multiplying the soil ratings to the number of acres gives an assessed value, which is then multiplied by an equalization factor, to determine a taxable value.

Taxable value is the number used in determining property taxes. The county commission determines its budget amount for the coming year and what mill levy needs to be applied to achieve that dollar amount. Likewise, school districts and cities convey their needs and these are applied as mill levies for the respective entities.

Hayes reminded those in attendance that her office is in the second of a three-year county-wide reassessment and that the majority of ag land in the county will be re-assessed next year. “Until then,” she said, “we will continue to adjust assessments on a case-by-case basis as we have been doing.”