Some ag land overtaxed millions, ex-county official claims

Shannon Marvel
Farm Forum

Taxpayers in 15 southern Brown County townships have been overtaxed by millions of dollars in the last five years, according to the county’s director of equalization.

That is, former director of equalization.

Michael Hauke Jr. said he was given the option on Jan. 5 of resigning or being fired. He said he submitted his letter of resignation Monday.

Hauke said he wouldn’t have taken the job 11 months ago had he known about the system Brown County uses to assess agriculture land, which he claims is illegal.

“I respect their decision to let me go,” he said during an interview Monday morning. “My problem is they’re screwing the taxpayers.”

Hauke was previously the director of equalization for four years in Brule County. He is the vice president of the South Dakota Association of Assessing Officers executive board.

He said a map crafted by Brown County officials before he started adds an improper layer to the assessment of agricultural land. He said the map is designed so that farmers with land that would be likely to sell for more money pay more in property taxes.

As a result, Hauke said, the county is overassessing ag land by 18 percent — that’s more than the 100 percent the state already taxes for productivity — in Columbia, Claremont, Cambria, Putney, Riverside, Aberdeen, Bath, Henry, Groton, Warner, Gem, West Hanson, West Rondell, East Rondell and Garden Prairie townships.

Brown County Commissioner Duane Sutton said the county follows all state laws when assessing ag land and has adapted the changes made by the state each year.

“Based on my experience, the productivity model that directs how we assess ag land went into play a few years ago and has been tweaked every year in the legislation to address things that no one could foresee,” Sutton said.

He said there have been very few taxpayers from the agricultural community who have appealed their property assessments.

“We’ve had zero appeals on the way we’re assessing ag land, and I think that speaks volumes to how well we’re doing,” he said.

Sutton said he disagreed with the idea that the county is assessing ag land improperly.

“All we’re doing is following state law, and we’re doing exactly what we’re supposed to be doing,” Sutton said. “The Department of Revenue reviews it every year.

“If (people) were lining up in the courthouse saying ‘My assessments are too high,’ then I would say, ‘Yeah, maybe we’ve got an issue.’”

Sixteen townships — Frederick, Hecla, Ravinia, Carlisle, Franklyn, Oneota, Allison, Palmrya, Osceola, Savo, Richland, Liberty, Greenfield, Lansing, Portage and North Detroit — are taxed at 87 percent productivity, at least 10 percent less than every other township in the county, Hauke said.

The Hecla/Britton School District and Frederick Area School District are funded by the property taxes generated from those townships. Those districts are being shortchanged in property taxes collected, Hauke said.

Ag land in Brainard, Shelby, South Detroit, Westport, Garland, Lincoln and Ordway is taxed at 97 percent productivity, Hauke said. The Aberdeen School District budget is funded by property taxes from those seven townships.

The various numbers are on a map Hauke submitted to the South Dakota Department of Revenue as part of his proposed 2018 assessment plan.


A system implemented in South Dakota in 2009 assesses ag land based on productivity. Assessments were previously based on market value. Under the new formula, values are based on gross revenue per acre in the previous eight years, according to state law.

Hauke said the county map divides Brown into three zones, or neighborhoods. Ag land owners in the group of 15 townships pay too much in taxes while others underpay, he said.

The state’s productivity model has a feature in it to account for better land, as it includes 118 different soil qualities, he said.

“This was their way to buck back on productivity,” Hauke said of Brown County’s process.

The result is the 15 townships pay about $1 million extra in property taxes each year, he said.

Hauke said he informed the state Department of Revenue of how Brown County assess ag land in December. The state, he said, has a year to respond or take action.

Michael Houdyshell, director of the property and special taxes division for the state Department of Revenue, was not aware of Hauke’s concerns. Houdyshell said the department looks at how counties assess ag land at a macro level.

“We’ll look at what their dollar-per-acre assessment is on agriculture land and compare it to what our information is,” Houdyshell said during a phone call Monday. “That number (provided by the state) is used to assess agricultural land, and it’s tied to the productivity number and rating of each soil type on that individual parcel. State law states that it should be assessed at that productivity level.

“Typically, they’re either at 100 percent or within a percentage or two one way or the other, depending on local adjustments. The last time I looked at Brown County, it was at 99 percent (overall), but if there were some variances at the township, we aren’t aware of them,” he said.

Houdyshell said he would look into Hauke’s concerns.

“Typically, what happens if we receive information or a complaint about assessment practices within a county, we can conduct an investigation and review the records with them to determine whether or not there is a violation of state law and, if there is, what corrective action there needs to be to get into compliance,” Houdyshell said.

Specific system

Gene Loeschke, an assessor for Brown County, said the system used to determine the value of ag land is specific to Brown County.

“We have some diversity in our county that we take into account. We drive our neighborhoods by the market,” Loeschke said.

He said officials challenged state legislation prohibiting using market numbers when splitting the county into two groups to be taxed differently. But the challenge was overturned.

“There was legislation passed in 2011 that did allow neighborhood marketing to be a factor. So we made some adjustments from one end of the county the other,” Loeschke said.

He said that areas in the north and south parts of the county that have similar soil types may have the same productivity rating, but not the same productivity value.

“I think the market bears that out,” Loeschke said.

The difference in productivity value between two parcels with similar productivity ratings can range between 25 to 30 percent in some cases, he said.

District 3 state Sen. Al Novstrup, R-Aberdeen, said any common sense used to determine ag land assessments went out the door when legislation approved a new way to calculate productivity in 2009.

Novstrup said it would be hard to believe that Hauke’s predecessor, Mary Worlie, would have implemented an ag land assessment system that conflicts with state law.

“I would predict that the way it was done it was done correctly,” he said. “Knowing Mary Worlie, who was a top-notch assessor, when she implemented neighborhoods, I’m guessing she implemented them according to state law.”

Worlie retired in 2017 after 18 years with the county.

Novstrup said he discussed the productivity model with Worlie two years ago and acknowledged that they agreed that the model was extremely flawed.

Hauke said the neighborhood system implemented by Brown County for ag land wasn’t obvious since it was created around the same time as the state’s shift to the production model.

End of time with county

Hauke said that commissioners never spoke with him in closed session about any problems they had with him.

He said he met with Commissioner Rachael Kippley on Jan. 5 and was told his time with the county was coming to an end. He admitted that he’s had some personnel issues while working for the county that likely contributed to the commission’s decision.

He said he couldn’t implement the Brown County plan because it countered the oath he took as an assessor, and he honors his obligations to use assessment practices set forth by the state.

“I will probably never get another assessor’s job in South Dakota for doing this,” Hauke said. “I’m doing this because what they’re doing is not right.”

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Michael Hauke Jr.