Landowners grapple with ag assessment issues

Shannon Marvel
Farm Forum

After learning of Brown County’s ag land assessment issues, landowners in neighboring counties have been asking questions about their own property assessments.

That’s how Day County residents in five townships discovered that their ag land also was being overassessed.

The reasons for the higher ag land assessments — in particular an assessed value of 127 percent of the top per acre value — were not due to human error.

While reviewing ag land assessments, county officials discovered a computer glitch that doubled the upward adjustment of ag land in the northwestern part of county.

After correcting the glitch and issuing reduced property tax assessments for this year, there are still issues of overtaxed ag land to be resolved in Day County that go back several years.

The state ruled that counties cannot set values higher than the top per-acre total determined by the department under what’s called the production model, according to an evaluation of Brown County’s ag assessment plan.

The findings prompted landowners in Day County to ask about their ag land assessments.

At a March 20 Brown County Commission meeting, Michael Houdyshell, division director for the state Department of Revenue, said he was made aware of Day County’s issues a few days earlier.

In an email March 27, Houdyshell told the American News that Day County “has a topographical area that has been assessed over its productivity due to the greater production capacity in that area during the phase-in period.”

A county cannot set values higher than the top per-acre total determined by the state Department of Revenue based on productivity, Houdyshell said.

Unlike Brown County, the upward adjustment in Day County was not based on land sales and there was no use of neighborhoods.

Productivity model

He said the higher rate has been in place since the state switched to using the productivity model to assess ag land in 2010.

At that time, South Dakota changed the way it determines the value of ag land from a process based on market sales to one based on productivity. The top per-acre value for each county is determined by the Department of Revenue. It’s based on gross revenue per acre in the previous eight years. The number is different for each county and changes from year to year.

Day County Director of Equalization Dari Schlotte said in an email that the upward adjustment affects about 10 percent of the county and is in an area off the Coteau hills. That land is in portions of of Farmington, Homer, Union, South Andover and North Andover townships in the northwestern part of the county.

Schlotte said the adjustment was based on contour, accessibility and “production of usable acres during the flooding period.”

State law allows adjustments to be made based on the capacity of the land to produce agricultural products, the location, soil survey statistics, terrain and topographical condition of the land, including climate, accessibility and surface obstructions.

Landowners with flooded farmland can submit an application to the assessor’s office and the director of equalization can make adjustments to the flooded ag land’s assessed value, according to state law.

However, Schlotte said the adjustment in the five Day County townships was the only adjustment made within the county. In other words, no adjustments were made for ag land inundated by flooding in other areas of the county.

The problem

Day County Commissioner Frank James said there are two issues that resulted in the higher assessment rate — one was deliberate, the other involuntary.

James said due to the soil quality and other topographic factors, Schlotte increased the assessed value of ag land in the townships by 10 percent above the top-dollar value.

This year, that total is $3,152 in Day County.

Schlotte then made another upward adjustment two years ago that assessed the same area in Day County at 113.5 percent of the state’s top per-acre value.

A computer glitch doubled the upward adjustment and inadvertently raised the area’s assessed value to 127 percent of the top per acre value, James said.

The glitch was discovered in March — two years after it took effect, James said.

“(Schlotte) will retroactively go back and lower those,” he added.

Despite correcting the error, James said he doesn’t believe any landowners who paid higher property taxes because of the mistake will get refunds. But any affected landowners will get a reduced property tax assessment this year, he said.

Schlotte will also remove the upward adjustment completely when assessing ag land in 2018 for taxes payable in 2019 so it is assessed at 100 percent productivity.

He said the downward adjustment from previous years is due to the reduction in flooding and verified sales showing little to no difference in the value of farmable acres in the county.

While an adjustment cannot be made based on ag land sales, it can be documented by comparable sales, according to state law.

James said he hopes Day County ag land owners are understanding of the situation.

“The whole thing is murky and as long as people are satisfied to fund the local government and local schools, they won’t have an issue,” he said.

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