Overtaxed ag land lawsuit winds up in court

Shannon Marvel

Whether six property owners whose agricultural land was overtaxed last year will get full refunds from Brown County is now up to a judge.

Judge Scott Myren heard arguments during a court hearing Tuesday afternoon at the Brown County Courthouse. He did not issue an immediate ruling.

Travis Swisher, Bob Swisher, Jim Hundstad, Harry Pharis, Kevin Pharis and Ray Larson are suing Brown County, seeking a refund for the 18 percent they were overtaxed for their 2017 property taxes paid this year.

Landowners in 15 southern Brown County townships were assessed at more than the top-dollar level set by the state in recent years. That’s under South Dakota’s so-called production model that determines the value of ag land. It was implemented about a decade ago.

As part of the production method, Brown County used a map that broke the county into three neighborhoods. It was crafted so that land that was likely to sell for more was assessed at a higher level — 118 percent of the state’s top-dollar value.

Other townships in Brown County paid either 97 percent or 87 percent of the top number.

Earlier this year, the South Dakota Department of Revenue determined that Brown County’s ag land assessment plan was flawed because it placed higher values on property in the 15 townships. Brown County has since revamped its assessment plan.

In May, county commissioners allotted $513,411 for property owners in southern townships who paid more than their share, with the average refund per acre being $1.35.

The county has yet to follow through on that proposal to offer overtaxed owners of agriculture land a partial refund for 2017 property taxes paid this year.

Brown County State’s Attorney Chris White said he and other attorneys were working on preparing a release that landowners would have to sign in order to receive the payments. While doing that work, he said, the county was sued by a group of six landowners seeking a larger refund. That halted the county’s move to offer any abatements, White said.

Property owners who accepted the county’s original proposal would have had to agree to not seek additional payments for amounts they were overtaxed in previous years. That’s what the release was about.

White said commissioners will decide their next step in offering the partial refunds after the judge’s ruling in the civil lawsuit.

The men who sued the county are only seeking a full refund for 2017 property taxes — not anything for previous years.

If Myren rules in favor of the landowners, the county could face a budgetary crisis, White said in court Tuesday.

White said he believes avoiding such a crisis is what state lawmakers intended when they created the appeals process.

The plaintiffs did not appeal their assessments to their local board of equalization as is the usual process. But they also did not know they were being overassessed until after the appeal deadline.

Each year, property owners who don’t agree with an assessment have until March 15 to file an appeal to their township board of equalization. From there, they can appeal to the county board of equalization. After that is the state Office of Hearing Examiners, then a lawsuit in state court.

“It’s just too late to do that,” White said of a lawsuit. “They had their chance to go to their local board of equalization.”

Reed Rasmussen, the attorney for the six landowners, said more than 200 Brown County residents whose ag land was overassessed paid their property taxes in protest — including some members of township equalization boards.

He argued that suggests the local boards of equalization weren’t even aware their land was being overassessed by 18 percent.

White said there are no facts to support the landowners’ claims that the county intentionally concealed the use of neighborhoods.

He said the state was aware of Brown County’s ag land assessment plan, which included the neighborhoods, yet did not find any issues with it until the Department of Revenue reviewed the plan at the county’s request in February.

The state is not a defendant in the lawsuit and previously declined a Brown County request to help pay for the refunds the commission approved.

Myren questioned whether taxpayers were informed of how the map was used to assess their ag land.

White said they would have been had they asked the director of equalization about the process. He said that the assessment plan, including the neighborhoods, is public record.

Whether the director of equalization would have informed the landowners of the neighborhood map is unknown, Rasmussen said.

Former Brown County Director of Equalization Michael Hauke Jr. raised the overassessment/ overtaxation issue. He was fired in January.