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Summer Study Notes
As told by Shannon Rittberger for District 1,
Butte County Director of Equalization
The summer study for property tax met for
the second time this last Monday. They met for one day,
as they did the last time. The next and final meeting is
scheduled for October 29 and/or 30.
The meeting started with Michael Kenyon. He
presented some information about what sales are excluded
from the assessment process. He also provided a
spreadsheet that detailed how much the assessment of
each county would change if the 150% sales were
considered, then how much it would change if all (150%,
NAZ, and <70 acres) excluded sales were considered. No
surprises here, all of our ag assessments would
increase.
The next three hours were spent with Kansas’
version of Colleen. The committee invited an employee of
the Kansas Department of Revenue to present an
explanation of how ag land is assessed in Kansas. She
took much longer than planned for her time, but her process generally impressed the members
of the committee.
In Kansas, the county appraiser determines
whether a parcel qualifies for an ag classification. The
department of revenue, specifically this lady,
calculates the value, which is then sent to the county.
This value is what she called a “modified income
approach.” She stressed that it is not a market
capitalization rate, and that it results in an intended
preferential assessment for ag land.
Kansas uses a very complicated formula to
value ag land. It involves all typical crops and pasture
forage typical to a parcel. It estimates average yields
for those crops and utilizes soil ratings. It also uses
an eight year average of commodity prices. These are
used to determine income. Expenses such as fertilizer,
management, seed, fuel, water, fencing, taxes, ect. are
estimated to determine net income. The cap rate is
calculated using information on the loan rate from the
Farm Credit Bank, the county tax rate, and a couple of
other adjustments. This final “income” value is then
reduced by 30% to arrive at an assessed value, as all
property in Kansas is assessed at a percentage of market
or “income” value.
There was a presentation by Fred Baatz
regarding the classifications of property in different
states. His information generated several comments
throughout the day regarding the adding of an additional
classification of ag land.
A soil scientist presented information on
how the soil survey is developed and how ratings are
calculated. His most startling comments were how there
are a few instances where their ratings differ from
those used by our department of revenue and regulation.
He also took some time to explain his own opinion of how
soil ratings would be the best basis for an assessment.
He does not like using sales information, nor does he
like using rents or yield data. However, he was not
specific on how an assessment would be derived from a
soil rating.
Rob Miller presented a lively discussion of
different soil ratings and locations in Pennington
county, and how they affect assessment. He described an
adjustment process to some parcels that is necessary to
achieve equality, after accounting for soil ratings.
An ag insurance agent, who
is also a farmer, was invited to speak. He pretty much
described the yields and taxes on his own property, and
seemed a bit concerned that one parcel might have a few
dollars more in taxes because it has a more superior
yield than another property that is less productive.
Representatives from the farm bureau,
farmers union, cattlemen’s association, wheat growers,
and the soybean association presented testimony. They
were quick and generally praised the committee for
considering some type of income or production based
assessment.
An attorney, who
is also a
farmer, testified on behalf of the corn grower’s
association. He spent more time and detailed the three
positions of his group:
1.
Rental rates should not be used for taxation
purposes.
2.
They will not support the productivity method, if
it penalizes a producer for his management.
3.
They would like the repeal of all 150% rules and
an additional classification for ag land.
There was only one
person from the general public that spoke. I don’t
remember his name. He said that he has testified to the
legislature every year for many years and would not have
this year, except for all of the people that asked him
to. He presented a hand-out that graphed the amount of
total property taxes paid in South Dakota for the last
11 years. Not surprisingly, that amount has gone up.
There was no discussion about inflation, population
increase, or any other reason for this. No member of the
committee asked any question of him.
One legislator,
submitted a handwritten sheet of calculations and spoke
of his simple method of arriving at a number very
similar to the current assessment. Of course, he used
his farmland as an example, along with several other
properties. He admitted that he “backed into” the number
that he wanted. He also stated that his process worked
for cropland, but not for rangeland. His process was to
multiply a rent figure by the soil rating, then again by
the same soil rating, then multiply that by 11. When
asked why he used 11, or why multiply by the same soil
rating twice, he stated, “Those were just the numbers
that were needed to achieve the conclusion that I
wanted.” His presentation did nothing more than show
that regardless of what method is used, some factor will
have to be contrived to achieve an intended result.
The meeting ended with
some discussion about where to proceed. My impression is
that the committee is very undecided about what to do.
Their intention is to draft some sort of legislation for
consideration, hopefully at the next meeting in October.
The chairman identified several options:
1.
Change nothing.
2.
Eliminate the 150% rules and value using sales.
3.
Add an additional classification, or more, of ag
land.
4.
Value using an income or productivity method,
using rental rates or yields and prices.
The next meeting will be
interesting to see what kind of legislation is drafted.
They have a problem of developing some kind of method
that assesses ag land differently, but gives us the same
values that we currently have now, with no shifts to or
from non-ag, or east or west across the state. |
