Early March is a period many landowners dread — the time when assessment notices about their properties’ values are sent out by the county government.
Each year, the Department of Equalization sends out notices to landowners whose property’s value has been reappraised at an increase of 20% or more of the previous value. By law, these notices must be sent out by March 1 and include a way for property owners to challenge the assessment made by the department.
These values are important, as they determine what amount the landowners will have to pay taxes on.
This year, Lake County saw increases between 15% and 40% in most residential properties, said Rick Becker, director of the Lake County Department of Equalization. This increase comes not from growth but from reappraisal, Becker said.
Every year, the department reappraises residential property values based on property sales. For this year, the department looked at home sales from Nov. 1, 2021, to Oct. 31, 2022. Properties were reappraised based on the amount homeowners would likely receive if they were to sell the property in the current market.
In South Dakota, the median home sales price rose 54% from 2018 to 2022, according to the South Dakota Realtors Association.
Agricultural property has its value calculated in a different way, Becker said. Since 2010, South Dakota has determined the value of agricultural land by its potential productivity, not how much it would sell for on the market. In its formulas, the Department of Equalization looks at an 8-year average to determine productivity.
It’s also not how the land is used that affects the value; different types of soil affect the value of agricultural land.
Crop soil land saw an increase in value of 0.52% and non-crop soil land saw an increase of 3.62%, Becker said. Even if a land is used for grazing, it can be classified as crop soil land based on the soil type. The total value of property in the county cannot be determined right now, Becker said. The process to get that amount can take several months and goes through local boards as well as the state government.
For Becker, there’s one piece of information that’s important for landowners to know: The Department of Equalization does not determine how much an individual will pay in property taxes. The department’s job is to assess and appraise property values; the department does not have the authority to levy taxes.
“The increase in value does not equate to a direct increase in taxes,” Becker said. “Just because the value went up 40% doesn’t mean taxes are going up 40%.” Local governments are in charge of asking for and collecting property taxes.
When Lake County, for example, considers its budget, it does not set a property tax rate directly. Instead, it determines the dollar amount it needs to continue its services and requests that total dollar amount, and the property tax rate is then set based on the total value of all property in the county.
The county can only increase the total dollar amount it requests from all property taxes by the consumer price index (CPI), which is 3% this year. This process spreads the tax burden more evenly and is why a 40% increase in value doesn’t amount to a 40% increase in taxes.
However, at previous Lake County Commission meetings, Shelli Gust, commission administrative officer, has presented several options for the county to increase its revenue through property taxes. This includes methods like an opt-out, which allows local governments to levy taxes above the 3% CPI rate they are otherwise limited by.
If the county does not increase the amount collected through property taxes, then services will have to be cut, Gust said.
“You’re getting very close to a position where you have to do less,” Gust said at a Feb. 21 meeting. “We’re not the only county in this situation.”
