Meade County ranchers who sued the county for what they believe to be high property taxes, recently learned they had lost their case.
On May 13, 2022, Judge Eric J. Strawn determined that the property taxes paid by the appellants were neither unconstitutional nor were the data incorrectly applied by the county. The judge pointed out that many of the areas of concern would require legislative action.
Bill Kluck, of Mud Butte, South Dakota, was one of the callers, under his ranch names Echo Farm and Cattle LLC, Sulfur Camp and Cattle Creek. The others were Deb Nachtigall, Trask Real Estate, LP and Jon Jordan. Kluck said it would appear that suing the state would have made more sense since it is state law that governs how the county board of equalization assesses taxes, but in this case, suing the State was not an option.
He also said he realizes the county has to follow a protocol set out in state law to determine taxes, but the state has room to improve its formulas because a large portion of their methodology was done through rules and guidelines and was not necessarily defined in codified. right.
Meade County Chief Assistant District Attorney Ken Chleborad said the county maintains that “the legislature is telling us what we need to do. We are told what data to use, and that is the data we use. We apply it in a particular mathematical way and it produces a particular result.
The breeders believe the court failed to consider many of their arguments. One of their main demands was that although the state property tax, since 2008, is considered a “production-based” tax, it really isn’t tied to production, they say. Kluck gives the example that in 1991, the production value of farm property in Meade County averaged $60 per acre. In 2021, it was $416 per acre. “That’s a six- to seven-fold increase. Has anyone’s production increased that much? he asks rhetorically. State statistics showed that a 500-550 pound calf was valued at 80.68 quintals in 1991, while in 2021 the value was 161.15 quintals, about twice as much, much less increase than the “production value” of agricultural land. .
Another complaint is that the state uses soil types as part of the formula to determine property taxes and in some cases then assumes that the owner should use “highest and best use” from the ground, rather than using his judgment of what works best on their operation. For example, part of the “harvested” soil is not in a place where it can be cultivated, or is a parcel too small to be cultivated, or is otherwise unsuitable for cultivation. Therefore, the soil is used to produce grass, but is taxed at a higher “cultivation” rate.
The state has a formula it uses to determine the average “production value” of farmland in each county, which takes soil type into account. Then the county uses the soil type to determine each property owner’s tax assessment. “It’s such a nightmare for evaluators,” Kluck said. “I may have more soil graded for crops than my neighbour, but he may not be producing anymore. But that’s assessed differently.
It was argued in the Legislature this spring and has been pointed out by ranchers including Kluck that a point of contention is “Type 4” soil which is considered for tax purposes to be “harvested” soil, but in many cases is non-culturable.
Along with this, the breeders in the lawsuit said that accurate data is often unavailable or difficult to obtain, and in these cases the data used is biased or inaccurate. Kluck offers the example that Meade County has approximately 2,100,000 acres of agricultural property. About 700,000 are classified as crops, but only about 300,000 are ‘cultivated’. Most of these “cultivated” soils are in perennial hay crops such as alfalfa or tame grass, Kluck said. According to state statistics, only about 30,000 of those acres are irrigated. Still, “irrigated hay yields are applied to the general tally of cultivated acres,” Kluck said. In drought years like 2012 and 2021, when dryland yields were low or zero, irrigated acres become the only numbers reported, greatly skewing the “production” data for all “cropped land” acres. , did he declare. “In 2012, a very dry year, statistics showed spring wheat yields of 50 bushels/acre because the only wheat reported was on irrigated soil. Remember that crop yields are applied to approximately 400,000 soils classified for crops that are native grass or reverted to grass.
Agricultural Use Sales
The lawsuit claimed that some sales considered “sales for agricultural use,” which affect the value of farmland, are not really agricultural sales. “In our testimony, we pointed out that a property that sold for $16,900 an acre was considered a ‘farm sale,'” Kluck said. “I auctioned off a property that didn’t get an average bid of $525/acre, but then the county estimated it was valued at $1,100 per acre. Attached property sold for $469 per acre.
Kluck said he and the ranchers also argued that the law allows the state revenue department to use AUMs, rental rates and calf prices or a combination, to establish the value of the ground in grass. “Years ago, the NRCS helped me determine the appropriate AUM (animal units per month) or carrying capacity for my ranch. That would be an appropriate way to determine a production-based tax.
State law says NRCS data will be used to determine each county’s production (10-6-33.32). But at trial, a witness for the state said the NRCS data could not be used, Kluck said.
“Another aspect of agricultural production that the law does not address is an overall decline in production throughout the county,” Kluck said. “NASS data shows that in western South Dakota the number of dairy cows has fallen from 70,000 in 1991 to 49 head in 2021, the number of sheep is about 1/3 of what it was in 1991, and hog numbers are about 1/10 of 1991 numbers. Total cattle numbers are down at least 10%, and actual acreage in Meade County is also down. All of that considered, do you think that in that 30-year period, our production has increased six to seven times? Could confiscatory taxes be partly responsible for this drop? Do you think the court was biased in favor of the county and the state? We just don’t have the production to pay those taxes.
Another important point that Kluck said the court didn’t seem to consider when making its decision was the testimony of one of his own witnesses. “Dr. Elliott, the state agribusiness specialist in the South Dakota State University expansion, testified as a state witness. He testified that in his study, commissioned by the South Dakota Legislature, he found that Meade County’s assessments are 48% higher than the statistics would support, but this fact was not mentioned in the court’s findings .
Chleborad pointed out that in the judge’s “findings of law”, Judge Strawn said: “The quality of the data of Dr. Elliott, NASS or any other entity raised by the appellants as statistically calculated, unverified and otherwise inaccurate is a problem to be addressed to the legislator. The Legislature made no effort to direct Dr. Elliott or the SDSU in their work, by statute or administrative rule. The legislature has mandated the use of these sources and the legislature can change that mandate.
Tax working group
Additionally, decisions of the Tax Working Group must be reviewed by the Rules and Review Committee, and Jon Jordan testified that this does not happen. This was also not mentioned in the court’s findings.
The judge ultimately ordered that “the decision of the Meade County Equalization Board regarding the assessed value of the property in question be affirmed in all respects.”
Fall River County
Joe Falkenburg, chairman of the Fall River County Commission, said his commission recently approved a resolution asking Governor Noem to consider certain changes to tax laws. The resolution is below.