Residents learn about property tax legislation

More than 70 people attended a two-hour informational meeting  Sunday, Feb. 23, at the Hot Springs American Legion where they heard from Hot Springs resident Robert Paul and District 30 Senator Amber Hulse, who together discussed the various property tax bills which are in play during this session of the state legislature.

The meeting was hosted by a group called Tax Relief for Property Owners, which was co-founded by Paul along with Shirley Schumacher. The group has a Facebook page by the same name which currently has just under 700 members, many of whom are from Fall River and Custer Counties, but according to Paul, there are lots of members from all across the state as well.

As the meeting began, Paul said there were a total of 10 Senate Bills and seven House Bills related to property taxes this year, compared to just one bill during the 2024 Legislative Session, which demonstrates a significant shift in focus for the 2025 session.

However, since many of those bills have already been killed—in part due to some of them increasing things like sales tax or creating new taxes by eliminating certain exemptions—the focus of Sunday's meeting centered primarily on SB 191, which Sen. Hulse introduced Feb. 4 and which was unanimously recommended by the Senate Taxation Committee last Friday, Feb. 21. It later unanimously passed the senate.

Hulse said the committee’s unanimous 6-0 support of her bill was a bit unusual to have that level of support coming out of a committee. That then meant only 11 more senators would have had to vote in favor of it on Feb. 25 for a simple majority of 17 out of the 35 vote, in order for it to get passed along to the House of Representatives.

If adopted, SB 191 would limit annual valuation increases on owner-occupied single-family dwellings and nonagricultural property, however, Hulse said she plans to make an amendment when it comes up for a vote in the Senate to exclude nonagricultural property, like commercial, from the bill.

Describing how the bill would work, Hulse said, that if you owned your property prior to 2020, the assessment values would reset to what they were in 2020 and then be increased by 3 percent each year after that. If you purchased the property after 2020, the assessment values would reset to whatever they were when you purchased the property and then increased 3% each year after that.

Paul then provided an example of an actual property assessment and how it would be impacted if SB 191 is ultimately passed and implemented in July 2025 and thus impacting the 2026 taxes, which are not payable until 2027.

His example used property that had an assessed value of $238,840 in the year 2020 and had a tax bill at that time of $4,450. That same property now has an assessed value of $413,700 (increase of 73 percent) in 2024 and has a tax bill of $5,690 (increase of 27 percent).

With SB 191, that $413,700 valuation would get reset to $238,840 and then increased 3 percent in 2021, 2022, 2023 and again in 2024, to create an assessed value of just $268,800 instead.

“Little bit of a difference, isn't it?” Paul asked, and then added, “Which would you rather have? The valuation of $268,000 or $413,000?”

An audience member then said, “I understand your math, but if its a lower valuation, they just raise the mill rate.” The mill rate (or mill levy) is the tax rate that is applied to the assessed value of a property. One mill is one dollar per $1,000 of assessed value.

Paul agreed but argued that, at least within Fall River County in regards to their funding, the decision to change the mill levy is done at a local level, which is something local residents then have the opportunity to keep an eye on more closely. It was pointed out later in the meeting that in regards to school funding – which is where the majority of most property taxes go – that mill rate is often determined by the state.

“The mill levy is going to be determined by local need divided into valuations,” Paul explained. “They can't exceed their budgets by more than 3%, with the exception of the schools.”

Later in the discussion, Paul used his own property as an example when he said that the mill levy he paid in 2003 was $43.91 per $1,000 valuation. In 2023, it had decreased down to $14.24 per thousand.

“In that 20 year period, my mill levy dropped 308 percent … my valuation increased during that time and went up 197 percent, while my property taxes increased 32 percent,” stated Paul, as he described how even though the mill levy went down, his property taxes still went up.

“Mill levies do play a part of it, but those are something that I think on the local level, we can certainly keep under control,” Paul said. “Will they go up? Yeah, probably somewhat, but I think they will go up at somewhat of a manageable level, if we keep an eye on the budgets of our local government.”

Hulse explained that her motivation for coming up with SB 191 was to fix the problem which created the higher property tax bills for area residents when prices were rapidly inflated post-Covid.

“At the end of the day, I always ask as a legislator, What is the problem here? What has happened that has caused the problem?” Sen. Hulse said. “And it's been the increase in valuations. So if that's the issue, why are we not just focusing on what resolves that issue?”

When asked by the audience who is opposing SB 191, Sen. Hulse said the biggest pushback has been from the Ag lobbyists, who fear that if owner-occupied property owners get tax relief, there could be a shift of more of the burden falling on them. Hulse said currently, Ag land makes up about 35 percent of the land in the state, but those owners only pay about 20 percent of the property tax share.

Paul added that the groups he has seen offer opposition to the bill have been Farm Bureau, the Retail Association and also two members of the Department of Revenue.

During the discussion, and after an audience member brought it up, Paul pointed out that it was important to know that the state does not receive any money from property taxes, and that all of the property taxes received are used to fund local governments like county, school and city. In Hot Springs, Paul said the city receives property taxes to fund general operations and uses its 2 percent sales tax as a means to fund special projects.

With the rapid increase in property valuations over the past few years, and in turn the increase in property taxes being paid in, audience member Dennis Shaw asked, “where is all of this money going?”

Paul said it was a difficult question to answer, while Hulse described how the lines can get a bit blurry, especially in regards to how property taxes are allocated for schools.

“What is happening is that our area is now deemed a desirable area to live in,” she said. “Because all of these people moved here from out of state and skyrocketed the worth of the land here. So as a formula on a page, our area looks like a rich and wealthy area that can raise money locally for our own schools.”

Because of this, Hulse said, “our area has seen a decrease in state funding, from the state pool, going to pay for our schools.”

“For example, Custer (School District) doesn’t get any money at all from the state budget … so where is the money is going? It's staying local. All of the money you're paying is staying here, but what is happening is that, when the glass used to be filled half way by local efforts and then another half way by state funding, the state isn't pouring anything else into the glass any more, because we're filling it up at the local level.”

Hulse and Paul also summarized some of the other bills, including the Gov. Larry Rhoden's tax bill which puts a cap on how much property taxes can increase moving forward. Sen. Hulse said she supports the Governor's bill but said that it doesn't do enough to fix the problems that are present now.

Another bill is Senate Joint Resolution (SJR) 506 would will create a ballot measure in the 2026 election which resets and freezes property taxes at the 2020 levels until the property is sold, which then triggers a tax bill of 1 percent of the sale price if the buyer is a resident of South Dakota. If the buyer is from out of state, the tax bill is then 2 percent of the purchase price.

Sen. Hulse said this bill is “well-intentioned” but not thought out thoroughly enough and would likely have too many negative consequences. Additionally, she said it also just kicks the can down the road some more and wouldn't go into effect until 2028, with no guarantees of passing. Paul was opposed to it because its focus was on prices and not valuations.

Both agreed that South Dakota’s best chance of seeing meaningful property tax relief was to support SB 191 wholeheartedly.

While very similar to last year’s SB 167 – which narrowly passed the Taxation Committee by a 4-3 margin, but was then quickly put to a vote on the floor of the Senate the very next day and died 11 to 20 – both Hulse and Paul said there is a much greater chance of SB 191 passing this year.

The 2024 bill (SB 167) was prime sponsored by Sen. Jack Kolbeck from District 13 (Lincoln/Minnehaha County) but was co-sponsored by all three of District 30’s representation in Sen. Julie Frye-Mueller, as well as Reps. Trish Ladner and Dennis Krull.

Sen. Hulse said part of the reason her SB 191 is more likely to pass is because SB 167 was argued to have not been constitutional. This year, however, Sen. Hulse said she specifically added some wording that sited relevant Supreme Court rulings that help to rationalize its constitutionality.

Paul added that another big reason it failed last year was because of how quickly the senate leadership last year rushed it to a vote, which did not allow supporters of the bill to get organized and express their support to the senators.