The ongoing saga over displeasure with the sharp rise in many property valuations in the county continued at the June 5 meeting of the Custer County Commission, with one commissioner suggesting the commission roll valuations back to 2018 levels and do more gradual and equitable increases. It’s a move, Custer County department of equalization (DOE) director Patty Caster said, that could end up actually hurting taxpayers in the long run.
Commissioner Mark Hartman called the sharp increases—some as high as 40, 50 and 60 percent— “unacceptable,” and said something needs to be done to make the increases more palatable.
Hartman said the increases should have been more of a “blanket increase,” lamenting that some properties saw sharp increases while others saw minimal increase or no increase at all.
“Otherwise it’s not equal or fair,” he said.
Caster said it’s not accurate to look only at dollar amounts in increases, as they were not a blanket increase, but rather, a manual raise in the Computer Aided Mass Appraisal (CAMA) system the department of equalization utilizes. Caster said the system assesses property based on average quality of construction. That means the more square footage, the better materials, components, etc., a home has, the sharper increase those properties realized, compared to those of lesser square footage and quality.
“By law, sales have to be market value. Market values is the sales used, and if you look at the market in Custer County, it is and has been high for a number of years,” Caster said.
Prior to the manual raise, the CAMA system valued a structure at 85 percent of what it would cost to build in Custer County. Once DOE staff delved deeper on the back end of things, it found it costs much more to build a structure in Custer County than what the values were coming out at the 85 percent level. It was raised to 110 to achieve the proper structure value indicated by the market, Caster said in a later interview.
The county could legally roll back its 2020 assessment to the 2018 level, but Caster cautioned against that, saying the 2018 assessments were at 74 percent of the county’s non-agricultural median ratio. By law, the county has to be at least 85 percent of market value on its ratio.
The closer the county gets to 100 percent of full and true assessed property valuations, the better the adjustment factor it receives. Full and true property assessments are adjusted (the adjustment can be positive or negative) to provide a taxable value for equalization. Sales of properties in the county from the previous year are used to determine the sales ratio, which in turn gives the adjustment factor.
Even with all the increases made in 2019, the county is still taxing at only 87 percent of full and true values, meaning more increases are likely on the way.
“I’m not going to argue with you. I’m just going to say it’s never equal if some people take all of the burden and some take none,” Hartman said. “That’s not equalization, first of all. Second of all, no one should have seen more than a 20 percent increase in one year.”
Hartman cited a report by S.D. Department of Revenue property tax specialist Wendy Semmler that said the dramatic increases experienced by some property owners—while not impossible—is uncommon, and that no property should have seen more than a 20 percent increase.
“If it took us four or five years to get there, the worst thing that’s going to happen is the state is going to put it in their audit that you’re not at their 85 percent,” Hartman said.
However, last May, Michael Houdyshell, director of property and special taxes division for the S.D. Department of Revenue, warned the commission that if it did not raise the valuations of all non-ag[ricultural] properties in Custer County, it’s possible the state would do it for them, and even tax over full and true value to accelerate the closing of the gap the county was experiencing.
Caster said the taxpayers would be hurt by lowering the assessments back to 2018, as the county’s adjustment factor, which is .977, would go up to cover the assessment decreases, which would mean taxpayers would simply pay more than their assessed values. The closer assessments get to market value, she said, the better it is for taxpayers as a whole.
“We have time. We can talk about it down the road,” Hartman said. “I’m still convinced we are going to have to do something.”
Caster has been warning about the impending assessment increases since December 2017, when she told the commission before she became head of the department of equalization that many county structures had not been assessed at their market value for at least two years.
The issue bubbled to the forefront earlier this year when county residents complained to county commissioners about a dramatic rise in their valuations. The increases were not solely brought on by the county’s need to fall into compliance with the state, however, as Caster said at a special May meeting that relatively new DOE staff and unfamiliarity with the CAMA system and its capabilities also contributed to the increase.
Commission chairman Jim Lintz pointed out that higher assessments don’t automatically mean higher taxes. Unless the county dramatically increases its spending in 2020, the tax load to taxpayers won’t change, he said, as property owners are taxed according to what is needed for the annual county budget.
“The amount of money we are collecting as a whole, if we are controlling that enough, [tax money] doesn’t change any,” he said.
Auditor Terri Cornelison said that’s not entirely the case, as those who saw the 40, 50 and 60 percent jumps in their valuations will still pay more taxes, while those who saw 20 percent or less will not.