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House committee approves change in valuing farm landPIERRE, S.D. (AP)--A measure that would make a major change in the way farmland is valued for property tax purposes was endorsed Jan. 28 by a South Dakota House committee. The bill would value agricultural land based on its ability to produce agricultural income. The current system, which generally seeks to set a market value based on the sale of comparable land in a community, needs to be replaced because it no longer works, said House Republican Leader Larry Rhoden of Union Center. "It doesn't work to rearrange the deck chairs on the Titanic. It's time for a solution," Rhoden said. The State Affairs Committee voted 8 to 4 to approve HB1005, which was suggested by a panel of lawmakers who met last year to study the problem. The bill now goes to the House for debate. Opponents said there are too many unanswered questions about the proposed new assessment method. They said it may cause shifts in the tax burden among different kinds of property owners. The current system seeks to set a full and true value on grassland and cropland by using the selling price of comparable property. But critics have said the current method of assessing farmland by reviewing sales of similar land is ineffective because there are not enough sales of farmland for comparisons in many counties. They said the system is further skewed because state law requires unusually high-priced sales of land, those for more than 150 percent of assessed values, to be ignored when other assessments are calculated. The so-called "150 percent rule" was put in place to protect rural landowners from huge spikes in assessments when other agricultural land is sold for artificially high prices because of its commercial development potential. The bill approved by the committee Jan. 28 would eventually repeal the rule that now excludes consideration of property selling for more than 150 percent of its assessed value from being used in setting values for comparable land. It also would provide that the value of grassland and cropland would be determined by a formula based on the land's ability to produce agricultural products and income. The change would not take effect until studies had been done on some aspects of the formula. Rhoden said 43 other states use the productivity method to set the value of agricultural land for property tax purposes. The measure was written to prevent any shift that would boost taxes on residential and commercial property, and it is also intended to cause as little shift as possible among agricultural land, he said. The committee on Jan. 28 rejected a competing bill, which would have left the current system intact but repealed the 150 percent rule. The sponsor of that measure, Rep. Al Novstrup, R-Aberdeen, said his bill would do a better job of protecting farmers and ranchers whose land is not being sought for development. "The winners are not farmers. They're land developers," he said of the bill that would use productivity to value agricultural land. "The losers are farmers out in the prairies with this bill." Novstrup said the bill that would use productivity to value farmland amounts to a gross income tax. It also could cause problems if eastern South Dakota farmers are selling their corn for high prices and ranchers in the western part of the state are suffering through a drought, he said. County assessors from across the state also said they oppose the measure because they would rather continue using the current valuation system. The proposed change also would limit landowners' ability to appeal valuations, they said. But House Democratic Leader Dale Hargens of Miller said county assessors would be able to handle the proposed change in valuation methods, just as farmers have adapted to changing practices. "Sometimes in life you have to retrain yourselves, and I think this would be one of those times," Hargens said. The South Dakota Farm Bureau, the South Dakota Farmers Union and other major farm organizations supported the bill. But Rep. Joni Cutler, R-Sioux Falls, said she could not support the bill because many details are not yet known about what effects it would have. "It really smacks more of an income tax than a true value of what property is worth," Cutler said. 2/11/08 Date: 2/6/08
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