Property values still skyrocketing

Custer County will let the State of South Dakota inflict the rest of the damage when it comes to upcoming property assessments, as in some cases a “tremendous increase” in land valuation in the county already planned by the county’s equalization department will be met with a blanket increase in valuations from the state after it ensures the county is taxing its property at 85 percent of market value as required by state statute.
At the Feb. 9 meeting of the Custer County Commission the commission heard from county Department of Equalization director Leah Vissia, who talked about the raises her office will implement  for this year’s assessments payable next year, which will include valuing some land outside the city limits within the county at $50,000 for the first acres, $15,000 for the second through eighth acres,  $5,000 for the ninth through 11th acres and $3,000 for every acre thereafter. In some cases, such as Lakota Encampment, located north of Hermosa near the Pennington County line, lots will be valued at $250,000.
“That’s what they are selling for,” Vissia said. “That’s going to be a tremendous increase, but that’s what they are going for. We don’t have a choice.”
These changes will bring bare property outside city limits to 92.4 percent and bare property inside city limits to 92.37 percent of market value, closer to the full and true market value. Currently, the bare land outside city limits is at 53.9 percent, while bare land within a town’s limits is at 79.8 percent. Property taxes are paid at 85 percent of the county’s level of assessment and property that is under assessed doesn’t pay less in taxes. Rather, a factor is added in by the state that brings that percentage—such as the 36.2—up to 85 percent, which technically means a landowner is paying more in taxes than what the property is valued at.
Other increases discussed by Vissia are a 10 percent increase on homes in the City of Custer, a 20 percent increase on land in the City of Custer, a large increase in commercial properties, and homes in Pringle and Buffalo Gap rising 30 percent, along with an increase in homes in Fairburn. The results will once again likely be higher property taxes, and in some cases, a staggering increase. Even with all these large increases, the county will still be at only 80 percent of market value overall, 5 percent short of what is required by the state.
“I can’t even get to 85 percent yet,” Vissia said.
Vissia said the only way she knows of to get up to the 85 percent is to tack increases onto homes outside of towns, but she is reticent to do so having just put a huge increase on land outside of towns.
“I would just as soon not increase the houses and land at the same time,” she said.
“Does the state have any idea what kind of a problem we have out here?” asked commission Mark Hartman.
Commission chairman Jim Lintz said the state knows there is a problem with skyrocketing property values in the Black Hills, but nobody has an idea what to do about it.
“I don’t have any answer. I really don’t,” Vissia said. “This is what we have to do. Until they can figure out a new way of assessing or getting money, this is what we’re going to have to do.”
Vissia added that as much as the continually-rising values are hurting local people, those local people are complicit in the problem.
“The local people are asking the price, and out of state people are paying the price,” she said. “Local people are setting the market just as much as the out of state people are buying. They’re the ones setting the price.”
It is well documented that a large contributor to the skyrocketing property values is people from out of state moving to Custer County and in some cases paying three or four times the amount at which property is valued. This in turn drives up the comparable sales aspect of valuations, which drives up assessments, and, subsequently, taxes.
Among the possible solutions discussed was something similar to Proposition 13 in California, which declared property taxes were to be assessed their 1976 value and restricted annual increases of the tax to an inflation factor, not to exceed 2 percent per year. A reassessment of the property tax can only be made when the property ownership changes or there is construction done. The state has tried a similar tactic in the past, where if someone paid more than 150 percent of the value of a property it was not used in comparable sales, but it was challenged in court and declared unconstitutional.
Vissia said a 3 percent sales tax that goes toward education would probably work, but said there is a slim chance that would ever be approved.
Hartman suggested coming up with an assessment for Custer State Park, but the state constitution says state parks cannot be taxed.
The state’s funding formula for education also came under scrutiny, as the Custer School District takes around 70 percent of the property tax dollars collected in the county, yet there are many years the school district gets no money from the state for education due to the way the state funds education. Because the county is considered wealthy, it pays for its own education costs while also helping pay for poorer counties’ education.
“I don’t think we would be having this problem if we got 50 percent of our money for schools,” Lintz said. “That’s why I think the system is broken. I don’t know why as a citizen of Custer County I should pay a penalty because we are considered a wealthy county.”
The solution, he said, may be challenging the way the state funds education.
“I don’t think it’s constitutional and I don’t think it’s fair to the taxpayers of Custer County,” he said.
In the end, the commission decided to hold at the 80 percent the equalization office was able to get the county to, and let the state “be the bad guy” by tacking on a factor that will spread out the rest of the tax increase equally across the board in the county. A challenge to the way the state funds education could be in the offing, as well.
“If we don’t do something soon, locals won’t be able to afford to live here,” Hartman said.