Tax burden falls on Hills residents

Pennington County officials discussed all things property tax related at a nearly two-hour meeting in Hill City Feb 28. County commissioner Ron Rossknecht explained his rationale for putting the meeting together,  saying, “I  think it’s right to meet face to face to answer questions.” About 65 people attended the meeting. 

Shannon  Rittberger, Director of  Equalization for Pennington County, did most of the talking, giving a presentation entitled “How Does a Rising Real Estate Market Affect Property Taxes?”

Data from the federal government shows a 12.4 percent increase in housing prices in South Dakota between the third quarter of  2021 and 2022. Rittberger was met with grumbles from the audience when he said “the virus didn’t make our real estate market go up,” but elaborated that record low interest rates and demand for housing due to the millennial generation buying homes were more likely factors. Rittberger estimates a third of Rapid City single-family home sales went to people from out of state.

 Rittberger noted that a 3 to 6 percent market increase is normal and that Pennington County residents are seeing 20 to 30 percent increases for the last three years. And while he admitted home prices are coming down nationally he’s not seeing that tendency in the Black Hills. 

“We’re thinking residential home prices aren’t going up like they were,” said Rittberger stopping short of saying they’re going down. “I’d just be guessing what’s gonna happen next year.”

What is certain is that there have been “huge increases” in bare land prices, especially bare land with pine trees.

A concerned citizen who identified that she and her neighbors each saw a 40 percent increase in the assessed value of their homes wanted to know why they were carrying the weight of the tax burden.

“Why isn’t the growth in Rapid carrying the same weight?” she asked. 

Rittberger replied, “pine trees,” but also acknowledged that if the average increase was 25 percent that, yes,  these homeowners  are taking on a bigger share of the tax burden.

His presentation shows Keystone, the Rushmore Ranch area of Keystone and Old Hill City Road were some of the hardest hit areas in Pennington County with increases of 137 percent, 62 percent and 42 percent, respectively.

As one citizen said, the increases are “unsustainable in a short period of time.” She may have summed up the sentiment most people in the room felt by saying, “there needs to be a stop gap measure. It’s not fair; there’s got to be a way.”

But Rittberger’s hands are tied.

“There’s neighborhoods that have gone up more than others. That’s just what our market is doing,” he said.

Both Hill City and Keystone are considered neighborhoods for assessment purposes. Residents were confused as to how all of Hill City could be one neighborhood, and how a home in Sunset Creek, for example, could possibly compare to a home on North Newton.

“If we get too small a neighborhood there won’t be enough sales,” explained Rittberger, noting that sales are what affect valuation. 

Valuation, in county taxing terms, is what a homeowner can expect to sell their home for on Nov. 1 of the taxing year. This prompted many to wonder how a South Dakota resident can compete with out of state cash buyers who they feel are driving up the value of homes and thus property taxes at an unreasonable rate.

The anomalies in a market for the most part don’t affect a person’s assessment.

“But,” Rittberger said, “if that is happening over and over again, that’s an indication of where our market’s going.” 

Rittberger said a property is not going to be based on the highest sale nor on the guy who bought a home from his grandmother and got a really good deal. Rather, it will be assessed on “market value, every year.”

Someone asked what happens due when a cash buyer pays $999,000 for a property that was really worth half that amount. Rittberger said the county  appraises an individual’s home based on comparable home sales, not on what the house next door sold for.

The Department of Equalization is going to look at all the sales in the market. If the market goes down the assessed value will go down.

While the county uses three years worth of sales information when conducting appraisals it is still appraising at what a home will sell for on that Nov. 1 date, the county assessment date.

Rittberger’s office appraises 50,000 properties a year employing a mass appraisal mathematical model. The assessment values tend to be between 97-98 percent  accurate with Rittberger saying, “we are reasonably  good at assessment values.” The state audits the appraisal accuracy by also comparing sales price to value.

The process is not perfect since oftentimes county appraisers have no access to a home or know of mitigating factors that may in fact impact assessment.

“If there’s something wrong  like a cracked foundation we don’t know that,”  Rittberger said, explaining why the appeals process is so important. 

That appeals process differs slightly depending on whether you live in the county or Hill City or Keystone city limits.

For a city limits resident, the first point of contact is the city itself. Keystone and Hill City have a form you can fill out for tax assessment disputes. The form asked the reason for the dispute as well as how much a homeowner thinks the assessment should be. Those forms must be submitted to the respective city hall by March 16.

The appeal is then heard by a member of the school board and common council.

The first step of appeal for Pennington County residents begins with calling the Office of Equalization and getting a meeting with one of the appraisers who will explain the process, review comparable homes and give you a form if you choose to continue the appeals process. The form will also ask for justification for the assessment reduction and what value you feel your home should be assessed at. This information gets reviewed by the Pennington County Commissioners during a hearing with the homeowner.

Rittberger agreed that many in Hill City and Keystone are taking on a bigger share of the burden. He used Old Hill City Road parcels as an example of an area that was hard hit by recent high priced land sales. Many residents respectfully voiced their agreement.

“Something’s out of whack. What is out of wack here? How can we let this happen. Why can’t we cap the assessment to 15 perent?” one asked.

“When do you feel you can say this is out of line and say ‘we can’t change an assessment by 40 percent to an area?’” asked a citizen. “when are we gonna take responsibility for what we’re causing for the individuals here. When are we gonna take responsibility and say , ‘this is too far out of line?’”

“There is nothing in the law that puts a cap on the increase,” Rittberger said. “I have to appraise it for what it would sell for every year.”

Another asked, referring to an elderly person on a fixed income, “where do these people go?”

Rittberger explained his office is bound to follow state codified law. The state is the only entity that could put a cap on assessed value increases and current state law requires the Office of Equalization to  assess a property based on what it would sell for Nov 1. 

Rittberger was sympathetic when answering yes to one individual who asked if their assessed value might grow 70 percent in two years, noting again his office is following state law.

He did explain several programs for the elderly who may qualify, such as a freeze or homestead but with home values so high Hill City and Keystone, residents often don’t meet those qualifications. Getting help from Pierre appears to be the only source of relief.

State law already limits the annual increases in the budget for the county to 3 percent a year, or the current Consumer Price Index, whichever is smaller. A breakdown of Pennington County’s budget reveals 20 percent is spent on general government, including building and grounds, IT, and human resources. Public safety, including jails, law enforcement and juvenile services make up the greatest portion of the budget, and when added together combine to 35 percent.

However  a person’s tax bill is made up of multiple taxing entities. Some of those taxing entities on  an individual’s tax bill, such as a fire or ambulance district, can do an “opt out,” opting out of that cap for a certain number of years for a certain amount of money for a particular reason. Opt out don’t renew automatically but can remain in effect virtually forever if the taxing entity acts upon them. 

The levy, which is calculated by the auditor, can go up by more than 3 percent due to these various taxing entities.

“Nobody sets the levy,  it’s just simply that gives us that much tax money out of this much value,” Rittberger said.

Rittberger said it’s important to understand that a significant increase in the values of the  housing market does not result in more money for taxing entities. Budgets are based on the cost of performing services. 48 percent of the county’s budget currently comes from property taxes.

Tax assessment notices for next year have already been mailed and Rittbeger says that “generally we can expect as big an increase this year as we did last year.”

This prompted one man to utter, “you’re gonna move everybody out,”  while another offered, “South Dakota  is growing up, but you don’t need to squash its people.”

For those who missed this meeting, Pennington County Officials will be hosting another public meeting March 22  at 6 p.m. at the Rimrock Community Center, 12270 SD 44. Representatives from several districts in South Dakota, including District 30, have been invited to attend.