Somehow fate placed both Sen. Al Novstrup and former legislator Paul Dennert on the state’s agricultural land assessment task force. Novstrup, R-Aberdeen, defeated Dennert, D-Aberdeen (formerly Columbia), in the 2012 state Senate election for the Aberdeen district. Both men take property taxation very seriously. They come from very different perspectives. Novstrup is a businessman who asks, Where is the relief for commercial property? Dennert is a lifelong farmer who saw agricultural land get substantial relief through the school-aid formula but has seen other levies such as capital outlay and pensions drive up the school-tax bill for farmers and ranchers nonetheless. And so it is worth considering what Paul Dennert and Al Novstrup brought to the table Tuesday during the final meeting of the task force for 2013.
Dennert proposed a law that would require a county director of equalization to keep two sets of values on the books for each parcel of agricultural land. One value would be based on the current system of agricultural production value. The second value would be based on “fair market” if the land was converted to a non-agricultural use, to be known as the deferred value. If the land’s classification changed, the director of equalization would then provide the past three years of deferred value to the county auditor, and the auditor would calculate three years of back taxes based on the levies for each of the three years of deferred value. The owner of the land would get credit for the agricultural taxes paid but would need to pay the remaining balance of the deferred-value taxes that would be owed. The property couldn’t be transferred until the deferred-value taxes were paid in full. The task force didn’t take any action on the Dennert deferred-value tax, letting it expire for lack of support.
Novstrup brought four proposals. None gained enough support for the task force to vote. He wanted to change the capitalization rate used in the formula for setting ag-land values under the current system, from the present 6.6 percent to 6 percent, which would have increased values. He also wanted to change the eight-year average to five years for determining ag-land production; the high year and the low year currently are thrown out, so it’s a rolling six-year average, and his proposal would have in reality turned that into a rolling three-year average. His third proposal would have set a schedule of specific requirements for ag land to be assessed at certain minimum percentages of its production value, because land in many counties is valued far less than it should be as a result of land values and crop production increasing rapidly in recent years. State law already sets a 2019 deadline for that to happen in full.
Novstrup’s fourth proposal sought to broaden the task force’s responsibilities. He wants to change the name to the Property Assessment Task Force and set its scope as the “equal and uniform assessment of all real property and shall review the implementations of the provisions of law concerning the assessment and taxation of real property.” In other words, do for commercial property and owner-occupied homes what the task force has been charged by law to do for agricultural property.
On each of his four proposals, Novstrup made a do-pass motion. None of the times did another task force member second his motion, leaving each proposal to die for lack of support.
It is unlikely that the task force will be the final forum where any of the Paul Dennert and Al Novstrup proposals are heard. The task force’s decision to endorse a conversion of agricultural property values to be based on actual use, rather than on the hypothetical values from soil type and crop productivity, will prompt a major debate in the 2014 session. Likewise, farmers are already pointing out that the high crop-price values from recent years, especially for corn, aren’t holding up but will affect agriculture taxes for some years to come. And there is a widespread opinion that agriculture producers should be paying more in school taxes; the cap that was placed in law was intended as a minimum to protect schools in case agricultural land values decreased, but they’ve increased instead. In the cities, meanwhile, there is a push that gained a foothold in the 2013 session for a different approach to taxation of rental property.
A gut feeling is that Al Novstrup’s interest in broadening the task force’s scope to cover all real property could well find majorities in the Senate and the House during the 2014 session. That would be in some ways a testament to the accomplishments of the task force, which has been led by then-Sen. Dave Knudson, R-Sioux Falls, and most recently by Sen. Larry Rhoden, R-Union Center. As the task force wrapped up its work Tuesday a complimentary statement was made by Rep. Jim Peterson, D-Revillo, about Rhoden’s fairness as chairman. Peterson, who knows agricultural property tax issues as well as any other current or past member of the Legislature, doesn’t say what he doesn’t mean.