PIERRE Responding to a public outcry about rising property taxes, South Dakota Gov. Larry Rhoden proposed a bill Thursday at the Capitol to cap growth in owner-occupied home valuations for five years.
The plan would also put stricter limits on the annual growth of local governments property tax collections and expand eligibility for property tax relief programs.
Rhoden lauded the approach as a reasonable compromise in a legislative session where property tax relief has spurred a host of competing proposals.
The governors version will take the form ofSenate Bill 216, introduced as an empty vehicle bill seven days ago.This week, Rhodens team filed a proposedamendmentthat outlines the plans provisions. The governor described it as an agreement reached by a property tax working group made up of 10 state lawmakers and representatives from his office.
Flanked by that groups membership at a Thursday press conference in Pierre, Rhoden thanked them for their passion to relieve the tax burden on South Dakota homeowners.
What it does
The total assessed value of all homes in a county ispart of the maththat determines a South Dakotans annual property tax burden, as are the values of home improvements across the county.
An individual homeowners property tax rate is set by dividing a local governments funding needs by the combined value of all of a countys homes, commercial properties and agricultural land.
Typically, the home value piece of that equation is tied to the housing market. In recent years, ballooning home values in some parts of South Dakota have pushed assessments and the tax bills that ultimately flow from them up.
The governors plan to address the issue wouldnt lower anyones property tax bills directly, but would instead make a handful of adjustments to keep them in check.
The proposal would cap growth in the total taxable value of a countys owner-occupied homes at 3% a year for the next five years. It would not make changes to valuations for commercial properties or agricultural land.
It would also shield home improvements worth less than 40% of a homes value from factoring into a countys total property value.
Local governments shouldnt need to grow just because a homeowner makes small improvements, Rhoden said.
On the funding need side, the governor wants to cap how much money a local government can ask for in property taxes.
Currently, unless two-thirds of its voters opt out of the states property tax limit, a local government can only ask for 3% more or the rate of inflation whichever is lower each year. On top of that, they can also ask for more based on new construction or home improvements.
Rhodens bill would limit annual growth based on new construction and home improvements to 2% and apply the same limit to school capital outlay funds. Schools use their capital outlay funds for land, buildings and equipment.
Finally, the bill would increase income limits for the states property tax freezerelief program for elderly and disabled people provided theyve lived in the state for at least five years. Rhoden said the income limit for a multi-person household would rise from $45,000 to $65,000, for example, and the maximum value of a home eligible for the program would rise from $350,000 to $500,000.
Reaction, competing ideas
The Rhoden-backed bill is a corrective to changes in property tax policies on agricultural land more than a decade ago, he said, which put additional pressure on homeowners to pick up the tab in the years that followed.
Property taxes are a critical funding source for county governments and school districts. The state relies on sales taxes to pay the bulk of its bills.
Over the past five years or so, spiking property values in some areas of South Dakota have created sticker shock that drove lawmakers to appoint a study group on the issue last year and pledge to provide relief this session.
At a Republican leadership news conference held shortly before Rhoden unveiled his plan, lawmakers pointed to property tax relief as a top priority. House leadership said public school leaders might need to find ways to tighten their belts.
To actually have a real property tax cut, you have to cut schools, because schools are 56% of our budget, said House Assistant Majority Leader Marty Overweg, R-New Holland.
Rhoden said hed need to hear more about specific ways schools would save money before responding to Overwegs comments. He said he hadnt heard them yet.
Rhoden did acknowledge, however, the multitude of property tax and property tax-adjacent proposals circulating in Pierre this session.
Just this week, for example, the Senatedefeateda bill from freshman Sen. John Carley, R-Piedmont, that would have given parents a property tax break if they choose to enroll their child in some manner of alternative to their local public school. Other property tax bills were deferred for later action as lawmakers waited for Rhodens plan.
Rhoden didnt speak to specific proposals, but said lawmakers should settle on a plan by the end of the legislative session next month.
Is this going to be an end-all, be-all? And the answer is no, Rhoden said. There are a number of bills being worked on, and well consider them individually as they come forward. And quite frankly, I think there are some reasonable proposals in addition to what you see before you today.
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