Codington County Bd. of Com'rs v. State, Bd. of Equalization

Decision Date14 December 1988
Docket NumberNo. 15960,15960
Citation433 N.W.2d 555
PartiesCODINGTON COUNTY BOARD OF COMMISSIONERS, Codington County, South Dakota, Appellee, v. STATE of South Dakota, State BOARD OF EQUALIZATION, Appellant.
CourtSouth Dakota Supreme Court

R.L. Ericsson of Ericsson, Ericsson & Leibel, Madison, Roger W. Ellyson, Jr., Codington County State's Atty., Watertown, on brief, for appellee.

Robert J. Wagner, City Atty., Watertown, and John P. Dewell, Asst. Atty. Gen., Pierre, for appellant.

HENDERSON, Justice.

TAX APPEAL/PROCEDURAL HISTORY

The Codington County Board of Commissioners (County) appealed a decision of the State Board of Equalization (State) reducing, by 19%, the assessed value, for tax purposes, of all properties within the City of Watertown (City). Upon a de novo consideration of the record, the circuit court reversed, holding that the State had no authority to make such a reduction where the questioned assessments did not exceed "true and full value." Thereby, the circuit court reinstated the original assessments by County. State appeals, arguing that the court either erred in disallowing the rollback of City values, or, if correct regarding City values, should have increased the assessed values of agricultural land to equalize valuation between the different classes of property.

We reverse. We reinstate the order of the State Board, which reduced the City's assessments, on the grounds that the County failed to substantially comply with statutory requirements pertaining to valuation of agricultural property.

FACTS

In 1977, City hired an appraisal firm to reassess all real property within its boundaries. The new appraisals, completed in 1979, resulted in a 45% increase in appraised values, and formed the basis for City's assessments of real property for tax purposes. During this period, assessments of agricultural land and farm houses were increased 10% and 15%, respectively.

In 1980, City's assessor raised his assessments of real property by 10% to account for inflation, and asked County to reduce the assessments by 35% to equalize disparity between City's assessments and those in other localities within the County. County declined the request, and rolled back City's assessments by only 15%, a decision unanimously affirmed by the State on July 29, 1980. In 1981, City's assessor again raised assessments by 10%, and County reduced City's assessments by 25%. In 1982, County reduced City assessments by 18%, and increased assessments of agricultural properties by 20%. The Codington County Township Association appealed the County's raised agricultural assessments, and the State reversed County's decision. State's findings of fact in that appeal reflected the County's calculations of agricultural land values relied primarily on market sales data. The State concluded, as a matter of law, that County's overuse of market sales data regarding agricultural land values was not provided for by statute, apparently referring to SDCL 10-6-33.1. *

The City then directed its City Attorney to appeal State's decision in circuit court; however, this course was abandoned when the County agreed to limit the spread between agricultural and urban assessments to 12%. This led to City's assessments being reduced by 25% in 1983.

In 1984, the picture changed: County refused to roll back City's assessments, although the Codington County Director of Equalization asked it to reduce such assessments by 25%, a reduction which would put City's assessments in the same position relative to assessments for agricultural land as in 1983. City appealed to State, which reduced City's assessments by 19%, bringing City and agricultural property assessments into the same relative position as they had averaged in the previous three years. County appealed to the circuit court, which reversed the State on the grounds that City had no basis for complaint when its assessments were not in excess of "true and full value." City and State appealed.

DECISION

City and State argue, in essence, that State has authority to reduce the assessments of nonagricultural property for the purpose of obtaining equalization between agricultural and nonagricultural property. Alternatively, they posit that such equalization may be achieved by raising assessments of agricultural properties.

Our state constitution contains two sections which are most relevant to our inquiry:

Article VIII, Sec. 15, provides:

The Legislature shall make such provision by general taxation and by authorizing the school corporations to levy such additional taxes as with the income from the permanent school fund shall secure a thorough andefficient system of common schools throughout the state. The Legislature is empowered to classify properties within school districts for purposes of school taxation, and may constitute agricultural property a separate class. Taxes shall be uniform on all property in the same class. (Emphasis added.)

Article XI, Sec. 2, provides in part:

To the end that the burden of taxation may be equitable upon all property, and in order that no property which is made subject to taxation shall escape, the Legislature is empowered to divide all property including moneys and credits as well as physical property into classes and to determine what class or classes of property shall be subject to taxation and what property, if any, shall not be subject to taxation. Taxes shall be uniform on all property of the same class, and shall be levied and collected for public purposes only.... Gross earnings and net incomes may be considered in taxing any and all property, and the valuation of property for taxation purposes shall never exceed the actual value thereof.... (Emphasis added.)

Summarizing, this constitutional framework determines that (1) the burden of taxation of all property is to be equitable, S.D. Const. art. XI, Sec. 2, (2) agricultural and nonagricultural property may be separated into distinct classes for tax purposes, S.D. Const. art. VIII, Sec. 15, (3) valuation of property is not to exceed its actual value, S.D. Const. art. XI, Sec. 2, and (4) taxation is to be uniform on all property in the same class. S.D. Const. art. VIII, Sec. 15; S.D. Const. art. XI, Sec. 2. This Court, in 1937, rejected a railroad's claims that separate classification and a cap on mill rates for agricultural property were unconstitutional under S.D. Const. art. XI, Sec. 2 (uniformity clause), and the Fourteenth Amendment to the United States Constitution:

This court in 1929 could see no proper distinction between agricultural land and other real estate for the purposes of school taxation. However, in 1923 and again in 1931 the State Legislature saw a distinction, and in 1930 the people of this state saw the distinction so plainly that they were willing to write it into the Constitution of this state. [See the last two sentences of art. VIII, Sec. 15.]

Great N. Ry. Co. v. Whitfield, 65 S.D. 173, 182-83, 272 N.W. 787, 791-92 (1937) (overruling Simmons v. Ericson, 54 S.D. 429, 223 N.W. 342 (1929)). This Court, in Great N. Ry., added that it could not "say that it is unreasonable for the Legislature to conclude that agricultural land cannot bear the same burden in relation to school taxes as other land." Id., 65 S.D. at 184, 272 N.W. at 792. The history behind S.D. Const. art. VIII, Sec. 15, is set out in In re Appeal from Refusal of State Bd. of Equalization to Hear Appeal of Lake Poinsett Area Dev. Ass'n, 330 N.W.2d 754, 758 (S.D.1983), wherein this Court held that "the South Dakota Constitution does not require uniformity of taxation between classes of property as well as within property classes." Lake Poinsett, id. " 'Boards of equalization have traditionally been created primarily to set a norm for equalizing assessments of property so that inequities will not result between taxpayers whose properties are in the same class.' " Id. (quoting Rapid City Area Sch. Dist. v. Pennington County Auditor, 284 N.W.2d 308, 311 (S.D.1979)). We can safely express that, as a general rule, there is no constitutional requirement for equalization between agricultural and nonagricultural property.

We view the statutory structure erected by the legislature regarding tax assessments and equalization as containing no provisions for equalization between property classes, as such. "[T]his court has consistently held to the uniformity within class rule." Lake Poinsett, 330 N.W.2d at 758 (citations omitted). We note that the legislature has acted upon its authority to classify agricultural property separately. SDCL 10-6-31 (directing assessors to designate all assessed property as either agricultural or nonagricultural). Further distinction is evidenced in the legislature's determination that the assessed value of agricultural property is to be measured differently from nonagricultural property, as reflected in SDCL Secs. 10-6-33 and 10-6-33.1, which read:

SDCL 10-6-33. Basis for determining valuation for tax purposes--Forced sale value not to be used. All property shall be assessed at its true and full value in money but not more than sixty percent of such assessed value shall be taken and considered as the taxable value of such property upon which the levy shall be made and applied and the taxes computed. In determining the true value of real and personal property the assessor shall not adopt a lower or different standard of value because the same is to serve as a basis of taxation, nor shall he adopt as a criterion of value the price for which the property would sell at auction or at a forced sale, or in the aggregate with all the property in the town or district; but he shall value each article or description by itself and at such a sum or price as he believes the same to be fairly worth in money.

SDCL 10-6-33.1. Factors considered in determining value of agricultural land. In fixing the true and full value in money of property, under the provisions of Sec. 10-6-33, the...

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