Property tax relief plans loom over final days of SD legislative session

Yahoo

08-03-2025

A January 2025 view of the South Dakota State Capitol in Pierre. (Makenzie Huber/South Dakota Searchlight)
South Dakota lawmakers have four days left to agree on a property tax relief plan.
There are three bills left on the table:
House Bill 1235 from Rep. Greg Jamison, R-Sioux Falls, caps local governments' inflationary property tax collection growth at a lower amount year over year.
Senate Bill 191 from Sen. Amber Hulse, R-Hot Springs, rolls back assessments for some homeowners and caps assessment growth for all of them.
Senate Bill 216 from Gov. Larry Rhoden caps countywide residential assessment growth for five years, caps the amount local governments can increase tax collections based on new construction and growth, exempts some home improvements from affecting assessments, and expands eligibility among disabled and elderly people for relief programs.
Legislative tone shifts from helping counties to blaming their spending
Legislators – including many who campaigned on the issue – must determine which bill or bills will make it to the governor's desk. They went home Thursday evening for a long weekend and will return Monday to Pierre for the final four days of the legislative session, except for a day in late March to consider the governor's vetoes.
'The best measure with the most relief should make it through,' said House Majority Leader Scott Odenbach, R-Spearfish.
Lawmakers are responding to public calls for relief, largely from non-agricultural property owners. Since 2017, property tax payments have gone up 47% for owner-occupied homes and 36% for commercial property, while rising 3% for agricultural property. Ag land taxes have been held in check by a change from market-based to productivity-based assessments.
All three bills are expected to be debated on Monday. Meanwhile, the Legislature passed a resolution Thursday to ensure the body will dig deeper into property tax policies. That bill creates an interim task force to 'identify impactful, substantive measures' to provide significant and lasting tax relief. The task force will include 16 lawmakers, a representative from the Bureau of Finance and Management, and a representative from the Governor's Office.
Senate President Pro Tempore Chris Karr, R-Sioux Falls, said property tax reform is 'one of the most important priorities' of the legislative session.
'We need to take a look at the whole picture of what's happening,' Karr told lawmakers, 'what forces are driving the property taxes to increase and what some of the mechanisms are that we can look at and consider to provide relief.'
Jamison's House Bill 1235 would reduce local taxing districts' annual inflationary budget growth from a 3% cap to a 2.5% cap. In both cases, the inflation rate becomes the cap if it's lower than either percentage.
The majority of property taxes — 56% — goes toward public school funding. Around 13% goes to cities, 27% goes to counties and the rest goes to various local entities, according to the state Department of Revenue. The state does not receive property taxes, relying instead on sales taxes.
Yvonne Taylor, representing the South Dakota Municipal League, told lawmakers earlier this week that Jamison's legislation is 'much more survivable' for city budgets than the other bills proposed. Counties and schools affected by the legislation, lobbyists said, would face more difficulties to meet obligations without seeking 'opt outs' to generate more taxes. An opt out is a decision by a local governing body to exceed the cap on annual property tax collection growth.
Jamison told lawmakers on the Senate Taxation Committee that the legislation would not provide as much property tax relief 'as you want, or the people that I represent want.'
But it's enough to send a message to local governments, according to Jamison, that they need to reevaluate their budgets and address the burden on homeowners.
'It's a little bit of a punch in the face to all these taxing districts,' Jamison said. 'No special privileges. But it's not a bloody nose, it's just a bruise.'
The committee unanimously agreed to move the legislation to the Senate floor, though some told the lawmaker they didn't believe it would provide enough relief and voted in favor simply to keep the conversation alive. The Senate deferred its debate on the bill to Monday.
The governor's bill would be more like a bloody nose to some of the local governments, Jamison told South Dakota Searchlight. That's because the plan could be particularly problematic for high-growth cities, counties and school districts, such as the Sioux Falls metro and the Black Hills areas, by holding down one of the levers that raises tax revenue.
Rhoden's 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.
School districts with high growth wouldn't be able to take care of their infrastructure needs to accommodate the growing population of students, said Heath Larson, executive director of Associated School Boards of South Dakota, in an interview with South Dakota Searchlight.
Rhoden unveils plan to slow property tax increases for five years
Lobbyists and officials for cities and counties oppose the bill because it would cut high-growth local government revenues by millions of dollars within a few years and would result in reduced services, they testified.
The plan could shift the property tax burden from homeowners onto agricultural and commercial properties in areas of high growth, said State Department of Revenue Secretary Michael Houdyshell. That's if the value of a county's owner-occupied homes exceed the 3% assessment growth cap set by Rhoden's legislation.
But Houdyshell called the proposal the most 'politically possible' of the three options, despite concerns raised. He added that it's 'not perfect policy.'
'This is a feasible path forward that accomplishes a lot of goals we set out to accomplish,' Houdyshell testified. 'It's not an earth-shattering change to the taxes folks are going to pay, but it does provide relief and I think that's the goal the governor is trying to accomplish with this bill.'
If Jamison's and Rhoden's proposals both pass, Jamison equated the limitations to counties to a broken neck. Or 'if not a broken neck, a bent one.'
Rhoden called the analogy a 'gross overstatement,' saying it won't hamstring counties 'in any form, shape or fashion.' He believes the two bills could complement each other if passed, though he didn't support a proposal to merge them into one package.
The House State Affairs Committee endorsed the governor's legislation in a 9-4 vote. The House of Representatives deferred debate on the proposal until Monday.
If a lawmaker can earn a trophy for the most opponents to a bill, Hulse joked during Senate Bill 191's committee hearing Wednesday night, then she's likely to take home that honor this session.
Senate Bill 191 would roll back owner-occupied residential property valuations to 2020 assessments for those who bought a property prior to November of that year. For those who bought a property after that, the valuation would roll back to the assessment at the time of the purchase. In both cases, future annual valuation increases would be capped at 3% until the property is sold, transferred or significantly renovated.
Of the dozen opponents to speak against the bill, the Department of Revenue's Wendy Semmler was the most vehemently opposed.
The rollback would remove $16 billion from the assessment rolls, Semmler said, leading to a $42 million loss in local funding for schools. That $42 million would then be the responsibility of the state to make up. Other opponents stressed it would hurt county budgets and could jeopardize South Dakota's AAA bond rating.
Semmler said proposed changes to the bill wouldn't help.
'My opposition is that Senate Bill 191 is bad policy and amending it at this stage of the game doesn't save it,' Semmler said.
But Hulse believes it's worth attempting to shake up the current property tax system.
'Right now I think our system as it stands is inequitable because you're sitting in your home, you've done nothing to your home, and you're being taxed more,' Hulse said. 'In what other situation do you do nothing and get taxed more?
The bill passed out of House State Affairs with a 7-6 vote and is expected to be debated on the House floor Monday.
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