Property tax relief bill heads to South Dakota Senate floor after tight vote Wednesday

PIERRE — Despite heavy opposition from the Department of Revenue, school groups and business groups, a bill that would cap property taxes for homeowners squeaked by the Senate Taxation committee in a 4-3 vote Wednesday.

SB 167, sponsored by Sen. Jack Kolbeck, R-Sioux Falls, would cap tax assessments at 3% and based on when someone bought their house, the starting valuation rate would reset to the 2020 valuation. Kolbeck said in committee that the bill would provide a modicum of predictability for homeowners who are shocked that valuations continue to climb.

“It also protects and safeguards our long term South Dakotans and aging population by increasing their ability to plan and save to stay in their house,” Kolbeck said.

For homeowners who bought their house before Nov. 1, 2020, their property tax assessment would reset to the 2020 valuation if the bill were to pass. Homeowners who bought their property after Nov. 2, 2020 but before Oct. 31, 2024, the assessment rate would be based on the fair market value at time of purchase. And for homeowners who bought the property after Nov. 1, 2024, the fair market value would be applied. But for all three, the property tax assessment could not go over 3% each year.

Property taxes have dramatically risen over the past few years. In Minnehaha County, the average county-wide property tax assessment increase was 14.4% for fiscal years 2023-2024, according to Chris Lilla, the Minnehaha County Director of Equalization, in December. That was 4% lower than the previous fiscal year when the average tax assessment increase was 18.8%.

Michael Houdyshell, the Department of Revenue secretary, said the current property tax structure was complicated.

More: South Dakota lawmakers propose bill that would cap homeowners’ property tax assessments at 3%

“You start moving pieces around, like in Jenga, you disrupt one piece, the whole thing can come crashing down, and there are lots of unintended consequences,” Houdyshell said.

Multiple opponents said if passed, a tax shift would have to occur to make up for the missing revenue. Others added the state aid formula for schools could also be impacted.

Nathan Sanderson, executive director of the South Dakota Retailers Association, said property taxes have become a concern and nobody, from homeowners to farmers, likes paying them.

“The structure that we have in place is equally unpalatable, so we would ask you keep that equally unpalatable system in place,” he said.

Sen. Herman Otten, R-Tea, said something needed to be done for property owners and that the bill could provide the Legislature to have a conversation about the property tax system.

Sen. Al Novstrup, R-Aberdeen, was the deciding vote Wednesday morning and made the motion to pass the bill onto the Senate floor. While he had come into the committee ready to vote against the bill, tracking with his past support for collecting equitable taxes on agricultural land, Novstrup recognized there had been a disconnect with reality.

“What do you do with a system that’s fundamentally broken with one-third? Are you better off breaking the other third or keeping it in place?” he said.

This article originally appeared on Sioux Falls Argus Leader: Bill to cap property tax heads to South Dakota Senate floor