Representative Ted Klaudt: Amendment D is Revenue Neutral

I had promised this one the other night. State Representative Ted Klaudt wrote a column in the Faith newspaper where he mentioned that Amendment D was "revenue neutral."

Without taking judgment on it one way or the other, it's an interesting concept to consider; that a constitutional amendment re-writing the way property taxes are assessed could possibly contribute no more or no less to government coffers:
By Ted Klaudt

Thanks for all the calls, emails and people who wanted to visit with me about the my last weeks article on Amendment C. I can see it is well worth my time to write these reports. This week I want to explain the issues in Amendment D. I want to remind you to feel free to clip the article out of the paper and save them for future references.

Amendment D is a change in the South Dakota Constitution that will completely change the State constitutions article XI, Section 2 dealing with the assessment of real property. The way it works now is the County Assessor set the value of your real property, using soil type and mainly comparable sales if there is enough sales of like property. One main point is if the sale is over 150% of the average sale it is put in special class for assessment. It then, after a short period of time, is reassessed at the average of the other property of like value. The fears that this special class can at some point go away with and act of the Legislature. That would result in the sale being added to the mix, resulting in the neighboring property assessment to rise considerably. This could and more than likely would result in everyone in that area to pay considerably higher taxes.

What Amendment D would do is roll back the assessment of your real property to the 2003 assessment. After January 1 of 2007 the price you sell your property for would be the assessment of the property. The only way to increase your assessment would be if you add on or remodel your property This amendment will allow no more then a 3% annual growth in your assessment of real property. A sale that would change your assessment would need to be an arm length sale. You could sell your farm/ranch to your children and that wouldn'tÂ’t change your assessment. One more point, it will be revenue neutral, meaning that the school, county and cities budget will not be affected by this change. This is a major change in the State Constitution. I am offering you the chance to hear both sides of this issues if a group out there would like to hear both side of this amendment I would try and arrange a debate over this amendment for your group.

I would be more than happy to visit with anyone about this amendment or any other issue you might have. Feel free to contact me. I would be happy to attend any kind of a meeting or visit individually with you. I can be reached at home 605-273-4576 or my cell phone 605-848-0221 or 605-848-2960. If you have email you can email me or just send a letter to Rep. Ted Klaudt, 10250 Walker Rd, Walker, South Dakota, 57659. Until next week take care and God bless each and everyone of you (don'’t forget to pray for RAIN).
As I've said, I'm a bit tossed on this one. I'm like everyone else that I'd like to see property taxes be stable and equitable. And low, too. Low is good.

But can a complete re-write of the system be "revenue neutral"? We've got Ted's opinion on one side. I asked a State Senator who I might consider on the other side who indicated that as opposed ot being revenue neutral, he considered it more of a shift of who is paying it.

Regardless, here's Ted's argument for his position on Amendment D.

Love it or hate it, have at it and let's hear about it.


Anonymous said…
Ted is exactly right.

The only exceptions will be with the funds that have a max mil levy without the 3% or rate of inflation restriction (ie) capital outlay and pension fund. BUT, it is an easy fix for those funds and it is the equivalent of 8th grade math to accomplish.
mhs said…
Easy fix 12:58? Only exceptions? EVERY fund has as max mil levy imposed by South Dakota law.

I'll use just one example, schools districts are allowed a max. levy of 3 mils for capital expenditures. This is the money they use to fix buildings, buy books and keep the buses runnning. Most districts in the state are at or near the 3 mil limit. The rollback will not be revenue neutral for districts that cannot increase beyond the 3 mil limit.

Other limits that will most likely be affected? Special education (1.45), pension levy (.85), County building levy (.90) etc. etc. etc. Ted's made the common mistake of thinking only of the general levy.

Amend D. supporters have been quoted saying legislators would be forced to raise levy limits above current levels or face the wrath of votes and local governments. Ted should think real hard about how this could effect his district. The Ag levy is now the lowest, does he really want that levy limit to be re-opened?

That's the problem with D. Rather than working to try to improve the problems of the current system, it creates a free-for-all that, like Proposition 13 in California (D's model).

PP, if you want to have some fun, reprint all my posts from last week and see if the D supporters can offer a single fact to refute any of it. So far, they only respond with name calling. How about a real debate for once folks?
Anonymous said…
10-12-29. Annual school district levy–Report to county auditor–Spread against property. The school district board of a school district shall by resolution adopt a levy in dollars and cents sufficient to meet the school budget for the general fund of the district for the current fiscal school year. The school district shall report the levy to the county auditor by the first of October on forms prescribed by the county auditor. The county auditor shall spread a levy in dollars and cents over the taxable property of the school district sufficient to raise the money requested by the school district, subject to the legal dollar limitations provided by law.

Source: SDC 1939, § 57.0515 as added by SL 1953, ch 460, § 1; SL 1969, ch 44, § 35; SL 1971, ch 74, § 1; SL 1986, ch 126, § 22; SL 1989, ch 30, § 26; SL 1997, ch 87, § 3.

Note the words:,, shall spread a levy,,,sufficient to raise the money requested,,,

This is the LAW, MHS, do you see a max mil-levy in there ? The mil levy is set by the dollars requested, not the other way around. There is no max on general fund k-12, the legislature makes it whatever they want every year, they call it the max, but there is no max !! because it is only the max for that year. The max for the general fund is not like the max for capital outlay by any stretch.

When the state wanted an internet tax, all of the sudden they could tell cities how much to reduce the sales tax rate to be revenue neutral when they started to tax food, they (the state) called it revenue neutral. It would be the identical procedue, unless they forgot 8th grade math.

By the way, the legislation fixing this issue is already done,,,sleep well
Mark Schuler said…
Also, since I don't like anonymous comments, I'll give up my mhs handle for this debate. Sen Napoli signs his name so I will as well.

I'm Pierre native and was Gov. Mickelson's REDI Fund coordinator from 1987 to 1992, selling SD's tax structure to companies across the country. I was a banker and lawyer in western SD during he worst of the farm crisis so I do know a few things about farmers losing their operations. In a 22 year finance career I've done everything from car loans to home loans to corporate lending. I've been a Public Finance investment banker for the last 14 years working with local governments in seven states and have done over a billion dollars worth of financing in my career.

I first studied Prop 13 in Dean Don Dahlin's SD Government class at USD in 1981 and have followed it closely ever since. My comments aren't based on opinion, but on the proven history of Prop. 13 since it's passage in 1978.
Mark Schuler said…
Anon, just read the rest of 10-21.

A few highlights:
12-21, County gen levy max of 12.
12-28 Township gen levy max of 3
12-28.1 Township fire levy max of 1.20

and the big one: 12-42 sets up the classes of property and the general fund limits for school for each:

Ag: 3.03
homes 4.76
Comm. 10.19

Note these are only the gen. fund limits. The cap outlay, etc. limits are other places in the code.

I sincerely think this is where you D folks made your error Anon. You looked only at the process the Legislature uses to allocate aid and not the underlying taxing authority and limits on the units of local government. You have to read all of them together.
mark schuler said…
10-12, sorry. I really need new bifocals.

10-12-29 is the authorizing language for taxation by school boads and imposes the Oct. 1 deadline for the next years levy, subject to the limits imposed by 10-12-42 and other places.

Note the last nine words of 10-12-29 "subject to the legal dollar limitations provided by law"

ie: 12-42, etc.
Anonymous said…
Amendment D doesn't make any sense. If the supporters are on one hand saying property taxes are going sky high every year but on the other saying D is revenue neutral, what exactly is the benefit?
In taxes; Shift Happens!
nonnie said…
Explain to me this argument against amendment D - that it will make it harder for a person to buy a house or land in the future.

If amendment D passes: A person buys property, that property is limited to a taxable value increase of only 3% per year for the present owner. If that owner sells it in ten years, the buyer's tax is reset based on the then value of the property.

If amendment D does not pass: A person buys property, that property's taxable value can go up by any amount per year determined by like sales nearby. If that owner sells it in ten years, the buyer's tax is based on the then value of the property.

Same property either way, same taxable value at ten years either way, same taxes at ten years either way to the new owner.

What's the problem? The only difference is that it prevents 10-15% hikes in evaluation per year to the present owner. Makes no difference in evaluation at the end of ten years to a new buyer.
Anonymous said…
Here's the question I posted on the other thread that no one ever answered. My question is an honest one and I'd love for someone to answer it:

Hey Napoli, I think Amend D mostly benefits the bigwigs: land developers, landowning businesses and corporations, etc. The rich get richer. Yeah, it will help Ma & Pa too, when they're old an on a fixed income, and I'm all for that, really, but it seems mostly to help the big shots. Am I wrong? If so, tell me how.

If you want lower property taxes, why not lower property taxes?

I'm all ears, pal. You have a potential vote here, if you can persuade me. Honestly.
Anonymous said…
Nonnie and 11:46,

Let's assume that Amendment D really is going to be revenue neutral. The property valuation won't go up more than 3% so that will leave a deficit to be filled somewhere else. Accoridingly the mill levy will have to be adjusted to make up for the loss and when that house is repurchased, that mill levy is going to be considerably higher.

Amendment D protects established businesses and homeowners. On one hand that is good but the fallout is it hits new businesses and homebuyers harder to make up for it.
MHS sounds like he knows a lot about California's Prop 13 which is the same principle. There is a lot to be learned by their mistake.
Anonymous said…
Just go read all you can on California's Proposition 13 and it will answer most of your questions about Amendment D
nonnie said…
OK, assume I buy the argument that the mil levy will be higher.

There is still the huge problem of my property's value being adversely affected by my neighbor's. If a neighboring farm is bought for 2-3 x what it is worth because some land developer or out of state hunter with ookoods of money or a huge farmer who simply wants the land and doesn't care what he has to pay for it, then my valuation and thus taxes go up too. There maybe is a 150% limit or something, but still, that is not fair to me. Who is willing to fix that? At least Amendment D addresses this issue.

Our property taxes have risen outrageously in the last few years. Maybe I want to care about me right now and not some unknown person in the future. Maybe that sounds selfish to you, but I don't think it necessarily is. Calls for property tax relief seem to fall on deaf ears to most, and this amendment D finally addresses a huge problem.

I will vote for D!
Anonymous said…
Iam with nonnie, Ted and 56,000 signers of amendment D petition getting this on the ballot.I'm voting YES on D, my mind is made up.
Anonymous said…
Two things bug me:

1) Proponents of D say it'll hold down property taxes. Your message is VERY misleading to the point of being actionable. D has NOTHING TO DO with property tax RATES. Face it, folks, if the county, the town, the school need money, they'll go for it. And the people who will pay -- and BIG TIME -- are people who are buying 15-20 year old properties, like young families or old people looking for a simpler house to live out retirement.

2) Two houses, side-by-side. Same floor plan. One owned by a family the last twenty years. The other recently bought by a struggling young couple. The young couple will probably pay nearly TWICE the property tax as the older empty-nesters. SAME HOUSE. SAME FIRE, POLICE AND ROAD SERVICE. Is this FAIR?

How 'bout if we just send 1 fire truck to the old guy's house, instead of 2?

Same goes for neighboring farms. Those who are pat are ... ok. The Future Farmers of America are going to get sca-rewed.
Anonymous said…
5:42 The 56,000 people who signed the petition were told it would cap increases in property taxes. This is a LIE.

It's hard to police -- or for that matter prosecute -- verbal promises made irresponsibly in the street.
john said…
Amendment D smells a lot like proposition 13 that was passed in California in 1978. It didn't help California. In fact Prop 13 made the housing market harder to get into for young families and for older families looking to downsize their home.

What Prop 13 did is make property taxes more unequal. Amendment D is bad for homeownership and for business growth in the state. Vote NO on D
Anonymous said…
Here's another way D hurts low income and senior citizens. The 3% cap doesn't apply to centrally assessed property, which is mainly utilities. So that's where a big part of this tax shift will go. And guess what? Utilities recover their taxes in the rates they charge for phone service, natural gas and electricity. Ask yourselves who can least afford higher rates.
Anonymous said…
Mr Schuler;

Yes note the reference to Dollar limit and not mil limit, the dollars (3% or rate of inflation is gaurunteed) So when folks say there will be a loss of revenue...that is a false statement, correct ? since the legal limit, by law, is a dollar amount. There is a bill introduced every year to set the levy that will yield the requested revenue. In 2001 the "max" levy was 5.36 for owner occupied. In 2002 the "max" was 6.50, an increase !! if 5.36 was the max, how did we get 6.50 the next year. Because of the LAW protecting the revenues for Schools. The legislature will follow the exact same process if D passes. And Schools will receive EXACTLY THE SAME REVENUE, if D passes or fails.

On the prop 13 comments, If you are comparing D to prop 13 then you have not read much about D. Prop 13 cut revenue BIG TIME, also capped mil levy and the growth of assessments. D does not cut revenue, does not limit the mil levy and matches the growth of assessments to the growth in government. How could you possibly compare the 2 proposals and say they are similar ??

You gave quite an impressive resume, I would say that your assessment of D if far below your ability thus far. go to READ the actual language and I bet you will have a better things to say about D in the future
Anonymous said…
10:06 So WHAT'S THE POINT of D? The point is that D shifts taxes to people who are (or wish to be) active in the real estate market. D is a PENALTY. An INSULT to those who buy or sell. For them it will GREATLY INCREASE TAXES. You admit in your posts that TAX RATES (mil rates) WILL HAVE TO COME UP to make up for future shortfalls. Those increases will scrape their benefit from the HUGE PROPERTY TAX INCREASEs paid by new buyers.

Those who have just bought a home will recognize the "penalty" and STAY PUT. Perhaps for 20 years! Or more! It will stifle the real estate market during which time next door neighbors will pay wildly different taxes.

Anonymous said…
I'm voting against it just because that idiot Napoli is for it.
Anonymous said…
anon 713;

Your remarks "huge" and "greatly increase" in reference to the difference in taxes is unfair. Have you seen an accurate spreadsheet ?

Since virtually all properties (residences) sell every 20 years, most of those sell every 10 years, the disparity you are talking about is not going to be HUGE or GREAT. I will go and get the numbers from a speadsheet I made and I wil post again tonite to summarize what the differences will be.
Anonymous said…
I think it's funny that you make light of "huge" and "greatly increase" when you yourself use words like "virtually all" and "most."

10:06 is wrong that the mill levy went up from 2001 to 2002. The mill levy was: 7.56 in 2000, 6.52 in 2001 and 6.5 in 2002.
House Bill 1139 points that out.

I don't think it's fair to generalize amendment d as being revenue neutral. It's like saying that eliminating the 150% rule would be revenue neutral; there are local ramifications. There are many counties that have little growth and turnaround. This will reduce local effort and create a greater need for state dollars for education resulting in more dependence on state money. It also begs the question in these small growth/low turnaround areas where local governments will get money.
Anonymous said…
You can go and read the STOP website but just be forewarned that it is full of exaggerations. It engages in class warfare putting the little guy against Wal-Mart and Ted Turner. The fact is those "astronomical" sales they are talking about don't even apply to your values because of the 150% rule. His example of how the market system works using a coat purchase isn't even logical. Your both BUYING two coats and your valuation is based on multiple sales, not one large sale.
For all the moaning and complaining going on about valuations going up and raising their taxes, I bet there isn't much complaining when they build a balance sheet, apply for a home-equity loan, or sell their home.
Anonymous said…
7:59 How can you POSSIBLY argue that an increase of almost DOUBLE -- as it could be after 20 years -- is not, er,ah, HUGE?
Anonymous said…
anon 1215;

How did you get to a disparity of double ?? or are you repeating rumors ?
Anonymous said…
I buy a Home based on my income, why should I be taxed on my neighbors income ?

I am voting for D,, the rest of you are so lost Moses couldnt get you to the promised land.
Anonymous said…
6:35 That's just, just ... SILLY.

What you wrote makes no sense!

Are you hoping to pay a lot more property tax than your neighbor for a similar home because you make more?
Anonymous said…
The best information you can get about this issue - with both the pros and cons spelled out - is at the South Dakota Secretary of State website.
In a lime green bar are these words: The Ballot Question pamphlet is now available! Click here to view.
This brings up a great pamphlet that explains everything you need to know about every proposed amendment in a balanced manner.
If you think this pamphlet is helpful, please forward the website information to your online family and friends.
Know the facts before you vote.
Anonymous said…
anon 1102;

Thank you, the current property tax system makes no sense either.

I buy my home based on my income,,,the guy buys the house next door for 75% more than I paid, because, maybe, he and his wife both work and they really liked the house. The assessor tells me my house is now worth the same as my rich neighbor, sooo, I will be taxed on HIS INCOME, instead of mine. I'm sure youve never heard that scenario before right ,haha
Poliglut said…
12:14 ...

You're right.

You win.

I give.

I've never heard of that scenario before.

(75%? Whew!)
Anonymous said…
12:14 Even the tax man would know that that 75% guy was an IDIOT!
Robin Arc said…
All I have to say is vote no. Vote yes is you don't want new businesses or new people to move to South Dakota. Vote yes if you want all of our young people moving out of state because of the "penalty" of buying a new house-by making up for other peoples taxes. Who's going to want to sell or buy? Who's going to want to build? If you thought our housing market was horrible now, think of what it will be with D.

Give it 5 years and you'll all be wishing you voted against D.
JOHN G. said…
I recently moved to South Dakota from Florida. In Florida we've had a similar 3% cap since 1998. Eight years later evereybody hates it.

Our neighbors were paying four times more in taxes than we were (we bought in 1997 they bought in 2004). Over the years as our family grew we needed to upgrade to a bigger house but the thought of having to sell and buy (and therefore pay four times more in property taxes) was unbearable. The tax is just not fair. The lady across the street from us was widowed and her kids had gone off to college. She wanted to downgrade from a very large house but even though she would be buying a much smaller house her tax bill was going to be much higher.

The 3% sounds like a good idea at first but after a few years it becomes glaringly unfair and restrictive. Last year, the legislature in Florida contemplated fixing the problems with the law by proporsing a portability clause. The law never went anywhere.

South Dakota should have learned from other States and drafted an amendment that took into consideration things like portability, seniors, and first-time home buyers. When I talked to Sen. Napoli about this his only answer was that South Dakota is not Florida.

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