Property Taxes a function of levies, home value, and also residential growth
By Eric Harrold
HOT SPRINGS – Have you ever wondered what all factors into how much property tax you pay? Turns out, it’s a combination of things, some straightforward, and others…not so much.
Across the board, the one thing that everyone within a given tax district in the county shares in common is mill levies, or simply levies if you prefer. A mill levy is defined as the assessed property tax rate used by local governments and other jurisdictions to raise revenue to cover annual expenses. One mill is one dollar per. $1,000 of assessed value.
Not all districts have the same levies, as can be seen by viewing archived mill levy sheets published on the Fall River County Auditor’s webpage at www.fallriver.sdcounties.org/auditors-welfare-office/. Under the mill levy archive, one can view sheets going back to 2016 taxes payable in 2017.
What explains the difference between different tax districts in terms of mill levy values? Well, it depends.
According to Stacey Martin, a GIS specialist with Fall River County, it varies for individual levies. Each tax district has a unique combination of service district mill levies and not every tax district pays every type of mill levy. The most obvious example is for those outside city limits, who do not pay city mill levies. With respect to tax districts in the cities, when it comes to fire mills, they don’t have a separate fire mill because they pay the fire department through city government funds.
Another exception can occur when a district, such as District 11 has fire service from neighboring Buffalo Gap in Custer County. This results in extra county mill levy that is collected by the Fall River Auditor and then paid to the out-of-county fire department. Another example Martin gave were road district levies which not all tax districts have, that are formed by a group of homeowners, often in a subdivision, who form a board for the purposes of collecting a fee to maintain their roads. The ambulance and fire mills correspond to the ambulance or fire district budgetary needs divided by the assessed value of the district.
School mill levies are the only levies that differ within a tax district, according to land type with agricultural land assigned the lowest value, with owner-occupied in the middle, and non-agricultural land the highest. Martin informed that school mill levies are set by the local school board but with stipulations set by the state legislature, using a complex formula. She said that the school mills have been different each year that she has been involved with putting mill values into the spreadsheets that are viewable online, and that the mills differ between the three school districts. Martin pointed out that a look at the mill levy sheets will show that the school mill makes up 50% or more of most people’s total mill levy if they live outside of Hot Springs, Edgemont, or Oelrichs, and for those living in town, it is still about a third of one’s tax bill.
Martin elaborated on why folks might want to keep an eye on school mills during a time in which the county is seeing tremendous increases in the price of residential property sales.
“If you look at the mill levy sheets, you will see that in general the school mills have been coming down 1-3% a year,” said Martin. “But if you look at residential assessed values, many areas have been increasing 8-12% a year. The concern is that these high sales are going to drive assessed values to a percentage increase far beyond the 8-12%, which has become normal. And if the school mill only comes down 1-3%, like it has been, that imbalance between the rate at which assessed values increase and the school mill decreases will result in a large tax increase.”
According to Martin, as assessed values increase, most mill levies can be decreased, unless there is a budget increase. As long as the mills adjust down at the same rate the values increase, taxes remain the same. This might be the silver lining that local taxpayers are looking for, as there have were 43 new homes built in 2020, which includes 17 constructed in the city limits of Hot Springs, 11 at Angostura Reservoir, and most of the rest scattered throughout rural Fall River County.
New residential properties effectively help to spread out the tax burden so long as there is not a budget increase. As with many rural communities throughout the country, those in Fall River County have seen an influx of new residents coming from areas that have responded to the COVID pandemic by enacting mandatory masking and social distancing policies in an effort to reduce the impact of the virus.
Of course, there’s also the value of a residential property that comes into play. At its most basic level, property value is determined by the cost of building that property minus the depreciation due to age of the structure. The next step is to look at what similar homes have recently sold for and values are adjusted up or down based on the market values of such similar properties.