Soil table update for agricultural property tax delayed by complexity, turnover and inability of revenue department to anticipate public angst
More than five years ago, the legislature passed House Bill 1007 of 2016, directing the Department of Revenue to ask SDSU economists to update the soil tables that underpin farmland assessments. There was an emergency clause in that bill because, well, updating those floor tables was obviously an emergency.
Five years and seven months later, we still don’t have any new floor tables. The 2019 legislature was going to implement data provided by SDSU to simplify the farm productivity tax (it’s our highest notional income tax on farmland), but SDSU data made lawmakers nervous. , and they monopolized Senate Bill 4 of 2019 for Direct Revenue and SDSU to study the impact of updating soil tables on agricultural balance sheets.
Work has dragged on since and at Thursday’s Farmland Valuation Working Group meeting, Revenue Secretary Jim Terwilliger said we are still not ready to roll out the new soil tables for tax purposes. .
Terwilliger presented to the task force this memo sent to county equalization directors on August 9, 2021, summarizing what has happened with the soil tables project over the past five years:
- 2016: The legislature allocated funds to DOR to contract with South Dakota State University (SDSU) “to update data used in soil tables.” 2016 House Bill 1007.
- 2016 – 2018: SDSU researched new soil tables, studying the NRCS online soil survey and other data.
- 2016-2018: SDSU made presentations to the Agricultural Land Assessment Implementation and Oversight Advisory Working Group (Agricultural Land Working Group) on the state of research.
- 2019: The legislature asked the DOR and SDSU to “study the impact of changes to the methodology of soil assessment for the purpose of assessing agricultural land” by conducting a pilot study in several counties. 2019 Senate Bill 4. Data from the pilot study was reported to the Ag Land Task Force at the end of 2019.
- 2019-2020: SDSU continued to work on the soil tables project, including preparing a first draft of soil tables for each county.
- 2019-2020: Russ Hansen, Property Tax Specialist at DOR, worked closely with SDSU on the new floor tables project. Mr. Hansen had extensive experience in farmland valuation and computer science, which is very useful for the new soil tables project.
- 2020: DOR received SDSU’s first floor table project during the first part of the year.
- 2020: Russ Hansen, DOR property tax specialist, left DOR in July 2020.
- 2020: The first draft floor tables have been sent to all DOEs for review by the DOE to find any errors or anomalies. The DOEs were to report errors and anomalies to the DOR.
- 2020: DOR hired Kathy Goetsch as a property tax specialist to replace Russ Hansen, effective September 2020.
- 2020: SDSU worked on a second draft floor tables for several counties.
- 2021: DOR Property Taxation Director Lesley Coyle left DOR in March 2021. From 2019 to 2021 Director Coyle was heavily involved in the new floor tables project.
- 2021: DOR received from SDSU a second draft floor tables for several counties during the first part of the year.
- 2021: Wendy Semmler was hired as the new director of the property tax division of the DOR in April 2021.
- 2021: DOR sent second draft floor tables to multiple DOEs for DOE review during the first part of 2021.
- 2021: The DOR informed all DOEs in May 2021 that the new draft soil tables will not be used for the assessment of agricultural land in 2022.
- 2021: DOR continues to work on the floor tables project [Secretary Jim Terwilliger, Department of Revenue, memo to county directors of equalization, 2021.08.09].
Terwilliger attributed the continued delay in resolving this emergency to complexity, turnover and misinformation:
The implementation of a new soil table for the 66 counties of South Dakota is a major and very complex project. Hundreds of soils need to be examined, multiple datasets need to be investigated, and the review and testing of soil tables all need to take place before moving forward. The DOR continues to review the draft floor tables and work on the issues that have been raised with the SDSU. The DOR will not go ahead with new floor tables until we are satisfied that the new floor tables are correct.
The DOR experienced a turnover of key personnel which slowed down implementation. Losing Property Tax Division Manager Lesley Coyle and Property Tax Specialist Russ Hansen, the two people who were the heads of the DOR Floor Tables project implementation team, rolled back the project. Although the new director of the property tax division, Wendy Semmler, and property tax specialist Kathy Goetsch are very knowledgeable, neither had been closely involved in the floor tables project. It took a long time for these people to get up to speed.
Valuable DOR time was reallocated from work on the floor tables project to dealing with public misinformation. In May 2021, a DOE shared their county’s first soil table project with the public. When the DOR sent the first draft floor tables to the DOEs, the DOR enlisted the help of the DOEs to help identify any errors or anomalies that need to be corrected. When the DOE shared a first draft of the Soil Table with the public (which wasn’t close to being finalized), it only caused public angst over the provisional database. The result is that the DOR must have spent precious time explaining that the first floor table project was not final. A second draft soil table was sent to the county in mid-2021, which helped correct some errors that were present in the first draft. Even the second draft is not final. The DOR must focus its limited resources on soil tables for the 66 counties [Terwilliger, 2021.08.09].
The complexity that I can understand as a delaying factor. But turnover? Had the ministry and legislature resolved this emergency diligently, they would have finalized and implemented the tables before the ministry lost its two main project leaders. If the Soil Table update turned out to be so monumental, it should have been at the top of the list of knowledge capture projects for transitions, with the ministry spending a lot of time on departing Hansen and Coyle (and possibly even be an allowance after departure) to prepare brief notebooks for their replacements on the floor tables.
What about disinformation? It sounds like an inability to anticipate the public reaction of the ministry. The boxing of 2019 SB 4 made it clear that the Legislature and Revenue clearly understood that the reconfiguration of the soil tables and the resulting tax assessments would raise all kinds of concerns among rural and less rural taxpayers. That is why when you publish this first draft for public discussion, you ensure that “DRAFT” is stamped prominently on every page of this first version and on each director’s understanding of Equalization, and you accompany this draft with ‘A list of the top 20 questions you anticipate will be frequently asked when taxpayers see that first draft and turn around.
The delay in updating the ground tables looks like a bad P3 case – and I’m not talking about the paycheck protection plan. In this case, the state government’s poor planning means that we will continue to base the property taxes of farmers and ranchers on soil studies which, as Terwilliger notes in his memo, are 20, 30 or even 40 years old. .
Hmm … tax farmers on income we assume they could make based on old soil data that the Revenue Department finds incredibly difficult to update and deploy, or ask farmers to submit their own. real income data, as they already do every year for the federal government and tax it on the basis of the single, straightforward figure known as taxable income, which do you think would be the easiest and fastest?