Trask v. Meade Cty. Comm'n

#28732-a-MES
2020 S.D. 25

IN THE SUPREME COURT
OF THE
STATE OF SOUTH DAKOTA

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PATRICK and ROSE MARY TRASK, Appellants,

v.

MEADE COUNTY COMMISSION,
ACTING AS MEADE COUNTY
BOARD OF EQUALIZATION, and
the MEADE COUNTY DIRECTOR
OF EQUALIZATION, Appellees.

****

APPEAL FROM THE CIRCUIT COURT OF
THE FOURTH JUDICIAL CIRCUIT
MEADE COUNTY, SOUTH DAKOTA

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THE HONORABLE GORDON D. SWANSON
Retired Judge

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JAMES P. HURLEY of
Bangs, McCullen, Butler,
Foye & Simmons, LLP
Rapid City, South Dakota Attorneys for appellants.

KENNETH L. CHLEBORAD of
Office of the Meade County
State’s Attorney
Sturgis, South Dakota Attorneys for appellees.

****

CONSIDERED ON BRIEFS
APRIL 29, 2019
OPINION FILED 05/06/20
#28732

SALTER, Justice

[¶1.] Patrick and Rose Mary Trask challenged the valuation of their

agricultural land before the Meade County Commission sitting as a board of

equalization (the Board), arguing the director of equalization incorrectly applied

statutory provisions to determine the land’s production value. After the Board

granted only partial relief, the Trasks appealed to the circuit court, which affirmed

the board’s assessed value of their property. The Trasks now appeal the circuit

court’s decision. We affirm.

Background

[¶2.] Patrick and Rose Mary Trask (the Trasks) farm and ranch 11,091

acres of land in southern Meade County. Patrick testified that he has lived and

worked on this land his whole life, and with Rose Mary since 1975. The Trasks are

predominantly cattle ranchers, but they also grow hay and alfalfa on portions of

their property to feed their cattle.

[¶3.] The assessed value of the Trasks’ ranch for 2016 was initially

calculated as $539 per acre. However, before mailing the tax assessment to the

Trasks, Kirk Chaffee, the director of equalization for Meade County, made

discretionary adjustments that reduced the assessment to an average of $519 per

acre.

[¶4.] The Trasks appealed this valuation to the Board. Following

arguments from the Trasks, the Board further adjusted the assessment down to an

average of $512 per acre. The Trasks, nevertheless, appealed the Board’s decision

to circuit court.

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[¶5.] The circuit court conducted a trial de novo during which the Trasks

acknowledged that the statutory method of assessment requires a determination of

their land’s “agricultural income value on a per acre basis.” SDCL 10-6-33.28.

However, they argued that the assessed value for their land was artificially high

because it failed to account for how the land is actually used. Patrick testified that

he believed 23% of his property should be classified as cropland and 77% should be

classified as noncropland. However, Chaffee and the Board (collectively, the

Appellees) determined that the Trasks’ property is comprised of 61% cropland and

39% noncropland based upon soil classifications Chaffee is obligated to use. Though

he cannot change the soil classification for agricultural land, Chaffee testified he

can make valuation adjustments based on the unique characteristics of the land to

“fine-tune[]” the valuation and ensure the county-wide assessment is “consistent

and fair.”

[¶6.] The circuit court affirmed the Appellees’ tax assessment of the Trasks’

property, finding that Chaffee “fully complied with the statutory mandates for

assessing agricultural property” and “appropriately took discretionary adjustments

as allowed by the statutory scheme for assessing agricultural property.” The court

further found that the Trasks had not shown that their 2016 tax assessment was

“unjust or inequitable” because the assessed valuation of their property did not

exceed its actual value and the Appellees had uniformly applied discretionary

adjustments to all Meade County agricultural property.

[¶7.] The Trasks raise several issues on appeal, which we consolidate and

restate as follows:

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1. Whether the circuit court erred when it determined that
the Appellees complied with statutory provisions for
valuing agricultural land in their 2016 assessment of the
Trasks’ property.

2. Whether the circuit court erred when it determined that
the Appellees’ 2016 tax assessment of the Trasks’
property did not violate provisions of the South Dakota
Constitution that require uniform taxation at no more
than its actual value.

Standard of Review

[¶8.] “The interpretation . . . and . . . application of statutes to given facts is

a question of law (or a mixed question of law and fact) that we review de novo.”

Smith v. Tripp Cty., 2009 S.D. 26, ¶ 10, 765 N.W.2d 242, 246. We review “[a]n

appeal asserting a violation of a constitutional provision [a]s a question of law.”

Stehly v. Davison Cty., 2011 S.D. 49, ¶ 7, 802 N.W.2d 897, 899. “Under the de novo

standard of review, we give no deference to the [circuit] court’s conclusions of law.”

Id. (quoting In re Guardianship of S.M.N., 2010 S.D. 31, ¶ 10, 781 N.W.2d 213,

218).

Analysis

Assessed Value of Agricultural Land

[¶9.] In 2008, the Legislature substantially revised the method of valuing

agricultural land for taxation by moving from a market-value approach to a

productivity-based model. See SDCL 10-6-33.28 (advising that “beginning on July

1, 2009, agricultural land shall be assessed based on its agricultural income value

on a per acre basis”). We have not previously considered a taxpayer challenge

under the new agricultural valuation model, codified at SDCL 10-6-33.28 to 10-6-

33.37.

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[¶10.] The essence of the change is reflected in the text of SDCL 10-6-33.28,

which institutes the term “agricultural income value” and broadly requires that

valuation “be determined on the basis of productivity and the annual earnings

capacity of the agricultural land.” The statute also provides a method for

calculating agricultural income value, which is defined as “the capitalized annual

earning capacity on a per acre basis . . . adjusted by an amount that reflects the

landowner’s share of the gross return.” Id. To determine capacity in this regard,

cropland and noncropland is considered separately:

The capacity of cropland to produce agricultural products shall
be based on the income from crops or plants produced on the
land. The capacity of noncropland to produce agricultural
products shall be based on cash rents or the animal unit
carrying capacity of the land, or a combination of both.

Id.

[¶11.] To account for the cost of planting a crop, the annual earning capacity

for cropland is identified as “thirty-five percent of the annual gross return to the

land,” while noncropland is calculated at “one hundred percent of the annual gross

return to the land based on cash rent . . . .” Id. For both types of agricultural land,

“the annual earning capacity shall be capitalized at a rate of six and six-tenths

percent to determine the agricultural income value.” Id.

[¶12.] The Legislature placed the responsibility for determining the

agricultural income value with the Department of Revenue (the Department). In

this centralized role, the Secretary of Revenue must provide each county director of

equalization with annual “agricultural income value[s] for each county as computed

pursuant to § 10-6-33.28[’s]” productivity-valuation model. SDCL 10-6-33.31.

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[¶13.] The Department’s efforts are guided and informed by the collection

and analysis of data. Under the provisions of SDCL 10-6-33.29, the Department

must create “a database to determine the agricultural income value of agricultural

land by county.” Relying on information from “South Dakota State University and,

if necessary, the South Dakota Agricultural Statistics Service,” the Department’s

“cropland data may include: acres planted, acres harvested, yield per acre, and

statewide crop prices. The noncropland data may include: cash rents,[ 1] rangeland

acres, pastureland acres, rangeland AUM’s[ 2] per acre, pastureland AUM’s per acre,

grazing season data, and statewide cow and calf prices.” SDCL 10-6-33.29. 3

[¶14.] Using the database to track the yield history for individual counties

and applying statewide commodity prices, the Department develops a specific

agricultural income value for cropland. Drawing upon historic cash rents for

noncropland within each county, the Department also develops an agricultural

1. In practice, cash rent for noncropland is used exclusively to determine the
agricultural income value for noncropland in Meade County. Although the
Department could consider other information, such as the grazing capacity of
rangeland or pasture, Chaffee testified that this data is not reliably available
throughout Meade County, and its use for the Trask ranch would lead to a
lack of uniformity in the county-wide equalization process. Though the
Trasks maintain their claim that this information should be used for their
ranch, they have not challenged the court’s decision to accept Chaffee’s
explanation of the reason it cannot be considered.

2. An “AUM” is an acronym for an animal unit month and is calculated as the
monthly amount of forage necessary to sustain one animal unit (AU), which
is a one thousand-pound cow with or without a calf.

3. The 2020 Legislature amended the text of SDCL 10-6-33.29 to, among other
things, require that the data collected “must” include cash rents and calf
prices, while allowing that the Secretary of Revenue “may” also collect other
noncropland data including “rangeland and pastureland animal unit months
per acre, rangeland and pastureland acres, and grazing season data.”

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income value for noncropland. Sometimes referred to as the Olympic average, the

historical data includes the preceding eight years of production, excluding the

highest and lowest years. See SDCL 10-6-33.29.

[¶15.] These values are, in turn, matched against soil ratings in a specific

county. Initially, the Department’s income information is matched with optimal soil

ratings within the county to establish “top-dollar” values for cropland and

noncropland. The productivity for the rest of the soil conditions existing within

individual parcels are judged relative to the top-dollar value to obtain an assessed

value.

[¶16.] Finally, each county’s director of equalization may adjust assessed

values based upon the following factors that affect the productivity of a specific

parcel:

(1) The capacity of the land to produce agricultural products
as defined in § 10-6-33.2; and

(2) The location, size, soil survey statistics, terrain, and
topographical condition of the land including the climate,
accessibility, and surface obstructions.

SDCL 10-6-33.31. 4

[¶17.] Chaffee testified that this adjustment authority allows him to “fine-

tun[e]” the assessed value based upon unique circumstances affecting productivity,

as long as he documents his adjustments and applies them consistently to similarly

situated agricultural land throughout Meade County. In this regard, he has

developed a standard adjustment handbook to help ensure he applies adjustments

4. Subsection (2) was amended during the 2020 legislative session to reorganize
the list of enumerated factors.

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evenly. Chaffee testified he applied two “standard” adjustments to the Trasks’

property.

[¶18.] The first was a “crop adjustment.” This adjustment generally allows

Chaffee to reduce the assessed value of certain areas that include crop-rated soil but

cannot practically produce crops due to a myriad of reasons, including topographical

features or a small segment size. Chaffee reduces the proportionate assessed values

of areas affected by the crop adjustment by 41%, which brings the value of these

“croppable” soils down to a level similar to areas with noncrop-rated soils.

[¶19.] The second adjustment, Chaffee explained, was a “soil adjustment”

reduction of 20%. This standard adjustment reduces the value for areas with

noncrop-rated soils that cannot sustain grass or forage. These areas included areas

of hard-pan ground or channelized soils resulting from seasonal or intermittent

water flow.

[¶20.] The court found Chaffee’s testimony factually credible and his

explanation of the statutory standards legally sound, concluding that the Appellees’

valuation of the Trasks’ ranch was “done in accordance with the directives given by

the Legislature.” We agree.

[¶21.] Based on data collected by the Department, the Appellees determined

the agricultural income value for Meade County agricultural land. Set against

optimal soils for cropland and noncropland categories, Chaffee computed the top-

dollar production value of $1,040 for cropland and $435 for noncropland. He then

evaluated these figures against an array of other soil types before arriving at a full

assessed value for the Trask land of $5,980,255, or $539 per acre. Chaffee also

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made discretionary crop and soil adjustments that reduced the assessed value to

$5,761,395, or $519 per acre. After considering the Trasks’ arguments, the Board

reduced the assessed value again to $5,680,020, or $512 per acre. From our review

of the Appellees’ procedure, we find no deviation from the correct statutory course.

[¶22.] The Trasks offer three principal contrary arguments: (1) the Appellees,

and therefore the court, did not follow statutory provisions that mandate the

consideration of certain data like animal units and climate; (2) the court allowed the

Appellees to value the Trasks’ land using “fantasy” or “potential” production

conclusions that were not realistic given poor soil conditions; and (3) the increase in

taxes since 2009 greatly outpaces actual ranch production for a cattle operation.

[¶23.] The first claim requires us to examine the role of SDCL 10-6-33.2 in

light of the new productivity model to determine assessed values for agricultural

land. The statute provides that:

In determining the capacity to produce, the county director of
equalization and the county board of equalization shall consider
yields, the extent to which the land is able to be tilled or is
nontillable based upon soil type, terrain, topographical, and
surface conditions, and animal unit carrying capacity, as
determined by the natural resources conservation service, farm
credit services of America, farm service agency, the extension
service, and private lending agencies dealing with land
production capacities.

Id.

[¶24.] If this were the only statute describing the production capacity of

agricultural land, the Trasks’ argument might well be convincing. However, SDCL

10-6-33.2 is a remnant of the former market-based valuation method. Of course,

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the text still says what it says, but subsequently enacted statutes have consigned it

to a different role under the new productivity-valuation method.

[¶25.] The provisions of SDCL 10-6-33.28, for example, exclude SDCL 10-6-

33.2 from the list of operative statutes now used to determine productivity by

stating, “[t]he productivity of agricultural land and its annual earning capacity

shall be based on data collected and analyzed pursuant to this section and §§ 10-6-

33.29 to 10-6-33.33, inclusive.” Another unmistakable indicator of the Legislature’s

purposeful effort to reconceptualize SDCL 10-6-33.2 is its reference contained in

SDCL 10-6-33.31 which provides that the assessed value “may be adjusted” based

upon the “[t]he capacity of the land to produce agricultural products as defined in §

10-6-33.2 . . .” (emphasis added).

[¶26.] Construing these statutes together, as we must, we conclude that the

provisions of SDCL 10-6-33.2 do not mandate the sole and exclusive list of data

sources required to value agricultural land. See Olson v. Butte Cty. Comm’n, 2019

S.D. 13, ¶ 5, 925 N.W.2d 463, 464 (citation omitted) (“[S]tatutes must be construed

according to their intent, and the intent must be determined from the statute as a

whole, as well as enactments relating to the same subject.”) Instead, the data

described in SDCL 10-6-33.28 through SDCL 10-6-33.33 is used to develop a parcel’s

agricultural income value, which is also “adjusted by an amount that reflects the

landowner’s share of the gross return” and capitalized at a rate of 6.6%. SDCL 10-

6-33.28. The resulting assessed value may, as indicated, be adjusted further based

upon the considerations listed in SDCL 10-6-33.2. We therefore conclude that there

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is no statutory requirement to determine the assessed value of agricultural land by

sole reference to SDCL 10-6-33.2.

[¶27.] The Trasks’ next argument, objecting to what they describe as

“fantasy” or “potential” productivity conclusions, states less a claim of legal error

and more a disagreement with the Legislature’s decision to adopt a production-

based valuation method. Central to the Legislature’s determination of productivity

is a determination of what the land could produce, not necessarily what it actually

produces under its current management. Certainly, the circuit court did not err by

concluding that the Appellees followed the law in this regard.

[¶28.] Nor do we believe the Trasks’ land was erroneously valued based on

their theory that the Appellees attributed more productivity to some of their land

than justified by its use. The Trasks are particularly troubled that some of their

land was designated as having soils that were “croppable,” or capable of sustaining

crops, in light of what they believe to be strong factual evidence to the contrary.

However, the relevant question is not whether the Trasks can, in fact, raise crops on

these areas, but rather, whether the Appellees operated within their statutory

authority to determine a final assessed value. We conclude they did, but more to

the heart of the Trasks’ argument, we believe the process associated with valuing

their property tempers the effect of their claims, which, based on the record, seem

one dimensional.

[¶29.] The Trasks’ ranch includes 11,091 acres in Meade County, which

Patrick Trask acknowledges includes some cropland. In his view, 23% of the ranch

is cropland, and 77% is noncropland. The Appellees, based on the productivity

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model, determined 61% of the Trasks’ ranch is cropland and 39% is noncropland.

However, the difference is not as stark as it seems because the argument overlooks

the more comprehensive inquiry the Appellees undertook to determine the quality

of the cropland. If, in general terms, the Trasks are correct in their assertion that a

large portion of their ranch is not suitable for crops, the statutory standards should

logically produce values that skew low for cropland, away from the $1,040 top dollar

figure in 2016 and closer to an average that approximates noncropland. The record

demonstrates that this is, in fact, what happened. Through Chaffee’s discretionary

crop and soil adjustments and the Board’s additional reductions, the Trasks’ final

assessed value of $512 per acre is not appreciably higher than the top-dollar value

for noncropland of $435 per acre. 5

[¶30.] The Trasks make a distinct but somewhat related claim of statutory

noncompliance, alleging Chaffee should have recategorized portions of their land as

noncropland. In this regard, they juxtapose Chaffee’s testimony that he is not able

to change the soil classification with the text of SDCL 10-6-33.32, which states that

“[a]gricultural land shall be divided by the director of equalization into categories,

including cropland and noncropland.” We think this argument is not sustainable.

[¶31.] Soil classifications are a function of their type, which is determined by

referencing official government soil surveys. Indeed, SDCL 10-6-33.32 further

provides that “[e]ach [soil] category shall be divided into classes based on soil

5. The Trasks have not challenged the top-dollar calculations, and although
they claimed some of their land was incorrectly described as croppable, they
have not argued that the portion of their ranch classified as noncropland
contained inferior soils for raising grass and forage to graze cattle.

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classification standards developed by the United States Department of Agriculture

Natural Resources Conservation Service.” The Trasks’ argument turns on their

evidence of unsuccessful prior crop performance in certain areas classified as

cropland, but they do not allege that the soil types were incorrect.

[¶32.] Nor can they point to evidence of prejudice even if Chaffee incorrectly

stated he could not alter the soil classification. We have held that “[s]ubstantial

compliance with legislative directives is sufficient in determining assessed

valuation.” Knodel v. Bd. of Cty. Comm’rs, 269 N.W.2d 386, 389 (S.D. 1978). Even

where a taxing authority fails to “fully comply with statutory mandates . . . a

taxpayer cannot avail himself of such invalidity without also showing that the tax

levied was unjust and inequitable.” Id.

[¶33.] Here, the record does not support a determination that the tax levied

on the Trasks’ ranch was unjust or inequitable. We are not convinced on this record

that Chaffee could have, or even would have, changed the soil classification of the

Trask land. Also, as indicated above, the Trasks received the benefit of

discretionary adjustments from Chaffee and further reductions from the Board to

an average per-acre level just above the top-dollar value for noncropland.

[¶34.] Finally, the Trasks argue that their property tax increases have

increased dramatically since the implementation of the productivity-based model

despite little to no increase in their production. As discussed above, however, the

model is based upon the capacity of the land to produce, not its actual production.

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Moreover, the Trasks’ argument about the wisdom or fairness of the system

implicates questions of public policy, not appellate error. 6

Constitutional Taxation

[¶35.] The South Dakota Constitution requires that “[t]axes shall be uniform

on all property of the same class . . . .” S.D. Const. art 11, § 2. Additionally, article

11, § 2 provides that “the valuation of property for taxation purposes shall never

exceed the actual value thereof.” In application, we acknowledge that “exact

‘uniformity and mathematical accuracy in assessments is absolutely impossible,

[but] there must be substantial compliance [with constitutional mandates].’” Stehly,

2011 S.D. 49, ¶ 9, 802 N.W.2d at 900 (quoting Codington Cty. v. S.D. Bd. of

Equalization, 433 N.W.2d 555, 558-59 (S.D. 1988)).

[¶36.] We have previously stated that taxation disputes incorporate “a

presumption that tax officials act in accordance with the law and the taxpayer bears

the burden to overcome the presumption.” 7 Apland v. Bd. of Equalization for Butte

Cty., 2013 S.D. 33, ¶ 9, 830 N.W.2d 93, 97 (quoting Apland v. Butte Cty., 2006 S.D.

53, ¶ 16, 716 N.W.2d 787, 792). Taxpayers meet their burden to overcome this

6. The circuit court credited Chaffee’s testimony that tax assessments for
agricultural land in Meade County were significantly undervalued under the
market-based method. However, to ameliorate the impact of exponential
increases for cropland values, the Appellees applied the provisions of SDCL
10-6-77, which limits the annual increase in “total taxable value” to 20%.

7. Pursuant to SDCL 10-3-16, however, we no longer presume that the director
of equalization’s actual valuation is correct. See Smith, 2009 S.D. 26, ¶ 14
n.7, 765 N.W.2d at 248 n.7 (“Although the presumption of correctness was
abrogated, we note that [SDCL 10-3-16] did not abrogate the presumption
that tax officials act in accordance with the law and not arbitrarily or
unfairly when assessing property.”).

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presumption by “produc[ing] sufficient evidence to show the assessed valuation was

in excess of true and full value, lacked uniformity in the same class, or was

discriminatory.” Id. (quoting Apland, 2006 S.D. 53, ¶ 16, 716 N.W.2d at 792).

“[O]ur scope of review of a trial court’s decision in a trial de novo of a tax

assessment is to determine whether the findings are clearly erroneous.” Kindsfater

v. Butte Cty., 458 N.W.2d 347, 348-49 (S.D. 1990).

[¶37.] Here, the Trasks have not established that their assessment

transgressed constitutional standards. Chaffee provided undisputed testimony that

he applied the same adjustment rules across all similarly situated property in

Meade County. In fact, he has standardized his adjustment practices and compiled

them in a handbook that he and his staff consult as a resource. Given this record,

the Trasks’ argument that their assessment lacked uniformity within the same

class of property is not sustainable.

[¶38.] Beyond this, the circuit court found that the Trasks’ $512 per acre

assessment was “substantially less” than the $800 per acre average market value of

agricultural land in Meade County. The court’s finding was based on Chaffee’s

report detailing Meade County land sales dating back to 2012. Its determination

regarding the constitutionality of the Trasks’ valuation is not clearly erroneous.

The Trasks’ criticism that Chaffee “cherry-picked” the representative transactions

to produce an artificially high market value overlooks the fact that Chaffee

computed the average value for all arm’s-length transactions at an even higher

figure of $821 per acre.

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[¶39.] On appeal, the Trasks make the additional claim that the school land

adjacent to their property is “valued and taxed by Appellees at the noncropland

value,” but their property is assessed as cropland. Though the Trasks did not make

this uniform-taxation argument to the circuit court, they now claim that Patrick’s

trial testimony supports a claim of disparate treatment:

Counsel: [A]re the . . . production of those soils the same on the
State land as they are on the deeded land?

Trask: I don’t have any idea how they could be any different.

[¶40.] We are not convinced that this issue was properly preserved for

appellate review. However, even if we were to review the merits of the claim, we

think the record is simply insufficient to sustain the merits of the Trasks’ argument.

At most, Patrick’s testimony reflects an assumption that the adjacent school land

has the same annual earning capacity as his land and must be assessed uniformly.

However, his testimony on this topic, alone, is speculative. 8

[¶41.] For these reasons, we agree with the circuit court that the Trasks have

not met their burden to show that the Appellees’ assessment of their property

lacked uniformity or exceeded fair market value. We therefore conclude that the

circuit court did not err when it found the Trasks’ 2016 assessment was

constitutional.

Conclusion

8. Patrick did testify that the adjacent school land has a less productive rating
for animal unit carrying capacity. However, because of the unavailability of
uniform and comprehensive AU data, Chaffee testified he is unable to use it
in adjusting the assessed value of noncropland acres.

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[¶42.] The circuit court did not err when it found that the Appellees properly

followed statutory law in its 2016 assessment of the Trasks’ agricultural property

and did not violate the State constitution. We understand that the Trasks offer a

determined argument that productivity valuation should be based upon the actual

use and production of the land. However, our role in this appeal is not to determine

this claim of inequity directly. Instead, we must faithfully interpret and apply the

statutes enacted by the Legislature for the specific purpose of departing from a

market-based method of valuation for agricultural land. Lingering dissatisfaction

with the resulting statutory procedure is best addressed by the Legislature, whose

fact-finding committees and task force are uniquely situated to carefully study the

impact of the productivity model statewide and propose legislative changes or

adjustments. 9 We affirm.

[¶43.] GILBERTSON, Chief Justice, and JENSEN, Justice, and SABERS,

Circuit Court Judge, and WILBUR, Retired Justice, concur.

[¶44.] SABERS, Circuit Court Judge, sitting for KERN, Justice, disqualified.

9. We note that during the 2019 legislative session, the Governor signed Senate
Bill 4 into law, requiring the Department of Revenue, in conjunction with
South Dakota State University to “study the impact of changes to the
methodology of rating soils for purposes of assessing agricultural land.”
SDCL 10-6-33.38.

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