SD Dept. of Revenue outlines Limits on Property Taxes for Local Governments

Sd Department Of Revenue

State law limits the amount of property  taxes that local governments (counties,  cities, townships, fi re districts, etc.) can  collect from their property owners. Local  governments are limited to the amount  of property taxes they collected last  year, plus an increase for infl ation based  upon the consumer price index (but not  more than 3%), and for new construction  within the taxing jurisdiction.

Last Year’s Taxes × (CPI + Growth %) = Increase of Tax Call

The State Economist from the South  Dakota Bureau of Finance and

Management calculates the consumer  price index (CPI) annually using federal  statistics from the US Department of  Labor. It is reported to the Department  of Revenue, who forwards it to the  counties by February of each year. CPI  is available to all taxing entities and is  the same for all taxing entities.

Pay 2024 CPI = 3.0% State statutes allow for counties, fi re  districts, and cities to store any unused  CPI factors from the previous three  years. The Department of Revenue  keeps track of the CPI usage and  provides that information upon request.

Market increases in the value of the  property within the taxing district  automatically decrease the property  tax rates to ensure that the caps are  not exceeded. An example to illustrate  how the property tax limitation works:

• Last year, the total property  valuation within a city was $100  million and the city property tax  budget was $300,000. To collect  that amount, a levy of $3.00/$1,000  of value was calculated by the  county auditor.

• This year, the CPI was set at 3%.  The city saw a valuation increase  of 1% due to new construction in a new subdivision. Also, the  county assessor increased  values based upon market  indications. The new value of  the city is $110 million.

• Under the property tax  limitation, the city can increase  the $300,000 it received from  property taxes last year by 4%  (3% for CPI + 1% for growth) for  a total of $312,000.

• To prevent the city from going  over the cap, the tax rate  calculated based on the $110  million of value within the  district automatically lowers to  $2.84/$1,000 of value.

Prior to the property tax limitations  being implemented, property taxes  had increased at a rate of about  6% annually. The property tax caps  used today have signifi cantly slowed  this increase. If the historical rate of  property tax growth had continued  unchecked, property owners would  be paying over $2.7 billion in  property taxes. Instead, property  owners are paying just over $1.5  billion of property taxes. ■

EVERY SATURDAY BLACK HILLS FARMERS  MARKET Rapid City

CULTURAL EXPO Rapid City

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