John APLAND, et al., Plaintiff and Appellee, v. BOARD OF EQUALIZATION FOR BUTTE COUNTY, SOUTH DAKOTA, Defendant and Appellant.
No. 26196.
Supreme Court of South Dakota.
April 10, 2013
2013 S.D. 33
Considered on Briefs on Jan. 8, 2013.
Kenneth E. Barker of Barker Wilson Law Firm, LLP, Belle Fourche, South Dakota, Attorneys for plaintiff and appellee.
Robert L. Morris of Day Morris Law Firm, LLP, Belle Fourche, South Dakota, Attorneys for defendant and appellant.
WILBUR, Justice.
[¶ 1.] This is the second property tax appeal tо this Court concerning the Butte
FACTS AND PROCEDURAL BACKGROUND
[¶ 2.] Apland and Director have been involved in a dispute over the method Director used to calculate the value of Apland‘s property for tax purposes in 2002 and 2003. In Apland I, Apland assert[ed] that the methodology used by Director to determine the assessment value of Apland‘s rangeland violated the Constitutiоnal requirements of equality and uniformity. Specifically, Apland assert[ed] that it was error for Director to use sales of land with “appurtenant water rights” without any adjustment for the market value of those water rights. Apland assert[ed] that this error led to his rangeland, which does not have appurtenant and nontransferable water rights, being assеssed at a substantially higher value than other rangeland of similar kind and quality. Apland v. Butte Cnty. (Apland I), 2006 S.D. 53, ¶ 17, 716 N.W.2d 787, 792. “Apland‘s expert, Jerry Kjerstad, stated that ‘sales ... with water rights should not be paired with sales without water rights unless an adjustment for the water rights could be quantified.‘” Id. ¶ 18 (alteration in original). Thus, the question before this Court in Apland I was “whether it was clearly erroneous for Director to use sales of land with access to [the Belle Fourche Irrigation District (BFID)] in his formula when determining that under
[¶ 3.] This Court held that Director “failed to comply with the Constitutional requirements of equality and uniformity.” Id. ¶ 20. See
[¶ 4.] On remand, the trial court held a hearing and considered post-trial briefs
[¶ 5.] In response to the trial court‘s first post-remand memorandum decision, Director submitted an affidavit detailing his methodology in reassessing the lаnd. In his affidavit, Director stated:
29. That although your Affiant has concluded that there is no value that you can specifically and solely attribute to the value of water rights or access to water for irrigated sales and therefore there is no need to make a “downward adjustment” of the irrigated sales prior to performing the deviаtion analysis, your Affiant follows the directive of the Supreme Court and Circuit Court and will do the same as [Apland‘s] expert by determining value using a small data set which consists only of those sales that are less than 150% of assessed value.
30. That your Affiant undertook a pairings analysis for the 2002 and 2003 assessment years using only “good sales”2 which are non-rejected sales that are not sales over 150% of assessed value.
31. Each non-irrigated sale was paired against each irrigated sale.
32. An adjustment for soil quality is made to account for any productivity difference in each pairing and the resulting dollar difference is assumed to be solely attributable to water rights or accеss to water.
33. A percentage difference in adjusted sale price per acre is calculated for each pairing.
34. The median of these percentage differences is calculated for all of the pairings involving each non-irrigated sale, and for all of the pairings for all the sales.
35. A negative percentage difference is an indication that irrigation had a negative influence on value. A positive difference is an indication that irrigation influenced the sale price positively.
36. In the 2002 assessment year, there were two non-irrigated sales that were paired against thirty irrigated sales. Both of these sales indicated a рositive
37. Thus, if one used only the small data set of “good sales” for the 2002 assessment year, the value of water rights or access to water (irrigation), if one assumed it was solely [due] to water rights or access to water (irrigation), is forty-eight (48) percent of the sale price of each irrigated sale.
38. That for the 2002 assessment year, a downward adjustment of 48% of the sale price of each irrigated sale is then made.
39. That for the 2002 аssessment year, after adjusting the sale price of each irrigated sale, the neighborhood analysis is performed and is as follows:
- Median Market Value per Acre (Entire County Sales) is $155.00 per acre.
- Median Market Value per Acre (Northern Sales) is $104.00 per acre.
- Median Market Value per Acre (Southern Sales) is $219.00 pеr acre.
40. That for the 2002 assessment year, after adjusting the sale price of each irrigated sale, there is a greater than 10% deviation pursuant to
SDCL 10-6-33.6 ....
44. That for the 2003 assessment year[,] there were no “good sales” of non-irrigated land in which to pair with irrigated land to determine the percentage of sale price attributablе to water rights. Nonetheless, forty-eight (48) percent value was assigned as the percentage attributable to each sale and a downward adjustment of 48% of the sale price of each irrigated sale is then made.
45. That for the 2003 assessment year, after adjusting the sale price of each irrigated sale, the neighborhood analysis is performed and is as follows:
- Median Market Value per Acre (Entire County Sales) is $133.00 per acre.
- Median Market Value per Acre (Northern Sales) is $116.00 per acre.
- Median Market Value per Acre (Southern Sales) is $179.00 per acre.
46. That for the 2003 assessment year, after adjusting the sale price of each irrigatеd sale, there is a greater than 10% deviation pursuant to
SDCL 10-6-33.6 .
By stipulation, the parties’ briefs and exhibits, including both Director‘s affidavit and an affidavit and report from Apland‘s expert, Ronald Ensz,3 were submitted to the trial court for its consideration.
[¶ 6.] In its March 25, 2011 memorandum decision, the trial court concluded that Director failed to value the appurtenant water rights and make a downward adjustment рrior to calculating the median market value. The trial court also held that, until an adjustment is made for appurtenant water rights, a median value comparison for the purpose of “neighbor-hooding” is meaningless. Accordingly, the trial court determined that Director‘s methodology was incorrect. The trial court entered a judgmеnt in favor of Apland and instructed Director to make the adjustments as determined by Apland‘s ex-
pert
STANDARD OF REVIEW
[¶ 7.] “An appeal asserting a violation of a constitutional provision is a question of law reviewed undеr the de novo standard of review.” Stehly v. Davison Cnty., 2011 S.D. 49, ¶ 7, 802 N.W.2d 897, 899. “Statutory construction is also [a question] of law to be reviewed under the de novo standard of review.” Cable v. Union Cnty. Bd. of Cnty. Comm‘rs, 2009 S.D. 59, ¶ 19, 769 N.W.2d 817, 825. “This Court [] reviews affidavit evidence de novo.” Id. “Under the de novo standard of review, we give no deference to the trial court‘s conclusions of law.” Stehly, 2011 S.D. 49, ¶ 7, 802 N.W.2d at 899 (quoting In re Guardianship of S.M.N., T.D.N., and T.L.N., 2010 S.D. 31, ¶ 10, 781 N.W.2d 213, 218).
ANALYSIS AND DECISION
[¶ 8.] Director argues that he correctly performed the methodology as directed by this Court in Apland I. In doing so, he contends that he adjusted sales prices downward to reflect the value of appurtenant water rights. Further, he asserts that, after that adjustment, there still existed a more than 10 percent deviation in the median market value per acre in an identifiable region as compared to the county median market value. Thus, Director argues that he was justified in applying
[¶ 9.] “All real property in South Dakota is to be assessed for tax purposes at its true and full value.” Apland I, 2006 S.D. 53, ¶ 16, 716 N.W.2d at 792. The following “underlying constitutional provisions must ... be complied with: (1) the burden of taxation of all property is to be equitable,
[¶ 10.] In Apland I, we stated that “the methodology undertaken by Director was correct but for his failure to give appropriate consideration and value to appurtenant and nontransferable water rights, specifically BFID water rights.” Id. ¶ 26. Pursuant to our directives in Apland I, Director was instructed to: (1) make adjustments downward for sales containing аppurtenant water rights; and (2) only after making those adjustments, determine whether the median market value per acre in an identifiable region deviates by more than 10 percent from the county median market value per acre under
[¶ 11.] On remand, Director submitted an affidavit in which he performed the methodology required in Apland I to satisfy the requirements of
[¶ 12.] Director also followed our directives from Apland I in assessment year 2003. Because there were no “good sales” of non-irrigated land in which to pair with irrigated land in 2003, Director again used 48 percent as the percentage attributable to water rights and made a downward adjustment of 48 percent to each irrigated sale.
[¶ 13.] After making adjustments for irrigated sales in 2002 and 2003, Director calculated the median market value per acre in each identifiable region. Notably, both Ensz and Director had nearly identical calculations for the “adjusted” median sales prices for the same years—2002 and 2003. For example, in assessment year 2002, Ensz concluded that the adjusted median sales prices were: $156 per acre for all sales within the county; $221 per acre for southern sales; and $104 per acre for northern sales. As noted above, Dirеctor concluded that the adjusted median sales prices for assessment year 2002 were: $155 per acre for all sales within the county; $219 per acre for southern sales; and $104 per acre for northern sales. Additionally, in assessment year 2003, Director and Ensz reached identical conclusions for the median sales prices for the entirе county ($133 per acre), southern sales ($179 per acre), and northern sales ($116 per acre).
[¶ 14.] It was only after these adjustments and determinations that Director determined the median market value per acre in the identifiable region deviated by more than 10 percent from the county median market value per acre for assessment years 2002 and 2003. Thus, under
[¶ 15.] After Director completed the procedure for “neighborhooding,” he concluded that the assessed valuations for Apland‘s property were valid аnd not in excess of full and true value.4 However, Apland‘s argument is that, even after Director created neighborhoods properly incorporating the value of BFID water rights, Director‘s valuations were not equal and uniform within the respective neighborhoods as required by our Constitution. From this record, we are not able to determine if Director‘s method of valuation of Apland‘s property resulted in an equal and uniform assessment within each of the newly created neighborhoods. Although Ensz submitted evidence suggesting his view of that question, the trial court did not consider this last remaining specific question. As a result of including the impact of appurtenant and nontransferable water rights, this determination may re-
quire
CONCLUSION
[¶ 16.] The trial court concluded that Director‘s methodology on remand was incorrect. We disagree, in part, because Director did the correct analysis to ascertain whether neighborhoods werе justified. We remand for a determination of whether Director‘s assessments complied with the Constitutional requirements of equality and uniformity within the neighborhoods.
[¶ 17.] Reverse and remand.
[¶ 18.] GILBERTSON, Chief Justice, and KONENKAMP, ZINTER, and SEVERSON, Justices, concur.
Notes
If the median market value per acre in an identifiable region within a county deviates by more than ten percent from the county median markеt value per acre, the county director of equalization may establish a separate market value per acre for the land defined by the director of equalization within that identifiable region.