STATE OF SOUTH DAKOTA
OFFICE OF
THE ATTORNEY GENERAL

February 5, 1969

Bernard Linn, Commissioner
Department of School and Public Lands
Pierre, South Dakota 57501

OFFICIAL OPINION NO. 69-8

Determination of minimum rental price for school endowment lands based on assessed valuation thereof.

Dear Mr. Linn:

You have requested my official opinion on the interpretation of Chapter 34, Laws of 1968, Section 2, which reads as follows:

". . . The average appraised rental price on term leases of school and endowment lands shall not be less than 2% per acre of the full and true value, pursuant to the provisions of SDC 1960 Supp.

57.0334, on such lands in the county where the land is located ... "

SDC 1960 Supp. 57.0334 relates to the determination of value for taxation purposes, and reads in part as follows:

". . . All property shall be assessed at its true and full value in money but only 60% of such assessed value shall be taken and considered as the taxable value of such property upon which the levy shall be made and applied and the taxes computed . . . but he (the assessor) shall value each article or description by itself and add such a sum or price as he believes the same to be fairly worth in money ... "

Since the rental rate on term leases is to be tied to the full and true value determined for tax purposes, it becomes necessary to examine certain provisions relating to this term as it is applied in the field of taxation. Article XI, Section 2 of our State Constitution provides that the evaluation of property for taxation purposes shall never exceed the actual value thereof. SDC 57.0301 Section 5 says that the true and full value shall mean the usual cash selling price at the place where the property to which the term is applied shall be at the time of assessment. As noted above, SDC 1960 Supp. 57.0334 requires property to be assessed at its true and full value in money with a lesser percent to be taken for tax purposes.

Terms "true and full value in money," "usual cash selling price," and "fair worth in money" are identical and mean the sum for which the property could be exchanged under fair conditions. The price at which the property can be sold in the ordinary course of business is equivalent of its fair market value. Tidball v. Miller, 72 SD 243, 32 NW 2d 683; In Re: Jepson Appeal, 76 SD 421, 80 NW 2d 76.

Taxable values as finally equalized by the boards of equalization are reported by the State Department of Revenue in its annual report for each county in the state. These valuations are those taken for tax purposes in the several counties and are supposedly at 60% of full and true value. Whether or not they are is a question of fact, rather than of law. In this regard I can only call your attention to the annual sales to assessment ratio study prepared also by the South Dakota Department of Revenue.

According to its terms, the sales ratio study is designated to show the relationship of the taxable value to the sale price of real estate. It is prepared for the specific purpose of showing the different levels of taxable values for a class of property as determined from rural and urban real estate with· in each county in South Dakota or the state as a whole. There are many considerations which go into making up a sales ratio study and if it is accepted with the limitations which are inherent in it, it may be used as one method in arriving at the full and true value of property. Ratios, in fact, represent only those properties which have been sold and in applying the ratio to other property not sold, you are assuming that the average of the property sold is a true reflection of the average of all properties in the county.

By way of example, the Thirteenth Annual Report of the Department of Revenue indicates that agricultural land outside corporate limits in Aurora County is assessed at the average of $32.04 per acre. The 1968 sales ratio report of the Department indicates that Class A, agricultural land, is assessed at 39.4% of its full and true value. Applying this ratio then to the taxable value would indicate that the full and true value of this land was $81.32 per acre and in similar manner the average taxable value of agricultural land in Harding County is $6.26 per acre which is indicated by the sales ratio to be 29% of the full and true value. This would, by sales ratio computation, indicate a full and true value of $21.58. Agricultural land in Haakon County has an average taxable value of $10.03 and a sales to assessment ratio of $24.80 reflecting a full and true value of $40.44.

I must emphasize again that the determination of full and true value is a question of fact and under SDC 1960 Supp. 57.0334 that determination has been left to the sound discretion of the assessors in this state. Whether or not full and true value is arrived at must be determined from all of the facts and circumstances relating to such assessment and is not a matter of law on which I can advise you except as noted above.

Respectfully submitted,

Gordon Mydland
Attorney General