RAPID CITY, S.D. (AP) — Patti Kowalchuk didn’t pay much attention to her property taxes until recently.
Now, the 74-year-old widow and grandmother wonders if she will be taxed out of her west Rapid City home.
“I don’t know what happened,” Kowalchuk told the Journal in April. “I’m very busy with my grandchildren; I have seven. Life interests and demands change … to spend a few hours looking (property tax information) up is not my cup of tea these days.”
Her late husband served in the Air Force, so she spent much of her adult life moving around the world, raising a family, and working as a teacher. She moved to Rapid City in 2014 from Virginia to be closer to her son and his family.
Last year, she purchased her son’s home near Canyon Lake and soon realized that her property taxes would be increasing by more than $400 this year.
“When I first saw the amount of the tax compared to other states I have lived, it was very shockingly high to me. I tried to find an exemption that I could qualify for. As far as I can find out, there is none. I panicked, knowing that it would not be long before I would no longer be able to afford to live in my own home due to the high taxes,” Kowalchuk said.
In 2019, she paid $3,240 in annual property taxes. In 2020, her taxes increased by 10.5% to $3,582.
Kowalchuk is hardly alone when she worries that rising property taxes in Pennington County could push her out of her home, the Rapid City Journal reported.
Many local homeowners have seen increases in their property taxes over the past few years with property valuation increasing by an average of 5% to 6% over the past seven years in Pennington County, according to data from Rapid City Area Schools.
Fred Carl, who has lived in Rapid City since 1984, saw an 11.5% increase in his property taxes this year after the county’s most recent assessment.
Six years ago, his property taxes increased by nearly 15%. In the years between, they have risen anywhere from 3% to 6%. Carl lives in the Whispering Pines subdivision in west Rapid City with his wife and is retired.
“To me, that’s substantial increases. Right now, I’m paying almost $4,567 a year,” he said. “Rapid City and Pennington County have always been famous for their property tax rates. I get it, they’ve got to have money to operate. But my biggest gripe is the significant percent changes from year to year.”
Carl said while his increases have hovered around 7% each year, some of his neighbors have seen increases as high as 25%.
Steve Hata, a semi-retired physician, has lived near West Boulevard since 1995.
His property taxes started increasing five years ago and have been soaring ever since, he said. Five years ago, his house was valued at $180,000. The most recent assessment valued it at $276,600. His property taxes now approach $4,000 a year.
Chris Johnson bought his house in 1995 and now pays $5,963 annually in property taxes.
In 2010, he paid $4,277. The year after he bought the house in 1996, his property taxes were $2,682. Johnson said the increases are outpacing his household’s income.
“We don’t want to ‘get our money out’ of our house. We want to continue to live here into retirement,” he said. “With property tax pushing past $6,000 and no end in sight, a fixed income will be progressively less able to handle these charges.”
Pat Hahn is relying on retirement income to survive after the value of the house she built with her husband doubled. Hahn paid $6,052 in property taxes in 2017. This year, she owes $6,465.
“I have eliminated every cost I can think of; I do no traveling, no shopping, no belonging to the swim center or anything else, nothing except for necessities. I feel the federal, state and local governments have failed me,” Hahn said.
Property taxes alone are not responsible for the squeeze some homeowners are feeling. Higher costs for food, energy and gasoline contribute as well as the millage rate, or the tax rate, that helps determine the property tax rates for payments to the city, county and school district after they approve their budgets.
Hata said he and his wife spend twice as much on groceries compared to five years ago. He is relying primarily on investment income to cover his expenses until he can collect Social Security, but even then he said he will have to continue to cash out his portfolio to cover living expenses.
Kowalchuk said she tries to live within her means — she does not have cable or any kind of television subscription, her car is paid off, and her son pays her phone bill.
“To me, it’s a big deal to buy a coffee and a bagel. That’s the way it is, because of the expenses,” she said. “When property taxes start going up at $200ish, that’s a lot to a person in my situation.”
As costs continue to rise, homeowners fear the situation will necessitate leaving their homes. Kowalchuk said if nothing changes, she will not be able to afford a single-family dwelling in the area.
Kowalchuk said she is fortunate — her son lives nearby and if it became necessary she could move in with his family. She said it is not ideal for her or them, but she knows others who have no such fallback.
She said a downside of not being able to afford a home that someone has lived in for a long time will ultimately burden the city’s infrastructure.
“That is a major life change like that is likely to bring major depression, illness, and cause more people to draw on food banks and other mutual aid,” Kowalchuk said.
High property taxes will also affect the city’s attractiveness to retired people, who are critical to any economy, she said.
“(Rapid City) is going to price itself out of being a good retirement area. Retired people have more loyalty to local businesses, and they can spend time and resources on amenities,” Kowalchuk said.
Carl said the increases won’t force them out of their home, but it could be a different story for his in-laws, who are in their 80s and whose house acts as their savings account.
Last year when the Rapid City Area Schools Board of Education proposed a new bond measure to pay for new schools, which if passed would have resulted in higher property taxes, Carl’s in-laws were almost forced to put their house on the market, he said.
Hata’s wife also owns a property in Albuquerque, New Mexico, where they are planning to move after he finishes his business in Rapid City. The Albuquerque property has a market value of around $450,000 and they pay around $3,000 annually in property taxes.
In addition, Hata owns property in Hawaii along with his brother. That house is valued at $2 million but property taxes remain around $3,000 a year. In both cases, the couple’s properties are worth more than their Rapid City home but property taxes are lower.
South Dakota is one of nine states that does not have a state income tax.
The state ranks 43rd in the nation for overall tax burden, according to data from WalletHub, but adjusted for property taxes alone, the state’s tax burden jumps to 19th. Adjusted for sales tax, South Dakota ranks ninth.
State Sen. Helene Duhamel, a Republican from Rapid City, said discussions on other sources of revenue are continual, but the state has resisted an income tax for good reasons.
“In South Dakota, we have resisted an income tax in order to continue to keep the tax burden on our citizens at the lowest possible level. That’s why South Dakota ranks so highly nationally for lowest tax burden per capita,” Duhamel said.
Carl said even if state government changed its tax policies, it’s doubtful that taxpayers would get much relief.
“It’s never going to stop. Costs continue to go up and you hope your property value does too, but there’s got to be some correction in how this is done,” he said. “I’ve thought about adding an income tax, but every story I’ve heard is consistent — when laws change or taxes are imposed to try to take away pressure on property owners, it doesn’t change.”
Hata and others, however, fear dire consequences unless changes are made by the state Legislature.
“How is this sustainable in the long run?” Hata asked. “It’s coming to a crisis, and all of it is a symptom of poor governance. I’m a conservative, but I’m a responsible conservative. I want to see our tax dollars at work. If you’re going to tax us to death, at least show us the benefits.”
Property owners interviewed for this story said if current taxing trends continue many longtime residents will have no choice but to sell their homes and move elsewhere.
“For people moving into the area with a lot of money, I guess this is fine, but for people who have been here forever, this is going to push them right out of their homes,” Carl said. “That’s the flip side of bringing everybody to South Dakota.”