Rapid City Area School District No. 51-4 v. Pennington County Auditor

MORGAN, Justice.

This unfortunate confrontation pits the Rapid City Area School District No. 51-4 (school board) against the Pennington County Board of Commissioners sitting as a county board of equalization (county board) in a contest to ascertain which entity is to determine the fiscal requirements of the Rapid City School District. The Pennington County Auditor is caught in a crossfire. Subsequent to the school board’s adoption of a proposed budget for 1979-80 school year, the county board met and lowered the taxable percentage of true and full value for the county from forty percent in the previous year to thirty percent. This action resulted in a shortfall of $293,117.00 to the school board’s budget. Upon application of the school board to this court, an alternative writ of mandamus issued directing the county board to set a percentage of true and full valuation to be applied against the taxable property of their county such as would be sufficient to meet the budget of the school board and further directing the county auditor to spread a levy in mills over the taxable property of the school district sufficient to raise the money requested subject to legal mill levy limitations. The county board and auditor having made their return on the alternative writ and the court having considered the same and having heard the argument of counsel, we dissolve the writ directed to the county board, and direct the county auditor to spread the levy based on sixty percent of true and full valuation for the determination of the levy computation.

Before proceeding with a discussion of the merits, it will be helpful to outline, in general terms, South Dakota’s statutory assessment and equalization procedure.

Every county is authorized to appoint a county director of equalization whose function is to determine the value of all taxable property within the county. See SDCL 10-3. After all real and personal property is valued at its true and full value in money (SDCL 10-6-33), the director is to list the property and deliver the assessment rolls to local boards of equalization not later than the fourth Monday in May. SDCL 10-3-28.

These local boards are statutorily directed to meet on the fourth Monday of May “for the purpose of equalizing the assessment of property in each township, town or city, and such equalization board shall immediately proceed to examine, ascertain, and see that all taxable property in the respective township, town, or city has been properly placed upon the assessment roll and has been duly valued by the assessor.” SDCL 10-11 — 13. Then, on or before the first Monday of June, the clerk of the township, town or city equalization board is to deliver the assessment roll to the director of equalization, certifying that the assessment roll is correct and should be accepted by the board of county commissioners. SDCL 10-11 — 21. According to SDCL 10-11-25, the county commissioners, along with the county auditor, are to constitute the county board of equalization of the assessment of property. Sitting as the board of equalization, these officials are to hear appeals, determine the percentage of true and full value to be used as taxable value, and equalize assessments of property. SDCL 10-11-25. In determining the taxable percentage, the board of equalization is limited by SDCL 10-6-33 which provides that no more than sixty percent of the true and full value may be considered taxable value upon which the levy shall be made and applied and taxes computed. Prior to 1977, this statute gave no discretion to the board in determining *310the taxable percentage, providing simply that sixty percent was to be the taxable percentage in all cases. The county board of equalization is to meet annually on the third Tuesday in June and may adjourn no later than the first Tuesday in July to carry out these duties. SDCL 10 — 11—25.

The county director of equalization is then to calculate any changes made by the county board of equalization and make abstracts of the real and personal property lists and forward copies to the department of revenue on or before the third Monday of July. SDCL 10-11-41.

At the same time this process of assessment and equalization is proceeding, the school districts are formulating their budgets. According to SDCL 13-11 — 2, the school board is to develop a proposed budget for the next fiscal year to be prepared for consideration at the regular May meeting. This proposed budget is to be published in an official newspaper not later than July 15 together with notice of a hearing on the budget. This hearing must be held before August 1. Then, prior to September 1, the school board must approve a budget and, by resolution, must adopt a levy in dollars sufficient to meet the budget. This levy must be reported to the county auditor by September 1. SDCL 10-12-29. The amount of the levy must be certified to the county auditor on or before the first day of October. SDCL 10-12-7. The county auditor must then spread a levy in mills over the taxable property of the school district sufficient to raise the money requested by the school district subject to the legal mill limitations. The mill levy is computed by dividing the budget by the taxable valuation (true and full value times taxable percentage). However, the number of mills which can be applied with respect to various taxing entities and even various funds within the entities, is limited by statute. The mill levy is then applied proportionately to each taxpayer’s taxable property within the school district to determine his individual tax liability. All taxes become due on the first day of January of each year next following the levy. SDCL 10-21 — 4. In accord with these statutory mandates, the school board developed a proposed budget for the 1979-80 school year which was approved by the school board on May 22.1979. In the initial steps of the process, the school board had determined “that there shall be no increase to the average taxpayer over that paid in 1978 — 79 in support of the public schools.” The proposed budget totaled $18,131,614.00 including an item for contingency fund in the amount of $565,856.00. On June 8, 1979, the proposed budget was published and notice was given for a public hearing. The hearing was held on June 19,1979. No objection to the budget was registered at the hearing by the county board of equalization. The final budget (denominated the annual budget) adopted on August 28, 1979, totaled $18,-385,987.00 with the contingency fund reduced to $509,167.00

In the meantime, on the assessment and valuation levels, the county assessors had apparently succeeded in bringing true and full value of property county-wide, rural and urban, into closer conformity, resulting in an increase in assessed valuation in the county in the amount of approximately $43,250.00. Pennington County Commissioners began sitting as a board of equalization on June 19,1979, and concluded on July 3.1979. On that last day, the county board adopted a resolution “to set the taxable percentage of full and true valuation at thirty percent, to be applied to all classes of property.” From the context of the published minutes, that resolution was an attempt to set the taxable valuation at a point equal to the previous year. However, there is no indication that the thirty percent figure would accomplish that end. Indeed, if it had, this dispute would not have arisen.

The county board’s action resulted in a shortfall to the school board’s budget in the amount of $293,117.00. The school board appealed the action to the State Board of Equalization which dismissed the appeal on motion of the county board on the ground that the statute under which the appeal was taken had been repealed. On August 24.1979. the school board initiated this orig*311inal proceeding in mandamus requesting that the county board be required to roll back the taxable percentage to the 1978 level, thus allowing the county auditor to spread the budget on the tax roll on the property in the school district.

We first discuss the county board’s decision to set the taxable value at thirty percent of true and full. The authority under which the county board claims to act is Chapter 86, Session Laws of 1977, which first amended SDCL 10-6-33 to provide that all property should be assessed at true and full value but “not more than” sixty percent as opposed to “only” sixty percent of such assessed value was to be taken and considered as taxable value. Next, the enactment amended SDCL 10-11-25 by inserting direction to the county board of equalization to determine at its annual meeting the percentage of true and full value to be used as taxable value as well as to carry out the previous duties of the board to hear appeals and equalize the assessments. Finally, the enactment repealed subdivision (3) of SDCL 10-11-47 which had authorized appeal to the State Board of Equalization of property between counties assessed below the state average. Counsel for the county board urges that these actions of the 1977 Legislature delegate to the county boards sole authority to set taxable value in their respective counties. We disagree.

As counsel for the county board points out in his brief, the practice of assessing officials prior to the 1977 enactments was to appraise property at lower than true and full value and then apply the sixty percent figure in order to control the spending of various taxing units which were bound by maximum mill levies. Counsel argues, in effect, that the 1977 legislation places the imprimatur of the legislature on this practice because, although it requires the assessment of true and full value, it authorizes the various county boards to continue to limit the taxing authority of the taxing entities by setting the percentage of true and full value for tax purposes without any guidelines whatsoever. To accept this interpretation would raise a serious constitutional issue. Without doubt, the legislature is the authority to first determine the percentage of taxable value that shall be used, but for the legislature to delegate this authority to the county boards without adequate guidelines would clearly be unconstitutional. However, where we can resolve an issue without passing on a constitutional question, we are required to do so. Aberdeen Ed. Ass’n v. Aberdeen Bd. of Ed. Ind. Sch. D., 215 N.W.2d 837 (S.D.1974); In Re Snyder’s Estate, 74 S.D. 14, 48 N.W.2d 238 (1951); Haas v. Independent School Dist. No. 1 of Yankton, 69 S.D. 303, 9 N.W.2d 707 (1943). We therefore prefer to take the alternative route and view this strictly as a matter of statutory interpretation.

The amendments which seemingly delegate broad authority to the county board deal with equalization. Boards of equalization have traditionally been created primarily to set a norm for equalizing assessments of property so that inequities will not result between taxpayers whose properties are in the same class. These boards “can exercise only such powers as are expressly granted to [them] by statute and statutes conferring power and authority upon the county board of equalization in these circumstances are strictly construed.” Municipal University of Omaha v. County Bd. of Equal, 181 Neb. 881, 151 N.W.2d 924 at 926 (1967). No doubt exists that equalization efforts of the various boards have been severely hampered in the past by the practice of assessing property below its true and full value. To upset an overassessment one had to prove that it was in excess of true and full value. Often, an assessment would be below true and full value but far in excess of the value of comparable property. It seems clear that the 1977 enactments were designed to alleviate this problem and we hold therefore that it was the intent of the legislature to give the county boards the authority to set a percentage of true and full value for the sole purpose of equalizing values between properties in the county. Where the percentage set by the county board is sufficient to meet the fiscal needs of taxing entities whose budgetary *312authority is founded on legislative grant, the percentage set is immaterial. But, where the percentage adopted by the board results in a shortfall to the budget of the taxing entity, the county board’s action is ultra vires and void. School districts have clearly been granted the authority to levy taxes so that funds can be raised sufficient to cover their budget. No statutes exist which manifest a legislative intent to allow county boards to share in that authority. Neither does the statutory scheme contemplate that the discretion granted the county boards to set a taxable percentage should be used to undermine the levying authority of the school districts which the state constitution directs be granted to them. See S.D.Const., art. VIII, §§ 1 and 15.

It follows that the county board’s action in this case is not binding on either the school board or the county auditor. We need not therefore require the county board to do anything further and, indeed, we have grave doubt that we could. Thus, the writ is dissolved as to the county board. This decision dispenses with the need for us to address the county board’s contention that the remedy of mandamus is improper in this case.

The writ is granted, however, as to the county auditor. The question which necessarily arises from our decision is whether, in spreading the levy, the county auditor should use the forty percent of true and full value which was previously set for 1978 or the sixty percent maximum set by the legislature. As counsel for the county board admits, the percentage of true and full value has no real effect on taxes levied because the higher the percentage is set, the lower the mill levy will be after the budget requirements are applied. In other words, given the same true and full value and the same budgetary requirements, the mill levy computed at thirty percent would be twice the mill levy computed at sixty percent but both would result in identical tax levies.

We perceive, however, that the authority of the county board to set the percentage of true and full value under SDCL 10-11-25 is an annual determination for the purpose of equalization for that particular year. We hold, therefore, that lacking a valid determination for the 1979 taxing period, the county auditor should use the legislative limitation of sixty percent in computing the mill levy and spreading the taxes on the books. We emphasize that this holding relates only to the county auditor’s computation of the mill levy for the purpose of raising funds to cover the school district’s budget. With regard to the general county budget, the county auditor should compute the mill levy using a taxable percentage of thirty percent.*

WOLLMAN, C. J., concurs. FOSHEIM, J., concurs specially. DUNN and HENDERSON, JJ., dissent.

The author of the opinion deems it necessary to answer questions raised by the dissent and offers the following comments.

My brother Dunn, Justice, obviously misapprehends the thrust of my analysis. The legislature is the constitutionally designated body to place limitations on taxing authorities. It has exercised this authority by imposing both the sixty percent true and full value guideline and the mill levy limitations on various taxing entities and funds. For the legislature to delegate this authority to another body, legislative or executive in nature, without spelling out some criteria, would be unconstitutional. To answer Justice Dunn’s questions: First, the sixty percent legislative mandate is not to be ignored; and second, the imposition of a mill levy limitation is a legislative action clearly within the discretion of the legislature. Look at the other side of the next question. If the legislature intended to let some intermediate body control school board budgets by controlling the percentage of true and full value, why the necessity for any mill limitation?
Finally, with regard to the concern expressed by Justice Dunn, that the opinion favors school boards over other units of government, I would simply point out that the record does not show any other units complaining of inadequate levy and this court can grant relief only to those who seek it.