COLUMBUS — Nearly three months after the Ohio Farmers Union and the Ohio Farm Bureau Federation presented suggestions to Ohio Tax Commissioner Joe Testa for amending the state’s current agricultural use value, or CAUV, formula, the issue will be back on the table.
Testa’s agricultural advisory committee will have its first meeting of 2015 at 10 a.m. March 5, with the CAUV as the primary agenda item.
Meanwhile, farmers in 41 Ohio counties began receiving CAUV tax bills last month, some reflecting significant increases.
Cause for concern
The CAUV is a differential real estate tax assessment program, passed into law by the Ohio General Assembly in April 1974. It lets farmland owners have their parcels taxed according to its value in agriculture, rather than full market value.
It applies to landowners with 10 or more acres devoted to commercial agricultural use or, if below the acreage threshold, farms that produce an average yearly gross income of at least $2,500.
The current CAUV formula, set up in the Ohio administrative code, is based on yield, crop price, an established crop rotation pattern, the subtraction of production costs, and the resulting net income per acre of a parcel of a particular soil type.
These numbers are then divided by the CAUV capitalization rate, or the cost of the rate of return a purchaser would invest, which is currently 7 percent.
Market fluctuations and increased commodity prices over the past decade have led to a steady decline in the capitalization rate, resulting in higher property values. With commodity prices, particularly corn, taking a nosedive in the past year, the increased property values have left many farmers struggling under the very program designed for their benefit.
Ohio recently completed a triennial reappraisal of half of the state, and some CAUV estimates reflected as a 200-to-300 percent increase.
Recommendations
The OFBF and OFU each sent recommended amendments to the CAUV formula to Testa and members of the Ohio General Assembly on Nov. 13.
The OFBF noted in a news release at the time that the changes “can be accomplished through administrative action and will not require legislation.”
In an interview with Farm and Dairy that month, Testa said some of the changes could indeed be implemented without legislative action, but advised caution.
“The whole CAUV process is designed to take out short-term market changes each year and maintain greater stability,” he said. “So even if we make these changes, it is based on a seven-year rolling average and you would have to see significant changes up or down for multiple years in a row before it would affect the formula.”
First meeting set
The Ohio Department of Taxation’s agricultural advisory committee includes representatives from the Ohio Farm Bureau, the Farmers Union, the Grange, the Ohio State University Department of Agricultural, Environmental and Development Economics, and a representative from the Ohio County Auditor’s Association. The group normally meets with the tax commissioner in September and February.
In November 2014, Testa told Farm and Dairy that he hoped to meet with members of the tax department’s agricultural advisory committee before the end of the year to allow for implementation of proposed CAUV changes by 2015 — in time to affect taxes paid in 2016.
Ohio state Rep. John Patterson, D-99, said he suspects the delay in scheduling that meeting may have had to do with items in Gov. John Kasich’s 2015-2016 budget, which was released Feb. 2.
“My hunch is that the CAUV might be tied into the governor’s whole budget,” Patterson said.
Like others, Patterson said there is a long-term impact of making changes to the CAUV formula.
“The formula has worked so well that, like anything else, the general public has paid no attention before it hit this perfect storm of variables,” Patterson said. “We all understand that there is a certain built-in volatility with agriculture, but the idea is to see what can be done to resolve some of the volatility.”
But doing nothing, Patterson said, could also create bigger problems.
“What happens when rents are raised and the renters back off?” he said. “The owner is left with land he can’t, or doesn’t want to farm, so he sells it off. And the bank doesn’t want to farm it, they want to sell it off in lots for housing.”
Ongoing meetings
In October 2014, the Ashtabula and Geauga County Farm Bureaus joined with several farmers and foresters, representatives from OSU Extension, the Ashtabula Soil and Water Conservation District, auditors in Ashtabula and Geauga counties, and Patterson to form a task force to addressing possible changes to the CAUV formula.
Ty Kellogg, Ashtabula County Farm Bureau organization director, said the task force has met monthly since its formation.
“The original goal was to get some relief immediately,” Kellogg said. “We have found that immediate help is not going to happen.”
Kellogg said the group is still determined to find what can be changed, the best way to make those changes, and how long it is likely to take.
“The rest of the state will be appraised next year and when those 2016 bills come, it’s going to be just as much fun as it was this time,” Kellogg said.
Kellogg said he does feel the March 5 agricultural advisory committee meeting will be a step in the right direction.
“It does show that the Department of Taxation, the tax commissioner and all parties involved are willing to take steps toward having a larger tax conversation,” he said.
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Related stories:
- Will Ohio have CAUV changes by 2016? Nov. 19, 2014
- Ohio CAUV tax rates: What goes up, must go up some more, Oct. 22, 2014
- Ohio Farm Bureau tackles CAUV concerns, Oct. 22, 2014
- Ashtabula meeting to discuss rising CAUV rates, Aug. 6, 2014
- Farmers see 2008 CAUV rates increase, Feb. 11, 2009
Brian:
The Ashtabula CAUV Task Force is now focusing on “Removing Minimum $/acre” and “Adding Risk” to the formula as our top 2 recommendations. These are in addition to all other recommendations which have been made over the past 3 years. We have studied OFU and OFBF recommendations now on the table and we fully endorse them as starters to solve the unfair taxation problem we face..
But if all the recommendations already on the table are enacted, the CAUV valuation will recover only about 30% of the 2014 increase. If our either one of Task Force recommendations is seriously considered and enacted, we can raise the 30% to recover about 100% of the 2014 increase. On 1/31/15 Farmers Union adopted Task Force recommendations.
So now we have to give Ohio Department of Taxation and the CAUV Advisory Committee members our latest recommendations.
Fred Pierce-Ruhland on behalf of CAUV landowners on our Task Force 440-224-2150
Our next Task Force meeting is 2/9 9am at 31 Wall St Jefferson, Ohio. All are welcome.