Anyone with fenced in livestock understands the idiom: the grass is always greener on the other side of the fence. Such is the case for our Great Pyrenees sheep dog that we have penned up with our sheep. The dog’s name is Clay. He has a pretty nice setup in the barn and pasture with sheep and a donkey to play with endlessly, ample room to run around, a comfy place to curl up and sleep, and plenty of food and fresh water.
Unfortunately for us, the very large dog has the ability to get out through very small places. He is terrified of the electric fence, so that is not an issue. The problem is with the gates in the barn.
We have a swinging gate with a latch to allow easy access to the pen, but even though the bottom of the gate is only a few inches off the ground, he can get out. If we make the fence lower, he crawls over the top.
And, even though the spaces get smaller and smaller, the large dog still gets out on occasion. Apparently, the appeal of the greener grass outside of the fence is even greater than the laws of physics. The result is an increasingly complex series of fences and gates to keep the dog from getting out that also makes it much harder for us to get in.
As the farm economy has boomed in recent years, more farmers have been wondering if the grass is always greener with Current Agricultural Use Value (CAUV) in terms of land tax rates. CAUV values are determined for around 3,500 different soil types in Ohio with a formula that is administered by the Ohio Department of Taxation. The formula uses the following factors: crop yields, crop prices, cropping patterns, other non-land production costs, and a capitalization rate based upon interest rates. With increasing yields, crop prices at record or near record highs, relatively low expenses, and low interest rates, CAUV values increased substantially over the past few years. And, with the tax values updated every three years, there have been many landowners getting some shocking increases in taxes.
But, are those shocking increases reason to look at trying to change CAUV? Conventional wisdom on this issue may suggest the answer is “no.” Since the CAUV program was adopted in the mid 1970s, it has done what it was designed to do, in many cases erring on the beneficial side of the landowner. The original intent was to calculate an accurate tax value for farm ground, which typically would reduce taxes by around 50%. In 2005, CAUV provided a 90% reduction in taxes and in 2010 the reduction was 75% for Ohio’s farmers.
In the last few years, though, as CAUV values peaked, the difference between the “discounted” CAUV value of agricultural land and the market value of the land got slimmer. In a handful of cases, there are reports that the CAUV value is actually higher than the market value for some land under some very specific situations. In the bigger picture, though, the startling increases in CAUV value combined with the current, and significantly lower, crop prices has many farmers pitchforks-and-shotguns angry. Pre-election politics have legislators listening.
Farmers being upset in this situation is understandable, but is it justifiable and politically wise? There are people interested in taking measures to weaken CAUV and generate more tax revenue from agricultural lands. CAUV has its share of opponents and re-opening the debate could have political risks. And, when times are good in agriculture, it can be a challenging political argument for farmers to get large tax breaks when compared to other property owners.
On the other hand, there may be some legitimate problems with the CAUV formula and potential improvements that could be made (particularly with regard to the capitalization rate) to soften what truly are large tax increases for farmers. The concern generated from the most recent round of 41 Ohio counties with CAUV re-assessments has been great enough to encourage another look at CAUV.
So, if you are hopping mad about a big property tax increase with CAUV, there may be hope. But first, take some time to calm down and assess the situation. You can go to your local auditor’s office and find out what your land value would be if it were taxed at fair market value to see what you are saving with the CAUV program. In most cases, even with a jaw dropping 200% or 300% increase in your CAUV value, there is still a significant savings in the program.
Stay tuned for the findings of the Ohio Farm Bureau’s assessment of CAUV later this year. Until then, as hard as the painful tax increases on Ohio farmland may be, it is important to understand that even though it may look pretty good initially, the grass really may not be so green outside of CAUV. And, if we fail to tread lightly in this political quest for greener grasses, we may just find that the fence is stronger and we can’t get back in to where the grass was pretty green in the first place.