Monday, June 1, 2015

Update on CAUV proposed changes

Despite Final Modifications, Farmers Say CAUV Formula Still Needs Work
Department of Taxation staff said Thursday that updated valuation tables for agricultural land are firm, despite farmers' continued complaints that more needs to be done to ensure they're paying fair amounts  The grievances were aired at a public Agricultural Advisory Committee meeting in Columbus, where the department detailed previously announced changes to the Cultural Agricultural Use Value calculation.  Changes include using more up-to-date crop prices and yields and an increased deduction for woodland clearing. However, they don't encompass recently proposed Ohio Farm Bureau Federation's recommendations to further adjust the factors used to determine the capitalization rate and set lower values for land that's part of a federal conservation program. 

The current CAUV formula wrongfully assumes that land is held for only five years and becomes more valuable as its mortgage is paid down, OFBF's Leah Curtis said. In reality, land is often held over generations and the capitalization rate should take into account productive capacity rather than the owner's equity in the land.  "We would like to see (the recommendations) implemented, if possible, for values this year," she told ODT.  However, tax Equalization Division Executive Director Shelley Wilson said after the meeting that the 2015 tax year valuation tables set to be issued by the tax commissioner next week will take into account only those calculation modifications already agreed upon.  Attempting to make any changes in time for this tax year would "be pushing our timeline," she added.  Ms. Wilson said the department has chosen not to adopt some of the recommendations that have been made by committee members because of complexity and the limited scope of its work related to valuations.  Some of the suggestions, she said, "don't really represent calculating a use value, which has been assigned to an appraiser and we have always maintained that it is the department's job to actually act as an appraiser to calculate a use value which is just like the market value of your house. The answer is where the data takes you. It's not something that you can ethically manipulate."  Despite the department being resolute with the OFB recommendations that have already been implemented in the 2015 valuations, conversations will continue in an effort to make the formula as accurate as possible, Ms. Wilson said.
Ted Finnarn, with the Ohio Farmers Union, urged increased examination of the capitalization rate and other OFB recommendations regarding draining and wood clearing costs.  While the new calculation includes increased deductions for surface drainage and wood clearing, they remain below actual costs, he and others in attendance contended.  "We feel those values are still a little bit out of whack. The changes we made are good and we're moving in the right direction, but more needs to be done," Mr. Finnarn said.
Ohio Forestry Association Director John Dorka said members "object" to the woodland clearing deduction that was doubled to $1,000 in the new formula. "It's our opinion that it's considerably higher than that, and we've provided data that supports that," he said. 
The updated cost of clearing woodland that's taken into account when calculating CAUV is at the level that it would have been in the early 1990s, Steve Maurer, state executive director for the Ohio Farm Service Agency, said.  He also supported the OBF recommendation to tax crop land that's been set aside for conservation at the lowest possible rate.  "We as an agency would have an interest in making certain...that treatment of the land for tax purposes does not inhibit the decision to put it in conserving use," Mr. Maurer said.
Delaware County Auditor George Kaitsa and the Department of Natural Resources Division of Forestry also backed OBF proposals targeted toward more accurate valuations.
A handful of farmers from Montgomery County also weighed in. They spoke out against the valuations, saying that taxes have increased so significantly in the past few years that many are struggling to maintain their operations.  They complained that the average statewide millage that is used is unfair because they're paying higher taxes than are factored into the formula. However, Ms. Wilson said tailoring CAUV to individual farms or counties would lead to complications.  "There are 3,500 different soils and 4,500 different taxing districts. That's an awful lot of data, not only for us to manipulate and certify back to the counties, but small rural counties do not have sophisticated computer systems so it becomes an administrative burden," she said.  ODT would alter valuations to include incentives or make other artificial adjustments only if it was required to do so through legislation, Ms. Wilson said.  Earlier this week, OFB State Policy Director Brandon Kern briefed the House Agriculture & Rural Development Committee on the CAUV recommendations, telling lawmakers to standby in the event that the administration fails to take action on additional changes.  In continuing to further review the valuation program, which 60% of farmland is registered under, Ms. Wilson said it will be important for all parties to keep in mind the department's duty to all tax payers.  "Every time we lower a farmer's value, residential values go up, so it's a fairness issue for everyone," Ms. Wilson said.

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