I met recently with a farm family and questions were raised about the agricultural district program in Ohio. And so I thought others might be wondering exactly what is an ag district and why should a farmer enroll in an agricultural district?
Possible nuisance lawsuits, concerns about taking property by eminent domain, and the ability to defer potential assessments as a result of utility extensions are a few of the reasons all landowners should consider whether to apply to be in an agricultural district.
In 1982, the Ohio legislature passed legislation that allowed for the creation of agricultural districts. This legislation was created to help farmers continue their farming businesses by offering protection from nuisance lawsuits related to livestock manure and pesticide applications, defer assessments in situations where utilities are extended across farm property, and provide protection in cases of eminent domain.
An ag district isn’t the same as CAUV, and that’s a common misperception among many.
Current Agricultural Use Valuation (CAUV) allows farmland to be assessed at an agricultural value for real estate tax purposes rather than a “higher and best use” valuation. I think the confusion comes about because the requirements for enrolling in CAUV are the same as those for forming an agricultural district.
The requirements are fairly simple and include the following:
— The land must be in agricultural production;
— Land qualifies if it is enrolled in a federal government land retirement or conservation program during the year of application and for at least three years prior to the year of application;
— The land must be composed of tracts, lots, or parcels that are at least 10 acres in size, or have generated an average gross income of at least $2,500 during the past three years. Or, the owner can present evidence of an anticipated gross income of $2,500.
Where do I start?
In Ohio, applications for placing land in an agricultural district are available form your county auditor.
For farms located in unincorporated areas, the application is made to the county auditor and if the farm meets the criteria, the auditor must certify the application.
If the land is located in a municipality or included in an annexation petition that has been filed with the county commissioners, landowners must file with the county auditor and also with the clerk of courts of the municipality.
Within 30 days of the application, the municipality must hold a public hearing. Within that same time period, the municipality may approve, approve with modifications, or reject the application. If the municipality modifies or rejects the application, they must demonstrate that having the land placed in an agricultural district would create a substantial adverse effect on:
— The provision of municipal services within the corporation;
— Efficient use of land within the municipal corporation
— The orderly growth and development of the corporation;
— The public health, safety or welfare.
Once the application is approved, it is in effect for five years. At the end of the five-year period, the landowner can elect to extend the term of the district.
A reapplication can be made at any time between the first Monday in January and the first Monday in March of the year in which the agricultural district terminates.
If the land is annexed by a municipality, the owner is not required to apply to the municipality either at the time of annexation or at any subsequent reapplication if the following criteria are met:
— The land was not sold to another person (except immediate family);
— The owner who signed the application did not sign the annexation petition;
— The owner did not vote in favor of the application.
If any of these conditions did occur, the municipality would have review powers at the time of the five-year renewal.
Penalties for removal
Are there penalties for removal from an agricultural district? Yes. If, during any five-year period, landowners choose to remove the land from an agricultural district, the county auditor collects one-fourth of the penalty assessed under the CAUV program.
The penalty is paid on those acres that were converted to other uses — not all of the land.
If the land is also enrolled in CAUV, there may be two penalties to pay. If the land in CAUV is developed, the owner must pay back the tax savings realized during the three year period. This is in addition to any recoupment under CAUV. If the land is not in CAUV, the penalty for withdrawing from an agricultural district is computed as if the land was in CAUV.
Enrolling in an agricultural district makes sense for all farmers to consider. It is a program that provides protections, doesn’t cost anything to apply, and the application form is simple to complete. Stop in and talk to your county auditor if you have specific questions about the application.