COLUMBUS — Ohio farmers and the Ohio Farm Bureau continued their call for a more accurate Current Agricultural Use Value formula during the second hearing of a Senate bill April 13, before the Senate Ways and Means Committee.
Farmers testifying in support of S.B. 246 said their taxes have more than doubled in the last few years, and cited concerns that non-agricultural factors are being used to calculate the formula. They also said they’re being taxed for land that they leave idle — for conservation practices — as though it’s producing cash crops.
The average statewide increase in CAUV was 294 percent, from 2008 to 2014, said Brandon Kern, Ohio Farm Bureau Director of State Policy. He said farmland taxpayers paid a total of $370 million more in 2014, than in 2008.
“For those of you who have worked in small business, ask yourselves if you would be able to manage a tax increase of some 300 percent,” said Lane Osswald, a Farm Bureau trustee and farmer from southwest Ohio. “It’s not an easy thing to budget for.”
Osswald and Kern said they want the CAUV program to accurately reflect farm productivity. In 2006, Ohio Farm Bureau supported changes to the formula that actually resulted in higher taxes, Kern said, because farmers agreed that outdated yield figures needed to be updated.
“Our first priority is maintaining the integrity of this program so that we can justify its existence,” Kern said.
He also noted that the rapid increase in farm commodity prices justified an increase in taxation — but that it was followed by a rapid and near-record decrease.
“Nationally, from 2013 to 2015, we experienced the second largest net farm income ‘decrease’ in history,” Kern said, adding that if the formula isn’t fixed, “many farmers won’t be able to survive.”
In the bills
The bill calls for two main reforms. First, it would prohibit the use of “equity buildup” and “appreciation,” as part of the CAUV calculation.
Secondly, it would make farmers’ investments in conservation practices more tax friendly, by assigning the lowest CAUV value to conservation ground that remains in year-round conservation, for a minimum of three years.
Currently, farmers are being taxed on their conservation ground as though it’s producing a crop.
Doug Erwin, a land manager from Champaign County, manages farmland and conservation land in multiple counties, including about 500 acres enrolled in the Conservation Reserve Program.
He said conservation contracts often take land out of production for 10 or more years. They usually include an upfront payment to the landowner, or a rental payment, but he said it’s usually less than what the farmer could get for renting out the same acreage.
“At these (current) rates, the commitment to these conservation programs is in jeopardy,” he said, all at a time when farmers are being asked to do more conservation to improve water quality.
Kurt Garver, a farmer from Butler County, said farmers like himself have two main options. Either farm it and pay the high taxes — with the potential they’ll lose money in the process, or turn it down and watch the land go to development.
“Our family has lost over 600 acres in the last two years to development,” he said. “Once it’s gone, it’s gone.”
Small and specialty crop farmers are also concerned.
Val Jorgensen, an organic farmer from Westerville, said equity buildup is a poor determinant of farm value, because families like her own often own their farms for many generations — and never really see the benefit of equity until the farm is sold.
She said farmers can sometimes borrow against their equity, but that it’s a risky investment, with the added cost of interest.
Sen. John Eklund, R-Geauga County, questioned Kern over the assertion that equity doesn’t lead to farm profitability.
“I recognize you can get your equity out of your property when you sell it,” Eklund said. “You can also find other ways to get your equity out of your property.”
He said millions of Americans have used their equity to help finance their purchases, and “improve their lots in life.”
Kern said over longer periods of time, equity buildup could lend itself to a more profitable farm operation, but said the five-year equity period used in the formula is a concern.
”I think it’s the disproportional effect that an equity buildup assumption has, as opposed to what the emphasis should be on, in terms of farm income producing potential,” Kern said.
Sen. Bob Peterson, R-Washington Courthouse, who chairs the Senate committee and also farms, said the proponent testimony was “very reflective of what’s happening out in the agriculture community.
“Farmers across the state, including our (own) farming operation, are experiencing doubling and tripling of taxes,” he said.
The committee will hear opponent testimony during the third hearing, April 20.
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