July 14, 2010
“Do developers misuse property tax breaks intended for farmers?”
This question was posed to the Legislative Audit Bureau staff. Last week, auditors released results of their review of the Use Value Assessment law.
Back in 1995, the Legislature created the Use Value law to ease property taxes on farmers and cut down on urban sprawl. Land used for agriculture would be assessed at the value of its agricultural “use” – not its market value.
By most accounts, the Use Value law has been successful. Farmers are not forced out of business because of high property taxes which helps promote a thriving agriculture economy that benefits all state taxpayers.
Critics of the Use Value Assessment law claim non-farmers have benefited in a way the people of the state never intended. Land destined for development but still in crops is being valued as agricultural land.
The audit sought to answer the question of the misuse of use value.
The auditors found that farm land in large cities is more likely to be owned by a developer than a farmer. It seems, the bigger the city, the more likely this is so.
Among the 14 municipalities examined in the audit, less than 1% of agricultural land in Akan Township in Richland County was owned by a real estate or property development company. But more than half of the ag land within Appleton and Sun Prairie city limits was owned by such a company.
The audit also found that agricultural land in some cities is more likely to be platted. While only 13.5% of the parcels in Appleton were platted, almost all (92%) of the parcels in Middleton were platted. And the audit showed the likelihood of platting was related to parcel size. The average size parcel in Middleton was only 1.3 acres, but in Appleton more than half were over ten acres.
There have been numerous efforts to keep land destined for development out of Use Value Assessment.
The most recent attempt was during the last budget debate. A proposal offered by a colleague made land platted for development or not zoned for exclusive agriculture ineligible for Use Value Assessment. But sometimes land that is platted is not developed. And many times farmland that is not zoned ‘agricultural’ is used for production agriculture.
Zoning is controlled by local government and zoning ordinances vary widely across the state.
For example, many townships in Trempealeau and Pierce Counties are zoned ‘rural residential’ even though most of the land is in production agriculture. The city of Eau Claire removes all agricultural zoning on land it annexes from neighboring townships, regardless of its previous zoning and its current use.
Conservative estimates are that more than half a million production agriculture acres in Wisconsin are zoned rural residential and another quarter million ag acres are within cities and villages. Together – if that budget proposal had passed – nearly one-twelfth of Wisconsin farmland would have been removed from Use Value Assessment.
Removing this land from Use Value would have created a massive property tax increase for farmers. In fact, the audit showed the 387 acres of farm land in the Eau Claire city limits would have seen over a 100-fold increase in taxes.
Working quickly with a few rural Assembly colleagues, I was able to defeat that budget proposal.
Solving the problem of unintended tax breaks for developers doesn’t need to be like using a bomb to level an anthill. The problem of misusing Use Value is best handled by the assessors responsible for inspecting the property.
Some assessors interviewed for the audit kept visiting questionable property and asked owners for verification the land is in production agriculture. Tax forms, lease agreements and other documents can be used to verify the actual use of the land.
The Use Value Assessment was not intended to benefit developers. But in crafting a solution to this complex problem, we must protect the original purpose of Use Value – to sustain our family farmers and Wisconsin’s agriculture legacy.