Many landowners with property enrolled in the Current Agricultural Use Valuation program have been surprised this year to see their values have significantly increased – in some cases more than doubling.
Now landowners in Ottawa and Sandusky counties can learn why.
A workshop to discuss rising CAUV property values, sponsored by Ottawa County Auditor Jo Ellen Regal and Sandusky County Auditor William Farrell, will be held Nov. 12 in the multipurpose room at Riverview Healthcare Campus, 8180 W. State Route 163, Oak Harbor.
The workshop begins at 7 p.m.
The auditors have invited Larry Gearhardt, Director of Local Affairs for the Ohio Farm Bureau Federation, to discuss updates in the state’s data used to determine CAUV land values.
“Many rural landowners are shocked when they discover the 2009 CAUV values. Depending on the soil types, some values increased several hundred percent over 2006,” Gearhardt wrote this summer in a statement prepared for the Farm Bureau.
For property tax purposes, farmland devoted exclusively to commercial agriculture may be valued according to its current use rather than at its “highest and best” use. By permitting values to be set below the market values, the CAUV normally results in a substantially lower tax bill for working farmers, according to the Ohio Department of Taxation.
Soil types, crop yields, and growers’ capitalization rates - based on farm mortgage interest rates and the “opportunity cost” of equity capital – are factored into the CAUV calculation.
To qualify for CAUV, the land must meet a requirement during the three years preceding an application, which is filed with the county auditor:
• Ten or more acres must be devoted exclusively to commercial agriculture use; or
• If less than 10 acres are devoted to commercial agricultural use, the farm must produce an average yearly gross income of at least $2,500.
What has driven valuations higher?
Gearhardt says 2006 values were some of the lowest in CAUV history.
“Starting in the year 2000, CAUV values decreased at an unprecedented rate,” he writes, with 2005 representing the bottom when the average value for all soil types in Ohio was $123 an acre. “CAUV values are now trending upward. Because of low 2006 values, it doesn’t take much of an actual increase to represent a 200 percent to 300 percent increase over 2006 values.”
County auditors are required to reappraise every parcel of land every six years and to conduct a triennial update every third year after a reappraisal. Sandusky, Ottawa, and Lucas counties are among the counties to undergo reappraisals in 2009.
Gearhardt notes also that reported crop yields were updated in 2006 for many soil types.
“For example, the Farm Service Agency lists the average corn yield for Millgrove Silt Loam (arguably the best soil in the state) at 144 bushels per acre,” he writes. By 2009, the corn yield for that soil type was closer to 172 bushels an acre.
In spite of the increased valuations, he says, there isn’t an equal increase in taxes.
“Because of tax credits, the possible expiration of certain mills, and a tax reduction factor, the actual taxes paid by the landowner will not increase in the same proportion as the value,” Gearhardt writes.
He considers the Ohio CAUV formula the best in the country. “It is not CAUV’s purpose to guarantee the lowest values for landowners, but rather to accurately reflect what is happening in the farming community.”
Richard Gehring, a soil scientist with the Natural Resources Conservation Service, also calls CAUV a good deal for farmers.
“Historically, CAUV has averaged about 10 to 25 percent of average market value, so producers enrolled in the CAUV program are reaping a significant tax savings,” he said.
In Sandusky and Ottawa counties, the updated production values for land in the CAUV program will be applied to the 2010 property tax bill, the auditors said.
For information about the workshop call the Ottawa County auditor’s office, (419) 734-6740 or the Sandusky County auditor’s office, (419) 334-6123.