By LINDA McGURK
Indiana Correspondent

WEST LAFAYETTE, Ind. — When land use and economic development are discussed at the county level, the first things that usually come to mind are new housing developments or factories.
But keeping farmland in production and supporting livestock and biofuel operations can also help local governments keep their costs down and boost revenue, according to the Indiana Soybean Alliance (ISA).

“Agriculture pays more in revenue than it receives in services and we think rural counties need to realize that keeping land in farms is a form of economic development,” said Leah Beyer, ISA’s livestock director. “We want the counties to think about all the pros and cons before farm ground is taken out of production.” 

To prove its point and provide counties with a new land use planning tool, the ISA recently commissioned a statewide study on the Cost of Community Services (COCS) for Indiana counties and school corporations. COCS studies are frequently used to determine the financial impact of residential, business and agricultural land use.

But what makes this study unique is that it covers virtually the entire state and provides seven different cost allocation scenarios from which counties may choose.

“I wanted to take apart the COCS analysis to see what makes it tick,” explained Larry DeBoer, the Purdue University agricultural economist who conducted the study.

“These studies always come up with the same results, and that is that residential property imposes more costs than it delivers in revenue. So I decided to vary the assumptions to see if I would get a different result. The answer is yes and no.”

Because school districts spend five or six times more money than county government, they usually dominate the results of COCS studies. When DeBoer combined the two sectors, he got the same results as in previous studies, for all counties under all assumptions about the allocation of costs and revenue among the three sectors.

But when schools were taken out of the mix and he varied assumptions about property value and vehicle use, a more complex picture of the fiscal impact of different land uses emerged. For example, in Indiana, residential and business property is assessed at market value, whereas agricultural property is assessed at its use value, which on average is less than a third of the market value. If costs were instead allocated based on the market value of farmland, the study shows agriculture may be paying less into the system than it receives in services.
Changing the assumptions about road construction and maintenance costs by recognizing that heavy trucks create exponentially more wear on county roads than residential vehicles can also change the traditional COCS results for county governments. The division between agricultural and business vehicles is not clear, however, since there’s no data available on how many miles trucks drive on county roads.

“Under certain assumptions about education, roads and property value, agriculture pays more in revenue than it receives in services from local government. But if you don’t accept the assumptions used for that analysis, you get a different result,” DeBoer explained.

The study provides seven different sets of assumptions, or scenarios, to help local governments evaluate which is most applicable to their counties. ISA has chosen to highlight what it feels is the most “balanced” set of assumptions for the agricultural sector, and which shows agriculture as contributing more in property taxes than it receives in services.

Under this assumption, agricultural property is assessed at its use value, road use accounts for miles traveled and not just vehicle count, and rural counties are assumed to impose fewer costs from public services, such as schools, libraries and crime protection, than urban areas.

“This study reveals that by keeping agriculture land in production in Indiana – and supporting agriculture expansion in the areas of livestock and biofuels – local governments can keep costs of services down and boost revenue, as the sector generates on average two and a half times more in taxes than the actual costs it imposes or services it receives,” said Mike Yoder, ISA board member, in a statement.

Though ISA’s stance could be interpreted as another contribution to Indiana’s long-running debate about property taxes, Beyer said that was not the intention of the study. “This is not meant to be part of the property tax debate,” she said. “The study looks at what services are provided and who pays for them. We want this to be a tool for land use planning rather than assessment of property taxes.

“We saw a need for help with planning on the county level. Many of the counties didn’t have a really good feel for the cost of community services and we thought this study could be a huge asset.”