COLUMBUS, Ohio — Some farmers are questioning why the taxes on their current agricultural use value (CAUV) land are increasing.

“It is because we’re enjoying very high crop prices currently, good yields and low interest rates,” said Chad Endsley Ohio Farm Bureau Federation director of agricultural law. “If crop prices would go back down and interest rates back up, then farmers would see their CAUV values and therefore, their taxes, go back down again.”

Those taxes are determined by a formula established by the Ohio Department of Taxation, which it then provides to the county auditors, Endsley said. The formula takes into consideration crop yields, crop prices, cropping patterns, production costs and interest rates.

The auditors look at the Natural Resources Conservation Service (NRCS) 10-year average of corn, wheat and soybeans yield estimates, he said. Next, they consider cropping patterns – on average, how much acreage is planted in these three crops. They weight the formula based on that cropping pattern.

“Then, they look at crop prices for the last seven years and they kick out the highest and the lowest year, and then average the remaining five years,” Endsley said. “Next, they look at non-land production costs ... input costs, equipment, seed, fertilizer, those types of things.

“Finally, they look at the capitalization rate, which is closely related to the interest rate.”

Also, those numbers all vary by soil type, he said. Ohio has at least 3,300 different soil types and each type has a different yield and a different value associated with it. Those values are only updated every three years, Endsley said.

Since it is a seven-year rolling average, three numbers drop out and three numbers are added every time they do an update. For the 2011 formula, the three years of crop prices added to the formula were 2007, 2008 and 2009.

“For corn, the three crop prices that were dropped out of the formula were $2, $2 and $2.50” he said. “The three numbers that were added to the formula were $3.95, $3.95 and $3.70. The crop prices almost doubled over that time period, so the formula is going to be significantly altered as a result.”

The CAUV program was begun in 1975 as a farmland preservation tool so farmers could stay on their land and not have to sell it for development. It was designed to reduce property values for farmland by approximately 50 percent, Endsley said.

“But five to 10 years ago, crop prices were so low and interest rates were so high that farmers were actually seeing a 90 percent reduction in their land values ... and were paying taxes on that reduced value,” he explained.

Because crop prices are now increasing and interest rates are lowering, the value has gone up slightly and farmers are now seeing on average a 75 percent reduction in their land values, still far below what they would be paying without the CAUV program, Endsley said.