COLUMBUS, Ohio — The Ohio Senate last week included farm property tax reforms in its recently passed budget bill.

 

The changes made to the state’s Current Agricultural Use Value (CAUV) formula are said to correct a flaw under which farmland taxes have increased by more than 300 percent in recent years.

The reforms also remove penalties on farmers for applying practices to farmland that protect water quality.

But in Ohio, reducing farm taxes has consequences. According to Howard Fleeter, analyst with the Ohio Education Policy Institute, in 65 school districts with high concentrations of farmland, homeowners would see property tax rates rise between 2.5 and 5 mills. For another 130 districts, residential taxes would rise 1 to 2.5 mills. A 2-mill increase, for example, would cost $70 per year for every $100,000 of property value.

Fleeter noted that past CAUV increases coincided with rising crop prices and said state data show the average CAUV per acre has fallen from its peak of $1,668 in 2014 to $1,249 in 2017.

This plan by legislative Republicans also means less revenue for schools. This would come as 439 school districts would see either state funding cuts or increases of less than 1 percent per year under the proposed budget.

The new plan would lower agricultural land values by roughly 30 percent. The complex formula reduces the taxable value of farmland (currently less than 55 percent of market value) by using an “agricultural use” value rather than a “fair market” value. “Really what we’re looking for is to make sure this formula is accurate,” said Leah Curtis, policy counsel for the Ohio Farm Bureau (OFB). “There are portions of the formula that need to be more tied to the farm economy, so farmers have an accurate property value like everyone else does.” 

 

After the Senate passed its version of the budget bill last week, the OFB stated: “The Ohio Senate has responded to a pressing need affecting Ohio’s family farmers by including farm property tax reforms in its recently passed budget bill. The changes made to Ohio’s Current Agricultural Use Value formula correct a flaw under which farmland taxes have increased by more than 300 percent in recent years, a burden that any business or individual would find unsustainable.

The reforms also remove penalties on farmers for applying practices to farmland that protect water quality.”

“Overall, spread out across the state, we’re not talking about a significant amount of money,” said Senate President Larry Obhof (R-Medina). “But for agricultural landowners, we’re talking about a 100 percent increase every three years. We’re going to put a stop to that.”

He said the only question is exactly how the value reduction will occur. For example, the Ohio House proposed a six-year phase-in, while the Senate proposed three years.

A key change, Curtis said, would tie the CAUV’s capitalization rate more to the agricultural market rather than the broader financial market. Farmland values, she said, jumped 300 percent from 2008 to 2014. “It’s not an increase you can budget or plan for.”

The Senate approved the budget by a vote of 24-8, and the House and Senate will now work out their differences in conference committee, with a final vote scheduled for June 28.

“We are optimistic that the reforms will be in the final budget bill, given that both the House and Senate have included them in their versions,” Curtis said.

 

The House approved its own version of the budget bill, with the same CAUV reforms, in a 58-37 vote on May 2. Before adding the CAUV reforms to the budget the bill, the Senate also unanimously approved the same reforms in a separate bill, S.B. 36, with a 33-0 vote.