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School boards, courts putting pressure on CAUV program

By Amy Beth Graves

More than three decades ago, Ohio voters approved an amendment to the Ohio Constitution, establishing the Current Agricultural Use Valuation (CAUV). Since then, CAUV has undergone changes but more significant ones are possibly on the horizon because of pressure from school boards and courts.

"I’ve never seen anything as serious as this," said Larry Gearhardt, senior director of local affairs for Ohio Farm Bureau Federation (OFBF). For the past 15 years, Gearhardt has been OFBF’s representative on a committee of experts in farm production and economic issues that helps advise the Ohio Department of Taxation about CAUV. The tax department administers the CAUV at the state level, and county auditors administer it in each of Ohio’s 88 counties.

"A number of people who haven’t cared about CAUV now do," Gearhardt said. "People are looking over our shoulder, putting the program at risk."

He said the advisory committee, which typically meets twice a year, is convening monthly to take a closer look at the program. He said many outside groups believe CAUV is unfair because farmland is taxed according to its value in agriculture, rather than full market value. Communities have been questioning CAUV as they seek to increase their tax base.

"Our job is not to make the taxes as low as possible but to protect the program," Gearhardt said. "If we lose the program, we’ll be paying fair market value (for agricultural land)."

The tax department determines CAUV values by using five factors in a formula: crop yields, cropping patterns, crop prices, nonland production costs and capitalization rates (the cost of money invested in the land). For the past five or six years, the committee had noticed a decrease in the average per acre value, which seemed to not reflect its true value.

The committee, which consists of not only farm groups but the County Auditors’ Association, Ohio Association of County Treasurers and Ohio Chapter of Realtors Land Institute, took a closer look at the formula and determined that the yields per acre had not been adequately updated for years. The committee then used current data to more accurately reflect the yields per acre for all Ohio counties. The updated crop yields were made in August and will be in effect for this tax year.

"Abnormally low CAUV values forced us to update the crop yields. Rather than have a further decrease in value, we now have an increase in value for 2005 and 2006," Gearhardt said, noting that the increases will likely be higher over the next few years.

The committee also is looking at whether other changes to the CAUV program are needed, including if farm government payments should be included in the formula and how timberland fits into the formula. Some court cases, including one that went up to the Ohio Supreme Court, have challenged whether forestland can get the CAUV tax break.

Because of CAUV’s low tax values, school boards have been intervening in court cases as they try to increase their tax base, Gearhardt said.

"The school boards are putting a lot of pressure on politicians," he said. "If ag tax receipts go down, then residential receipts go up. Residents, who are paying 70 percent of the tax burden, feel that this is unfair. It’s putting a lot of pressure on the program."