By: Leah Curtis, Ohio Farm Bureau Federation Director of Legal Education
OFBF members have seen current agricultural use values increase exponentially over the last several years. This is in part due to the fact that values were at their lowest point in history less than 10 years ago. In 2005, the average CAUV value in the state of Ohio was $123 per acre. Although this low value resulted in low property taxes for farmers, it also brought a serious threat to the program as we know it. Many groups were concerned as some farmers were paying as low as $1-$2 per acre in total for taxes on their farmland, while residential taxes were increasing and local governments and schools dealt with decreases in funding.
As we have seen crop prices inch higher each year, and interest rates plummet, this issue began to self-correct. The function of the CAUV calculation is to ensure when the farm economy is doing well, values go up, and vice versa. In the last three years, we have seen record farm receipts – even in the face of increasing costs and some unstable sectors of the agricultural industry. Ohio farmers have also seen the market value of their farmland increase as well, with farmland selling near an average of $5,000/acre or more across the state.
Despite this year’s drought, in the context of the CAUV calculation, we currently have a perfect storm of prosperity. Crop prices are high, costs are increasing at a slower rate than income, and interest rates are in the basement. All these factors combine to result in higher CAUV values.
What is clear, is that the CAUV calculation is a sound and accepted method for the valuation of commercial property. It is the method a good investor would use when considering buying property. That being said, that does not mean there isn’t a need for review or possibly, room for improvement.
Five factors go into the CAUV calculation: Yields, Prices, Costs, Ohio’s cropping pattern, and the capitalization rate. These factors are based on Ohio’s three commodity crops: corn, soybeans, and wheat. Remember, CAUV is a program intended to value the income productivity of land – not necessarily the income productivity of different agricultural practices. This has been the accepted reason why the calculation is based on corn, soybeans, and wheat. Ohio calculates a CAUV value for the 3600 different soil types in Ohio that have a slope of 25% or less.
As we enter the policy development season and prepare for the OFBF annual meeting, we ask you to think critically about the CAUV program. Keep in mind that CAUV was created to ensure farmland was valued at its income-producing potential. The purpose was not to lower taxes, although that is the result of this policy. Farm Bureau’s duty to develop the best policy means we have to consider the impact not only on farmers, but agribusinesses, local governments, schools, and our rural neighborhoods. Remember CAUV can and does result in lowered tax base for your schools and local governments. Not only does this affect those entities, but it can also make CAUV ripe for inquiry from many sides. Just as Farm Bureau might consider changes to CAUV for the benefit of the farmer, other groups will also be involved looking for changes that benefit their constituents.
As you think about this program, please visit some of the various resources OFBF has available online discussing the CAUV calculation. We also encourage you to visit the Ohio Tax Department’s website to look at the most recent explanation of the CAUV calculation, which clearly lays out the data used in the CAUV calculation.
Read OFBF’s Guide to CAUV
Check OFBF’s events calendar for a CAUV meeting near you.
Visit the Ohio Tax Department’s website