Changes need to be made now to the Current Agricultural Use Value (CAUV) formula to make it more accurate. This is the message that Ohio Farm Bureau members, commodity groups and others have increasingly been expressing to legislators and the Ohio Department of Taxation.
CAUV was one of the top issues that Farm Bureau members discussed during February’s Ag Day at the Capital. Ohio Farm Bureau has made a second round of suggested changes to the CAUV formula that would help limit soaring property tax increases for landowners. Those proposals are encompassed in two bills: House Bill 398 sponsored by Rep. Brian Hill, R-Zanesville, and Senate Bill 246 sponsored by Sen. Cliff Hite, R-Findlay.
Farm Bureau members are asked to talk with their local legislators to support these bills and explain how the changes will result in more accurate valuations for landowners.
Ohio Farm Bureau’s work on CAUV has already resulted in an average savings of $10 per acre in counties reappraised in 2015. If OFBF’s second round of proposals are accepted, landowners could see an additional $13 in savings on average.
Ohio’s agricultural community is increasingly supporting Farm Bureau’s suggested CAUV formula changes. Recently, OFBF and nine other agriculture organizations sent a letter to the General Assembly expressing their support for the CAUV bills.
The letter was signed by representatives from OFBF, Ohio AgriBusiness Association, Ohio Cattlemen’s Association, Ohio Corn & Wheat Growers Association, Ohio Dairy Producers Association, Ohio Farmers Union, Ohio Pork Council, Ohio Sheep Improvement Association, Ohio Soybean Association and Ohio Poultry Association.
In the letter, agricultural leaders told legislators that “recent skyrocketing increases in CAUV values have made it apparent to many farmers across the state that the formula is not functioning as accurately as it should.”
Ohio Farm Bureau has been challenging two inaccurate assumptions in the CAUV formula’s capitalization rate: that land is a short-term investment and that it becomes more valuable as its mortgage is paid down.
The proposed legislation would prohibit certain nonagricultural factors from being used in the CAUV formula and remove disincentives for farmers to engage in certain conservation practices.
The current CAUV formula assumes land is held for only five years when in reality farmland is typically held for decades and across multiple generations. Currently, there are non-use factors in the formula that inflate farmland value by assuming land appreciates and landowners achieve equity buildup at predetermined rates. But these have nothing to do with the agricultural use of the land. In the proposed legislation, the use of equity buildup and appreciation factors would be prohibited.
Also in the bills are stipulations that CAUV land used for a conservation practice or enrolled in a federal land retirement or conservation program for at least three years be valued at the lowest of the values assigned on the basis of soil type. This requirement would encourage practices that protect the environment and water quality. Currently, farmers are discouraged from idling land because it is taxed as though it is producing crops. Farm Bureau believes taxing conservation lands at the CAUV minimum value is appropriate because conservation lands are nonproducing.
This is Ohio Farm Bureau’s second set of recommended changes to the CAUV program. The Ohio Department of Taxation enacted OFBF’s first round of suggested changes: to more closely tie tax values to current economic conditions in agriculture; include more recent data on crop mix, prices, yields and production costs; and better represent the true value of woodlands compared to cropland.
CAUV is Ohio’s most effective tool for preserving farmland. Under the program, farmland is taxed on its agricultural productivity rather than its development value.