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Ohio farmers face rising tax bills

Lawmakers look to reform tax formula

By MARC KOVAC Capital Bureau Published: May 14, 2017 4:00 AM
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COLUMBUS -- Roger Baker farms more than 1,000 acres in rural Wayne County, the heart of Ohio's dairy-producing counties.

He grows row crops and cuts hay and straw, much of the resulting harvest supporting the area's livestock industry.

There are good years for farmers and not-so-good years -- that comes with the territory.

"If you're going to be a farmer and you're going to harness God's earth to make a living, you've accepted the fact that you're going to get a few things slung at you now and then," Baker said.

But Baker and farmers in Wayne County and throughout the state didn't foresee the skyrocketing tax bills they've experienced in recent years, thanks to a perfect storm of low interest rates and other factors that are considered as part of the farmland taxing formula that's been in place in Ohio for decades.

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The combination led to a doubling or tripling or more of property tax bills for some farmers.

"It's stretching everybody," Baker said, noting that his annual tax bill went up $9,000 or $10,000 in the past few years, about a 250 percent increase.

Enter state lawmakers, who for months have been considering ways to address the issue.

The Ohio House and the Ohio Senate have taken slightly different approaches, via a budget amendment and a standalone bill passed by the respective chambers, and some sort of compromised solution could be in a position for final passage in coming weeks.

It's a complicated undertaking, with calls for reform from agricultural and related groups and calls for caution from school and local government advocates, who are concerned about what will happen when taxes are shifted from farmers to other property owners.

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"The effects will be to lower property valuations, causing a tax shift to residential taxpayers, disrupting the school funding formula, and resulting in some losses in revenue for school districts," Jay Smith, deputy director of the Ohio School Boards Association, told the Ohio House's Finance Committee late last month. "We urge you to remove this proposal and replace it with an independent review of the CAUV program."

For farmers like Baker, it's not about a handout or a tax cut.

"We're not asking for tax breaks," he said. "All we're asking for is for the equation to get a little more real time and real numbers to today's economy and the environment that we're working in."

The Formula

Ohio's farmland is taxed under a formula that focuses on its current agricultural use value, or CAUV, instead of its higher developable value. The system was established by voters in the early 1970s as a way to keep property taxes lower on land devoted to agricultural production and to ensure those sites remain in production rather than developed for residential, commercial or other purposes.

The basic formula takes into consideration a variety of factors, including crop yields and prices, production costs and interest and equity rates.

For years, the formula worked as intended. According to the Ohio Department of Taxation, the average CAUV per acre statewide in 2008 was $475, versus a market value average of $2,703. In a place like Wayne County, the per-acre average was a little more than $650, with a market value of $3,706.

Over the past decade or so, however, the formula has led to big upswings in property tax bills at a time of historic downswings in farm income.

"For some farmers, it's going to be hundreds [of dollars in increased tax bills]," said Leah Curtis, policy counsel for the Ohio Farm Bureau. "For some, it's thousands Their values have gone up exponentially. Even if their tax rate stays the same, they're are doubling or tripling their tax -- quadrupling in some cases."

Stan Dixon, a deputy tax commissioner for tax equalization for the state, told lawmakers earlier this year that CAUV rates had "gone from record lows in the mid-2000s to peaking to record highs in 2014."

According to the tax department, in 2016 the state CAUV average per acre had risen to $2,081, with a market value average of $3,889. In Wayne County, it was $2,352 and $5,233, respectively.

"The ag economy started to slide, and then all of the sudden the taxes started exploding," Baker said. "They exploded to a level that I don't think they've ever seen and I don't think anyone dreamed."

Sen Bob Peterson (R-Sabina), who is also a farmer, added, "Farms across the state, every three years, their taxes have doubled. If you were paying $10,000 in taxes nine years ago, six years ago you paid $20,000 three years ago, you paid $40,000 These numbers get real big, real fast A thousand acre farm that's probably $25,000, $50,000, $100,000."

It's been a double whammy for dairy farmers, Baker said, with rising property taxes and feed costs and dropping milk prices.

"I've had plenty of farmers, especially in the dairy industry, say something's got to give somewhere or we're not going to keep doing this," Baker said. "That's extremely troubling to me. If we start to lose dairy farms in our three-, four-county area here, it will change our demographics in a way that nobody, farmer or non-farmer, no member of this community will like."

Support for Change

The Ohio House and Senate have moved different legislation proposing CAUV reforms, the House in an amendment to the budget and the Senate via SB 36.

Both measures would tweak the CAUV formula, with an eye toward making it more reflective of current conditions and farm income and providing incentives for conservation measures. The House also proposed a six-year phase-in on the changes, while the Senate proposed three.

"That will dilute the impact that it has on local governments [and] schools," Rep. Kirk Schuring (R-Canton), who worked on the House language, said of the phase-in proposed in the budget amendment. "We think it's a fair formula Its impact will be minimal because of the way we structured it."

The legislature could move the separate bill or the budget amendment. Senate President Larry Obhof (R-Medina) and Schuring said the latter approach would make sense, given the tax, spending and other policies covered by the biennial budget bill.

Either way, Curtis said the effort represents one of the first major reforms of the CAUV program since its inception.

"We are supporting both [the standalone bill and budget amendment]," she said. "We think they're both great options We're just trying to get some reforms done Both are going to certainly provide important and needed reforms to the calculation."

"Our members have said CAUV reform is their No. 1 priority," Yvonne Lesicko, Farm Bureau's vice president of public policy, added in a released statement. "Farmers need to contact their legislators, let them know how important this is and ask them to support CAUV reform."

Baker, a Farm Bureau trustee, also supports lawmakers' reform efforts.

"It's not like it's going to be a huge windfall for anybody," he said. "It's making this equation more real time in today's economic environment."

Marc Kovac covers the Ohio Statehouse for Gatehouse Media. Contact him at mkovac@recordpub.com or on Twitter at OhioCapitalBlog.


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user_23876 May 14, 2017 10:10 PM

Hey, the Ohio Farm Bureau endorsed all those bone heads that are raising farmers'taxes. Think twice next time Farm Bureau members the next time the OFB endorses a slate of candidates.