Impact of Increases in Current Agricultural Use Values (CAUV)



Impact of Recent Increases in Current Agricultural Use Values (CAUV)

Since 1973 Ohio has provided a tax adjustment that determines farmland property valuation according to the land’s Current Agricultural Use Value (CAUV) instead of on the basis of its market (or “best and highest use”) value. The CAUV adjustment is employed in order to improve the equity of the property tax with regards to the state’s farmers, as economic trends (such as suburbanization) can increase the market value of farmland well beyond its agricultural use value. The Ohio Department of Taxation’s Division of Tax Equalization is responsible for the annual CAUV calculations. This article provides a brief overview of CAUV data from 2005 to the present.

CAUV values (based upon a formula taking into account various factors including farmland utilization, crop prices, and interest rates) have been steadily increasing since 2005. The increases in Tax Year (TY) 13 and TY 14 were particularly large. The CAUV increases have largely been due to increasing crop prices (which make farmland more valuable) and historically low interest rates (which lower production costs by making the cost of borrowing cheaper), as well as a result of Tax Department adjustments and updates to the CAUV formula which corrected flaws that led to record low CAUV values in TY 05.

Table one shows CAUV average value per acre as computed annually by Tax Equalization. In 2005 the average CAUV value was only $123 per acre. CAUV values then increased every year through 2014, which appears to be a record high for CAUV. As crop prices decreased, interest rates crept upward slightly, and the Tax Department, in conjunction with the Ohio Farm Bureau, made additional modifications to the CAUV formula, CAUV values have decreased in 2015 and again in 2016.

Table 1: CAUV Average Value per Acre, 2005-2016

|Tax Year |Avg. CAUV Value Per Acre |Tax Year |Avg. CAUV Value Per Acre |

|TY05 |$123 |TY11 |$700 |

|TY06 |$177 |TY12 |$719 |

|TY07 |$181 |TY13 |$1205 |

|TY08 |$249 |TY14 |$1668 |

|TY09 |$459 |TY15 |$1,388 |

|TY10 |$505 |TY16 |$1,279 |

Source: Ohio Department of Taxation Division of Tax Equalization CAUV

Explanations, 2012, 2015, and 2016.

Table two shows statewide totals of CAUV value compared to ‘Best and Highest Use” property values that provide an approximation of the market value of farmland. CAUV and Best & Highest Use taxable values reflect the 35% assessment percentage that is applied to all real property in Ohio. This data is available in the “PD32” file on the Ohio Department of Taxation’s website. (Note that the average CAUV value per acre shown in Table one differs from that shown in Table two. The reason for this discrepancy is that Ohio’s property appraisal system works in three-year increments, with different counties undergoing full reappraisal and reappraisal “updates” in different years. As a result, while the Tax Department computes the CAUV values every year, the new values only apply to the counties undergoing reappraisal or update in that year.)

Table two shows that CAUV values increased by nearly six times from 2005 to 2014, both in per acre and total value terms. Table two also shows that the gap between CAUV and market value for the state’s farmland has narrowed considerably since 2005, particularly in the past five years. However, the data in Table one showing CAUV values decreasing in both 2015 and 2016 implies that CAUV values as a percentage of Best and Highest Use taxable value will decline when the Tax Department releases the TY15 PD32 data in the Spring of 2016.

Table 2: CAUV vs. “Best and highest Use Property Values, 2005-2014

|Tax Year |Avg. CAUV Taxable |State Total CAUV Taxable |State Total Highest & Best |CAUV % of H&B |

| |Value Per Acre |Value |Use Taxable Value |Use Value |

|TY05 |$113.60 |$1,817,459,950 |$12,863,218,938 |14.1% |

|TY06 |$116.46 |$1,862,224,624 |$13,567,040,800 |13.7% |

|TY07 |$124.59 |$2,000,934,434 |$14,088,846,920 |14.2% |

|TY08 |$166.23 |$2,671,876,240 |$15,174,386,360 |17.6% |

|TY09 |$191.16 |$3,082,737,365 |$15,422,091,180 |20.0% |

|TY10 |$224.42 |$3,621,292,584 |$15,789,157,320 |22.9% |

|TY11 |$322.91 |$5,220,439,230 |$16,862,869,980 |31.0% |

|TY12 |$348.01 |$5,629,159,220 |$17,242,302,370 |32.6% |

|TY13 |$420.53 |$6,803,976,520 |$18,100,946,150 |37.6% |

|TY14 |$651.55 |$10,526,289,150 |$20,404,203,890 |51.6% |

|TY14/TY05 |5.74 |5.79 |1.59 | |

Source: Ohio Department of Taxation PD32 data files, 2005-2014

Table three provides some insight into the rapid increase (and impending decrease) in CAUV values by showing the change in the prices of Ohio’s three leading crops (corn, soybeans, and wheat) from 2004 through 2015. The price of corn was four times higher in 2012 than it was in 2004, the price of soybeans was 2.8 times higher, and the price of wheat was 2.5 times higher. The prices of all three crops have decreased since 2012. Because these three crop prices are a key parameter in the CAUV formula, the increase and then decrease in CAUV values should not be a surprise.

Table 3: Ohio Corn, Soybean, and Wheat Crop Prices, 2004-2014

|Year |Corn Price Per |% Increase |Soybean Price Per |% Increase |Wheat Price Per |% Increase |

| |Bushel | |Bushel | |Bushel | |

|2004 |$1.85 | |$5.15 | |$3.15 | |

|2005 |$1.98 |7.0% |$5.74 |11.5% |$3.16 |0.3% |

|2006 |$3.08 |55.6% |$6.46 |12.5% |$3.35 |6.0% |

|2007 |$3.95 |28.2% |$10.10 |56.3% |$5.50 |64.2% |

|2008 |$4.21 |6.6% |$10.30 |1.2% |$5.82 |5.8% |

|2009 |$3.55 |-15.7% |$9.78 |-5.0% |$4.41 |-24.2% |

|2010 |$5.45 |53.5% |$11.50 |17.6% |$5.21 |18.1% |

|2011 |$6.44 |18.2% |$13.00 |13.0% |$6.73 |29.2% |

|2012 |$7.09 |10.1% |$14.60 |12.3% |$7.94 |18.0% |

|2013 |$4.41 |-37.8% |$13.00 |-11.0% |$6.54 |-17.6% |

|2014 |$3.78 |-14.3% |$10.30 |-20.8% |$5.60 |-14.4% |

|2015 |$3.80 |0.5% |$8.86 |-14.0% |$4.60 |-17.9% |

|2012/2004 |3.7 | |2.8 | |2.5 | |

Source: Ohio Dept. of Agr. Annual Reports & Tax Dept. CAUV Overview (May 28, 2015)

CAUV valuation is a significant component of total Agricultural property valuation. However, because CAUV is applied only to land (and not to buildings), and only to land actively used for farming (as opposed to other uses), CAUV and Agricultural valuation are not one and the same.

Table four shows how CAUV values have compared to Agricultural real property values from 2005 through 2014. The statewide share of Agricultural property value attributable to CAUV has increased from 20.6% in 2005 to 58.0% in 2014.

Table 4: CAUV Compared to Total Agricultural Property Value, 2005-2014

|Tax Year |State Total CAUV Taxable Value |State Total Agricultural Value |CAUV as % of Ag. Value |

|TY05 |$1,817,459,950 |$8,805,953,530 |20.6% |

|TY06 |$1,862,224,624 |$9,095,462,290 |20.5% |

|TY07 |$2,000,934,434 |$9,415,735,235 |21.3% |

|TY08 |$2,671,876,240 |$10,286,819,610 |26.0% |

|TY09 |$3,082,737,365 |$10,635,448,390 |29.0% |

|TY10 |$3,621,292,584 |$11,260,083,760 |32.2% |

|TY11 |$5,220,439,230 |$12,764,531,160 |40.9% |

|TY12 |$5,629,159,220 |$13,128,236,140 |42.9% |

|TY13 |$6,803,976,520 |$14,348,509,580 |47.4% |

|TY14 |$10,526,289,150 |$18,136,183,149 |58.0% |

Source: Agricultural values from Ohio Dept. of Taxation SD1 data files, 2005-2014

A final perspective on the impact that rising CAUV values have had can be found by examining the change in the extent to which Agricultural property now contributes to the tax base of Ohio’s school districts. Consider the following:

• In 2005, 97 districts had Agricultural property value in excess of 25% of Total Class 1 real property value

• In 2014, 220 districts had Agricultural property value in excess of 25% of Total Class 1 real property value

• In 2005, 44 districts had Agricultural property value in excess of 25% of Total property value

• In 2014, 178 districts had Agricultural property value in excess of 25% of Total property value

• The statewide increase in Agricultural real property value from 2005 to 2014 was 106.0%

• The statewide increase in Residential real property value from 2005 to 2014 was 0.4%

Implications of CAUV Changes

As a result of the large increases in CAUV values in recent years, the Ohio Farm Bureau is requesting additional changes to the CAUV formula beyond those made by the Department of Taxation last year. The primary change that they are requesting would be an adjustment to the capitalization factor that reflects the manner in which interest rates and property equity factor into the CAUV formula. The proposed change would further reduce CAUV values (which Table one showed are already on the way back down under the current CAUV formula).

The proposed change to the CAUV capitalization factor would have the following impacts on Ohio school districts:

1) There will be a tax shift towards residential taxpayers. This occurs because the HB 920 millage rollbacks are applied to Class 1 property as a whole in each school district and not separately to Agricultural and Residential property owners. Thus, when Agricultural property values are decreased due to the CAUV change, an increase in the effective class 1 millage rate will occur in order to maintain tax revenues at existing levels. The result is an increase in taxes for residential homeowners and a decrease in taxes on farmers.

2) Millage rates on new levies will need to be slightly higher in order to generate a given amount of revenue. This occurs because the overall property valuation in school districts with agricultural property will be lowered due to the CAUV change.

3) The State Share index (SSI) for all districts will be affected. This occurs because the proposed CAUV change will not only reduce total property valuation in districts with agricultural property, but will also change the statewide valuation per pupil measure upon which the SSI for each district is based.

................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download