Farmer-friendly taxation


by Mike Kroll


If you read Sunday's Register-Mail you can be excused for thinking that the market value of Knox County farmland is in decline. The simple fact is that local sale prices of farmland are doing quite well, thank you. What the Sunday feature story in the Register-Mail, headlined “Farmland values failing” actually referred to was the equalized assessed value of local farmland, which unlike all non-farm property taxes, bears absolutely no resemblance to fair market value of the land. According to actual farmland sale records for 2005 obtained from Knox County Supervisor of Assessment Joyce Skinner's office over 5,300 acres of farmland has sold so far this year at an average price per acre of $2,442.

With farmland sales exceeding $13 million this year to-date, you cannot really say that the bottom has fallen out of the agricultural real estate market in Knox County. What you can say is that the current system of farmland property tax assessment is ridiculously rigged in favor of the owners of farmland. That same data from Skinner's office showed that the total equalized assessed value of the $13+ million farmland that has sold in 2005 is less than $3 million!

The reason is simple, farmers and their lobbyists in Springfield have been very successful in getting the property tax system manipulated in their favor. While all other real property is taxed on the assessed market value farmland is assessed on a complicated formula “based on income, productivity and yield” according to state statute. Township assessors are responsible for determining the market value of all non-farm property in their township and the County Supervisor of Assessments is responsible for assuring that this process is applied fairly and uniformly across the county. Neither plays any significant role in determining the value of farmland for the purposes of property tax calculation.

The mysterious and little understood process by which farmland values are determined is conducted in Springfield. First, the State Farmland Technical Advisory Board collects data on farm productivity across the state and each county provides farmland property descriptions including the amount of acres devoted to cropland, permanent pasture, other farmland and wasteland. Local officials then determine the correct soil type, slope and erosion by acre and use according to a document published in 2000 by the University of Illinois entitled “Average Crop, Pasture, and Forestry Productivity Ratings for Illinois Soils” but commonly know as “Bulletin 810.”

This is an elusive document. I was unable to locate an actual copy of this document in Skinner's office or the offices of County Clerk Scott Erickson, County Treasurer Robin Davis or the Knox County Farm Bureau. It seems that while Skinner has had a single copy of this document in her possession she has lent it to a member of the Knox County Board of Review. I was saved by an e-mail from Erickson that provided an Internet link to a PDF copy of this document. Counties are mandated to convert the the processes described in Bulletin 810 by the 2006 assessment year as opposed to the former “weighted tract method.” The Department of Revenue then “compiles data and calculates agricultural economic value for each soil productivity index” and formulates farmland assessment values based on this index which are then provided to the County Supervisor of Assessments office.

The end result of this process is to drastically reduce the taxable value of farmland across the state. The only type of property that is treated more kindly for property tax purposes is that owned by railroads (but that's a story for another time). Out of a total of 76 farmland transactions so far this year reported by Skinner's office only one sold for less than the assessed value. In every other case the sale price for the land exceeded the value utilized for the calculation of property taxes. And we're not talking about minor differences either. Those 76 farmland parcels that sold for $13,089,611 were taxed for a mere $2,932,029 – less than a quarter of the fair market value. Some cases were especially egregious. For example, one parcel of 10.28 acres sold for $30,000 yet was valued for property taxes at just $90 meanwhile a 20.8 acre parcel taxed at a value of $330 sold for $44,000 – both in September. More representative is the January sale of 335.76 acres for $673,380 taxed as $71,550; or a June sale of 156.83 acres for $387,100 and taxed as $103,140.

In instance after instance these farmland sales regularly sold for three, four or five times the value used to compute property taxes. There is no way for someone like myself to accurately determine how well the complicated regulations have been applied but it seems very clear that owners of farmland are benefiting from highly favorable treatment in determining property taxes. Farmers and their lobbyists claim that this is necessary to agricultural uses of land but the system hardly seems fair. When you consider that farmers glean their livelihood from this land, often grossing millions of dollars annually while many residential property owners are pay much higher taxes on homes that yield no income.

This is a problem that disproportionately affects downstate counties as very little of Cook County or the collar counties are classified as farmland. The suburban area surrounding Chicago provides a rich environment for property taxes while the rural downstate counties are witnessing declining equalized assessments and an eroding property tax base even as farm property sales are strong. The biggest victims are the school districts and community college districts that are heavily dependent upon property taxes while the Illinois legislature continues its practice of underfunding education. The fault here has nothing whatsoever to do with either the general or agricultural economy of Illinois and everything to do with catering to the special interests of the very potent agricultural lobby in this state.