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 ÒFarmland values failingÓ 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 Òbased on income, productivity and yieldÓ
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 ÒAverage Crop, Pasture, and Forestry Productivity Ratings for Illinois
SoilsÓ but commonly know as ÒBulletin 810.Ó
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 Òweighted tract method.Ó The
Department of Revenue then Òcompiles data and calculates agricultural economic
value for each soil productivity indexÓ 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.