The CAUV Battle: Farmland Valuations VS. School Funding

Jun 6, 2017

Farmers all around Ohio are turning to lawmakers to help fix what they see as a major crisis. Taxes on their land have been soaring. But making a change to the tax formula could do some damage to a different industry.

“This field here this is just under ten acres in this section. So it goes all the way back to the tree line that’s behind the grain bin.”

Brushing through his vast wheat field in Union County, Ron Grayson Burns explains how farming consists of making important business decisions every day.

“If you buy something now is that going to be good for the short term or something more of a long term investment.”

He points to his tractor and planter sitting on the gravel lot that leads up to the barn. The equipment is bigger than what Burns needs for the land he’s currently farming, but he hopes to expand his business.

“I hope to get at least eight years out of those so those are things that I can work in now but I want my operation to grow so having a larger planter instead of that 6-0 I know that it’ll fit my operation for the next five or six years."

But Burns and farmers all around Ohio are running into a major dilemma. Valuations on farmlands are increasing which means they’re seeing their property taxes skyrocket by as much as 300%.

As Burns puts it, the hike in taxes puts a lot of stress on the already challenging balancing act of running a farm.

“That’s when you go back to that pen and paper and you start looking to see what you need to do. Do you cut some cost of living for that time? Cause you still want to have a quality product, you still want to be good stewards of the land so you still want to maintain those aspects of your farm. But then where do you have to cut,” said Burns.

This all goes back to what’s known as the Current Ag Use Valuation, or CAUV. This formula calculates the tax value of farmland. The CAUV is a big, complicated formula with several variables. Agriculture advocates believe the cause of the jump is tied to what’s known as the Equity Capitalization Rate, which is based off of the federal interest rate. Since the federal interest rate has been held low, the valuation has gone up.

Leah Curtis with the Ohio Farm Bureau Federation says there are proposed changes in the state House and Senate which would take that factor out of the equation.

“The solution is to correct those assumptions in the calculation and make sure they are more closely tied to the farm economy so that’s things like making sure that equity rate is tied to actual farm equity rather than just the national interest rate,” said Curtis.

This is a fight that’s been brewing for a while at the Statehouse. That’s because, while the proposed change might bring down farmers’ taxes, it could also result in a big funding cut for schools.

Damon Asbury is with the Ohio School Boards Association. He says the proposals in the House and Senate could cut funds by as much as $20 million a year collectively from school districts around the state.

Asbury understands the adversity farmers are facing with the higher taxes, but he believes lawmakers are rushing into a solution without thinking it through.

“What we do have concerns about is what would appear to be a relatively rapid change without understanding the implication for both schools and local government and other taxpayers because the way the Ohio tax structure is assigned when one taxpayer pays less, others will pay more.”

According to Asbury, that jump in rates already seems to be leveling out on its own, and rates might not be too high in the next valuation. However, his group does believe an independent panel should look into a solution.

“It may very well be that some are antiquated like the capitalization rates. But on the other hand we’re not believing that the industry itself should be recommending the solution because it affects everyone, taxpayers, local government. We think that an independent commission that looks at the factors and comes up with a fair recommendation that would treat all fairly would be the right step,” Asbury explained.

Back in Union County, Burns’ farm is just five miles away from where he graduated from Fairbanks High School. He says he understands the importance of investing in education and community. Burns adds that changing the CAUV formula is a balancing act, just like running a farm, to make sure everyone’s paying their fair share.

“We don’t want it for a selfish reason and we don’t want it cheaper we want it to be accurate and that’s what the goal is,” Burns said.

The CAUV change is part of the House version of the budget, which is now in the Senate. And the Senate passed a stand-alone bill to make that change, and it’s now in the House. Either way, lawmakers could approve a change to the CAUV as early as this month.

The largest batch of farmers are preparing to be valuated again for new tax rates by the end of this year.