Battle Ground News

Homeowners expect to pay higher property taxes if they construct additions to their houses that increase the property values. So it is for farmers. When farmland is more profitable, landowners pay higher property taxes, and Larry DeBoer, Purdue Extension agricultural economist, says property taxes on farmland will continue to increase through 2015 -- and likely beyond that. 'I would assume they're going to go up,' said Jim Fields, who farms near Battle Ground, reacting to the news. 'With everything else ... this is just putting us in a squeeze.' The squeeze comes from the state's capitalization formula that takes several items into account in creating a base rate to assess an acre of farmland. Among the elements to the formula are commodity prices, farmland rental prices and interest rates. Over the past decade, farmers have seen commodity prices increase, farmland rental prices increase and interest rates drop. In short, farmland is more profitable today than it was 10 years ago, when the opposite was the case. This translates into a higher base rate and higher property taxes. Complicating the issue is that the formula is based on six years of data, and there is a four-year lag between the data gathered and implementation of that data into the property taxes. For example, the base rate in 2007 was $880 an acre, based on figures from 1998 through 2003. Last year, the base rate was $1,290 an acre based on figures from 2002 through 2007. This year, the base rate, calculated on stats from 2003 through 2008, is $1,500 an acre. With the four-year lag, DeBoer noted it was possible to calculate the base rate for 2015 -- $2,030 an acre. As it is with residential property, the assessment multiplied by the property tax rates, less any credits, is the tax bill, DeBoer wrote in his Jan. 27 column titled 'Capital Comments.' In an attempt to provide property tax relief for farmers, the General Assembly in 2010 tweaked the capitalization formula, allowing assessors to average the figures of the lowest five of the six years in the formula. 'That's reducing the assessed value of farmland about 10 percent,' DeBoer said. In his column, DeBoer noted that 2002 figures were favorable for keeping property taxes low, and the figures from 2007 were notably higher. But the tax relief dropped 2007 figures from the formula. Now, 2002 has fallen off the capitalization formula and is replaced with 2008 figures, and although 2008 figures were dropped from the formula for this year, 2007 figures remained in the mix. The profitable farming years that started in the mid 2000s will continue to drive up the capitalization formula. 'It's an increase of cost,' Fields said, reacting to the forecast of increases in the base rate. 'You buy more fertilizer, hopefully you get more yield. You pay more taxes, you don't get any more yield. 'It certainly doesn't help.' Some farm expenses are unknowns, but property taxes are something predictable, DeBoer said. 'We know this is going to happen,' DeBoer said. 'Property taxes are going to be higher, so plan for it.' In the northwest part of the county, AJ Booher isn't too worried about higher property taxes. That's not to say he's happy about it. 'I'll lose a lot more sleep over the price of corn going up or down,' Booher said, noting that last month the price of corn dropped 40 cents in a matter of minutes. In the grand scheme of things, property taxes are a small piece of his farm operation's expenses. The property tax reforms recently adopted into the Indiana Constitution won't help farmers either. Farmland was capped at 2 percent of the assessed value. None of the farmland in Tippecanoe County came close to the cap relief, Tippecanoe County Treasurer Bob Plantenga said last week. And if assessments go up, the caps get higher. No one has a crystal ball, and the only certainty for the base rate is through 2015, DeBoer said. But if one wants to speculate: If commodity prices stay high, farmland rental prices stay high and interest rates low, base rates will continue to increase.

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