COLUMBUS -- The Ohio Senate passed legislation Wednesday aimed at addressing skyrocketing farmland property tax bills, about a week after the Ohio House added its own reform package to the biennial state budget bill.
The measures are similar, and the Ohio Farm Bureau Federation and other agricultural groups are supportive of both.
SB 36 passed the Ohio Senate on a unanimous vote and heads to the Ohio House for further consideration.
Whether that bill or the House-passed budget amendment is the ultimate vehicle remains to be seen. Senate President Larry Obhof (R-Medina) said he expects the law changes to pass one way or the other.
"Both chambers agree that something needs to happen to provide relief to our farmers across the state," he said. "I think we all recognize that doubling the cost of your taxes every three years is not an acceptable outcome."
SB 36 focuses on the way the state taxes farmland, via a current agricultural use value, or CAUV, determination that takes into account farm income, soil types, seed and fertilizer and other production costs, mortgage rates and other factors.
The system was set up in the early 1970s as a way to keep property taxes on agricultural acreages lower than developable parcels -- that is, taxed for their agricultural value rather than the fair market value. The result, backers say, is farmers continuing to farm their land rather than developing it for residential, commercial or other uses.
But over the past 6-10 years, farmers' tax bills have doubled or tripled, thanks for a combination of lower interest rates and other factors that have skewed the CAUV formula, said Sen. Bob Peterson (R-Sabina), who is a farmer.
"Farms across the state, every three years, their taxes have doubled," he said. "If you were paying $10,000 nine years ago, six years ago you paid $20,000 three years ago, you paid $40,000 These numbers get real big, real fast."
Sen. Cliff Hite (R-Findlay), primary sponsor of the Senate legislation, said the resulting tax bills have been unmanageable.
"What we're trying to do is help farmers manage that tax situation," he said. "It's about relief and it's important that we give people that are involved in our No. 1 industry in the state of Ohio that type of relief Supporting this legislation ensures that the formula sticks to valuing farmland based on ag production."
SB 36 would address the issue by tweaking the CAUV formula to make it more accurate. Additionally, the bill would ensure farmland set aside for conservation measures is taxed at a lower rate than fields being used for row crops.
"I think it's very fair," Peterson said. "I think the agricultural community, they believe that the CAUV land rates have been skewed higher because of the equity rate that was used. This fixes that. This makes it an accurate formula and a fair tax policy."
Peterson said the legislation moved by the Senate Wednesday is similar to the House amendment OK'd earlier this month, though SB 36 phases the changes in over three years, versus a six-year phase-in included in the budget, among other changes.
"The agricultural community has been between a rock and a hard place," said Rep. Kirk Schuring (R-Canton), who worked on the CAUV amendment included in the House-passed budget bill. "They've seen exponential increases in property values, in some cases 300 percent or more, and then farm income has been down dramatically, the second lowest since the 1920s. We have to modernize the formula, and the modernization that we put in the House version of the budget will say that the equity rate would be based on farm income [statistics] disseminated by the U.S. Department of Agriculture."
Though the Senate vote Wednesday was unanimous, Sen. Joe Schiavoni (D-Boardman) voiced concern about the impacts of the legislation on school budgets. An analysis by the state's Legislative Service Commission noted possible losses of up to $20 million annually after fiscal 2019 for districts and other local governments, due to lower tax values on CAUV-enrolled lands.
"There's no doubt that [CAUV reform] is necessary," Schiavoni said. "But to put some of the burden on the school districts, I think it may be the straw that broke the camel's back in some school districts."
As for what happens next, Obhof said the changes would fit "in the budget pretty well because there are so many other tax- and spending-related provisions in there. As a standalone bill, it's fine, but it fits much more naturally in the budget than a lot of other things do."
Schuring added, "It really is something that I think is best placed in the budget, because there are so many moving parts in the budget that deal with local governments and schools."
Marc Kovac covers the Ohio Statehouse for Gatehouse Media. Contact him at firstname.lastname@example.org or on Twitter at OhioCapitalBlog.