Virginia s Use-Value Taxation: Past, Present and Future Agricultural and Horticultural

Transcription

1 Virginia s Use-Value Taxation: Past, Present and Future Agricultural and Horticultural Virginia Association of Assessing Officers Education Seminar July 17, 2013 Charlottesville, Virginia Gordon Groover and Lex Bruce Department of Agricultural & Applied Economics Virginia Tech (540) groover@vt.edu (540) lbruce@vt.edu Web site:

2 Objectives What s New Overview/Present How the model works The past Fortran, Lotus, Access, Oracle Future Changes in Rural and Urban VA Questions 2012 Survey Results

3 Agricultural/Hort: 92 counties/cities Forest: 75 counties/cities Open Space: 53 counties/cities

4 What s New? Revised SLEAC Manual FAQ s Rental rate approach (begin 2010)

5 Agricultural and Forestal Districts 2011 General Assembly simplified the process Can be considered an alterative to a jurisdiction-wide ordinance See SLEAC Manual for details

6 Agricultural and Horticultural Estimates

7 Two Approaches 1. Net income Capitalized (Income Approach) 2. Rental rates Capitalized (Rental Rate Approach)

8 Income Approach Use only published secondary sources The Composite Farm The county s composite farm is a typical farm within the county Crop acreage from latest Census of Agriculture current to be published in 2014 Only crops with 1 or more acres in the composite farm are considered. Calculations are: Acres of crop number of farms 1 acre

9 Prince Edward County TY2013 (DY2013 Crop Budgets and DCP Payments) Total Acreage Composite Farm (Acres) Estimated Net Return($/Acre) 1. Number of Farms Corn 1,540 3 $ Alfalfa $ Hay 14, $ Wheat Barley Soybeans Potatoes Cotton Pasture 19, $ Peanuts Tobacco Snap Beans Cucumbers D Pumpkins D Sweet Corn Tomatoes Watermelons D Double-Cropped Total 36, $3.59

10 Prince Edward County TY2013 Capitalization Use value = Net Use Value: $3.59 Capitalization Rates: Net Return Capitalization Rate a) Interest rate component (10 year straight AVG) b) Property tax component (10 year straight AVG) c) Rate without risk (a + b) d) Risk component (0.05 times c) e) Rate with risk (d + c) Unadjusted Use Values: w/out risk with risk = $3.59/ = $3.59/ = $51.26 = $48.82

11 Income Approach Prince Edward County TY2013 Table 1a: Estimated use-values of agricultural land by jurisdiction. Estimates apply to tax-year 2012 Cropland Pastureland Prince Edward I II III IV AVG I-IV V VI VII AVG V- VII AVG I-VII W/Out Risk W/Risk VIII

12 Westmoreland TY2012 Jurisdictional Profile Differences Number of farms = 171 Type III (w/o risk) $430 Wise TY2012 Number of farms = 178 Type III (w/o risk) $10 Rockingham TY2012 Number of farms = 1,970 Type III (w/o risk) $430 Henry TY2012 Number of farms = 340 Type III (w/o risk) $0

13 Rental Rates TY2012 Annual Estimates Table 1: Cropland and pastureland values based on NASS 1 capitalized rental rates Jurisdictions Counties Capitalization Rate Cropland Irrigated cropland Pastureland Rental Rate $/acre 1 Value $/acre 3 Rental Rate $/acre 1 Value $/acre 3 Rental Rate $/acre 1 Value $/acre 3 Accomack ep 490 Albemarle Alleghany wc wp 260 Amelia Amherst Appomattox Arlington nc np 300 Augusta Bath Bedford Bland swc Botetourt Brunswick Buchanan swc swp 130 Buckingham Campbell Caroline

14 Income and Rental Rate Approaches Compared TY2012 Income (Averaged) Cropland Rental Rates (Annual) Cropland Class III (w/o risk) ($/acre) ($/acre) Accomack Albemarle Alleghany Amelia Amherst Appomattox Augusta Bath Bedford Bland Botetourt Campbell Caroline Carroll Chesapeake Chesterfield

15 Real Net Farm Income Virginia $/farm $25,000 IPD Index, 2005=100, BEA $20,000 $15,000 $10,000 $5,000 $- Data, Economic Research Service/USDA, years

16 Past Census data farms with sales >$10K Budgets developed for geographic regions Limited number of urban fringe counties Virginia was a rural state Quota crops peanuts and tobacco USDA data, prevalent Data was hand entered Hardcopy publications only

17 Ag Census for 2014 and on Future Non-disclosure creep in urban fringe counties Non-disclosure less that 5 large farms in one jurisdiction, no data VA is now urban state NASS definition of a farm ($1,000 of gross sales), e.g., lifestyle and hobby farmers (where s the profit motive?) H.R. 1638: Census Reform Act of 2013 repeals Ag Census GovTrack.us said, no chance of passage

18 Market information Future Federal and VA cutbacks in funding for NASS and VDACS leading to limited number of reports Council on Food, Agricultural, and Resource Economics (C-FARE) requested info on use of NASS data - life blood of economist Non-disclosure of prices and or yields Direct verse wholesale prices (fruit) Single buyer fruit/vegetables Contract production, e.g., peanuts, tobacco, grapes, fruits, vegetables,

19 Future Funding for program maintenance, e.g., enterprise budgets? Questions on state funding Good now line item in TAX budget Future Secretary of Finance request to GA How to match budget needs with state revenue Composite Index Use-value and Ag and forestal districts Conservation easements

20 Future Conservation easements if Not farmed, not timbered, not open space Then, what is it? Control of land - lease verse own Definition of agriculture Covenants that prohibit farming Cyclical nature of Ag Land owners pleading for farmers to farm my land

21 Thanks! & Questions? usevalue.agecon.vt.edu

22 Participation in 2012 Use- Value Survey Of 134 counties and cities, we received 109 completed surveys About 80% participation Director 6% Individuals Completing the Survey Other 18% COR 57% Assessor 19%

23 RESULTS

24 Conservation Easements 72% of the jurisdictions who responded have conservation easements Easements are valued using a variety of methods

25 How are easements valued? Other 30% Ag and Hort 31% Property value less value of the donated easements 5% Open Space 14% Forestry 20% *Other valuation methods include Farm Bureau input, current or historical SLEAC values, adjustments on a case-by-case basis, etc.

26 Use-Value Program Of the 109 responses, 73 have use-value assessment programs or agricultural/forestal districts Northampton County is the only jurisdiction (who responded to the survey) with a district program but not a use-value ordinance

27 Use-value participation broken down 120% 100% 96% Percent Responses 80% 60% 74% 56% 40% 38% 20% 0% Ag and Hort Forestry Open Space Ag/Forestry Districts

28 Application Process Information Required Initial Application Validation Minimum acreage requirements 65% 54% Affidavit 50% 44% A nutrient management, conservation, and/or timber management plan Participation in government programs to improve environmental quality A copy of the owners IRS 1040-Schedule F (farming) or 1040-Schedule T (timber). A copy of the farm lease or an affidavit from the tenant stating the land is actively farmed 41% 26% 28% 19% 39% 41% 49% 46% Physical inspection of participating tract. 31% 37% Other: Some form of production or income history documentation, management plan...

29 Specialty Crops None (0%) of the respondents indicated that their jurisdiction had adopted an ordinance that reduced the minimum acreage for specialty crops in the program.

30 50% 45% Hours/week dedicate to monitoring participating land 44% 40% 35% 30% 25% 25% 20% 15% 16% 14% 10% 5% 0% > 100 no answer 2% 0%

31 SLEAC Estimates: Agricultural In establishing horticultural use values, SLEAC estimates are: No answer, 25% Used verbatim, 22% Not considered, 19% A major factor, 26% A minor factor, 8%

32 SLEAC Estimates: Horticultural In establishing agricultural use values, SLEAC estimates are: No answer, 27% Used verbatim, 20% A major factor, 24% Not considered, 19% A minor factor, 10%

33 SLEAC Estimates: Forestry In establishing forestry use values, SLEAC estimates are: No answer, 29% Used verbatim, 17% A major factor, 19% Not considered, 25% A minor factor, 9%

34 SLEAC Estimates: Open Space In establishing open space use-values, SLEAC estimates are: Used verbatim, 13% No answer, 37% A major factor, 15% A minor factor, 7% Not considered, 28%

35 SLEAC Estimates: Agricultural and Forestal Districts In establishing agricultural and forestal district use-values, SLEAC estimates are: Used verbatim, 7% A major factor, 10% No answer, 46% A minor factor, 6% Not considered, 30%

36 Open Space Valuation Most respondents indicated that their jurisdictions uses a combination of agricultural and forestal SLEAC estimates to value non-golf course or park open space.

37 Rental Rate Approach Of the respondents with use-value programs, 49% were not aware of the rental rate approach, 26% were aware, and 26% did not answer Yes, 26% No anwser, 26% No, 49%

38 Rental Rate Approach A majority of those who are aware use the estimates in conjunction with other SLEAC estimates or do not consider them at all. Used verbatim, 1% A major factor, 7% A minor factor, 3% Use other SLEAC, 5% No answer, 72% Not considered, 12%

39 GIS Of those with use-value programs, most do not employ GIS when tracking property values Jurisdictions that do employ GIS use it to classify land uses, determine soil class acreage, etc. Yes, 25% No anwser, 27% No, 50%

40 Ag and Hort Understanding of SLEAC Methodology My understanding of the SLEAC methodology for estimating the use values is sufficient for me to make proper use of these estimates. Strongly agree, 8% No answer, 26% No opinion, 21% Agree, 36% Strongly Disagree, 6% Disagree, 12%

41 Forestry Understanding of SLEAC Methodology My understanding of the SLEAC methodology for estimating the use values is sufficient for me to make proper use of these estimates. Strongly agree, 5% No answer, 26% Agree, 30% No opinion, 27% Strongly Disagree, 6% Disagree, 7%

42 Open Space Understanding of SLEAC Methodology My understanding of the SLEAC methodology for estimating the use values is sufficient for me to make proper use of these estimates. Strongly agree, 3% No answer, 29% Agree, 26% No opinion, 31% Disagree, 7% Strongly Disagree, 4%

43 Questions When you have questions about the use-value taxation program to whom do you turn for answers or insight? 40% 35% 30% 25% 20% 15% 10% 5% 0% COR TAX CODE VT & SLEAC Other

44 Thanks! & Questions? usevalue.agecon.vt.edu