A new way of calculating residential property tax -- adjusting for whole neighborhoods instead of on a property-by-property basis -- will be rolled out in one Ohio county, with an eye toward statewide adoption. Designed to "fix" perceived unfairness, I still see problems with this concept.
But FAR more problematic is Ohio's practice of taxing agricultural land based on current agricultural use valuation (CAUV). Its not he practice, per se, that is wrong. But that if a land owner disagrees with the assessment there is no legal means to challenge the audit value.
Here is the looming problem that will definitely see news coverage in the coming 12-18 months. As commodity prices (corn, soybeans, etc.) spike, Ohio farm property taxes will see dramatic increases. While the valuation has generally been fair -- considering we have had more than a decade, until recently, of low prices paid for grain -- farmers are in for a fiscal whammy when they see their next tax bills.
Ohio farmers are going to see a large increase in their valuations due to state soil values, said Licking County Auditor Mike Smith at a meeting of Central Ohio real estate professionals and affiliated service providers. "Locals have no control over that and the property owner has no right to appeal, so its kind of a double whammy," he told those attending the meeting. "They'll see that next year, on their 2011 taxes payable in 2012. There is nothing you can do about it."
Wow! Nothing? Not for long, I would think. Individual farmers, the Ohio Farm Bureau, Ohio Agricultural Union and others will have something to say about it, as will rural resident/property owners who do not farm, but instead rent their farmland to professionals who grow food. Clearly, all involved will not be pleased to see their land taxes spike. Amazingly, there does seem to be no appeals mechanism at the state or local level. With commercial and residential properties, however, owners can petition to have their property taxes reduced by providing evidence through sales comparables that similar nearby properties are selling at far lower values.
Under current state law, property valuation of land used for agriculture is based on crop prices, and since these prices have been rising dramatically around the world, property values follow. Smith noted that huge increases have been seen in Fairfield County, and the people there are "grabbing pitchforks," a euphamism for rallying against taxes and demanding changes from lawmakers.
The current formula says that owners are making so much money off the soil. As corn prices and bean prices go up, soil values go up. And Ohio's six-year cycle means the jump in valuation is a big one when it comes.
Smith was a featured speaker at an area real estate association. He outlined another issue facing his office, specifically the perceived unfairness of property-by-property valuation (for taxes) adjustments. He said most of Ohio's 88 counties re-appraise on a three-year cycle. Licking County Auditor Mike Smith says market-adjusting valuations of individual properties as they transfer was either genius or it was stupid. So the plan is to adjust for entire neighborhoods, so that similar properties pay similar taxes.
I see problems here also that could impact investors or existing homeowners. There are homes of varying values in any neighborhood, based on their condition, rental income, etc. But equalizing values as an alternative to "huge inequities?" Where are the huge inequities. The value of the sale is the value of the sale. The intent is for similar properties to pay similar taxes. But that smacks of the practice of some police and sheriffs who "selectively enforce" traffic laws. Specifically, picking out one or two automobiles to chase for a speeding or other traffic infraction when far more are breaking the law.
Selective enforcement in law enforcement is harshly frowned upon. So how can it be okay wrong to market adjust at the time of each sale, and try to "equalize all the values?" I'm sorry but frankly this sounds an awful like the words coming out of Washington, whose White House leaders continue to talk of "spreading the wealth."
Keep tuned. Farmers with pitchforks upset over their land taxes, and homeowners unhappy with "neighborhood valuation" as opposed to property-by-property valuation may well be two giant political issues here in the Buckeye State. Will they have an impact on elections later this year and into 2012. Who knows?