4266 Tuller Road
Dublin, OH 43017
CAUV Values Increase
Robert Moore
Current Agricultural Use Valuation (CAUV) allows farmers to pay real estate taxes on the agricultural value of their farmland instead of the fair market value of the farmland. To use an actual example, a 54 acre parcel in Delaware County has a fair market value of $171,500 ($3,175/acre) and a CAUV value of $8,860 ($164/acre). If taxes were paid on the fair market value, the owner would pay $2,712 annually. However, by enrolling the property in CAUV, the owner pays $307 in annual taxes, a savings of $2,405 ($45/acre) each year.
The intent of CAUV is to allow farm land owners to pay tax on their land based on their use of the land. As local government and school board budgets become tighter and tighter, CAUV is scrutinized more and more. Critics of CAUV claim that it is unfair that a specific group of people, farm land owners, pay less in real estate tax while the rest of the population does not receive such a benefit. However, studies show that even at CAUV value, farmland generates a net return to the community because of the low services required by farmland. Conversely, residential properties, even when taxed at full value, tend to consume more in public services than it generates in tax revenue. The point being that budget deficits are more likely caused by consumption of services by residential property than it is by CAUV.
CAUV values are calculated for each of the 3650 soil types in Ohio. This calculation is based on a formula containing the following five factors:
- Cropping Pattern – combination of corn, soybeans, wheat, and hay typically grown on the soil type
- Crop Prices – based up a survey of Ohio elevators
- Crop yields – based up Farm Service Agency yield for each soil type
- Non-land production costs – based up enterprise budgets developed by Ohio State University
- Capitalization rate – based upon the average Farm Credit Service rate on a 15 year loan and the previous five years average interest rate
Using these five factors, the Ohio Department of Taxation calculates the CAUV for each soil type in Ohio. The county auditor then applies these CAUV rates to each CAUV property in the county.
The county auditor is required to reappraise the value of the land in the county every six years and to update the value of the land based on sales the third year of ever six year reappraisal period. The CAUV values are updated when an appraisal or update is performed in the county. Therefore, CAUV values are adjusted at the same time that the value of all land is adjusted in the county – every three years.
Recent reappraisals and updates in counties have caused a significant increase in CAUV value causing concern for many land owners in Ohio. The question often arises as to why there is such a dramatic increase in CAUV values. The answer to this question involves several factors.
First, CAUV values were at a record low rate from 2000 – 2005. Therefore, any increase in CAUV value will appear to be large when the previous CAUV value was very low. Second, according to Ohio Farm Bureau, Farm Service Agency yields were discovered to be too low and were increased significantly in 2006 to reflect the true yields on Ohio soils. For example, Millgrove Silt Loam went from 144 bu./acre to 170 bu./acre for corn. Lastly, the capitalization rate decreased due to lower interest rates. A lower capitalization rate causes higher land values. The three factors, particularly the yield adjustment, cumulated in a rather dramatic increase in CAUV values.
Land owners have the right to appeal the value placed on their property by the county auditor. This appeal process begins at the county level but can go as high as the Ohio Supreme Court. Most appeals involving CAUV pertain to the eligibility of certain property for CAUV but CAUV values could be challenged as well. However, the formula for determining CAUV values is well established, has been used for many years, and is grounded in sound principles. Therefore, appealing the actual CAUV values would likely be a difficult appeal to win.
