Farm owners across Southern Illinois are facing higher property taxes, as a new law pushes up assessments on their land much faster than the rest of the state.
Ironically, legislators wrote the law to address runaway assessments in the first place.
For the past 30 years, there has been a 10 percent cap on the amount farmland assessments can change. During that time, Southern Illinois farmers benefited because their land wasn’t assessed as high as the rich soil north Interstate 70.
For example, if an acre in St. Clair County is worth $10, and an acre in Champaign County is worth $100, with a 10 percent increase, the following year those acres would be assessed at $11 and $110 apiece. The first acre’s assessment increased by $1, and the second one increased by $10. Keep adding 10 percent to those acres for 30 years, and you have a pretty big disparity in land values.
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So the new law, passed in 2013 and first applied this year, changed the 10 percent cap. Previously, farmland was assessed by the productivity of different types of soil. Now, assessments will change by the same flat amount, based on a 10 percent cap on the mid-range type of soil.
When property tax bills were mailed out earlier this year, the sticker shock surprised many, but the time line of the new tax structure may surprise them more.
The Illinois Farm Bureau estimates that the cap adjustment could take between 15 and 20 years to even out assessments.
Finding a solution
The cap change ensures that soil values catch up to “the formula that was originally written into the law,” Brenda Matherly of the Illinois Farm Bureau said, referencing the initial Farmland Assessment Act, which was passed in 1977.
Back then, she said, farms were assessed at fair market value, which was often set at the high rate that developers would pay for the land. It was a great bargain for sellers — at one point, Illinois was developing 100,000 acres a year, according to Matherly — but it made the land unaffordable for other farmers.
The Farmland Assessment Act changed farmland assessment from fair market value to be based on soil productivity, but over the next decade, the price of farmland plummeted, Matherly said. Taxing bodies reeled as their revenue fell, especially those in rural areas, which relied more on farms. So, in 1986, the legislature passed a law that set a 10 percent limit on changes in assessed value.
The update gave local governments a better idea of how much money they could expect to take in, but after the change, the economy improved, and the value of farmland has risen ever since. After 30 years of growing disparities in assessments, lawmakers decided to take corrective action.
“Nobody likes their taxes being increased,” said Tom Jett, of the St. Clair County Farm Bureau. When he and Matherly were at a meeting to explain the new cap to farmers in early August, quite a few people were upset, he said.
Some of the misunderstanding among farm owners centered on the difference between assessments and taxes. When farmers got their annual tax notice, many, zeroing in on the percent increase, confused the two.
The Farm Bureau also explained how far apart assessments had gotten. Last year, the value of land with the poorest soil increased by $1.39 an acre, and the value of land with the best soil increased by $58.72. This year, land with all soil types increased by $15.33, after a one-time rebate of $5 to make the transition easier.
This year, the rate of assessed value for Illinois’ best soil slowed from an almost 10 percent increase from the 2013 to the 2014 tax year to a 2.4 percent increase the following cycle, after the $5 rebate.
Luckily, by the end of Matherly’s presentation, there weren’t a lot of questions.
“Most farmers have some level of understanding of how farmland is assessed,” Jett said. The cap change, he added, was “probably the best solution they could have come up with.”
David Tiedemann, a St. Clair County Board member, is one of the corn and soybean farmers who was taken aback by the initial increase in his assessment.
This year, he paid taxes on 17 parcels, 14 of which he has either owned or co-owned for the past three years. They totaled about 509 acres.
Before the cap change, Tiedemann’s assessments on the 14 parcels increased from about $63,000 to $68,000, or 7.45 percent. After the cap change, they increased to about $75,000, or 10.35 percent.
Tiedemann went to the county assessor’s office to see whether he should protest the increased assessments. There, he said, he met a couple guys at the courthouse who were also there to protest their bills. They thought it was a clerical error. Then they saw how it’s calculated and understood better what was going on.
“(It’s a) fairly good way, a mode, of computing taxes for farm ground,” Tiedemann said.
Before the cap change, Tiedemann’s farmland taxes on the 14 parcels increased from $4,100 to $4,600, or about 12.5 percent. After the cap change, they increased to about $5,300, or 15.3 percent.
The cap change “didn’t affect it a whole lot,” he said of his $700 increase in taxes.
The new rate Tiedemann paid was a little less than the rate for St. Clair County farmland. Here, they rose 14 percent in the year before the bill to 16 percent this year.
About 63 percent of St. Clair County is farmland, according to the assessor’s office.
The University of Illinois devised the scale for ranking soil productivity, which goes from 82 to 130. The median soil productivity index, the type that the new assessment standard is based on, is 111. The average in St. Clair County is 101, which is slightly better than other counties in the area, many of which rank in the 90s. Madison County’s is 103.
Less than 4 percent of crop land in Illinois has a productivity index of 82, according to Matherly, of the Farm Bureau. The worst average countywide belongs to Johnson County, near the Ohio River, at 89.
Finding a smoother transition
Although the cap change doesn’t affect taxes all that much, some think that it could have been rolled out better.
“It should have been corrected earlier,” Tiedemann said.
He suggested the legislature review farmland assessments every 10 years, because some counties, like Johnson County, depend more on farmland assessments to fund local governments. “It’s not fair to the schools,” he said.
Grain prices were better in 2013 and 2014, and it would have been easier to adjust financially then, he said. Every expense adds up.
“Farmland assessments are only half the equation,” he said. If school boards didn’t raise their levy every year, then the assessments wouldn’t go up as much. The cap forces people to be more vigilant about who controls their taxes, he said.
Tiedemann decided against protesting his tax bill, and the last date to do so already passed for most townships. For farmers who live in St. Clair Township, the deadline is Sept. 28.
Here’s a snapshot of the final assessed values for land with the worst, middle and best soil productivity levels. The values are ordered by tax year, whose bills are paid in the following calendar year. In the current 2015 tax year, the first to which the new law was applied, farm-owners received a $5 rebate, which is reflected in the amounts.
Source: Illinois Farm Bureau