Decrease in ag land valuations proposed

Owners of agricultural land would see a decrease in property taxes under a bill heard by the Revenue Committee Feb. 7.

Currently, agricultural and horticultural land is valuated at 75 percent of the land’s actual value for property tax purposes. LB670, introduced by Omaha Sen. Beau McCoy, would ultimately lower the valuation percentage to 65 percent over a three year phase-in. McCoy said the feedback he received while on the Tax Modernization Committee is that property taxes are too high.

“As we traveled the state we heard overwhelmingly that property taxes are a huge burden, not just for [agricultural] producers, but all Nebraskans,” he said. “Agriculture producers represent just 3 percent of the state’s population, but are paying nearly 25 percent of total property taxes.”

The bill also would phase in decreases to the acceptable range of valuation for agricultural and horticultural land from the current level of 69-75 percent to 59-65 percent of actual value by tax year 2017.

Finally, the bill would decrease the adjusted valuation percentage for purposes of determining state aid under the Tax Equity and Educational Opportunities Support Act (TEEOSA) from the current level of 72 percent to 62 percent of actual value by tax year 2017.

Jarel Vinduska, a farm owner in Sarpy County, supported the bill. He said agricultural land owners currently are forced to pay property taxes based on inflated land values.

“There is no relationship between [agricultural] land and your ability to pay, like with income or sales tax,” he said. “When [agricultural] commodities go down, you’re still stuck with the high prices.”

OpenSky Policy Institute Executive Director Renee Fry testified in opposition to the bill, saying it would have detrimental effects on school funding.

“If state aid to schools is increased [as proposed under the bill], property tax levy rates would have to increase an average of 4.5 cents to avoid service cuts,” she said. “More than 100 schools would be pushed over their levy limits. [This bill] will either shift taxes or will result in significant cuts to important services like education and public safety.”

Lowering the agricultural and horticultural land valuation would result in higher equalization aid under the TEEOSA formula. As introduced, LB670 would result in state aid increases of $7.9 million in fiscal year 2014-15, $16.7 million in FY2015-16 and $28.9 million in FY2016-17.

The bill would take effect Jan. 1, 2015.

The committee took no immediate action on the bill.