Income-based ag land valuation method proposed

The assessed value of Nebraska agricultural and horticultural land would be based on its income potential rather than its market value under a proposal heard Feb. 3 by the Revenue Committee.

Sen. Joni Albrecht
Sen. Joni Albrecht

LB820, introduced by Thurston Sen. Joni Albrecht on behalf of Gov. Jim Pillen, would require county assessors to use an income-approach calculation to determine a parcel’s “agricultural use value” each year beginning in 2024.

In determining that value, assessors would use income and expense estimates for each class of agricultural and horticultural land and capitalization rates set by a new, five-member Agricultural Land Valuation Committee.

The bill would cap annual increases in total statewide assessed value for agricultural and horticultural land at 3.5 percent.

Albrecht said an income-based valuation method, which is used in neighboring Kansas, Iowa and South Dakota, is a “more fair and equitable” assessment method than a market-based approach.

Pillen testified in support of the proposal, saying Nebraska’s current method results in farm and ranch land values that are based on the sale price of a neighboring property, not a parcel’s ability to produce income.

He said this has led to “extraordinary” increases in agricultural and horticultural land valuations across the state, in some cases driving farmers and ranchers out of business.

Scott Peterson testified in support of LB820 on behalf of Nebraska Cattlemen. He said the current valuation method puts Nebraska farmers and ranchers at a disadvantage to those in surrounding states that have adopted an income-based approach.
Mark McHargue testified in support of the bill on behalf of Nebraska Farm Bureau and six other groups representing Nebraska’s agriculture and ethanol industries. Although those groups support the bill’s intent, he said, they are concerned that the proposed valuation method would require a “high degree of professional judgment.”

Testifying in opposition to LB820 was Jon Cannon of the Nebraska Association of County Officials. Depending on the types of property in a county, he said, a county board might not be able to increase its levy enough to make up for the revenue lost due to valuation changes caused by the new method.

Also in opposition was Rebecca Firestone of OpenSky Policy Institute. She said the change could shift more of the responsibility to pay for public schools and local government onto residential and commercial property owners in areas with a mix of property types.

Shane Rhian testified in opposition to LB820 on behalf of Omaha Public Schools, saying it could increase the number of school districts that receive state equalization aid. He said lawmakers also are considering proposals this year to provide foundation aid to each district and reimburse districts for a greater percentage of their special education expenditures.

If those additional funding obligations prove unsustainable in an economic downturn, Rhian said, a future legislature likely would balance its budget first by cutting equalization aid, which OPS relies on for a substantial part of its budget.

The committee took no immediate action on the bill.

Bookmark and Share