Ag land valuation proposals heard

The valuation of agricultural land would be affected by a bill and proposed constitutional amendment heard by the Revenue Committee March 3.

LB439, introduced by Elk Creek Sen. Lavon Heidemann, would change the school district valuation of agricultural and horticultural land from 75 percent of actual value to 65 percent. The acceptable rage would be modified from 69-75 percent to 59-65 percent of actual value. The bill also would change the value of agricultural land for state aid to education purposes from 72 percent to 62 percent.

The bill would have an operative date of Jan. 1, 2012, and is estimated to result in a $52 million reduction in school district property tax revenues and a $33 million increase in state aid under the current funding formula.

Heidemann said changes to agricultural land valuations are needed to address the disproportionate burden placed on farmers and ranchers to fund rural schools. LB439 would help neutralize agricultural land valuation increases, he said, which totaled 11.75 percent from 2009 to 2010, compared to 4.32 percent for all real property.

The higher property taxes paid by Nebraska farmers put them at a disadvantage with their counterparts in neighboring states, Heidemann said, adding that some farmers close to the border are choosing to expand their operations out-of-state because of tax considerations.

John Bonaiuto, executive director of the Nebraska Association of School Boards, testified in opposition to LB439. Hoping for a $33 million increase in aid to offset the $52 million in reduced property taxes is not realistic, he said. Rural schools face dwindling student enrollments and district-wide valuation increases, he said, and would not fair well competing for state aid dollars.

Seward County assessor Marilyn Hladky, representing the Nebraska Association of County Assessors, testified in a neutral position. She said LB439 could require assessors to keep two records and submit two sets of statements because of the unique valuation for school districts.

LR9CA, introduced by Ogallala Sen. Ken Schilz, would amend the state constitution to allow agricultural and horticultural land to be divided into subclasses for taxation purposes.

Schilz said his amendment would allow the Legislature to implement legislation to consider productivity in the taxation of agricultural land.

Jay Rempe, representing the Nebraska Farm Bureau, testified in favor of LR9CA, saying it would provide a more accurate reflection of the income potential of agricultural land, specifically pastureland.

Hladky testified in a neutral capacity, citing concerns over how mixed use parcels would be assessed. She said assessors already group agricultural land into classes based on their market values.

Further, she said, LR9CA could lead to a property tax shift from owners of grass land to other land owners.

Bruce Johnson, professor of agricultural economics at the University of Nebraska-Lincoln, also gave neutral testimony. Agricultural land valuations should reflect future income flows, he said, and pastureland historically has been overvalued in relation to its income-generating potential.

Both Iowa and Kansas value agricultural land based on its income potential, Johnson said, and Nebraska could move closer to that system with LR9CA.

The committee took no immediate action on either the bill or the proposed constitutional amendment.