Decreased agricultural land valuation proposed

The Revenue Committee heard testimony Jan. 29 on a bill that would decrease agricultural and horticultural land valuations.

LB178, introduced by Syracuse Sen. Dan Watermeier, would decrease the valuation percentage of agricultural and horticultural land for purposes of school district taxation. Under the bill, valuation percentages, which are currently set at 75 percent for agricultural and horticultural land, would decrease by 5 percent annually until reaching 55 percent in fiscal year 2019-2020. That valuation percentage would continue on in perpetuity.

Watermeier said that farmers and ranchers currently carry a disproportionate responsibility for funding schools.

“Nebraska farmers and ranchers represent less than 3 percent of the population, but they pay more than 30 percent of property taxes statewide,” he said. “Rural landowners are disproportionately funding our schools even though all residents benefit.”

The bill also would adjust the acceptable range for agricultural and horticultural land to:
• 64 to 70 percent in 2016;
• 59 to 65 percent in 2017;
• 54 to 60 percent in 2018; and
• 49 to 55 percent in 2019 and after.

The adjusted value percentage used in the calculation of state aid under the Tax Equity and Educational Opportunities Support Act also would decrease annually by 5 percent from its current level of 72 percent to 52 percent in 2019 and beyond.

Representing the Nebraska Farm Bureau, Lavon Heidemann spoke in favor of the bill. He said the property tax burden has been unfairly placed on the state’s agricultural industry.

“We have seen a natural shift of the property tax burden to the agricultural sector,” he said. “There are a lot of people in Nebraska that think it’s time to shift that back to the commercial and residential sectors. We believe this bill would help accomplish that.”

Larry Dix, executive director of the Nebraska Association of County Officials, opposed the bill, saying it is unlikely to accomplish its goal of increasing the number of schools receiving state aid.

“If the end game is to try to adjust the value to increase equalized schools, [this bill] would actually reduce the value in some school districts and they still won’t be equalized,” Dix said. “They won’t have enough value and they won’t be able to raise their levy high enough to continue what they’re doing.”

Renee Fry, executive director of the OpenSky Policy Institute, testified in a neutral capacity. Reducing property taxes for agricultural and horticultural land should be a priority, she said, but she agreed that LB178 could lead to an increase in local levies.

“Initial revenue loss for schools under this bill would be $182.5 million,” Fry said. “At least 32 districts would be unable to make themselves whole without going over their $1.05 levy limit.”

The committee took no immediate action on the bill.