Bigger taxes for small acreages
July 26, 2013
Nearly 45 Pennington County landowners have presented testimony at the last three county commission meetings in opposition to a recent change in the designation of agricultural land for property tax purposes.
In May the commission voted 3-1 to increase the minimum acreage to be considered for ag land status from 40 acres to 160.
County Commission Chairman Lyndell Petersen, the lone dissenting vote, said the action was unexpected and happened quickly. "Without notice and virtually no discussion, following a report that was listed on the agenda, there was a motion and a second and then approval to make the jump to 160 acres." The Hermosa rancher said the action, which affects 466 landowners, was taken with one commissioner absent. "I said wait a minute, we're moving too fast, but they all voted in favor of the action and now we're paying the piper."
In order for a Pennington County landowner to qualify for ag status which potentially provides for a reduced taxation rate, he or she must meet two of three requirements:
“The director of equalization called those that aren’t big time aggies, ‘tax cheats.’ This is exactly the atmosphere they wanted to create.”
Leo Hamm, Pennington County landowner
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1. must be actively involved in agricultural production
2. the income from the property must represent 30 percent of gross annual income
3. the property must be 160 contiguous acres (was 40 acres previously)
Leo Hamm, whose family owns about 600 acres near Rapid City, said that the commission action pits rural against city. "It was their goal. The director of equalization called those that aren't big time aggies, 'tax cheats.' This is exactly the atmosphere they wanted to create.
"Agriculture needs limited taxation. Undeveloped land lacks the ability to generate revenue and should qualify." The former county commissioner worries that this action is a step toward eliminating the opportunity for the "common man" to own land. "When citizens are denied the ability to own property by whatever extent they are able, then as a society we are in real trouble. If you can't afford to own land, you won't be able to afford a home either."
Hamm explained that a local rancher rents his family property for grazing and that the income, usually less than $10,000 per year, pays the taxes, keeps the water running and the fences up, but there is rarely any leftover after that. "A few years back a former legislator wanted to 'even out' the tax burden by shifting even more of it to ag. He commented that he would pay about two and a half percent of his gross income on property taxes. Well my family already pays close to ten percent."
A tax is fair only if the payer has the ability to pay, said Hamm. "Raw land doesn't have that abilty, so you are looking at the well-heeled being the only ones who can afford land." Hamm said if there isn't a change, a lot of young people "raising chickens, growing gardens and more" will be wiped out.
Carol Rae-Olsen, a Nemo-area rancher, said many of the individuals being affected by the rule change are fourth and fifth generation landowners. "We need to remember that this is a culture, a heritage we cherish, and one that has built this community." She said she knows of a young couple with children who raises a few head of livestock on 40 acres in hopes of teaching their children agricultural stewardship and work ethic. "They said their children have learned a lot from taking care of animals on their acreage but quadrupling the tax burden on this family will mean they lose or give up on their way of raising their family."
Olsen also said she has talked with real estate representatives who have told her the tax increase will wreak havoc with the land market.
"I think some of the supporters of the ag status tax qualification change are under the impression that their taxes will be lowered as a result of this," said Rae-Olson, who is skeptical.
Petersen, who was elected by residents in the eastern portion of Pennington County, said that a 2009 Cost of Community Services study conducted by a Colorado State University professor and a Swiss researcher provides insight into the expenses borne and benefits enjoyed by each sector of the community.
The 2007 Pennington County budget was attributed to the expenses and income of three categories of real estate: agriculture and open space, industrial and commercial, and residential. The taxes yielded from each sector were weighed against the expenses incurred from each, and a figure was reached to determine whether or not each group used more or less than their own contribution.
According to Petersen, a value of 1 would mean that the taxes paid would be equal to the services rendered and expenses incurred by the category in question. "Agriculture came in at .51, which means it is paying more than it is getting in services," he said. "Industrial and commercial was calculated at .36, meaning they are contributing even more. And residential came out to 1.29. So they are technically not paying their way," Petersen said. He believes the survey results dispel any myth that the city guys are subsidizing "all those nasty ag people."
Petersen said state law allows a range of 20 to 160 acres for ag land designation but that 160 is "rare" and 40 is "common." He added that more statutory details need to be discussed including whether or not the land should be required to be contiguous in order to qualify, and whether or not timber should be considered an ag product, a point the director of equalization has contended.