CAUV ALLEN COUNTY AUDITOR Hon. Rhonda Eddy-Stienecker Sponsored by: Hon. Rhonda Eddy-Stienecker ALLEN COUNTY AUDITOR CAUV Current Agricultural Use Value Speakers: Richard F. Hoffman, Esq. LOCAL GOVERNMENT SERVICES Richard H. Hoffman, ASA, CAE, MAI, CRE, FRICS APPRAISAL RESEARCH CORPORATION

TONIGHTS AGENDA 1. Review the Current Formula 2. Discuss Current and Potential Changes 3. Timeframe 4. Answer Your Questions I think we want to remove number 3 examining market value changes. We are not using that and so we really don’t want to talk about it.

6-YEAR VALUATION CYCLE we need to remember to define what a triennial in a revaluation really is as the opening to this slide.

WHAT IS AGRICULTURAL USE? OHIO REVISED CODE SECTION 5713.30 Must be for a commercial purpose Animal or poultry husbandry, aquaculture, apiculture, commercial timber or timber contiguous to other qualifying land, field crops, tobacco, fruits, vegetables, nursery stock, ornamental trees, sod, or flowers Land devoted exclusively to biodiesel production, biomass energy production, electric or heat energy production, or biologically derived methane gas At least 50% of feedstock must be produced on land under common ownership Facility must be contiguous to, or on land under common ownership

EXPLANATION OF THE CALCULATION OF VALUES FOR VARIOUS SOILS (2015) CAUV land values are calculated by the capitalization of net income from agricultural products assuming typical management, cropping and land use patterns, and yields for given types of soils. There are 3514 different soil types with slopes of 25% or less.

CAUV HISTORY When CAUV was adopted in 1974 it was designed to reduce values by approximately 50% In 2005 CAUV provided a 90% reduction in value In 2010 the reduction was 77% In 2014 the reduction was 62% In 2015 the reduction was 52% CAUV was adopted in 1974 – – we need to change 1975 to 1974

AGRICULTURAL ADVISORY COMMITTEE WHO SETS CAUV VALUE? OHIO DEPARTMENT OF TAXATION Order AGRICULTURAL ADVISORY COMMITTEE We need to get a list of everybody that’s on the agricultural advisory committee and probably add a slide or an addition to this slide that lists the people that are part of the program COUNTY AUDITOR

SOIL HISTORY SAMPLE

WHY THE INCREASE? 1984-2005 Yield Adjustment (catch up) Lower Prices Leaving Formula Higher Prices Joining Formula Lower Cap Rates (Fed Reserve Policy – Current) Change in cap rate formula (2016 and Beyond?) I have added the world “yield” to the top line

FACTOR CHANGES & CAP RATE 2015 Timelines of Data Reduce two-year lag to one year Crop yields & Crop prices Non-land production costs Current OSU Crop Enterprise Budgets (2015) Capitalization Rate Revise debt/equality split: 80% loan/20% equity Farm Credit Services 25–year fixed multi-flex rate for loan amounts over $25,000 and over. Prime rate plus 2% at Bankrate.com WSJ Survey

WOODLAND VALUATION CHANGES Deduction for subsurface tile drainage Increase from $500 to $770 OSU Farm Custom Rates, 2014 – statewide survey Deduction for surface drainage Increase from $250 to $380 (37 soils) Deduction for clearing Increase from $500 to $1,000 (all soils)

FACTORS IN FORMULA

TIMEFRAME DTE uses a seven-year Olympic average The high and the low years removed 2015 Years 2008, 2009, 2010, 2011, 2012, 2013, 2014 I’ve taken out 2005 and added 2012

YIELD ADJUSTMENT FACTORS Base year = 1984 (Used from 1984-2005) Annual adjustment since 2006 10 year statewide yield average Data from Ohio Department of Agriculture I’ve added the word “from” in the 1st line

AVERAGE CROP YIELDS BY YEAR IN OHIO Source: USDA/National Agricultural Statistics Service

Source: USDA National Agricultural Statistics Service

ADJUSTED CROP PRICES IN THE MODEL 2012-2015 CAUV 2015, Public Hearing 5/28/2015

Crop Yields/Cropping Pattern Single crop pattern for most soils based on the most recent five-year average of acres harvested, 2010-2014: Corn 40.0% Soybeans 52.6% Wheat 7.4% A pattern of 50% corn and 50% soybeans for organic soils. Source: USDA, National AG Stats Service – 2014 Summary

Non-Land Production Costs Base & Added Unit, 2012-2015 Source: Field Crop Enterprise Budget 2015, OSU Extension, Department of Agriculture CAUV 2015, Public Hearing 5/28/2015

Capitalization Rate TY 2012-2015 I think I’ve updated this slide correctly for the numbers for 2015 Source: Ohio Department of Taxation

2015 RESULTS– CAPITALIZATION RATE

2015 Sample Calculation - Miami Source: Ohio Department of Taxation & Ohio Agricultural Statistical Service CAUV 2015, Public Hearing 5/28/2015

2015 RESULTS vs. 2012

Average CAUV and Ohio Cropland Value - USDA Dollars per Acre, 2000-2014 Source: Ohio Department of Taxation

Cropland, Average CAUV Dollars per Acre - 2000-2015 We need to add a 2014 number 2 to this slide and the total is $1668 for 2014. Source: Ohio Department of Taxation

2014 AVERAGE CAUV VALUES Source: Ohio Department of Taxation

2014 MARKET VALUES Source: Ohio Department of Taxation

Source: Ohio Department of Taxation

YOUR QUESTIONS?