LAND USE, LAND, VALUE, TAXES, AND DEVELOPMENT

Land Use, Value, and Taxes: Main Points Rural land in Alabama is valued ($ per acre) about the same as in Georgia and South Carolina, less than in Florida, more than in Kansas and Mississippi. The value of land here does not come primarily from its use in agriculture or from its innate productivity. Land in Alabama has held its value consistently, and is a “good deal” for investment. Land taxes in Alabama are the second lowest in the nation, lower than all our regional neighbors. Evaluation for land taxation is not done on the basis of current market value but on the basis of current use value. Current use evaluation results in a value of about $500 per acre.

Alabama Land Values Over Time The following slides come from Professor Walt Prevatt of Auburn University. They show the changes in Alabama land values over time, in comparison to the region and to the country.

Farm Real Estate Values, Alabama,

1 Alabama Farm Real Estate Values were deflated using the Gross Domestic Product Deflator, 1950=100.

Annual Percent Change In Farm Real Estate Values, Alabama,

Farm Real Estate Values, Alabama & U.S.,

Population Determines Rural Land Value The following slides, also from Dr. Prevatt of Auburn, show what influences the value of agricultural land. The “r 2 ” indicates how strongly a factor influences land value. The first two slides show that cotton prices and calf prices have almost no influence on land value. Productivity is not key. The third slide shows that timber value accounts for about 35% of land value. The fourth slide shows that population accounts for about 61% of land value (96 – 35 = 61). Population has influence because of the demand for housing and other development. Land can be held for speculation because of the low tax.

Econometric Analysis Of Value Cropland Value Cropland Value = f ( Alabama Cotton Prices ) Cropland Value = 1, CP R 2 =

Econometric Analysis Of Value Pastureland Value Pastureland Value = f ( Alabama Calf Prices ) Pastureland Value = CP R 2 =

Econometric Analysis Of Value Timberland Value Timberland Value = f ( Alabama Timber Prices ) Timberland Value = PP R 2 =

Econometric Analysis Of Value Farm Real Estate Value (FREV) FREV = f ( Forestry Receipts & Population) FREV = FR POP R 2 =

Raising Taxes Alabama land taxes are low. Low land taxes allow land to be held by speculators, by successful timber growers and farmers, by poor farmers, and by poor rural residents. Raising taxes might gain some revenue for the state, and might cause the land to “move”. Raising taxes might also adversely affect poor farmers and poor rural residents. Land tax changes have to be part of a larger view about taxes and development.

Alabama Development Problems The following sequence of slides comes from Dr. Sumners of Auburn University. It shows that the traditional development policy in Alabama has not worked. The traditional development policy was low land taxes, little provided infrastructure, with a poor and undereducated work force (but hard working). This policy actually resulted in: High rural poverty Poor education, including low test scores No infrastructure development Out migration Break-down of the rural lifestyle No Development

Economic Development Issues for Rural Alabama Joe A. Sumners, Ph.D. Director Economic Development Institute Auburn University

Alabama Rural Distress County June ‘03 Unemployment 1.Washington17.4% 2.Wilcox15.4% 3.Lowndes13.8% 4.Dallas13.7% 5.Sumter12.9% 6.Greene12.7% 7.Bullock12.5% 8.Choctaw12.0% 9.Perry11.7% 10.Lamar10.9% 11.Hale10.5% 12.Butler10.1% 13.Randolph10.0% County % Over 65 1.Covington17.9% 2.Crenshaw17.1% 3.Tallapoosa16.6% 4.Clay16.5% 5.Henry16.4% 6.Geneva16.3% 7.Fayette16.1% 8.Etowah16.0% 9.Lamar15.9% 9.Randolph15.9% 9. Cherokee15.9 %

Alabama Rural Distress Counties with Lowest SAT Scores 1. Bullock 1. Macon 1. Perry 1. Sumter 2. Barbour 2. Greene 2. Lowndes 2. Wilcox 3. Marengo 4. Butler 4. Coosa 4. Pike 4. Russell 5. Chambers 5. Clarke County Median Family Income 1.Wilcox $22,200 2.Sumter $23,176 3.Bullock $23,990 4.Greene $24,604 5.Perry $26,150 6.Macon $28,511 7.Lowndes $28,935 8.Dallas $29,906 9.Butler $30, Crenshaw $31,724

History of Economic Development in Alabama Throughout the 20th Century, Alabama’s economic development strategy was built on low taxes and unskilled, low-cost labor. In the later 20th Century, the U.S began to export low wage, polluting industries; new focus on high technology. Alabama was poorly positioned to compete when question became not “what does labor cost” but “what does labor know.”

“ The State of the South 2002: Shadows in the Sunbelt Revisited ” (MDC, Inc.)  “ National recovery won ’ t bring jobs back to the rural South. Production has moved to other countries with lower wages, or plants have substituted technologically advanced machines for people. Tens of thousands of jobs are not coming back. ”  Gone forever is the kind of economic development strategy that Alabama and other Southern states used for decades to lure industry: “ Enticing companies from afar to relocate with the bait of cheap land, low taxes and a surplus of hardworking but undereducated workers. That old recipe no longer works. ”

Tax Burden TOTAL PER CAPITA STATE AND LOCAL TAX REVENUE (FY 2000) STATE TAXESNAT. RANK 1.Georgia $2, North Carolina 2, Florida 2, Kentucky 2, Louisiana 2, South Carolina 2, Arkansas 2, Mississippi 2, Tennessee 2, Alabama 2, National Average $3,100 Alabama: 68% of Nat. avg; 75% of Georgia’s tax burden

Property Tax Revenue 2002 (Per Capita) PROPERTY TAX REVENUE PER CAPITA (FY 2000) STATE PROP TAXES NAT. RANK 1.Florida $ Georgia South Carolina North Carolina Mississippi Tennessee Kentucky Louisiana Arkansas Alabama National Average 885 Alabama: 34% of Nat. avg.; 54% of other southern state avg. ($561)

Education Spending EDUCATION SPENDING PER K-12 PUPIL ( ) STATE SPENDING NAT. RANK 1.Georgia $7, Kentucky 7, South Carolina 7, North Carolina 6, Florida 6, Louisiana 6, Mississippi 5, Tennessee 5, Arkansas 5, Alabama 5, National Average $7,463 Alabama: 70% of national average; 82% of other southern state avg.

Rural Schools Local funding for education in Alabama’s rural school systems is only 57% of the local support provided to school systems in the state’s metropolitan areas. County and city school systems in Alabama’s 45 rural counties average $793 per student in local support. County and city school systems in the state’s 22 counties located in metropolitan statistical areas average $1,386 per student – a difference of $593 per student. (Source: Public Affairs Research Council of Alabama, Samford University, “Local Support for Public Schools: Tax Rates and Revenues Per Student, 1999”).

Economic Growth ECONOMIC GROWTH (% change in employment ) STATE NAT. RANK 1.Florida 4 2.Tennessee 10 3.Mississippi 12 4.Arkansas 16 5.Louisiana 18 6.Georgia 25 7.Kentucky 28 8.South Carolina 32 9.North Carolina40 10.Alabama 41

Economic Growth INDEX OF STATE ECONOMIC MOMENTUM (September 2002) STATE NAT. RANK 1.Florida 5 2.Tennessee 12 3.South Carolina 20 4.Georgia 22 5.Arkansas 23 6.Kentucky 24 7.Mississippi 25 8.North Carolina 27 9.Louisiana Alabama 38 The Index looks at one-year changes in: 1) employment, 2) personal income, and 3) population