Questions

What is the CAUV Program, why does it exist, and what the heck goes into it?

  • Optional program for farmers with more than 10 acres of land to enroll in calculating their property tax value based off of agricultural conditions instead of market conditions, almost everyone participates
  • Started in the 1970s – its primary stated intent has been to combat urbanization which can put upward pressure on farms property values and hence their tax
  • The objective of the CAUV program was to discourage the sale of farmland for development purposes by providing the farmer with a tax break (http://www.the-daily-record.com/opinion/20120214/understanding-cauv-tax-program)
  • Attempts to tie the property value of a farm to its agricultural use and not its “next best use”
  • The formula involves:
    • Soil type/quality, yields/prices/non-land costs for corn/soybeans/wheat, and a capitalization rate
    • Higher quality soil has higher CAUV
    • All values are based on at least 5 historical values, usually through an Olympic average where the highest and lowest values are dropped

All categories are Olympic averages with the exception of rotation and yields.

Tax Year Capitalization Rate Yields Prices Non-Land Costs Rotation
2005 1999-2005 1984 1997-2003 1998-2004 ad hoc
2006 2000-2006 1995-2004 1998-2004 1999-2005 ad hoc
2007 2001-2007 1996-2005 1999-2005 2000-2006 ad hoc
2008 2002-2008 1997-2006 2000-2006 2001-2007 ad hoc
2009 2003-2009 1998-2007 2001-2007 2002-2008 ad hoc
2010 2004-2010 1999-2008 2002-2008 2003-2009 2004-2008
2011 2005-2011 2000-2009 2003-2009 2004-2010 2005-2009
2012 2006-2012 2001-2010 2004-2010 2005-2011 2006-2010
2013 2007-2013 2002-2011 2005-2011 2006-2012 2007-2011
2014 2008-2014 2003-2012 2006-2012 2007-2013 2008-2012
2015 2009-2015 2005-2014 2008-2014 2009-2015 2010-2014
2016 2010-2016 2006-2015 2009-2015 2010-2016 2011-2015
2017 2011-2017 2007-2016 2010-2016 2011-2017 2012-2016
2018 2012-2018 2008-2017 2011-2017 2012-2018 2013-2017
2019 2013-2019 2009-2018 2012-2018 2013-2019 2014-2018
Future current-6 years ago previous-11 years ago previous-7 years ago current-6 years ago previous-5 years ago
Years 7 Olympic 10 Average, lag 7 Olympic, lag 7 Olympic 5 Average, lag

Sources and timing of release:

  1. Capitalization Rate - interest rates come from Ohio Department of Taxation while the equity rate comes from USDA-ERS which has updates each year in February (should be considered “official”), August, and November.
    • USDA data files, should select the Farm Income Statements and then returns to operators
  2. Crop Production Reports affects yields and rotation. Typically there is an August, September, October, and November forecast. Then finalized values occur in January of the following year. The USDA Quick Stats API will incorrectly place the most recent forecast value for the current year in the “YEAR” reference period. This needs to be accounted for.
  3. Prices are for the marketing year period which are published by the USDA-NASS and have monthly prices. However, the official values come out around March each year.
  4. Non-Land Costs maintained at the Ohio State Extension website and there will usually be an initial estimate for the budgets in October of that year with the final update usually around May.

Has this been an effective program?

  • Well that depends who you ask – it has been effective to reduce the average CAUV property value over the years to at least 60% of average market value in a county
    • At the same time, the reduction in agricultural property values results in a shifting of the tax burden for residential land – so if you ask your typical homeowner then this program stinks
    • Some counties have struggled with budgetary issues because of the CAUV changes, so they might not enjoy this
    • The extremely low CAUV values in 2005 triggered the adjustment to yields, partly from the homeowners and counties
  • But there are certainly instances where highly productive soils exceeded their market value, although the lowest is always used for property tax assessment purposes
  • Historically, 1985 had average CAUV of 35% of market value and this trended down to about 14% in 2006. A steady rise has resulted in averages above 50% the last 3 years but this should come down

year Ohio Assessed Market Value of Land Ohio CAUV Ratio Property Tax
1985 $1,378 $482 0.3500964 $NA
1986 $1,341 $469 0.3500119 $NA
1987 $1,166 $389 0.3338258 $NA
1988 $1,097 $351 0.3201732 $4.90
1989 $1,061 $314 0.2961261 $4.62
1990 $1,066 $277 0.2596851 $4.19
1991 $1,073 $270 0.2514389 $4.04
1992 $1,077 $274 0.2541885 $4.16
1993 $1,112 $341 0.3066224 $5.36
1994 $1,149 $366 0.3187499 $5.47
1995 $1,202 $383 0.3186032 $5.89
1996 $1,296 $349 0.2693014 $5.38
1997 $1,348 $351 0.2605236 $5.36
1998 $1,424 $376 0.2638681 $5.71
1999 $1,658 $450 0.2712735 $6.83
2000 $1,736 $462 0.2659053 $6.82
2001 $1,809 $457 0.2527020 $6.82
2002 $1,941 $414 0.2132366 $6.22
2003 $2,005 $397 0.1981093 $6.02
2004 $2,058 $368 0.1786110 $5.68
2005 $2,297 $325 0.1412912 $5.16
2006 $2,424 $333 0.1372609 $5.32
2007 $2,506 $356 0.1420226 $5.71
2008 $2,697 $475 0.1760780 $7.69
2009 $2,732 $546 0.1998910 $8.88
2010 $2,796 $641 0.2293531 $10.57
2011 $2,980 $923 0.3095819 $15.52
2012 $3,046 $994 0.3264738 $16.92
2013 $3,196 $1,202 0.3758907 $20.63
2014 $3,609 $1,862 0.5158883 $32.60
2015 $3,757 $2,041 0.5431598 $35.04
2016 $3,890 $2,081 0.5348508 $35.66
2017 $4,387 $1,783 0.4063974 $30.58

(Note these are for assessed properties and does not treat soil types equally like later calculations do)

What changes have been made to the program and why?

  • Document main changes:
    • 2006 yield update started an increase - Farm Bureau had concerns the program would be revoked due to unjustifiably low CAUV values
      • Then high crop prices pushed the values upward
      • Declining interest rates also caused an upward rise in CAUV
    • Large complaints about the rapidly increasing property tax bills of farmers: the state average was about $5.32 per acre in 2006 and quickly quadrupled to $20.63 in 2013.
    • 2015 adjustment to decrease lags in components began the decline in CAUV values and higher clearing/drainage costs
    • 2017 changed in capitalization rate which will be phased in over a period of time
  • Wood County Document
  • New minimum values of $350 for cropland and $230 for woodland
    • Woodland value is the cropland value less clearing and drainage costs. Clearing is now $1,000 per acre (up from $500 in 2014) and drainage is $800 for somewhat poorly drained, poorly drained, very poorly drained, and saturated (ie soils which are not well drained)
    • Land in conservation is now assessed $230, the lowest value that can occur

year corn_price corn_price_odt corn_price_cauv_exp soy_price soy_price_odt soy_price_cauv_exp wheat_price wheat_price_odt wheat_price_cauv_exp
2006 $3.08 $1.99 $1.97 $6.46 $4.84 $5.04 $3.35 $2.49 $2.59
2007 $4.29 $1.96 $2.06 $9.93 $4.89 $5.38 $5.37 $2.64 $2.87
2008 $4.21 $2.02 $2.29 $10.30 $5.19 $5.83 $5.82 $2.89 $3.05
2009 $3.55 $2.29 $2.70 $9.78 $5.60 $6.63 $4.41 $3.05 $3.61
2010 $5.45 $2.66 $2.89 $11.50 $6.41 $7.97 $5.21 $3.41 $3.77
2011 $6.44 $2.89 $3.26 $13.00 $7.22 $8.57 $6.73 $3.64 $4.22
2012 $7.09 $3.19 $3.93 $14.60 $7.74 $9.08 $7.94 $3.98 $4.55
2013 $4.41 $3.91 $4.54 $13.00 $8.98 $10.40 $6.54 $4.54 $5.19
2014 $3.78 $4.48 $4.70 $10.30 $10.13 $11.07 $5.60 $5.16 $5.64
2015 $3.89 $4.55 $4.57 $9.16 $11.09 $11.08 $4.57 $5.67 $5.69
2016 $3.61 $4.49 $4.50 $9.66 $10.91 $10.91 $4.25 $5.53 $5.53
2017 $3.55 $4.51 $4.50 $9.50 $10.83 $10.83 $4.90 $5.53 $5.53
2018 $NA $4.18 $4.17 $NA $10.43 $10.43 $NA $5.52 $5.52
2019 $NA $NA $3.75 $NA $NA $9.79 $NA $NA $5.13

So the new 2017 changes have affected me already?

  • Not quite, for one this will be phased in over the 2016 CAUV values so as to not reduce values dramatically.
  • Depends on your county, 2017 had about half the state adjust while 2018 has a quarter and 2019 the remaining quarter.
    • CAUV values will update once every three years, but it depends on which county you live in. There will be about a quarter of the counties updated this year, last tax season had roughly half and in 2019 there will be the remaining counties updated.
    • Starting in 2020, there will be no more phase-in procedure

How much will this phase in process affect my CAUV?

  • In 2017 estimates, the average soil CAUV is around $1,150 but this includes a phased in adjustment factor of around $150. If this were 2020, then we would have seen values of around $1,000
  • For 2018, the average soil CAUV was $1,015 but the phase-in adjustment was around $140.
  • Our current projections for 2019 is to see about a 13% decline in CAUV value of around $890 which would have a phase-in of about $130.
    • This is the last year of the phase-in, the 2020 values would be $760 if there are no changes to CAUV values because the phase-in would not apply.
year avg_cauv indx_49 indx_59 indx_69 indx_79 indx_89 indx_99 indx_100 avg_change
1991 $146 $100 $101 $106 $209 $412 $614 $690 NA%
1992 $154 $100 $100 $107 $235 $460 $696 $790 5.48%
1993 $206 $100 $100 $153 $363 $629 $900 $1,000 33.77%
1994 $216 $100 $100 $174 $383 $637 $896 $1,010 4.85%
1995 $189 $100 $101 $150 $320 $539 $740 $870 -12.50%
1996 $160 $100 $100 $114 $257 $487 $689 $820 -15.34%
1997 $209 $100 $100 $163 $373 $632 $850 $990 30.62%
1998 $258 $100 $111 $230 $448 $694 $894 $1,040 23.44%
1999 $262 $100 $114 $233 $452 $699 $908 $1,060 1.55%
2000 $242 $100 $107 $200 $417 $666 $869 $1,030 -7.63%
2001 $231 $100 $104 $181 $394 $640 $842 $1,000 -4.55%
2002 $180 $100 $102 $125 $285 $516 $713 $870 -22.08%
2003 $163 $100 $101 $113 $244 $467 $663 $820 -9.44%
2004 $135 $100 $114 $104 $157 $342 $533 $690 -17.18%
2005 $123 $100 $106 $101 $124 $293 $492 $650 -8.89%
2006 $177 $108 $134 $125 $241 $465 $675 $880 43.90%
2007 $181 $100 $100 $123 $283 $521 $747 $970 2.26%
2008 $249 $100 $100 $188 $431 $708 $973 $1,200 37.57%
2009 $459 $176 $200 $435 $746 $1,059 $1,368 $1,620 84.34%
2010 $505 $200 $214 $436 $845 $1,278 $1,601 $1,900 10.02%
2011 $700 $300 $328 $632 $1,126 $1,641 $2,017 $2,380 38.61%
2012 $719 $350 $363 $610 $1,147 $1,717 $2,128 $2,490 2.71%
2013 $1,205 $350 $516 $1,218 $1,958 $2,743 $3,310 $3,780 67.59%
2014 $1,668 $350 $700 $1,778 $2,728 $3,718 $4,428 $5,030 38.42%
2015 $1,388 $350 $518 $1,371 $2,347 $3,354 $4,104 $4,770 -16.79%
2016 $1,310 $350 $466 $1,235 $2,255 $3,302 $4,074 $4,750 -5.62%
2017 $1,153 $350 $430 $1,061 $1,969 $2,909 $3,602 $4,205 -11.98%
2018 $1,015 $350 $400 $896 $1,723 $2,586 $3,226 $3,810 -11.97%
2019 $887 $350 $379 $743 $1,491 $2,298 $2,892 $3,445 -12.57%

How do you make these projections?

  • Based off of current expectations of prices, yields, non-land costs, and interest rates
    • Prices carry forward the most recent USDA values
    • Yields and rotation use the August forecast values from USDA which, will be updated with the September, October, and November forecasts. Finalized in January 2019.
    • Non-land costs use Ohio State Extension budgets carrying forward values from 2018 as place-holder for 2019. Will be updated when preliminary budget estimates are released
    • Interest rates carry forward current values

Once this takes effect fully – I will definitely see a decrease in my CAUV?

  • It is highly likely but not certain, it will still depend on yield/price and interest rate trends
  • Even if you realize a decreased CAUV, your tax rate might change
  • CAUV is different than property tax
    • CAUV gives the property value of which you’re taxed but not the actual tax you pay
    • Ohio has a taxable value of 35% property value, but then the “millage rate” will depend on your county, municipality, and school district
    • Millage rates might increase, so your CAUV might go down but tax rate could increase
  • Keep in mind that while the average in Ohio for property tax per acre was about $31.55 the minimum was $5.93 for monroe and maximum was $98.29 for cuyahoga

How does CAUV compare to other states?

All of the surrounding states do provide some sort of differential tax treatment

  • Indiana is most similar in using a use-value formulation but also use cash rents in their formula
    • $35 to $42 property tax paid per acre of farmland in Indiana for 2016
  • Illinois is about $17 to $20 per acre
  • West Virginia: about $1.50 per acre
  • Kentucky has been in trouble with improper classification of farmland (used for commercial development but received preferable farmland taxation.)

Was there a change in the conservation assessment?

Yes, in 2017 one large change was that land enrolled in conservation is now assessed at the lowest value ($230) whereas before its CAUV value was still based on the soil type.

Acreage history for CRP:

YEAR US OHIO fraction
1986 1,926,692 8,171 0.424%
1987 15,331,971 99,651 0.650%
1988 23,845,154 139,207 0.584%
1989 28,850,447 195,669 0.678%
1990 32,496,627 243,152 0.748%
1991 32,969,180 262,679 0.797%
1992 33,966,698 313,153 0.922%
1993 34,988,426 365,984 1.046%
1994 34,988,426 365,984 1.046%
1995 34,952,266 364,534 1.043%
1996 34,478,302 352,961 1.024%
1997 32,792,055 327,177 0.998%
1998 30,108,903 320,145 1.063%
1999 29,797,800 296,109 0.994%
2000 31,394,934 280,632 0.894%
2001 33,578,202 300,540 0.895%
2002 33,934,239 304,836 0.898%
2003 34,080,953 301,552 0.885%
2004 34,676,658 276,465 0.797%
2005 34,871,389 287,956 0.826%
2006 35,972,520 329,639 0.916%
2007 36,740,293 362,311 0.986%
2008 34,584,010 352,248 1.019%
2009 33,692,761 347,521 1.031%
2010 31,270,394 343,584 1.099%
2011 31,103,325 343,619 1.105%
2012 29,505,418 336,198 1.139%
2013 26,819,626 317,073 1.182%
2014 25,429,615 278,409 1.095%
2015 24,167,810 267,227 1.106%
2016 23,865,634 263,381 1.104%
2017 23,415,018 257,519 1.100%