Spending on farmland in Illinois could legally only fluctuate by 10 percent per year.
Recently, farmers in Monroe County have seen changes reflected in their property tax bills.
This can be explained by a 2013 amendment to the Law on the Assessment of Agricultural Land.
In order to understand the impact of this amendment on the property tax bill, one must understand the history of how farmland is – and has been – valued in Illinois.
Prior to the Agricultural Land Valuation Act of 1977, agricultural land was valued on the basis of its fair market value. It eventually became clear that this was not the best practice, as it did not necessarily reflect the value of the land from an agricultural standpoint.
Under a fair market value valuation system, land of the same soil quality in one part of the state could be valued much higher than that of another part of the state. .
Brenda Matherly, director of local government at the Illinois Agricultural Bureau, said this was largely due to differences in development pressure.
“In northern Illinois, if you have soil that has average productivity potential and it’s located around a large developing city, it was selling more than the same quality of soil in southern Illinois. ‘Illinois, which didn’t have as much development pressure. “Matherly said of how farmland was valued before the law.” Land in northern Illinois was at risk of being valued much higher simply because of development pressure, but in reality , this development pressure has no impact on the quality or quantity of the products you produce, so it just wasn’t fair and equitable.
Monroe County Treasurer / Collector Kevin Koenigstein said valuing farmland for fair market value would make taxes so high that many farms in Monroe County could not operate.
Because of such cases, lawmakers and the Illinois Bureau of Agriculture saw the need to change the way farmland was valued, and the Farmland Valuation Act of 1977 was introduced.
Under the law, farmland was valued on the basis of “a formula that determines its potential to generate income,” Matherly said.
This formula relies heavily on the productivity index of each soil type, or PI. Each PI corresponds to a particular dollar value per acre, explained Carl Wuertz, Monroe County Valuation Supervisor.
“Agricultural land is assessed on the basis of soil type and productivity, and its use, (for example) whether it is arable land, trees or the like, permanent pasture or waste. Each different soil type is assigned a PI number, or a productivity index number, ”Wuertz said. “Each productivity index is a dollar amount per acre of assessment. In 1977, the law on the valuation of agricultural land was enacted, calculating on the basis of the figures of the productivity index. “
Matherly explained in more detail the process of determining the PI of an acre of farmland.
“We’ll look at the soil quality in the state – and we have a lot of soil types in the state of Illinois – and give them a high, medium, and low production capacity and then evaluate them. as a result, ”Matherly said. “Obviously, lower grade soils, or lighter soils, will carry a lower rating than the good black soils we have in the central part of the state. “
The PI ranges from 82, which represents some of the poorest soils in Illinois, to 130, which represents the most productive soils in Illinois, Matherly said.
Koenigstein said most of Monroe County’s soil falls in the ’80s and’ 90s.
In 1986, an amendment was introduced whereby the assessed value for each soil type could not increase or decrease by more than 10 percent from the previous year, which created “certified values” for each PI. .
This rule was applied despite what the formula determined was an equalized assessed value of agricultural land for each particular soil type.
According to Matherly, that 10 percent was built up for the benefit of both the farming community and tax bodies. If farming communities were to see a 10 percent increase, it would be detrimental to them, while a 10 percent decrease would greatly harm tax agencies.
An important factor in this rationale is that the certified values created from the 10 percent limit help determine the assessed value of agricultural land.
“(In the 1980s,) the farm economy was very weak, largely because interest rates were so high, and because of that, the estimated value of farmland was dropping dramatically every year… we are losing more. value in property, we cannot keep our doors open. So they introduced a law that says that whatever the value of the formula, farmland should not be allowed to drop by more than 10 percent. They were therefore interested in not having it drop by more than 10 percent. On the other hand, (representatives of the farming community) have accepted this legislation saying… it cannot increase by more than 10 percent either, ”Matherly explained.
A significant gap between the certified values, which have remained somewhat stagnant over the years, and the equalized assessed values appeared and continued to grow over time.
As Matherly noted, the earning potential was increasing and taxes were not reflecting it.
She also said that the application of the 10 percent limit created another significant gap: one between the estimated value of poorer soils and those of high quality, which did not reflect actual yield potential.
“It was also particularly restrictive on poorer soils while better quality soils had a bit more freedom of movement,” Matherly said. “So, in addition to the growing gap between the certified value and the AVE, there was also a huge gap in the assessed value between the poorest soil and the best soil – a gap that by no means reflected the real return potential. “
As Wuertz explained, this required a change.
“To preserve the integrity of the Farmland Valuation Act, lawmakers have changed the way farmland is (valued),” Wuertz said.
This change was made with a 2013 rider. Under this amendment, the values assessed for each soil type cannot increase or decrease by more than 10 percent of that of the median soil PI, which is 111.
Since Monroe County does not contain soils with high PIs compared to other parts of the state, their certified values will continue to increase gradually according to the 2013 amendment until they reflect further equalized evaluated values.
That’s why many farmland owners in Monroe County have seen their property taxes increase in recent years.
Koenigstein and Matherly both said it could take many years. Koenigstein said many Monroe County farm owners pay in teens per acre on their property taxes.
“What’s going to happen, I think, is central Illinois counties are going to pay between $ 40-50 an acre, and in Monroe County we should be between $ 20- $ 25 an acre. acre in property taxes when all is said and done, ”Koenigstein said.
On the 2020 tax bills payable this year, Koenigstein said farmland owners could notice such increases.
“We are seeing a 15-20% increase in assessed assessment as well as corresponding tax amounts for farmland owners in Monroe County,” Koenigstein said.
While these increases may be surprising to some given that these percentages were somewhat stagnant about six years ago, Matherly pointed out that the alternative – reverting to valuation of farmland at fair market value – would have caused many difficulties for many Illinois farmers.
“If we lose the law due to a constitutional challenge in the courts or a legislative repeal by the General Assembly, the appraiser has no other… legal option but to apply a market value (approach agricultural land valuation). They can’t come up with their own way of valuing farmland just because someone doesn’t like how it works, so they have to take a market value (approach) which would be a significant increase in the day. the day after the assessed value of farmland, ”Matherly said.
For a detailed explanation of the property assessment process, see the previous coverage at republictimes.net.
To compare the evolution of property tax bills over the years for a particular parcel of land, visit monroecountyil.gov.