Property value assessments for tillable land will likely rise by more than 50 percent in parts of Winona County this spring, according to County Assessor Stephen Hacken. With the rising sale prices of cropland, assessed values for all tillable acres will go up, and taxes for rural landowners are expected to increase exponentially.
Hacken said he expects to assign values for prime tillable land at at least $7,000 per acre in 2013.
Cropland assessments at the beginning of 2012 were 65.2 percent of what land actually sold for during the year, according to Hacken. Assessors are required by law to assess property at 90 to 105 percent of its market value. Hacken said that he aims for the middle of that range, or 97 percent. "That's a 49 percent increase that I have to do to move that," Hacken said.
Cropland assessments will likely rise 49 percent on average across the entire county. The percentage increase for individual farms will vary. "We think some parts of the county are better than other parts of the county, and we will look and see where these sales are a little more. Generally, the southwest corner of the county gets a little bigger increase than the rest of the county does."
Neighboring counties have already seen the kind of increases in land values Winona County had last year, and things are not slowing down, according to Hacken. "The trend is going up. It's not going down. I don't think we've topped out yet."
The final assessment figures for 2013 will be released in March.
Higher values will mean higher property taxes for farms with many tillable acres. Tax rates for farms will not go up as dramatically as assessed property values, but farms with tillable land will pay a larger portion of the county's tax levy. Values for residential property, commercial and industrial property, and pasture and woodland acres will not be changing much, said Hacken, so with cropland values going up, the portion of the levy paid by other property owners will decrease.
The owner of Featherstone Farm in Rushford, Jack Hedin, said, "The reality is the property taxes are reflected in rents. We've seen rents going through the roof. It's gone from $150 to $200 per acre to well over $300 per acre. And the best ground is renting for much more than that."
When land values and rental prices start going up on nearby property, owners take notice, Hedin said. That makes finding good land to rent very difficult. "It can be a pretty toxic, competitive environment," he said.
University of Minnesota Extension Officer for Winona County Jacob Overgaard agreed that increasing land and commodity prices are driving up rent and competition for farmland. High commodity prices mean that farmers can stand to make profits in spite of rising rent and tax costs, he said. However, "a poor growing year can really mess up that calculation." It also makes the future "a little more uncertain" for crop farmers, he said.
"If five years down the line we see a dive in commodity prices, if the land rent and taxes don't follow that immediately, that will mean hard times for farmers," Overgaard said.
Land Assessment 101
2012 brought in record cropland sales with an average sale price of $6,816 per acre and a high sale of over $14,000 per acre. Those sale prices affect the valuations of cropland across the county. Each year, the assessor uses the median sale price to calculate market values for all land in the county.
Land, of course, is not created equal. Values for pasture, woodland, and tillable land are all looked at separately. Within tillable land, the assessor uses ratings created by the University of Minnesota Extension called Tillable Crop Equivalency Ratings (TCER). The TCER gives every piece of tillable land in the state a zero-to-100 rating based on its quality.
Hacken then gives land an A1, A2, B1, B2, C1, or C2 rating depending on its TCER (A1 land is 96 to 100 on the TCER scale, A2 is 90 to 95). A simple formula sets the value for A2 land at 95 percent of the value for A1 land, B1 land at 90 percent of A1 land, and so forth.
That system attempts to account for differences in land quality when determining values, and, according to Hacken, works pretty well.