Indiana farmers are bracing for a one-two punch from lower crop prices and higher property taxes, while hoping that a third punch, annexation, stays off their doorstep.
At last week's Fort Wayne Farm Show, Indiana Farm Bureau tax specialist Katrina Hall said farmland taxes and assessment have been identified as IFB's No. 1 legislative priority this year. That's because farmers are continuing to see higher tax bills due to rising tax assessments on farmland.
The base value on farmland has been escalating in recent years, Hall said, going from $1,760 in 2014 to $2,050 this year and $2,420 next year. By 2017, the base value will be $2,770.
"We know that that's going to happen unless the General Assembly intervenes," Hall said.
She pointed out that, from 2007 to 2013, property taxes on agricultural land have gone up 33 percent, representing about $100 million in gross assessed valuation, while the lion's share of savings have went to homeowners, whose tax bills have decreased by around $1 billion. Property taxes overall have declined by 15 percent.
"Farmland taxes are really absorbing the profitability of ag," Hall said. "In the future, that can be even worse."
On a per-acre basis, farmers paid $45 per acre in property taxes last year. If the current trend continues, farmers will pay $70 per acre in 2017.
This increase in tax responsibility for farmers is happening at the same time that crop prices are going down, well below the cost of production. Corn prices that were around $5 per bushel last spring declined to $3.60 last fall, and Purdue University's outlook calls for corn prices to average $3.65 this marketing year and $4 next year. Meanwhile, farm income has dropped to the same level it was in 2004 and 2005.
John Breit, a farmer from Woodlan, said his property tax bill amounts to $30 per acre. He said it's hard for a farmer to cover all of his costs, and pay taxes, when his margin is only $130 an acre.
"I don't feel that's quite right," he said.
Farmers can't do much about crop prices. Purdue's Chris Hurt said a 12-year high corn inventory and a record high soybean inventory mean that farmers are producing more than the market can consume. If there is anything they can do to improve their profitability, it would be to reduce costs. Hurt said farmers who rent land should consider talking with their landlords about reducing cash rent prices. If not this year, then certainly next year, he said.
Another option is to plant more soybeans than corn. Farmers like Steve Robertson of Kendallville said they are considering shifting acres, but he resists doing that on a large scale due to concerns with soil quality and erosion.
On a per acre basis, soybeans are expected to deliver $65 more in returns than corn for 2015, Hurt said.
On property taxes, Hall said the Farm Bureau organization is urging lawmakers to delay increases in soil productivity, which is another item used by the Department of Local Government Finance in determining the assessed value of farmland. However, Sen. Jean Leising (R-Oldenburg) recently introduced a bill that would use soil productivity factors from 2011 to figure taxes for 2015. This change would prevent farm taxes from rising another 6 percent on top of the other increases caused by rising assessments.
Leising's bill was passed by the Senate Agriculture Committee earlier this month.
Another priority issue for Farm Bureau is annexation. Hall said municipalities are seeking to recover lost tax revenue by expanding their borders, and in many cases this involves the annexation of farmland. And since farmland taxes represent the fastest growing segment of property tax revenue, Hall said cities and towns are anxious to capture the farmland tax base.
Cities like Lakeville, Michigan City and Elkhart are among dozens statewide that have sought to annex new territory.
Currently, landowners who oppose annexation must gather signatures and hire an attorney just to have their day in court. Hall said this process can be costly for farmers, so Farm Bureau wants the General Assembly to change this process so that the final outcome would be determined by a simple majority petition.