THE LORANDA GROUP, INC

Amongst all the euphoria surrounding the recent jump in farmland prices, there’s one issue that is just starting to be debated… if and how corresponding real estate taxes should be increased to recognize the higher values.  You may think that this isn’t even an issue in your state – there’s already a formula that addresses how much assessed values can change from year to year.  But let’s take a quick look at the big picture across most of the Midwest.  First, the majority of school, local, and county municipalities (the final destination for real estate taxes) are having trouble balancing their budgets.  Second, true valuations for residential, commercial, and industrial properties have fallen the past few years and in some cases the decrease has been dramatic (and I don’t think it would be financially or politically expedient to raise taxes on home owners who are struggling to make their mortgage payments).   And finally, farmland valuations have increased dramatically (primarily as a result of record profitability).  Hmmm, call me a cynic but it wouldn’t surprise me if some politicians begin calling for farmland owners to start shouldering more of the tax burden.

Iowa is beginning to address this very issue and a recent article in the Des Moines Register (Property Tax Bill’s Later Impact Fuels Debate) provides an overview.  This is one fight that will not be pleasant as government officials know that have to generate more revenue (O.K., they could also cut spending but that’s a different discussion).  And as we’ve seen across all levels of government, there is no law/rule/formula that can’t be revised, especially if they can frame the argument as being “in the best interest” of the public.  Regardless, I think farmland owners should start preparing themselves for what’s to come.