Property Tax Assessment Trends and Tax Implications - UNL CropWatch, Oct. 31, 2013

Property Tax Assessment Trends and Tax Implications - UNL CropWatch, Oct. 31, 2013

October 31, 2013

In a recent Cornhusker Economics UNL agricultural economists Bruce Johnson and Jim Jansen examine the significant increase in assessed agland valuations since 2008. Johnson and Jansen, both in the UNL Department of Agricultural Economics, note: "In 66 of the state's 93 counties, the agricultural land base represents at least 50% of the assessed value; and in many counties, that share is far greater." They write:

The agricultural sector is not only the engine of our rural economies, but it is also the heavy lifter of local government services.

Bruce Johnson and Jim Jansen
Oct. 23 Cornhusker Economics

County Breakdown

The five counties with the least ag land and their percentages were

  • Douglas, 1%;
  • Sarpy, 2%;
  • Lancaster, 5%;
  • Scottsbluff, 14%, and
  • Hall with 20%.

Counties with the highest percentage of assessed ag land were

  • McPherson, 89%;
  • Keya Papa, 85%;
  • Arthur, 84%; and
  • Hayes, Rock, and Wheeler, 81%.

State average was 33%. See a Nebraska map showing ag land as a percent of total assessed property value for each Nebraska county in the full article.

Sticker shock probably could best describe Nebraska agricultural property owners’ reaction when they opened the county assessor’s letter and read the new 2013 valuation. With few exceptions, the assessed valuations on agricultural land have climbed rapidly for several years – a clear reflection of the fact that in Nebraska, agricultural land is assessed according to a set percentage of market value. With Nebraska being at the epicenter of a bullish United States agricultural land market in recent years, it is inevitable that those increases have come to bear on assessed values for property tax purposes.

But sticker shock may also be one’s reaction to how the agricultural land assessment trends compare with valuation of other real estate classes that constitute the basis of our property tax system. Going back over 10 years of data maintained by the Nebraska Department of Revenue, Property Assessment Division, we have tracked the agricultural land class share of total annual increase in assessed valuation for the entire state. A decade ago, the agricultural land share of annual increase in valuation was less than 25%. But starting in 2008, with the onset of a serious national recession, a dramatic shift occurred. Even though Nebraska was spared the full brunt of the recession, the state’s residential and commercial/industrial real estate values were no longer rising and frequently were even declining in the market place. Moreover, new home construction and commercial property development slowed dramatically, meaning property improvements were not being added to the assessment roles at previous rates.

Meanwhile, the agricultural industry and its associated real estate markets experienced a steady upward climb. By 2009, the agricultural land class accounted for 50% of the increase in total assessed valuation for the state, and that percentage has continued to rise ever since. Despite recent economic recovery and a returned growth of building in the residential and commercial real estate sectors, the agricultural land portion of the increase in total valuation from 2012 to 2013 was 87%. (This reflects the fact that while residential and recreational values climbed 1.6% and commercial and industrial valuation rose 3.5%, the statewide increase in agricultural land was 22.8%.)

Read the full article and see infographics that illustrate the shift in ag valuations at Property Tax Assessment Trends and Tax Implications.