From Milw Journal Sentinel

Democrats zoom in on property tax loophole

Break meant for farmers, not developers, they say By Mike Johnson <mailto:[email protected]> of the Journal Sentinel

Posted: Jun. 22, 2009

Senate Democrats are moving to close a loophole that has given developers huge property tax breaks by planting crops on land that is zoned for residential or business purposes.

In some cases, lots have roads, utilities and street lights and are straddled by houses, but the developers get a break on the assessment and taxes because they have farmers grow corn, winter wheat or other crops.

At issue is the use-value assessment law enacted in 1995 to help keep farms viable by giving them a property tax break. Real estate developers soon found a way to make the law work for them.

“It just seems like it is being misused and getting out of hand,” Fond du Lac Assessor Donald Wegner said.

Local assessors and municipalities complained to Senate Majority Leader Russ Decker (D-Weston) about the problem, and he has inserted a provision in the Senate version of the state budget bill that would remove the tax break.

Under the provision, the definition of agricultural land would be modified for property tax purposes to exclude any land that is platted or zoned for residential, commercial or industrial use.

If approved by the Senate and Assembly and signed by the governor, the change would take effect Jan. 1.

Effect on development Developers and attorneys who represent them oppose the change, arguing it will stymie development.

“It will significantly increase costs related to development, discourage further economic development and have a direct impact on the affordability of housing and commercial office space,” said Thomas D. Larson, director of Regulatory and Legislative Affairs for the Wisconsin Realtors Association.

“With the downturn in the economy, many developments have been delayed, causing land that was planned and platted for development to continue to be used and taxed for property tax purposes as farmland until the economy improves,” Larson said.

Larson said if this provision becomes law, the property tax assessments on land will significantly increase – ranging anywhere from 10 to 50 times higher per acre depending upon the location of the property. This, he said, would result in more financial hardship for developers, financial institutions and local economies.

Assessors and municipal officials, though, say they want the change because the loophole shifts property taxes that should be paid by developers to other taxpayers, mostly homeowners.

The change would not add “one nickel more” in tax revenue for municipalities, said Ed Huck, director of the Alliance of Wisconsin Cities, which supports the change.

“For long periods of time, developers have been able to hold land and shift taxes to others,” Huck said.

Rich Eggleston, communications coordinator of the Wisconsin Alliance of Cities, said a developer in Eau Claire is tilling and seeding two parcels next to the Metropolis Hotel so it will qualify for the use-value assessment next year.

Currently, the property taxes for this land are $27,000, but next year, taxes will drop to about $40 because of the farm designation, Eggleston said.

And land adjacent to a Gander Mountain in Eau Claire also is being planted with crops. The current tax bill is about $50,000. It will drop to about $75 next year, Eggleston said.

Mike Grota, of Grota Appraisals, handles property assessments for Germantown and a number of municipalities in Ozaukee, Milwaukee, Washington and Waukesha counties.

“In Germantown and in many neighboring communities this scenario is common,” he said of developers planting crops on land zoned for other purposes.

In Fond du Lac, Wegner, the assessor, said there are two commercial lots that should be assessed at $636,100, but are valued at a total of $900 because winter wheat was planted on them.

With the commercial designation, the property tax bill should be around $13,536. Instead, the bill’s estimated at $19.15.

Then there’s the Whispering Springs subdivision that has homes along a golf course.

Six lots there should be assessed at a total of $270,000, with property taxes totaling about $5,745.

But with corn planted on one lot and weeds and marsh hay being harvested from the other five and used for farm bedding, Wegner said he is required to assess the land as agricultural. The total tax bill would be about $12.77.