By CAROL KING Field administrator for the Urban Counties Council of Illinois, she is a graduate of the University of Illinois, Champaign-Urbana; her article is taken from her M.A. thesis.

It's new and works in some counties

Protecting farmlands by use-value assessment

SIXTEEN COUNTIES have either adopted, or plan to adopt, a system of preferential treatment of farmlands by the tax assessor authorized under a 1971 law. Bond, Clinton, Cook, DuPage, Kane, Lake, McHenry, Madison and Winnebago counties originally adopted the program, and Adams County was in the process of using it for the 1975 assessment year. Adams, Bond, Boone, Kane, Lee, McHenry, Madison, Winnebago, Clinton, Cook and Lake counties used the program in the 1976 assessment year. The law is Public Act 77-1183, sponsored by Sen. Harris Fawell (R., Naperville), and amended in 1973 (Illinois Revised Statutes, 1975, Ch. 120, sees. 50 la—1 through 50 la—3).

The law provides for the assessment of farmland on the basis of its use for farming and not on the basis of the market value it brings for subdivisions or urban development programs. It is implemented at the county level. Within each county, township assessors continue to evaluate parcels of land on the basis of market value. Landowners must apply for the use-value assessment before January 1 of the assessment year. Once land is accepted into the program, its use-value assessment is determined at the county level. Typically, this use-value assessment is derived from soil productivity ratings. Thus, there are two assessed values on the tax books: market value and use- value.

The use-value assessment of farmland is one answer to the problem of "urban sprawl." The profitability of urban subdivisions has caused land developers and speculators to become interested in buying farmland on the urban fringe, and this has greatly increased the price of such land. Where the farmer has resisted the chance to sell, he has found he is subject to higher property tax assessments and higher tax bills. Beginning with Maryland in 1957, several states have permitted use-value assessments of farmlands to enable the farmer to continue to farm his land without paying increased taxes. This is seen as advantageous to city dwellers also because it keeps a green belt around communities.

The practice
The Illinois law originally applied only in counties of over 200,000 population and to farms of more than 40 acres. As amended in 1973, it can be adopted in any county, and any farm of more than 10 acres is eligible. The land must have been used for farming at least three years prior to the landowner's initial application. When land enrolled in the program is changed from an agricultural to a market value use, the county assessor is required to extend an additional tax bill to the landowner based on the difference between assessed market value and assessed farm use-value. When the land changes from farm to market value use, a tax bill is extended back for three years and a five per cent interest penalty is added on the difference between the two assessed values. The rollback penalty seeks to insure that all land enrolled in the program is truly intended for agricultural use.

County participation has been highest in the Chicago metropolitan area, where urban sprawl has been the greatest. But several counties defined by the 1970 census as metroplitan have not implemented the new program, notably Champaign, McLean, Peoria, Tazewell and Woodford counties.

One of the reasons for this seems to be that in these counties farmland is already being assessed at a lower percentage of market value than urban land in the same counties. In Champaign County, for example, rural land was assessed at 23 per cent of sale value while urban land was assessed at 35 percent, according to 1974 sales ratio studies by the state Department of Local Government Affairs. (A sales ratio study is one in which the price of properties that have been sold is compared with the assessed value of these properties to determine at which per cent of sales value they were assessed.)

What was true of Champaign County was true for all counties defined as urban in the 1970 census. Since the farmers' assessments are not apt to be lowered with use-value assessment, officials receive no pressure from farmers to implement the program. Farmers in these urban counties are not liable for the penalty — back taxes for three years plus five per cent interest — if they should sell or convert their land for a nonfarm use.

The data
Available data indicate that substantial reduction in assessments, however, has occurred in counties that use the program. In Cook County the reduction from market value to farm use-value has been 77 per cent, in DuPage County, 83 per cent; Kane, 65 per cent; Lake, 55 per cent; McHenry, 42 per cent; and Madison, 81 per cent. Five of these counties are in the Chicago area; Madison is in the St. Louis area. There is some question as to the extent of actual reduction in assessments that these percentages represent because of differences among Illinois counties in how they arrive at market value. The law itself in the past defined "fair cash value" for assessment purposes as 50 percent of sales value; in 1975 legislation reduced this to 33 per cent (see "Riding the Tax Reform Roller Coaster," November 1975, p. 341).

The doubts
Many assessors as well as property taxpayers have their doubts as to the necessity of the program.. Some of the factors they cite include:
— The land speculator temporarily farming land on an urban fringe also benefits. He can be subject to lower tax bills while the land is being farmed. When he turns it to a more profitable use, he pays the back taxes for three years and the five per cent penalty. But he had a greater amount of capital available (taxes he put off) at an interest rate that is lower than the current market rate.

— Costs for property tax administration are increased. In DuPage County, two additional assessing officials are constantly in the field checking on land enrolled in the program to insure that farming is actually taking place. It was in DuPage County that the question arose as to whether a polo field, also used for grazing, could qualify. It could.

— By lowering assessments for some, it either reduces property tax revenues or requires higher taxes for others to obtain the same revenues as before the adoption of the program.

Finally, the program may be thrown out by the courts on grounds of unconstitutionality. A case in which this question has been raised, Hoffman v. dark. Docket No. 74-3843 G, is awaiting the decision of the Illinois Supreme Court on a DuPage County Circuit Court ruling that the use-value assessment law is unconstitutional. Farmers fear the issue will not be decided before next June when the first installment of 1976 property taxes is due. ž

April 1977/ Illinois Issues/13


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