Your farm isn't a farm, assessors tell angry landowners
DES MOINES, IA - The land Steven Smith lives on has been farmed for more than 125 years.
It's less than 10 acres, but Smith grows alfalfa and usually raises some cattle when prices are higher.
But earlier this month, the Wright County assessor notified Smith and about 70 other property owners that their small farms will be assessed like homes in Clarion, Eagle Grove and the other small towns they live around — rather than as agricultural properties.
In other words, as far as his property taxes are concerned, Smith's farm is no longer a farm.
The residential classification increases Smith's property values 70%. He expects that his tax bill next year will rise substantially as well, climbing about $600.
Unlike his urban neighbors, though, Smith said he gets few town amenities — no sewer, water or other services.
"It's hard enough to live in the country and try to farm a little bit" without the large increase in values and taxes, said Smith, who also cares for his 90-year-old mother.
Other small farms across Iowa are seeing similar changes with new property assessments mailed April 2.
How property owners are treated across the state, however, may vary, Iowa assessors say, because the state gives little guidance outlining what constitutes a farm, despite repeated requests to lawmakers.
Most assessors look to the state's administrative code that asks whether the land is "in good faith, used primarily for agricultural purposes," said John Lawson, Clayton County's assessor and president of the Iowa State Assessors Association.
That leaves a lot of gray area on deciding what's a farm, especially when Iowa agriculture can range from four acres of vegetables to 4,000 acres of corn and soybeans.
"There's not real good laws written on it," said Steve Helm, Dallas County assessor, who spent a half hour Tuesday talking with a landowner whose small farm had been reclassified. Those discussions happen about three times a week, he said.
"It's always going to be an issue until there's a better-written law to define what a farm is," Helm said.
With improving housing markets in many counties, most questions are about increases in property valuations, assessors say.
Shari Plagge, Wright County's assessor, said her office took a close look over the past year at properties smaller than 20 acres, given the growth of rural acreages.
"Most people assume just because you're out in the county, you're automatically classified as agriculture," she said. "But by law, we have to classify property based on its primary use."
That means raising a few chickens or having a big garden don't necessarily make a small acreage a farm, Iowa assessors say. But small vegetable or fruit growers who sell their produce at farmers' markets might qualify.
"Even if there is some farm activity, it doesn't mean it's agriculture," said Tom Van Buer, the Johnson County assessor.
Van Buer and other assessors look at whether farming is the primary source of income, along with other criteria.
Plagge's crew uses a series of questions to determine if a property's primary use is residential or agriculture:
- Are crops or livestock being raised?
- Does the property owner use a neighboring parcel for farming, if not the home acreage?
- Does the landowner seek farm tax sales exemption?
- Do they file their income taxes under the code for farmers?
- Is it marketed as a farm operation?
"If necessary, we'd ask to look at income and expenses to see if there's a good-faith effort at making a profit from farming," she said.
Tim Johnson, senior research and policy analyst at Iowa Farm Bureau Federation, said the question comes up every reassessment year. The statewide ag group worries that assessors are trying to define farms too narrowly.
"We want assessors to follow the administrative rule that says if there's an ag process occurring on a parcel, it should be considered ag land," Johnson said.
Assessors shouldn't try to define how much or how little farm income or activity comes from acreages, Johnson said, noting the U.S. Census of Agriculture considers an operation with $1,000 in ag sales a "farm."
Iowa farmland values dropped 5.9 percent this past year, marking the third straight year land values have dropped. Register photos
"If you're a hobby farm in a rural area, even if that's not your full-time job, that shouldn't matter," he said. "Many people who are 'real farmers' don't necessarily get more than half their income off that agricultural land."
That's especially true during this farm downturn, with farmers working more than one job to make ends meet, said Smith, the property owner whose farm was reclassified as residential.
U.S. farm income is projected to fall to $62.3 billion this year, about 50% lower than the high set in 2013. Profits are tumbling along with corn and soybean prices, which are about half what they were in 2012, when a drought gripped the nation.
Iowa farm income has followed suit, dropping about 42% to $5.5 billion in 2015 from a 2011 high.
"People are experiencing some bad times in rural areas," with many towns hurting with less ag spending, said Smith, who plans to protest his valuation.
"It just seems like a way for the county to get more money," he said.
Plagge and other assessors stress that their job is to establish fair values for properties. Local governing groups, such as the supervisors, city council members and school boards, adopt budgets that actually determine how much property owners pay in taxes.
Assessments are the first step in a nearly two-year process, Plagge said. And property owners can protest their assessments to a local review board.
Dave Beenken, whose property also was reclassified in Wright County, said he moved three years ago to about 10 acres outside Kanawha so he could raise cattle for himself and others.
So far, he's been working to clean up the farm, with plans to build a cattle shed and graze his herd.
Beenken, a general contractor, said reclassification of his land, and his likely higher tax bill, may make him rethink his plan. He also plans to protest his assessment, which climbed about $30,000 to $92,800.
"If farmers lose money, are we going to reclassify their land, and say they're just a hobby farmer?" he asked.