Living near CAFO reduces property value, DOR rules
TOWN OF PIERCE — Living right next to the largest of large dairy farms will mean a tax break for a Kewaunee County couple, the state Department of Revenue has decided.
The ruling spells victory for Scott and Deborah Kliment, who have argued their dream home on a wooded lot in rural Algoma has been greatly reduced in value since the neighboring Ebert Dairy Enterprises developed into one of Kewaunee County’s largest agriculture operations.
The ruling, the first of its kind in the state, could have implications well beyond the Kliments’ 14.5 acres, affecting much of the rest of cash-strapped Kewaunee County and possibly elsewhere in the state.
Kewaunee County Board chairman Robert Weidner said the Kliments' 13 percent tax reduction won't have a big impact on the county budget, but that could change if other homeowners follow their lead.
“If this would carry over to other challenges to assessments, so that numerous residents are appealing their taxes and the valuation of their property, it could get to be substantial,” Weidner said.
The department’s ruling concerns residences that are neighbors of large farms know as CAFOs, or concentrated animal feeding operations. A CAFO, by U.S. Department of Agriculture definition, is a farm operation consisting of at least 1,000 animal units. A unit is the equivalent of 1,000 pounds of living animal. A single chicken or even a calf is too small to make up an entire unit, but a full-grown cow is roughly 1.4 units, so identifying a CAFO is more than doing a simple head count. A farm with 700 full-grown cows would probably have to be licensed as a CAFO, which imposes a variety of environmental requirements on it.
In any case, the Department of Revenue’s ruling pertains not to all CAFOs, just those with 4,000 or more animal units. And the department is quick to point out that, while its ruling recognizes that living next to a large CAFO might generally mean a reduction of property value, its estimates of that reduction are confined to Kewaunee County and specifically apply only to the Kliments’ property.
It started with smell
When the Kliments bought their property near the intersection of Counties D and K in 1995, the Ebert family farm across the road was perhaps larger than average but nowhere near CAFO-sized, and the term CAFO and the licensing process had not even been invented yet in those days.
“It was beautiful,” Deborah Kliment said. “It was all beautiful, single-family dwellings, all farmettes. We had an Amish family nearby. We should have taken the hint when the Amish moved out.”
“We should have moved with them,” Scott Kliment added.
Henry Ebert, a fifth-generation farmer, sold the operation to son Randy and his wife, Renee, and the two expanded the operation. Within about five years, the operation was a full-fledged CAFO and it grew from there.
“It amazes me how it snuck up on us so fast,” Deborah Kliment said.
Unlike some property owners who live near CAFOs, the Kliments have experienced no contamination of their well water. But the presence of Ebert’s operation has meant a steady stream of manure tankers parading past their house, sometimes at a rate of one every two minutes, Deborah Kliment said. There was increased noise from the trucks and construction of new outbuildings on the farm property, and an unbelievable stench.
“You can close the windows, turn on the A/C and spray Febreze, but it does no good,” she said.
“Some days, even the dogs don’t want to go out,” Scott Kliment said.
The road to a tax break
The Kliments thought about bailing out. They contacted two different real estate agents, both of whom suggested selling prices that were about the same, but were considerably lower than appraisals the Kliments had gotten five years earlier for refinancing purposes.
“It was greatly reduced, and they said be prepared to sit on it for at least two years,” Deborah Kliment said.
The couple dropped the idea of selling, but last year, they noticed a good-sized hike in their property tax bill, and they got to wondering why. Yes, there was an overall property tax increase, they were told, but they might want to talk to the tax assessor.
They asked for a re-assessment, which revealed a few mistakes in the property’s historical data, involving date of construction and overall square footage and the assessor adjusted their value downward. But the assessor declined to take the Ebert farm into account; that would have to go before the town’s Board of Review.
The Kliments did a little homework first. They learned the selling price of six area properties, all near the Ebert farm operation, and they compared those prices against the assessed values as listed on the county’s website.
“The selling prices were way below the tax assessments,” Scott Kliment said.
In general, those six properties sold for about 30 percent less than their assessed value, he said.
“So they were overtaxing us,” he said.
Without help from lawyers, accountants or activist groups, the Kliments took that information before the Board of Review in June. They testified to the board about smell and noise and showed them the sale prices and assessments of the six residences in the neighborhood. But in the end, the board shrugged and admitted it didn’t really know what authority it had to re-assess based on that information, so it ruled in favor of the assessor’s original estimate.
But one of the board members told them, “I’d appeal, too,” Deborah Kliment said.
The Kliments did. They were told they had the choice of whether to appeal to circuit court or the state Department of Revenue, and they chose the Department of Revenue. On Sept. 7, they sat before a panel of two Department of Revenue staffers in Green Bay; they and the town assessor made their case.
Early this month, the department issued its ruling in favor of the Kliments, who saw about a $30,000 drop in their assessment from the ruling.
The department apparently was unmoved by the Kliments’ complaints of smell and noise, nor was it swayed by their showing of the price-assessment comparisons of the neighboring six properties, the sales of which were too old to be useful.
But neither was the department impressed by the assessor’s attempt to show a comparable sales grid, because the assessor used sales of properties that the department found were not reasonably comparable.
So the department did its own study of residential sales in the county in the past three years. It excluded residences in the county’s two cities and two villages, and it excluded waterfront properties, all of which would be affected by different market forces.
It then graphed those properties by distance from a CAFO.
“The result of this study including all Kewaunee County CAFOs suggested the possibility of trends, but overall was inconclusive,” according to the department’s findings of fact document. “Therefore, the results of the study were further segregated by the size of the CAFO.”
In the end, the department looked at 184 sales of properties measured against CAFOs of more than 4,000 animal units, which included Ebert Enterprises, Kinnard Farms, Pagels Ponderosa, Dairy Dreams, and Wakker Dairy all in Kewaunee County, and Dairyland Farm, which is just outside Kewaunee County in Brown County.
Comparing sales price to assessment at those properties showed a larger difference within one-third of a mile of the large CAFO, a small but still significant difference just outside that third of a mile, and no significant difference a mile or more from the farm. In short, the property devaluation or the over-assessment was greatest in the nearest proximity to the large CAFOs in the county and diminished as you move outward.
The department’s conclusions: The value of property located more than a mile from a CAFO or within any distance from a CAFO smaller than 4,000 units is not impacted. The value of property located between a quarter mile and a mile of a large CAFO is reduced by 8 percent. The value of a property within a quarter mile of a large CAFO — namely, the Kliments’ property — is reduced by 13 percent.
It’s something of a moral victory for them, Deborah Kliment says.
“There are no winners here,” she said.
People who have a reason to care are either pro-CAFO or anti-CAFO, and waging this battle over property values has alienated many of their friends and neighbors, Kliment said.
Also, a reduction in property taxes is certainly desirable, but a loss of property value isn’t something to crow about.
“We would much prefer to have our home value back,” she said.
Not a blanket policy
The ruling does not provide an automatic tax reduction to anyone living within a mile of a large CAFO, the department is quick to point out.
“DOR considers this study to be appropriately extensive for application across Kewaunee County only,” the department’s facts sheet says. “While trends may be useful to consider in nearby, similar counties, it is not appropriate to apply beyond the immediate area. Kewaunee County is somewhat unique in that there are a significant number of (large CAFOs) from which to gather data.”
In a separate email to the Green Bay Press-Gazette, in answer to written questions, DOR spokeswoman Patty Mayers wrote, “This is not a statewide precedent. The study and decision were based on merits specific to this appeal.”
She declined to speculate whether the ruling would generate similar appeals.
Others are happy to speculate.
“It has huge implications,” said Lynn Utesch who, as a founding member of Kewaunee CARES (Citizens Advocating Responsible Stewardship), frequently finds himself serving as de facto spokesman for anti-CAFO factions. “This becomes the ground floor. The Kliments don’t have a contaminated well; they just exist within that radius. So this really opens it up: If you live in that radius, you deserve 13 percent … If you have a contaminated well, (your property assessment) should be lowered even more.”
The DOR’s study may be specific to Kewaunee County because of Kewaunee County’s property values, but “this also provides other areas with the template for what is necessary to actually get that price reduction,” Utesch said.
Even Randy Ebert sees the ruling as setting a precedent, and it irritates him.
“We have towns and counties that can’t meet their budgets the way it is,” Ebert said. “When you have people looking not to pay their share for whatever reason, you set a precedent, and for whatever reason, everybody will be challenging” their property assessments. “Today it’s big farms, tomorrow, who knows?”
Ebert had not seen the DOR’s findings of fact but questioned its validity.
“From the best of my knowledge, it’s one man’s opinion from the DOR,” Ebert said. “Did he even come out here, or did he make his ruling from behind a desk somewhere?”
In defense of CAFOs
The banking crisis of 10 years ago caused a lot of property values to plummet, Ebert said.
“Just because you can’t sell something for what you paid for it, that doesn’t always mean someone can be blamed for it,” he said. “We can find people all over the world who either have bought at the right time or the wrong time and that, if they speculated at the wrong time, can’t get the same amount out of it.”
Ebert said he’s proud of his farm, not just for its size but for its quality of operation, which helped make it the host farm for 2017 Wisconsin Farm Technology Days last summer.
Ebert acknowledges his operation generates truck traffic, though he said he’s lucky enough to have mostly contiguous farmland, which allows him to reduce the amount of manure he’d otherwise be hauling. What traffic he generates is on public roads, and he says he confines it and other noise-generation to daylight hours. The smell his operation generates is worse at some times of the year than others, and just now, crews are “hauling all day out of the bottom of the pits, and that’s not good smelling stuff, there’s no denying that.”
But “over 80 percent of the land in Pierce is zoned A-1 agricultural,” he said. “We are performing agricultural practices on land that is zoned for agriculture. Now, does farming look the same way today as it did five years ago? Ten years ago? Fifty years ago? Absolutely not. We all know everything is changing.”