Agriculture land valuation up by an average 7.5 percent

The Division of Property Valuation reports that agricultural land values in Kansas show significant increases this year.

The average increase is estimated at 7.5 percent higher than 2000 values. However, in some areas, dryland will increase even more.

In his report to the county commission last week, Clint Anderson. county appraiser, described the development as a “good news/bad news situation.”

The bad news, he said, is the 8.7 percent increase on agricultural valuation for this year. But the hopeful news for next year is that rates should level off, or maybe even decrease.

“The capitalization rate is the wild card that could make anything happen,” he said.

Agricultural land values are based on three considerations, Anderson said.

1. Income-crop yields multiplied by the price of the commodity.

2. Expenses-the normal expenses incurred when growing a crop.

3. Capitalization rate-made up of several components with the largest being a five-year average of the farm loan rate.

To arrive at the valuation figure, the net income is divided by the capitalization rate.

“That is why,” said Anderson, “as the capitalization rate declines, it decreases the value of the land.”

According to Mark Beck, director of property valuation, another consideration of the capitalization rate is an eight-year average used to determine this year’s values which is based on Landlord Net Income statistics from 1992-1999.

Next year’s values will be set by LNI statistics from 1993-2000.

“There were significant net income gains made in the ’90s, and that’s one of the factors affecting this year’s increase,” Beck said.

“The new values are a direct result of lower interest rates and higher yields and prices from the last decade.

“We remind taxpayers that the formula used to calculate land values includes data from a time period when the farm economy was better than today-and we understand some landowners may be confused at why values are escalating now.”

In Kansas, agricultural land is assessed at “use” value rather than market value. Market value is the most probable selling price of a property in an open-market transaction.

Use-valuation is based on the land’s potential for productivity. Consequently, highly productive soils are valued higher than moderately productive soils. There is no correlation between use value and market value.

“The hook to all of this,” said Anderson, “is that the income and expense is not individually set. It is set as a county within a region.”

Kansas State University is the responsible party to apply the state formulas to properties. KSU then turns those figures to the Property Valuation Division of the Kansas Department of Revenue.

PVD checks the calculations, then forwards the figures to the appraiser’s office.

Anderson, realizing the farming community is going to be unhappy with the news, said he and his staff will make themselves available to help people understand the increase.

“Farmers come in and want to talk to someone who can do something about all this, and I can’t,” he said. “The only control we have is to make sure the use and type of soil and number of acres are right.”

Anderson said PVD is in the process of planning regional public meetings to explain the increases in agricultural land values.

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