Rural Republicans strive to make good on pledge to roll back farmland tax changes enacted in 2008
The message from Republican legislative challengers on last summer’s campaign trail was clear: Farmers are suffering from state lawmakers’ recent changes to the Green Acres farmland preservation program.
Many of the Republicans in southeastern and central Minnesota who assailed DFL incumbents for failing to roll back 2008 Green Acres changes were elected in November. And now those newly minted senators and representatives from areas with lots of land enrolled in the program have been given the green light by caucus leadership to make good on their campaign promise. A proposal to repeal the 2008 Green Acres changes garnered symbolically significant status as the second bill introduced when the 2011 session began.
But as with many things in politics, the Green Acres bill that’s likely to advance at the Capitol this session will be more nuanced than the campaign rhetoric.
Sen. Dave Brown, R-Becker, who raised the issue of Green Acres during his successful bid to unseat Sen. Lisa Fobbe, DFL-Zimmerman, is now poring over the complexities of the property tax law, which is intended to prevent farmland tax bills from skyrocketing. While lawmakers like Brown said they wanted to jettison the Green Acres changes when they were campaigning, he said last week they are finding out that they will likely find a solution without throwing away the nuts and bolts of the reforms. Brown noted that county assessors have spent the last two years putting the reforms in place. Undoing the systemic changes made in that time would mean significant expense for local governments.
“If we totally repeal it and force all these changes on counties, then that’s almost like an unfunded mandate,” Brown said.
Green Acres was created by state lawmakers in 1967 as a means of keeping farmers’ property taxes from spiking because of trends unrelated to farming – like the encroachment of commercial development, which can cause the market value of agricultural land to increase dramatically.
Under the terms of Green Acres, county assessors value farms for tax purposes based only on the land’s agricultural use. Green Acres thus limits the valuation on which property taxes are levied to the agricultural worth of land, even if the land would have a much higher value if sold for other uses.
The result is that Green Acres shelters a portion of each agricultural county’s tax base from being levied. In 2007, Green Acres reduced property tax receipts by about $35 million. Swift increases in the value of land within easy driving distance of the Twin Cities in the last decade-plus produced a huge increase in the amount of property tax value that became sheltered from taxation: In 1993, just $700 million was sheltered; by 2007, Green Acres was covering more than $10 billion in value from the tax bite, according to a 2008 report by the Office of the Legislative Auditor.
The auditor’s report, released in the 2008 legislative session, launched Green Acres to center stage at the Legislature. The report showed that as much as 38 percent of land receiving tax benefits consisted of sloughs, woodlands and other land that is difficult or impossible to farm.
In response, lawmakers enacted two property tax classes: one for productive agricultural land that receives Green Acres benefits and a second for nonproductive land that is no longer eligible for Green Acres.
That summer, after lawmakers adjourned, farmers protested the changes. Rep. Kurt Daudt, R-Crown, who attended packed town hall meetings with angry residents in his role as an Isanti County commissioner, said one of his constituents clear-cut 100 acres of woodlands and converted them into fields.
“You’ve got to think that when people are making those kinds of decisions, we’ve got to take another look at this and make some changes,” Daudt said.
When Democrats controlled the House and Senate, DFLers representing swing districts – like Sen. Sharon Erickson Ropes, DFL-Winona, and Rep. Al Doty, R-Royalton, whose constituents had lots of land in Green Acres – introduced legislation to repeal the 2008 changes. But the Green Acres provisions in the 2010 omnibus tax bill did not go far enough to ease the political tension back in their districts. Republicans worked hard to exploit those tensions in their 2010 campaigns.
Thom Peterson, director of government relations at the Minnesota Farmers Union, which has criticized the 2008 Green Acres changes, said that this year’s debate on Green Acres will represent a clash of GOP political priorities with the practical difficulties of making big changes to the state’s complex property tax system.
“A lot of them ran on the issue and they are going to want to deliver something,” Peterson said – “something stronger than the changes that were made in the last year or two.”
Like the freshmen, Republican legislative leaders also have a political stake in the issue. One observer noted that rural legislators will face the worst pressures from back home when it comes time to vote on cuts to budget sectors like Local Government Aid and human services – and while most of the new members active on Green Acres are conservatives who won’t likely defect on budget votes, it doesn’t hurt to give rural legislators an early victory before budget negotiations start.
In the Senate, Brown and Sens. Jeremy, Miller, R-Winona, and Al DeKruif, R-Elysian, have been actively working on Green Acres. In the House, activists on the issue include Daudt and Reps. Bob Barrett, R-Shafer, and Tim O’Driscoll, R-Sartell. Veteran politicians Sen. Michelle Fischbach, R-Paynesville, and Rep. Mary Kiffmeyer, R-Big Lake, are also involved in writing legislation.
But the fate of Green Acres this session is still unknown.
Sen. Rod Skoe, DFL-Clearbrook, who was a key negotiator of the 2008 Green Acres reforms, said the changes have taken effect and will not likely be repealed.
“The immediate reaction is repeal,” he acknowledged. “But once the folks who are working on it start having discussions with the department and with assessors and farm groups, I think they’re going to find they would be better off making improvements and changes as opposed to the repeal. Repealing it would be pretty unsettling to the assessors and the Department [of Revenue] at this point.”
The first bill out of the chute, Senate File 2, proposed to repeal the Green Acres changes. But subsequent bills are being created that ease the tax burden on farmers without eliminating the new tax classifications that were enacted in 2008.
Like Brown, Daudt is realizing that lawmakers can’t fix the problem by simply repealing the 2008 reforms.
“I am fully aware you can’t put the toothpaste back in the tube here,” Daudt said.
Since arriving in St. Paul, legislators have learned that repealing the 2008 reforms would undo all the work that assessors have done to put land into the new classes for productive and nonproductive land. Reversing that work would add to the chaos and cost local governments time and money, Brown said.
“People want stability. So I don’t want to create something that destabilizes what county assessors have had to do over the last two years,” Brown said.
That presents an interesting question: How can the new Republican legislators who are concerned about the issue give farmers the tax preferences from the old system without doing away with two tax classes that were created in 2008?
One potential solution under consideration is a conservation program for which land in the nonproductive category could be made eligible. Lawmakers created a so-called “rural preserve program” in the 2008 reforms that carry much the same tax benefits as Green Acres. So far, however, farmers have found significant barriers to getting their land labeled as rural preserve.
“It’s possible that if we modify that [rural preserve] language,” Brown said, “it will bring about the changes that are needed.”
Although the freshmen working on Green Acres are under pressure to satisfy their constituents on the issue, the economy has had a big hand in diluting the urgency of Green Acres issues. For taxes payable in 2009, there was $9.8 billion in market value deferred on 3.9 million acres in the program, according to the state Department of Revenue. For taxes payable this year, the amount has plummeted to $5.7 billion on 3.96 million acres.