# Key Findings

The purpose of this report is to provide projections of property tax for agricultural land in Ohio for tax years 2020, 2021, and 2022. The projections apply for all soil types in Ohio enrolled in the Current Agricultural Use Value Program (CAUV) and are grouped by soil productivity indexes. Ohio underwent large legislative changes to the calculation of CAUV values in 2017 which were phased-in over one triennial cycle and the 2020, 2021, and 2022 tax years represent the first full implementation of the new formula for counties in Ohio. Current methodology for calculating CAUV values is explained along with how the projections are constructed. Ohio Department of Taxation (ODT) descriptions of calculations and the Ohio Code of legislation on CAUV are used in this report.

Highlights

• For reference, the average CAUV value for 2017, 2018, and 2019 were $1,153,$1,105, and $876 respectively. However, those values included the “phase-in” procedure and would have been approximately$1,000, $875, and$740 without the “phase-in.”
• Current projection for average CAUV value in 2020 is $665 which would represent a change of -24% from the previous tax year. However, the more apt comparison would be to the most recent triennial update in 2017 and the projection calls for a -42% decrease in average CAUV values for counties receiving updates to their property taxes. • The projection for the average CAUV value in 2021 is$760 which would represent a -25% change from the previous triennial update. The average CAUV value projections could end up as low as $560 or as high as$900 if actualized prices, yields, non-land costs, and interest rates for 2020 have large deviations from their recent trends.
• The very early projection for the average CAUV value in 2022 is $880 which would represent a 1% change from the previous triennial update. The average CAUV value projections could end up as low as$665 or as high as $1,010 if actualized prices, yields, non-land costs, and interest rates for 2020 and 2021 have large deviations from their recent trends. # CAUV Value Projections for 2020 through 2022 In 2019, the average CAUV value across all soil types was$876 per Ohio Department of Taxation (ODT) and was the final year of the “phase-in.” The “phase-in” resulted from legislative changes in 2017 which altered the formula for CAUV but would not fully incorporate the changes until 2020 and beyond. Without the “phase-in,” the average CAUV value in 2019 would have been $739. The projection for the average value of CAUV in the 2020 tax year is$666 followed by an uptick in the 2021 tax year to $759 and then$882 in the 2022 tax year. The projections are partially based on how the CAUV formula use Olympic averaging3 for certain components and it is possible for a potential high of $922 to a potential low of$497 for average CAUV values in 2020. However, CAUV values will not become official for 2020 until sometime after June but are unlikely to have a substantial divergence from current expected projections based on the currently available data for components which use Olympic averaging. The corresponding high projections for 2021 and 2022 are $900 and$1,008 respectively while the low projections for 2021 and 2022 are $561 and$667 respectively. There is more uncertainty with the expected 2021 and 2022 values because they are missing one or two years worth of values in their formula for the agricultural economy but the high and low projections capture the full range of values CAUV can take on in those tax years.

Projections of CAUV values are based on five major components in the formula which are averaged over a period of five to twenty-five years depending on the specific component: capitalization rate, commodity yields, commodity prices, commodity acreage/rotation, and non-land input costs. The commodities used in CAUV are corn, soybeans, and wheat. Each of these components are projected into the future based on recent trends in order to fill in missing values in the projection of 2020, 2021, and 2022 CAUV values.

While the projection of the CAUV values for 2020 tax year are to decrease from 2019, this is due to firstly from the absence of the “phase-in” as well as trends in the components that make up the CAUV formula. The projections for the CAUV values in the 2020 tax year are for the components of commodity yields, commodity rotation, and capitalization rate to remain largely unchanged from their 2019 values. Input costs are expected to continue their recent decline, although this is counteracted with commodity prices expected to decline by a larger degree in part to a recent low price environment but also due to higher prices dropping out of the calculation. However, the recent trend for input costs falling as well as an expected decrease in the capitalization rate – due to lower interest rates on farmland loans – will reverse the trend of falling CAUV values for 2021 and 2022 as they are expected to rise.

Under the expected scenario, the average CAUV value will continue to decline in 2020 by a similar proportion as the fall in the CAUV values from 2016 through 2019. Grouping soil types based on a productivity index, as seen in figure , can help display how similarly productive soils are expected to decline for the 2020 projections and corresponding rise for 2021 and 2022:

The 2017 through 2019 CAUV values were partially offset by the current provision in the CAUV calculations that phases in the new formula for CAUV, smoothing the adjustment to lower CAUV values over one cycle of property reassessment rather than these declines occurring immediately. The 2019 values had an adjustment factor where only half of the difference was included between the 2018 CAUV value and what the pre-adjusted 2019 CAUV would have been. This also occurred for the 2018 and 2017 values. Figure provides a productivity index grouping of soils over time if the “phase-in” did not exist, which indicates that the expected values in 2021 and 2022 will have similar values to what an unadjusted average CAUV value would have been in 2017 and 2018: