CINCINNATI — Terry Diefenbacher is a Colerain Township farmer whose family toiled in the soil for three generations.
David Warner owns an Indian Hill mansion surrounded by 60 acres of woods.
Jeff Eichorn is a commercial real estate broker trying to bring new jobs to Harrison Township.
All three have a 44-year-old Ohio tax policy known as the Current Agricultural Use Value to thank for help with their pursuits. But that raises some questions about whether the policy is working as intended.
“The whole idea is to protect farmland,” said Howard Fleeter, a former Ohio State University economist who has scrutinized the CAUV program on behalf of his consulting clients in education finance. “If I’m a farmer and this program is designed to benefit me, I’d be pretty mad about somebody in Indian Hill that’s getting the same thing that I am for just buying a house on a big plot of land.”
The I-Team has been studying the CAUV program as part of its ongoing coverage of tax breaks, from the Cincinnati abatement policy that sparked billions of dollars in new real estate investments since the last recession to the property tax exemptions that will help FC Cincinnati finance its new West End stadium.
The I-Team obtained public records from the Hamilton County Auditor’s office and reviewed all CAUV applications submitted in 2018 for roughly 1,000 parcels of real estate. Based on our analysis, the CAUV program generates about $3.8 million in annual tax savings from the 27,000 acres in the program. Those parcels generated at least $12.8 million in agricultural revenue in 2017.
But the tax savings and revenue are not evenly distributed across all jurisdictions. Indian Hill parcels, which represent 7 percent of the total acreage in the program, generate about 45 percent of the total tax savings. Delhi Township, which represents less than one percent of the total acreage, generates more than 30 percent of the agricultural revenue listed on CAUV applications.
“By doing this work and digging into this data, which you’ve had to do parcel by parcel, you’re providing information which as far as I know nobody has had before,” Fleeter said. “Is anyone breaking the law? I don’t think that there’s any evidence that that’s happening. I’d be shocked if that was happening. The question is, ‘Is the law having the intended result or not?’”
‘What it’s doing for farmers’
Officials intended the program to fight urban and suburban sprawl, said Gloria Gardner, an assistant administrator with the Ohio Department of Taxation. An expert on CAUV, Gardner said the program is enabled by a 1973 amendment to Ohio’s constitution.
“The program began in the 1970s, largely in response to development pressure for farmers across the state, which pushed up property taxes due to urbanization,” she said. “Farmland owners convinced the General Assembly to enact laws allowing the taxation of farmland based on its agricultural use. In November 1972, the Supreme Court found the new law unconstitutional. So, there was a constitutional amendment in 1973 that allowed for agricultural land to be taxed at its use value. The CAUV program went into effect for the 1975 tax year.”
The program is intended to benefit all kinds of commercial agriculture, including field crops, timber, sod, fruits and vegetables, animal husbandry, bee keeping and hemp production. The state sets the formula for how agricultural land is to be valued and county auditors ensure land owners are using their acreage in accordance with state law.
Diefenbacher, who serves on the board of the Hamilton County Farm Bureau, said Hamilton County’s auditor does a good job of screening applications for CAUV, using satellite maps and personal visits to farm properties to verify land is actually farmed. He thinks the program is working just fine in Ohio.
“I look at it from the perspective of what it’s doing for farmers,” he said. “And it has helped farmers. I know when the law was written back in the ‘70s, it kept a lot of farms from going under.”
Diefenbacher owns a 13-acre farm on Yeatman Road in Colerain Township. He sells most of his produce at The Citrus Tree, a farmer’s market he owns in Springfield Township.
The market value of Diefenbacher’s land is $143,770, according to Hamilton County’s auditor. Its agricultural use value is $57,720. His property taxes are based on the lower amount, which saves him about $1,900 per year.
“Our net profit on our produce is anywhere from $6,000 to $9,000 a year so that savings could very easily make us decide whether or not we’re going to continue to do this,” Diefenbacher said.
What it’s doing for Indian Hill
Twenty eight miles away from Diefenbacher’s farm, Robert Edmiston is testing the limits of organic farming at Turner Farm in Indian Hill. Edmiston is a lawyer whose late client, Bonnie Matsui, asked him to help her bring the “California Cuisine” movement to Cincinnati. It’s a food movement that emphasizes healthy dishes made from locally sourced, sustainable ingredients.
“She had already set it up as the largest certified organic farm in Greater Cincinnati area,” said Edmiston, executive director of Turner Farm. “We’re doing a few other things. We have a state-of-the-art kitchen here to teach people about health and wellness and a new relationship with food.”
Grass-fed beef and Black Welsh Mountain Sheep are two of Turner Farm’s specialties. It also harvests about 1,000 chickens per year and sells organic crops in local farmer’s markets. The property also has about 100 acres of woodlands.
“Those, we’re opening up,” Edmiston said. “It’s not like we have an active logging program but we have pigs that go into the woods and over time we’ll make that more and more accessible for agricultural and conservation purposes. We placed an agricultural easement on this about 2006. So, that land will never be developed.”
Turner Farm ranks second in the I-Team’s analysis of agricultural properties with the biggest tax reductions through CAUV. It has seven parcels in the program that pay about $33,000 in annual taxes but avoid another $197,000, based on the I-Team’s estimate which Edmiston confirmed.
The top-ranked property owner, Greenacres Foundation, owns 23 parcels that avoided $294,000 in property taxes through CAUV. In an email to WCPO, President Carter Randolph said the foundation operates a working farm that conducts agricultural research and education.
We have a hog operation that we are studying to see if hogs can be used to reduce invasive honeysuckle" Randolph wrote. "We produce poultry in our pastures to introduce additional diversity of manure and animal diversity. We have a study in our horse pastures using chickens to reduce the tick population."
Six of the top 10 property owners on the I-Team's list are in Indian Hill, which generates a total of $1.7 million in “taxes avoided” through CAUV. Five of those six qualified for CAUV by citing timber as one of their crops.
“Indian Hill was developed as an equestrian community and the only businesses that you’re really supposed to have out here are agricultural,” Edmiston said. “Just because a number of people came out here that had the wherewithal to buy the land doesn’t mean that they should be penalized for having the wherewithal to live out here. It is an agricultural community.”
What it’s doing for forests
The Hamilton County auditor classifies nearly 1,400 acres as commercial timber operations. They generate about $421,000 in tax savings for owners, 14 of whom are in Indian Hill. Leading the pack in this category are David and Ginger Warner, who save more than $100,000 in annual taxes from the 60 acres of sugar maple, hickory, walnut and beech trees that surround their $1.2 million home on Old Indian Hill Road.
David Warner is a real estate developer, best known locally for building the Atrium I and Atrium II office buildings Downtown. Ginger Warner is a University of Cincinnati trustee who also chairs the Ohio Arts Council. They did not respond to several messages at their home and office. Attorney Laurent Huguenin, who is listed in Hamilton County records as the trustee owner of the property, did not return the I-Team’s call or email.
So, we made public record request for the Woodland Stewardship Management Plan they submitted to Hamilton County’s auditor last February in support of their CAUV application. Here’s how Certified Forester Scott Costello described the Warner’s woods in the document:
“This is a nice block of woodland with good management potential. My recommendation would be to first control all the honeysuckle and other invasives here and then do some cull tree removal to improve the woodland quality. Then sometime five to 10 years from now I’d recommend a small selective harvest.”
Gardner said woodlands have been part of the CAUV program since its inception. To qualify for the tax break, property owners must own at least 10 acres of trees and show they’re managing the woods for commercial timber production.
“Generally, the county auditors ask for a forest management plan, although there is not statutory requirement for that,” she said. “That would include information for a potential harvest down the road, what they’re planning to do in the interim, like cutting grape vines out, trimming the trees, having the property fenced. There’s a whole series of management best practices they should have if they’re planning to harvest commercial timber.”
In a phone interview, Costello said he hasn’t returned to the property since early last year but his impression at the time was that ongoing work was being done to maintain the woods.
“There were areas where they had done the honeysuckle and cut the grapevines and stuff like that,” he said. “It depends on your perception. They could be much more aggressive but at least they’re producing timber in the future that could be marketable.”
Land-management plans cost up to $1,000 and include recommendations that could cost land owners hundreds of dollars annually, said Bill Wais, a certified forester and owner of Miami River Forest Management.
“Some people definitely are in it for just the tax break,” Wais said. “They don’t really intend to sell timber any time in the future. But if you’re doing things to promote the value of the timber or promote the growth of the timber you’re still in compliance with the law.”
Fleeter agrees the Warners are complying with state law. But he questions whether lawmakers intended for the program to bestow such a big tax break for tree farming.
“Do you really think that somebody in Indian Hill is going to sell off their wooded part of their lot to some kind of developer?” Fleeter said. “Is it just that we have a value that we don’t want to mow down every tree in Ohio? What I need is somebody to tell me the justification for them getting that large a tax break.”
What it’s doing for developers
The CAUV program may have been intended to fight sprawl, but Jeff Eichorn sees it as “a great tool” for economic development, too. Eichorn is an executive vice president with the Schueler Group in Lebanon. Its investment affiliates spent more than a decade converting 160 acres of farmland into the Harrison Township Commerce Center near the Dry Fork Road exit off I-74.
The company leased its land to farmers until it was able to attract commercial clients to the site. That generated income from the land along with reduced taxes through CAUV. And it kept the land from being overgrown with vegetation, which can cost thousands of dollars per acre to clear when it’s time to start construction.
“It’s a great way to hold land until it’s ready for development,” Eichorn said. “I’m a believer in the program.”
Eichorn said the project complied with CAUV statutes by paying a three-year recoupment of property tax savings when each parcel of farmland was converted to commercial use. A 13-acre corn field is all that remains of the original 160 acres.
Among the buildings replacing the farmland are: A GAP distribution center, Unilock paving stones, Skally’s Bakery and Duke Energy Corp. The utility is building a $60 million security center to monitor its Midwest electric grid, a project that will attract about 150 high-paying jobs to the township.
Harrison Township formed a Joint Economic Development District with the city of Harrison so it could collect an earnings tax on the new development. Township Trustee Tom Losekamp said that will reduce the property tax burden on the township’s 30,000 residents, farmers included.
Another factor driving the new development is the meager tax savings that Harrison Township farmers receive from CAUV. The I-Team’s data shows the tax savings per acre is $7,048 in Harrison Township. It’s more than $111,000 in Indian Hill. Put another way: Harrison Township has 10 percent of the county’s CAUV acreage but it only generates 4 percent of the total tax savings from CAUV.
“Most of the money earned from farming is less than the taxes saved,” Losekamp said. “My mother-in-law’s farm makes enough to pay the taxes with a little left over while a friend’s family loses money and pays more in taxes than is returned to them.”
What it’s doing for Hamilton County
A state policy that allows land owners to avoid $3.8 million in property taxes might seem like a drop in the bucket for a county that just approved a $276 million budget. Unless you consider that Hamilton County had to freeze wages and eliminate 750 jobs in the last 10 years just to keep its budget balanced.
Even after cutting the budget 33 percent to year 2000 level red ink remains. Commissioners voted Oct. 15 to increase the Hamilton County sales tax by 0.25 percent to eliminate a projected $20 million deficit for 2020.
Hamilton County Commissioner Todd Portune thinks it would be worth exploring whether CAUV could be modified to give local governments more discretion in how it’s implemented.
“I assume it’s all according to state law. If so we have no control,” Portune said. “But at the time we are struggling with our budget, if we’re losing $2 million or more in property taxes a year it does beg the question about the propriety of such policy. Especially in tough economic times when the state is taking away money from us in other areas as well.”
Fleeter said the local government impact is a cost to every taxpayer.
“The property owner is clearly getting the benefit and that cost is that the local governments are getting less revenue, which means that if they want to generate a certain amount of revenue they have to charge a slightly higher rate,” he said. “Everybody else will pay a slightly higher rate because of this type of a benefit.”
Edmiston rejects that argument. He said no reforms are needed.
“If you’ve got a family of four living on one acre versus a family of four that’s living on 40 acres they’re not going to use (government) services any more,” he said. “So, why should they be paying more just because they happen to have more land. It’s almost a socialist notion.”