Our View: Home on the range
November 8, 2011
As county assessors across Colorado prepare this month to re-value farms and ranches with houses and farm buildings for property tax purposes, it appears that House Bill 1146 is a positive step toward improving balance and fairness to the system.
There remains much to be learned and understood about how Colorado's new law will impact the property tax valuations of agricultural land in Routt County. However, we see encouraging signs in the new law that it will redistribute the overall tax burden here in a more equitable way without harming the farmers and ranchers who do the work of raising food in the Yampa Valley.
The new law is intended to remove some of the favorable agricultural tax status from as much as 2 acres of land associated with rural homes whose occupants are not farmers and ranchers but who allow farming and ranching activities to take place on their land for the express purpose of lowering their tax bills.
One illustration could be the Red Creek subdivision near Clark, where the property tax rates vary from home to home. Some property owners in Red Creek lease the portion of their 35-acre lots not occupied by their homes to a rancher for grazing. One 35-acre lot there was purchased for $47,000 and is valued for taxes at $740. With agriculture status, the annual tax bill is $13.12.
Right next door is a 748-square-foot home on a 35-acre lot. The land, which does not have agriculture status, is valued at $333,000 for tax purposes, and the one-bedroom home is valued at $113,000. The annual tax bill has averaged about $1,850 throughout the past three years.
In the same subdivision, there is a 3,400-square-foot home that sold for $900,000 in 2005. The land, which has agriculture status, is valued at $1,120 for tax purposes, and the home is valued at $520,000. The property's 2010 tax bill was $2,600.
Routt County Assessor Gary Peterson said he expects to take a fresh look at the valuation of 1,380 rural properties in 2012. The possibility exists that property taxes on those farms and ranches will go up in 2013. But that won't always be the case.
The new law had its genesis in 2010 when the state Legislature established a nine-member panel to explore the issue and make recommendations. Its membership included county commissioners and county assessors as well as representatives of the agricultural community.
Specifically, the new law requires Peterson and county assessors across Colorado to look at the 2 acres of land beneath a structure on a farm or ranch and consider whether they should be re-valued at residential values, based upon whether the occupants of the home actively are engaged in farming or ranching, which would make that building integral to the agricultural operation carried out on the land.
The owner of the farm/ranch need not occupy the house, but the occupant could be an immediate family member or an employee who raises crops or livestock. But it could not be a cousin, for example, who happens to live in the house.
We are mindful that the ability to graze 40 or 50 cows and calves on the open space within a neighboring rural subdivision is one of the puzzle pieces that can keep a legitimate family rancher in Routt County prosperous. Similarly, contracts to custom crop hay from one of those subdivisions can help a farmer pay for a new tractor.
However, our understanding of the new state law suggests the incentive for rural homeowners associations to continue that cooperation with agriculture remains intact.
At the same time, we think House Bill 1146 stands to reduce the subsidy to some rural homeowners that urban property taxpayers were required to absorb under the old system. It's only fair.