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Developers use agriculture loophole for lower taxes

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BY DENEEN SMITH

dsmith@kenoshanews.com

TWIN LAKES — The Meadows at Majestic Estates isn’t anyone’s idea of a working farm.

But the would-be luxury residential development is one of several developments in Twin Lakes taking advantage of Wisconsin’s use value assessment rules, getting a substantial tax break by harvesting crops on what are designed to be suburban yards.

Planned before the downturn in the real estate market, Majestic Estates includes 36 lots on 105 acres.The plan includes homes priced at up to $1.2 million, with room on the spacious lots for separate servants quarters or guest houses. The project was platted, concrete roads were installed behind handsome stone gateways, and signs were placed at each lot advertising its size and attributes.

“Majestic Estates brings the allure of luxurious countryside living together with the convenience of nearby amenities, recreational areas and quality schools,” states the website for the development.

Market slowed development

With the crash of the residential development market, the subdivision, started in 2006, has lingered. Just one house has been built in the development. President Robert Tomczak hopes to wait out the market and see the development completed.

In the meantime, he said, a farmer is harvesting hay off the residential lots.

“They are harvesting it three times a year,” Tomczak said.

Tax shift

The Legislative Audit Bureau released a report this month on the impact of use value assessment for agricultural land in 14 municipalities in Wisconsin, including Twin Lakes. The report found that developers were using the rules to lower their property taxes, in the process shifting the tax burden to other taxpayers in the communities.

The report found that in the 14 muncipalities in 2009, 6,300 agricultural acres were zoned for non-agricultural purposes, including residential or industrial development. Of those, 3,800 were owned by real estate or property development businesses.

If those properties were being assessed at market value rather than at an agricultural rate, the property owners would have owed a total of $4.7 million in additional property taxes, reducing the tax burden on all other parcels.

Most acreage in Twin Lakes

Of those 14 communities, Twin Lakes had the highest number of acres zoned for development but taking advantage of agricultural assessments.

More than 2,400 acres in the village are zoned for either residential or industrial development, but are used for agriculture. The town has 413 parcels of 1.5 acres or less that are assessed at farm value.

The report states that those acres are assessed at a total of $628,000 under use value rules, but have an estimated market value of nearly $55 million.

If those Twin Lakes property owners were paying taxes on the market value of the land, the average property tax bill for the other property owners in the village would drop by $251 a year, according to the report.

In Majestic Estates, for example, a two-acre residential lot — planted with hay and assessed for agricultural use — is assessed at $500 and pays $8.94 a year in taxes. A similar five-acre lot in the same subdivision — but one that is wooded and cannot claim agricultural use — is assessed at $349,000 and pays $6,230 in annual taxes.

Legitimate farm use?

Twin Lakes Administrator David Cox said there has been farmland within the village limits of Twin Lakes for many years. Most is owned and farmed by farming families who have lived in the community for some time, including the Stohr family, which has subdivided hundreds of acres of their property into individual lots, but continues to farm the land.

“The property I’m talking about has animals on it and crops on it and has been for as long as anyone can remember. But because there are imaginary lines there, the land is developable land,” Cox said.

The family has also developed and sold off other property.

Cox said about 1,200 acres cited by the report belongs to Thelen Sand and Gravel Co. That land was annexed into the village under zoning that allows the operation of gravel pits, but the land is being farmed until the company moves forward with mining operations.

The administrator said there are several similar developments moving forward, with infrastructure such as roads and water installed, which have then stalled because of economic conditions and are now being farmed to keep tax costs down.

Law meant to protect farms

Wisconsin’s use value law was enacted in 1995, designed to help protect family farms in the state.

Under the law, there are set values assigned to land that is being used for farming, rather than assessing farm property at market values used in traditional assessing. In 2008, about 35 percent of the land in the state was assessed as agricultural property.

Prior to the enactment of the law, farmland was assessed at market value, and farmers in areas where land was at a premium were hit by high property tax bills that pushed some out of business.

“The purpose of the law was to save the family farm,” said Rocco Vita, assessor for Pleasant Prairie and a number of other communities in Kenosha County, including Twin Lakes. “And I really do think that had it been enacted in the 1970s, you would see a lot more dairy farms in Wisconsin.”

Tough to change the law

The Audit Bureau report was requested by Senate Majority Leader Russ Decker, D-Wausau, who has said he would like to see changes in the law that would eliminate loopholes that allow tax breaks for developers.

Advocates for the real estate industry contend that property owners who are getting the tax breaks are appropriately following the law.

Rep. Peter Barca, D-Kenosha, said making changes in the law will be difficult.

“To make a change, it won’t be easy. We are the dairy state, and obviously you do want to protect agriculture,” Barca. “The key is that I think we’re going to have to sit down with all the affected parties and really try to come up with fair changes in the law.”

Cox said it would be difficult to change the law now, when the real estate industry is struggling.

“It would be easier to tell a developer in the good days, in the good times, that you’ve really got to pay full value on those because they are residential lots,” Cox said. “As opposed to telling them that now when so many subdivisions are teetering on the edge of bankruptcy.”

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$$$$$$$$$$$$

By unum civis

Every effort must be made to ensure big brother gets his cut.

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^^^^^^^^^^^^^^^^^^^

By The New Geor

Do we really need more crowded, overpriced subdivisons? Everyone wants to move out of the crowded cities to the wide open country areas.... to again cram themselves in between a bunch of other houses. Ridiculous. None of these houses and condos are selling for these outrageous prices, but developers are still building them.... then getting bailed out when they lose everything. And the houses sit idle and falling apart. Someone (local realtor perhaps?) needs to make a Google map of all the currently "for sale" houses in this area. It would be a pretty crowded map.

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Unbelieveable!

By Maggie

What a slap in the face to the other farmers in the area who have struggled most of their lives to keep their farms. It's shameful how they can get away with it. Either they are farmers or developers it's that simple. They shouldn't be able to have their cake an eat it too.

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Hmmm.....

By Maggie

Soooo..... if the one and only property that stands in that subdivision were to turn their backyard into a garden, would they also qualify for a tax break? I think not.

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