Land values to increase for some Grand Forks County landowners

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About 7,000 Grand Forks County landowners soon will be getting notices that their land values for 2012 are increasing by at least 10 percent.

The vast majority of the notices are for agricultural land, which increased by 25 percent this year. That compares with an average increase of 29 percent for agricultural land statewide.

The notices, which were mailed Friday, are sent to property owners whose property values increase by 10 percent or more in any one year, according to Amber Gudajtes, county tax equalization director.

Notices also were sent to 172 property owners in Northwood, N.D., as part of a two-year citywide property re-evaluation.

In Grand Forks County, the average acre of all agricultural land this year is $741.57. That’s about 91 percent of the state-allowed maximum of $814.91, which would have been a 32.4-percent increase.

The maximum values are by a formula the North Dakota Tax Department uses to calculate land values, according to Gudajtes.

Grand Forks County agricultural land values rose by 7 percent in 2011, 9.5 percent in 2010, and 3 percent in 2009, she said.

County-by-county, 2012 agricultural land values throughout the state increased from 18 percent to 36 percent, according to Tax Commissioner Cory Fong.

Agricultural land values are not based on market value, he said, and the increase in land value is not the same as a tax increase.

“Just because the values go up 30 percent does not mean the tax rate is going up 30 percent,” Fong said.

Counties set their own property tax rates later in the year.

The NDSU Department of Agribusiness and Applied Economics bases the agricultural land values by a formula for a capitalized average annual gross return, based on total production, input costs and interest rates.

Production and cost of production values are calculated on a rolling 10-year average, with the highest and lowest years eliminated and figuring the average from the remaining average.

For 2012, NDSU used crop years from 2001 to 2010, including record or near-record production and high prices in 2007, 2008 and 2010 for most counties.

The primary reason land values increased this year was the lowering of the capitalization rate for agricultural land, according to Fong.

The Legislature set a minimum capitalization rate, or floor, at 9.5 percent in 2004. By 2011, it had declined to 7.4 percent.

A sunset clause in the law allowed the floor to be eliminated this year. So, the 2012 capitalization rate was calculated using the 10-year-average of mortgage rates on North Dakota farm loans, according to the tax commissioner’s office.

“While the good production years being included contributed somewhat to the increase in agricultural land values, that change alone has the impact of raising values by 26 percent,” said Dwight Aakre, NDSU farm management specialist.

Here is a list of counties in northeastern North Dakota and the maximum average estimated agricultural value per acre of all agricultural land, and the increase from 2011:

• Benson. $470.46; 33.1 percent.

• Cavalier. $641.46; 33.71 percent.

• Grand Forks. $814.91; 32.4 percent.

• Griggs: $540.71; 30.69 percent.

• Nelson: $465.75; 30.79 percent.

• Pembina: $922.33; 30.29 percent.

• Ramsey: 467.92; 31.25 percent.

• Steele: $753.66; 31.17 percent.

• Towner: $586.73; 36.67 percent.

• Traill: $949.84; 30.87 percent.

• Walsh: $745.09; 19.43 percent.

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