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Grand Forks County farmers upset over skyrocketing land values

As Arvilla Township’s assessor, Paul Bernardy knows a thing or two about how land value is determined for tax purposes in Grand Forks County. But he’s on the side of the taxpayers upset with the skyrocketing value of farmland here.

He owns about 2,200 acres mostly in the western and central part of the county and is expecting to see the assessed value on his land go up an average of 77.9 percent. That could have a dramatic impact on how much property taxes he pays, depending on where the county sets the mill levy.

And he’s not alone. Out of 41 townships in the county, 18 saw assessed values go up by an average of 10 percent or more. The Top 5, all on the county’s western edge, saw increases of more than 40 percent. The average increase throughout the county was 10.5 percent.

“We feel it’s not done fairly across the board,” Bernardy said recently, referring to certain variables used to determine assessed values that he feels are too subjective. He also said he doesn’t think the broad brush the county uses to assign soil productivity to entire townships is very fair when productivity varies by acre.

As of Thursday, the county has received 17 pages of formal complaints ranging from individuals to entire townships appealing the valuations together. More are expected.

County officials say they will take another look at land valuations. The County Soils Committee will hold a meeting on Thursday before making its final recommendation to the County Commission in June.

But that’s not good enough for Bernardy, who said people in his area are in contact with the township lawyer.

County Tax Equalization Director Amber Gudajtes said officials are trying to work with land owners. “I don’t know if any system that you start with and it’s perfect,” she said. “We still want to make the system right.”

Market factors

While the Soils Committee will be looking at the valuations, it’s only one of several groups that have an influence on assessed land values in Grand Forks County.

By state law, North Dakota State University Extension Service is the agency that determines the value of an acre of farmland with modifications by other groups.

But the agency’s process is not based directly on market value. Instead it’s based on three variables with some bearing on the market:

  •  The potential profit that could be derived from the land based on data verified by the national Farm Service Agency.
  •  The cost of extracting that profit, such as the expense of combining and fertilizers.
  •  The capitalization rate, which is based on a 10-year average of mortgage rates on farm loans in the state. The lower the rate the higher the land value. Before 2012, the Legislature set a floor on the capitalization rate, which effectively controlled the increase in land value. In 2011, the capitalization rate could be no lower than 7.4 percent but, in 2012, using actual mortgage rates, NDSU set the capitalization rate at 5.8 percent.

This had a big impact on land value. From 1981 to 2008, the value of an acre of agricultural land stayed relatively static, averaging $425 in Grand Forks County. After that, sudden increases began until the average reached $1,004 this year.

Dwight Aakre, a farm management specialist with NDSU Extension, said farmers have been seeing really good production in recent years, so it would make sense that their land is worth more.

“They’ve made more money than they’ve ever made before,” he said.

The NDSU land value is modified by the National Resource Conservation Service’s soil-productivity index, which measures the fertility of soil for growing commodity crops. The county applies the index to entire townships instead of acre by acre.

Subjective factors

What the county’s Soils Committee has the most control over is the “modifiers.” These are variables that harm the productivity of a piece of land, including inaccessibility, irregular fields, poor drainage, rocks in the soil, soil salinity, stream overflow and wind erosion.

Gudajtes said the modifiers have become a source of contention because they can affect the value of land greatly — for example if a field is deemed to have too many rocks, productivity is deemed to be off by 20 percent — and these modifiers are determined by landowners and township officials, who are themselves landowners.

As a result there is a great incentive to exaggerate.

“Some townships were very generous and some were very conservative,” Gudajtes said.

Though the Soils Committee will be reviewing the modifiers when it meets next week, there’s a question of what it can really do because it didn’t make the initial decisions on the modifiers.

“We advise,” Soils Committee member David Burkland said. “We don’t have any inherent power.”

Public outcry

While rising valuations are what triggered complaints, the valuation changes are extremely uneven throughout the county. While 18 of 41 townships saw valuations increase 10 percent or more, 16 townships saw valuations decrease.

In general, the biggest increases were on the western edge of Grand Forks County while the biggest decreases were on the eastern edge, near the Red River where the soil is richer.

The highest increase was in Moraine Township, where most of Bernardy’s property lies. Valuation there went up an average of 60 percent to $919.56 an acre. The biggest decrease was in Falconer Township, adjacent to the river, where valuation fell by 16.3 percent to $974.85 an acre.

The Top 5 valuation decreases were all more than 8 percent and were all adjacent to the river.

That’s not lost on landowners. One complained that his land west of Larimore can’t produce high-value crops as land by the Red River and the crop is more dependent on rain to survive.

Keith Drees, a member of the Fairfield Township board, said people are also bothered that some parcels of land earlier deemed not farmable were now treated as farmable; farmable land is more valuable and subjected to more taxes.

In his township, in the south-central part of the county, valuations went up an average of 22.6 percent to $688.70 an acre.

“Everybody’s in an uproar now but until they do their homework and find out exactly what’s going on, nothing is in stone,” he said.

“There are people who aren’t happy with their modifiers,” said Burkland, the Soils Committee member. “There are people who are unhappy because their pasture land went up in value. And then there are people who are just unhappy that their taxes went up at all.”

He’s not immune himself. His properties are going up in value, too, with most parcels going up 11 percent, according to county records.

If you go

  •  What: The Grand Forks County Soils Committee will hold a meeting on land valuations.
  •  When: 1 p.m. Thursday.
  •  Where: The Grand Forks County Office Building, 151 S. Fourth St., Grand Forks.
Anna Burleson

Anna Burleson is the higher education reporter for The Grand Forks Herald. She is a 2013 graduate of the University of South Dakota's Mass Communication program and is originally from Watertown, S.D. Contact her with story ideas or tips by phone, email or Twitter, all of which are listed below. Examples of her work can be accessed here.

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