Bills filed in N.D. in attempt to make farmland valuation system more fair

In April, angry landowners crowded into a meeting room on the sixth floor of the Grand Forks County Building. The taxes they were expected to pay on their farmland had increased much more than usual and they weren't going to take it lying down.

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In April, angry landowners crowded into a meeting room on the sixth floor of the Grand Forks County Building. The taxes they were expected to pay on their farmland had increased much more than usual and they weren't going to take it lying down.

Almost a year later, legislation has been filed in North Dakota in an attempt to make the system used to calculate the value of farmland in the state more fair.

House Bill 1054 would restrict the use of "modifiers," or things landowners can claim limit the productivity of their cropland, in the calculation of land values. Examples include poor drainage and rocky soil. Statute already requires the land's use as cropland or noncropland be taken into account.

Senate Bill 2026 would require assessors, who are currently untrained locals in charge of compiling the data used to calculate the valuations in their area, to receive assessment education and become certified.

In North Dakota, the value of farmland is calculated by North Dakota State University using the potential profit from the land based on data from the national Farm Service Agency, the cost of obtaining that profit and a capitalization rate based on a 10-year average of mortgage rates on farm loans in the state, meaning the lower the rate is, the higher the land value. Modifiers are then applied in cases where land is less than desirable.


The bills would limit the number of modifiers applied to land and would require a trained assessor verify their presence.

"We really want to focus on 'what's the value of the land's inherent ability to produce?'" state Rep. Jim Schmidt, R-Huff, said. "NDSU calculates that and we have got a very good formula."

But Sen. Dwight Cook, R-Mandan, said the solution is still somewhat in flux.

"We knew our work was not yet done on this issue, but we had to pass it out because the deadline was there," he said.

Cook, Schmidt and Sen. Jessica Unruh, R- Beulah, have continued to meet with tax officials to find a "better solution," Cook said.


In Grand Forks County from 1981 to 2008, the value of an acre of agricultural land stayed relatively static, averaging $425. After that, sudden increases began until the average reached $1,004 in 2014.

After several tense meetings with the County Commission, County Board of Equalization and Soils Committee, the commission ultimately decided to eliminate the use of modifiers. This was because they had been unevenly applied in townships throughout the county, with some applying one blanket modifier to every acre and others measuring it differently on each parcel of land.


Schmidt said the bill limits modifier application because NDSU's soil productivity calculation, or productivity index, already takes most of them into account. Others, like land inaccessibility, would still be applicable because the soil survey used to calculate the PI doesn't include that variable.

"What was happening is that we were doubling up, so we want to eliminate that," Schmidt said. "That's only right. That's only fair."

County Director of Tax Equalization Amber Gudajtes said she wasn't sure how managing the modifiers would work out in the end, as the bill simply states they would be mandated by the state supervisor of assessments. While the bill is in flux, the county will continue not to apply any modifiers to 2015 valuations.

Schmidt also wanted to eliminate the use of modifiers for things like planted windbreaks because to him, those alterations are land management decisions and have nothing to do with what the soil has the ability to produce, which is what the valuations are ultimately supposed to encompass.

Will it work?

The county is required to hand the state at least 90 percent of a predetermined amount of money established by the state.

By eliminating the use of modifiers, Grand Forks County fell to 89 percent of that amount for 2014, and while the state gave out a temporary pass for that year, Gudajtes said that won't happen again.

Cook said the assessor bill is a big part of the solution, but Gudajtes worried where funding for those positions would come from, as she thought most of her assessors would likely quit if the bill passes.


But Cook wasn't phased.

"We send a lot of money to local governments ... if we have to make adjustments, we'll deal with this issue, but the point is to get the assessment done right," he said.

Grand Forks County Commissioner Gary Malm was skeptical the bills would fix all of the issues his county had seen this past year.

While the current system is required in statute, in his mind, basing valuations on market value is the answer.

"The point is, this system isn't working," he said. It may, with a little tinkering work, but it isn't going to be an answer."

But Schmidt disagreed.

"We want to avoid the market value because in some scenarios, people don't care whether they can make a living off (the land) or not, whereas the North Dakota farm family, they need to make a living off it," he said.

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