Photo by George Lauby
Deputy County Attorney Joe Wright and County Assessor Julie Stenger talk to TERC by telephone, as a dozen or more landowners and officials look on.
Faced with a possible tax valuation increase of 41% this year on pasture land, a dozen landowners joined Lincoln County Assessor Julie Stenger Monday for an all-afternoon tele-conference with the Nebraska tax equalization board.Stenger and her staff of appraisers have already scheduled a 13% increase on the land -- the most fragile grassland in the county -- in the northern and southwestern parts of the county.
The state Tax Equalization and Review Commission considered raising the tax valuations by another 28%.
That brought a set of landowners, who, despite the demands of calving season, sat through a hearing that lasted nearly four hours.
TERC chairman Robert Hotz said it appears the land is undervalued, based on sale prices over the last three years.
Stenger testified first for nearly 30 minutes.
She maintained that high sale prices were an anomaly – a bubble caused by a highly unusual combination of events – extreme drought, hefty disaster payments to ranchers from the federal government, and record-low interest rates.
“It is not representative of today’s market at all,” Stenger said. “We’ve seen land values level off and decrease, and that’s true statewide as well as in Lincoln County.
Stenger said she is equalizing valuations in Lincoln County with values in adjoining Logan and McPherson County. In some cases, the same ranch owns land in both counties, and it would not be fair to have sharply higher taxable values in one county than another on the same type of land.
Stenger, and most of those who testified, said drought drove up the prices of cattle. That, coupled with a federal disaster payment, gave cattle owners an unprecedented amount of income. Some ranchers used the money to buy more land, driving the price to record highs.
Land sales during the three years of Oct. 1, 2012 to Sept. 30, 2016 are used to calculate taxable valuations for 2017, according to a formula set out in state law.
However since then, prices have collapsed. Cattle are worth about half of what they were just two years ago, rancher and former state senator Tom Hansen said.
Hansen told the state commission that some pastureland in northern Lincoln County sold for $1,200 an acre to an out-of-state buyer during the peak. The same type of land is now selling for around $650 an acre.
Skip Marland, a real estate appraiser and broker for 40 years, called it a “very fast-moving whirlwind market” with a “knee-jerk” fall in the last two years. Marland believes the market is still trending lower, but he said out-of-state buyers do not want to buy land in Nebraska because property taxes are too high.
Farmer and rancher Don Lydic of rural Maxwell, who was a Custer County Extension Agent for 22 years, encouraged the commission to find a “wider tax base” than property.
“I believe land values are on a continued downward spiral,” Lydic said. “The bubble has definitely gone out.”
Duane McClain, who operates a ranch real estate company, said if tax values were raised 28%, it would raise the cost of owning a cow by $82.55 a year, when currently cattle owners only break even in the best of circumstances.
The price of calves has fallen from $1,600 a head to about $800 a head, he said.
“It was an income stream never seen before,” McClain said.
Hotz repeatedly said although unusual circumstances caused the market to soar, the circumstances affected everyone in the business, so he wondered why it should not be considered an authentic market.
“If we got a drought assistance payment every other year, on top of high prices…” McClain replied. “That’s an event you just don’t typically see.”
Stenger also told the commission that if valuations were increased by 28% like they wanted, it would drive the “co-efficiency of dispersions” beyond acceptable bounds. That co-efficiency is the difference between actual sales prices and the average price. The Nebraska Supreme Court recently ruled that those prices cannot be too far-flung, Stenger told the Bulletin after the hearing.
Hotz told Stenger that is a good point, and he complimented her for her work as assessor.
Finally, the three members of TERC voted unanimously not to insist on the higher valuations, to the joy and relief of those still in the room.
The sandhill pasture land, most of which is in the northern part of Lincoln County, will be valued at $525 an acre in 2017, Stenger said.
That is still a significant increase.
The same land was valued at $290 an acre in 2013, before the effects of drought took hold and the market went wild.