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A Tale of 2 Jersey Farmers

A local property tax subsidized Gentleman Jersey Farm.
A real working Jersey dairy farm
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  1. ThomasReid
    January 19th, 2008 at 12:14 | #1

    What’s your point? The diary farm may be getting federal farm subsidies?
    As far as local property taxes are concerned, the New Jersey Farmland Assessment Act of 1964 permits farmland and woodland actively devoted to an agricultural or horticultural use to be assessed at its productivity value.
    The Act does not apply to buildings of any kind, nor to the land associated with the farmhouse. Buildings and homesites on farms are assessed like all other non-farm property. When and if the land qualified under the Act changes to a non-agricultural or non-horticultural use, it is subject to a roll-back tax.
    To be eligible for Farmland Assessment, land actively devoted to an agricultural or horticultural use must have not less than 5 acres devoted to 1) the production of crops; 2) livestock or their products; and/or 3) forest products under a woodlot management plan.

  2. nohesitation
    January 19th, 2008 at 12:50 | #2

    ThomasReid
    Since you asked, to be blunt, one of my points is that there are hundreds of millions of dollars per year in local property tax breaks being given to fake farmers.
    Lots of these fake farmers are major corporations and land speculators (but not in the picture I posted).
    These tax breaks drive up local property taxes.
    Property tax relief and tax reforms need to eliminate this abuse.
    It would be much cheaper to simply buy the land, or the development rights, than to rent it via these kind of subsidies.
    Lousy open space and farmland preservation policy that costs an awful lot.
    And ask Senator Karcher, who lost her Senate seat when the public was made aware of these tax breaks.
    The Asbury Park Press did a reader poll and about 80% of respondents wanted these tax breaks eliminated.
    So, that’s my point! A picture makes the case much more elegantly than words.

  3. nohesitation
    January 19th, 2008 at 13:24 | #3

    ThomasReid:
    One question for you, since you like to ask them:
    Do you know of any other industry that gets government subsidies for the carrying costs of a productive asset?
    For example, if a factory is taken off line and mothballed during a period of surplus, does the government subsidize the factory owner during the time the plant is not producing?
    Land is an asset. Land speculators hold that asset (land) until they decide the market conditions are right.
    Why should local property tax payers be subsidizing speculative real estate industry?
    If farmland or open space preservation are the goals of the program, there are FAR cheaper ways to more effectively achieve those goals.

  4. ThomasReid
    January 20th, 2008 at 00:12 | #4

    I apparently come from a different point of view on property rights than you. Property taxes should be assed in a fair and equitable manner in order to fund the cost of local government. I don’t believe government should be in the business of maximizing tax revenue or angling to strip people of their property if a higher value use and therefore, a greater tax might be assessed on a new owner.
    The ever increasing cost of local government drives up property taxes, not the method of tax calculation. As I said before, the buildings and home-sites on farms are assessed like all other non-farm property, so the “tax break” you’re complaining about is only for the land used for agricultural purposes. Without this so-called break, could anyone afford to own farmland in New Jersey? There’s nothing in your photos to suggest either property is a “fake farm” or that the owners are somehow cheating anyone out of anything.
    The Farmland Assessment Rate is predicated on the idea that demand for local government services is less per acre of farmland than for residential or commercial property and therefore, it makes sense to assess farmland at a lower rate. That seems fair and logical to me. The “open space” is a side benefit for everyone.
    I fail to see how it would be “cheaper to simply buy the land, or the development rights, than to rent it via these kind of subsidies.” How could it possibly be cheaper? Not only would taxpayers have to pony up the money to buy the land, local government would lose whatever property taxes were being paid on a property. That would be a lose-lose proposition for taxpayers.
    As for former Senator Karcher, she was hoisted on her own Party’s petard.

  5. nohesitation
    January 20th, 2008 at 12:43 | #5

    ThomasReid -
    Point of view is not the issue here. You simply do not understand how the farmland assessment program works and what my criticisms of it are.
    It’s been well documented by others that the NJ Farmland Assessment program gives tax breaks to fake farmers. That’s why I posted a picture of a real farm compared to a fake one – there are far worse examples of corporate campuses that are considered “farms” in NJ. The program is a joke.
    Several years ago, the statewide costs of this fake farm tax break to all towns in the state was estimated at $200 million/year (this is the most the State Green Acres program spends in a big year)
    In addition to the subsidy to fake farmers, when a real farm is developed, the development is what causes local property taxwes to rise (more kids in school, more police, fire, roads, services, et al). So the “ever increasing costs of local government” are directly rlated to my point. The land owner and developer shift those costs to the taxpayer and keep 100% of the profits.
    Here’s how it would be “cheaper to simply buy the land, or the development rights, than to rent it via these kind of subsidies.”
    My mom taught me that its cheaper to own than to rent. By giving property tax breaks, the local taxpayers are renting the open space. If open space preservation is the objective, it would be cheaper to buy the development rights than to rent the land each year. Plus, by renting, the taxpayers get screwed in th end when when the “farmer” converts the land to development. Purchase of development rights avoids this cost.
    Do the math – others have done the numbers:
    1) Cost of purchase of development rights on a 100 acre farm = X$ (one time cost to tax payers)
    2) Annual tax revenues on farmland assessed farm Y$/year (tax ratable revenue loss of purchase of development rights – add a time frame (30 years) and an interest rate (6%) and calculate net present value of this revenue stream).
    X + Y = Z (costs to taxpayers of development rights purchase).
    Now compare cost Z with costs of typical farmland assessment
    Scenario I) – no development:
    (Assessed value of land) x (non-farmland assessed property tax rate) = A (non-farm ratable revenue)
    B = current farmland assessed revenue
    A – B = C annual revenue loss (subsidy to farm land owner)
    C x 30 years = D
    D – Z = BENEFIT of DEVELOPMENT RIGHTS PURCHASE
    Scenario II) – Farm is developed (hypothetical numbers)
    100 acres of farms = 100 houses
    100 houses = 200 kids
    average school costs per pupil = $12,000/year
    School costs of development = $2,400,000/year
    Total cost over 30 years = $72 million
    Cost of Police, fire, roads, libraries, ambulance, recreation, water, sewer,….???
    Do you now understand why it is cheaper to purchase the development right to a farm and keep it in real agriculture than to subsidize the holding costs of that fake farm during the period the landowner is waiting for a hot real estate market to sell and develop?

  6. JRacioppi
    January 20th, 2008 at 15:45 | #6

    Bill, is the top picture Christie Whitman’s “farm”??

  7. ThomasReid
    January 20th, 2008 at 23:19 | #7

    If the Farmland Assessment Rate was eliminated tomorrow, the total cost for local governments in New Jersey would be exactly the same, as would total property taxes levied to pay for it. Some property owners would pay more, some would pay less, but the total would remain unchanged. The same thing happens after a municipality goes through a revaluation.
    The Farmland Assessment Rate has no relationship to the pot of money available for the purchase of “open space”. More than 1 million acres in New Jersey are taxed as farmland and, as long as the rules for qualifying for the rate are applied consistently, I don’t have a problem with the program. But if it were eliminated tomorrow, there’d be a good many farmers in a financial bind. What joy is there in that proposition?
    I don’t know anything about the owners of the properties in your photos, but I certainly don’t wish to see either forced to sell because of a change in the method used for calculating their property taxes.
    My sentiments even apply to former Senator Ellen Karcher. According to reports, her $23,400 property tax bill would have been about $14,000 more per year without the farmland assessment rate. The total cost of local government for Marlboro wouldn’t change if she pays $23,400 or $37,400. If she pays $14,000 more, the remaining 11,482 Marlboro households would have their property taxes reduced by a total of $14,000, about $1.22 less per household.
    If Karcher can’t afford the extra property taxes, she can sell the property to someone who can or, as you suggest, taxpayers can buy the property for “open space”. If I were a Marlboro taxpayer, I would prefer that she kept the property and the farmland assessment rate.
    Marlboro’s effective tax rate is 1.82%. That translates into a $2,054,945 value for the Karcher’s property. The government doesn’t pay property taxes, so the $23,400 per year she was paying is lost. You chose 30 years as an example, so here’s the calculation for the lost property tax revenue: $23,400 (property taxes at “tax break” level) x 30 years = $702,000. Total cost to Marlboro taxpayers for the open space = $2,756,845. Thirty years of the Karcher’s maintaining the open space with “tax break” = $420,000.
    By the way, in your example you forgot the rest of the calculation. The people who own those newly built homes will be paying property, state income and all the other taxes that ultimately will be used to fund the local governments where the homes are located.
    Your calculation also assumes that those 200 children, who unbelievable will each require 30 years of public school education, wouldn’t exist if the land was sold to the state instead of to their parents.
    The farmland assessment rate doesn’t prevent government from buying property for “open space”, although it may very well keep land open on a private owner’s dime.

  8. nohesitation
    January 21st, 2008 at 11:42 | #8

    JRacioppi
    No, that’s not “Pontefrac” (Whitman’s farm).
    But I think her farm is enrolled in the Farmland Assessment program and she enjoys tax breaks at the cost of her neighbors.

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