When talking about taxes in Pulaski County, especially about raising taxes, I am often told “the farmers won’t go for that.” As a counterpoint, I was also told that farmers get a discounted tax rate and thus won’t be affected by any increase in property taxes. While I cannot know for sure what every farmer in the county feels about taxes, I can figure out just how we’re taxing agricultural land and how much any tax increase would cost to farmers. So I sent a Freedom of Information Act request to the county to see 1) how much the County spends on the tax deferral program and 2) how it’s applied.
The second question turns out to be easier than the first. Since 1978, Pulaski County offers a “Land Use Program” for farms of at least 5 acres which allows the land to be taxed not at its normal valuation, but at some estimate of the use of the land for agricultural or forestry purposes. If an individual landowner seeks the benefit of the Land Use Program, then she must provide evidence of being a “bona fide” farm to the Commissioner of Revenue. If the Commissioner determines that the farm meets the criteria, then the land is valued at $520 per acre. In April of 2015, the estimate of the land use value per acre was supposed to be raised to $600 but opposition caused it to be rolled back to $520, a value that has not been changed in many years according to my research. While some counties and cities have a land use valuation that includes open spaces, Pulaski County only allows for agricultural or forestry uses. Other states require those seeking land use valuation to sell or defer their development rights. Virginia does not do so and only requires that if the land is developed in a non-agricultural manner that the past 5 years of taxes be paid in full.
So now the big question- how much does this cost us? While the land use program is technically a tax break for agricultural lands, I think it’s better thought of as an expenditure. In the county, the program applies to about $208 million dollars worth of land, with an additional $62.5 million dollars worth of buildings that should bring in a total of $1,730,072.32 in real estate taxes. (All information from the Pulaski County Land Use Book, compiled by the Commissioner of Revenue and provided to me on May 8, 2017.) Through the use of the land use program, that land is valued instead at $53.4 million dollars and with the buildings (which do not receive a tax break) generates only $741,662.72 in tax revenue.
That means the land use programs eliminates $154.4 million in property valuation and costs the County $988,409.60 every year.
So in the past 6 years that we have been debating the cost of building a new middle school, the Board of Supervisors has spent nearly $6 million to subsidize the continuation of agriculture in Pulaski County. To be clear, I am not blaming or criticizing any individual for using the program and reducing their tax bill. I think that with all of the talk about how the County should spend it’s revenue, we need to be aware of the spending priorities of the County, especially since these items never show up in a budget line item.
So what does this mean for any tax increase needed to fund the new middle school? Well, an $0.11 increase per $100 of assessed value at $520 per acre would mean an increase of about $0.57 per acre. The largest landowner I was able to find in the Land Use Book provided to me by the County is Randall J. Kirk who owns about 2,610 acres. (It’s an enormous text file, so it’s not the easiest to search). His tax bill would go up about $1,500 per year. To put that in perspective, he currently has deferred a little less than $32,000 in real estate taxes per year through the land use program. If you owned a smaller farm, like say Charles Bopp, of around 168 acres you’d expect to see an additional $95.76 in tax per year to help pay for the middle school. That’s compared to just over $1,900 in tax savings through using the land use program.
So the additional tax increase equals, over the 20 year life of the school bond, close to a single year of tax deferral for many landowners. The overall cost of the tax deferrals offered by the Land Use Program is about $0.04 per $100 in assessed value (assuming every $0.01 generates about $250,000 in revenue). This means that if the program were discontinued the average Pulaski homeowner (at $140,000 median valuation) would see a drop of about $56 per year in their real estate taxes. Considering that the Land Use Program does not show up as a line item in the County Budget, it’s important to put tax increases to fund our schools into context with this program.
Additional information about Pulaski County expenditures will be forthcoming after I receive some further information I’ve requested from the County.