EFA Frustrated with Farm Tax Ratio

EFA seeking farm tax ratio reduction, order calling for fairness

by Rob Perry of The Aylmer Express

Elgin Federation of Agriculture representatives were frustrated earlier this year when they sought a reduction in the county’s farm tax ratio, drug due to the rapidly rising assessed value of farmland in recent years.

They said they weren’t seeking to pay lower taxes, illness only to continue to pay proportionally compared to other property classes that made much more intense use of municipal services.

EFA Director Steve Walsh said the organization started discussing the need for a tax ratio reduction in 2012, when they realized that inflated prices paid for farmland were going to raise everyone’s assessment markedly.

Farmland usually paid 25 percent of what residential properties were billed, per thousand dollars of assessment.  EFA asked Elgin County council to reduce that ratio to counterbalance some of the in-crease faced by farmers, to be phased in over the next four years.

As OFA analyst Ben LeFort explained, MPAC calculated that Class 1 agricultural land in Elgin was valued at $7,323 an acre in 2012, up from $4,051 in 2008.  Other agricultural classes saw similar increases.

In Elgin, that meant the assessment on farmland would, over the next four years, be increased by 51 percent, as would how much farmers had to pay in property tax.  Meanwhile, he said, residential properties were only increasing in assessed value by 12 percent, “which is really what is causing this shift (in the tax burden).”

Some other regions in the province had already decreased the farm tax ratio, he pointed out. Durham’s, Halton’s and Hamilton’s rates were 20 percent, and Chatham-Kent’s 22 percent.

Mr. LeFort said to give an idea of what the assessment increases meant in actual dollars, in 2013, as the higher land value started to be phased in, Elgin farmers paid an additional $647,540 in tax over 2012.  That would increase by an identical amount each year until 2016, when farmers would contribute $2,590,157 annually more to the county than they did in 2012.

But county councillors rejected the EFA’s argument, ironically led by farmers including Central Elgin Mayor Bill Walters.

EFA Director Ed Ketchabaw, in a later interview, regretted that, following an initial presentation, EFA representatives hadn’t been given a chance to rebut the county’s stand during a meeting in January.

At that meeting, Mayor Walters argued that different land classes took turns on the receiving end of big assessment increases.  Farmers hadn’t stood up for waterfront property owners when they saw their values skyrocket, he said.

Call to arms

Mr. Walsh said EFA had originally been sparked to action after hearing of a county tax comparison for 2013 that was based on a $200,000, 100-acre family farm.

“We asked, where is there a 100-acre farm for $200,000?” he said.  A county comparison based on a farm of that value suggested the tax increase would be only $80 annually.

In reality, EFA President Fons Vandenbroek said, a 100-acre farm was more likely to be valued at $750,000, magnifying the tax increase for 2013 by 375 percent over the county’s estimate.  He didn’t believe local farmland had been selling for $2,000 an acre since the mid-1990s.

Mr. Walsh said an EFA member just reported from a seminar by a real estate broker at a Junior Farmers gathering that in future, farmers would no longer own their own land, “because we’re selling Ontario piece by piece to China.”  Instead, farmers would have to rent land to grow crops on, “And that’s a scary thought.”

Mr. Vandenbroek said the same trend was being seen in Western Canada as well, and effects were starting to be felt.

Mr. Walsh, part of a Tillsonburg racing pigeon club, recalled when it recently donated $1,000 to a food bank there.  Volunteers, mentioned they had been surprised in the last year to see farmers coming in for food aid.

Mr. Vandenbroek said that since the county had already approved its 2013 budget, they decided to appeal for a tax ratio decrease this year.  When EFA representatives met with Elgin County council in January, “They didn’t feel the farm tax was burdensome. If they (farmers) could afford a $750,000 farm, they could afford the tax increase.”

Land rich, cash poor

Farmers might be rich in physical assets but could still be cash-poor, he said. Increased property values only paid off when land was sold.  But the county took the stand, “If you’ve got a farm, you’ve got the ability to pay.”   Mr. Vandenbroek said the county seemed unable to distinguish between property and income tax.

Mr. Walsh said the increased taxes came as farmers faced another new burden.  Many used propane to heat homes and farm buildings, he said, because natural gas pipe-lines were unavailable in their area.

Propane, more expensive to start with, was selling for 67.9 cents a litre in November, 88.9 at the end of December and 99.4 in late January.  That was how he heated his home, he said, and Mr. Vandenbroek used it for his barn as well.  Mr. Walsh said his cost for heating his home was, during recent cold, windy weather, $29 a day.  “Now propane’s become bad. The only source of fuel left is natural gas, and what’s going to happen with that?”

A proportional share

Mr. Vandenbroek said farmers weren’t asking for a tax freeze, just to continue to pay their proportional share in comparison with residential, commercial and industrial classes.

Before 2012, he said, land values were increasing at normal proportions when it came to tax assessment.  But because a few farmers were willing to pay a high price for land, values had been driven up to artificially high levels.  Mr. Walsh said foreign investors were purchasing land for far more than its actual productive value.

As a result, Mr. Vandenbroek said, young farmers were having an increasingly hard time getting started in the business, like had happened in Europe.  But unlike Europe, when farms could be divided into smaller parcels to be distributed among children, Ontario didn’t allow that in an effort to keep farmland intact, he said.

Even established farmers were having a tough time.

Livestock producers seeking to expand in an increasingly competitive market didn’t want to truck manure miles and miles to dispose of it, so when a farm came up for sale near them, they might buy it for additional land to spread the fertilizer on.  But that was becoming cost-prohibitive, as was even renting land.

“The rental prices have really taken off,” he said.  He added rental increases were partially driven by high commodity crop prices in recent years.

But, Mr. Walsh said, last year was poor for corn and, because moisture content was so high, the crop was earning just $3.80 a bushel, just over half its high price in recent years.

Having to pay 40 cents a bushel for propane to dry corn didn’t help, he added. And diesel prices were higher than gasoline, even though it was supposed to be the other way around.

And when high land rental costs were added to the mix…

Income cycles

Mr. Walsh said high prices in 2012 put some money in the pockets of farmers. But commodity prices were a cycle of highs and lows, the latter seen in 2013.  Mr. Vandenbroek said if crop prices slid further and interest rates went up, “Then we’ll have a disaster.”

Mr. Walsh added farmers faced a similar crisis in the 1980s, when interest rates rose to 15 or 20 percent and many farms were foreclosed on.  Farmers overextended themselves at that time, knowing they had to get bigger to survive, and some went too far.

Personally, he believed that played into the hands of big corporate farms.

Mr. Vandenbroek said the comparison by the county of farmers to waterfront cottage owners was unfair.

Mayor Walters suggested in January that since farmers hadn’t stood up for cottagers when their assessments went up, farmers couldn’t expect sympathy from others now.

But, Mr. Vandenbroek countered, a cottage was a luxury, a farm wasn’t.

Mr. Walsh said he didn’t believe the farming community had even been aware of the higher taxes for cottagers at that time.

And Mr. Vandenbroek pointed out farmers still paid regular residential taxes on their homes.

Their fields, which required only a fraction of the municipal services that houses did, shouldn’t have to pay more than their share of the tax burden.

But, he added, the EFA representatives weren’t surprised by county council’s reaction, even from those who were farmers.

Mr. Walsh said they knew county council had some tough budget decisions to make this year.

Councillors had responded immediately after EFA’s plea they had a hospital to help build, having committed to the expansion of St. Thomas Elgin General.

$6.5-million extra

But if nothing changed, over the next four years Elgin farmers would have contributed a cumulative $6.5-million in additional taxes to the county and municipalities.  Plus, he said, they faced the same 12-percent assessment increase on their homes that other residential owners did.  The question they had for the county, he said, was, “Do you need all that money, or can you lessen the burden across the board?

“Just because you’ve got it, you want to spend it.”

Mr. Vandenbroek said that if farm values swung the other way in future, the tax ratio could be adjusted upward again.  Adjusting the ratio, he said, would accomplish what had always been intended—smoothing the highs and lows out of tax bill increases.

Mr. Walsh said if the ratio was reduced to 21 percent, the county would still be realizing additional revenue from farms, but Elgin councillors hadn’t even offered a compromise.

Mr. Vandenbroek said the EFA felt council didn’t really understand the issue.

Ironically, he said, counties and regional municipalities with large urban populations seemed more sympathetic to farmers than rural ones.

Mr. Walsh said Chatham-Kent had lowered its tax ratio to 22 percent. But Elgin councillors focused on lower tax ratios around the Greater Toronto Area, and ignored the Chatham-Kent example.

“There is nothing we can do this year,” he admitted. Elgin was moving ahead with setting its budget.

Election year

EFA had to go back to the drawing board and start anew, he said, adding municipal elections were coming this year.  Perhaps that might result in more sympathetic ears around the county council table, he said.

Mr. Vandenbroek repeated farmers weren’t asking for lower taxes, just to continue to pay only their fair portion of the total county tax levy.

“And somehow it’s got skewed,” Mr. Walsh said.   Why should other property owners care about farmers being taxed so much?

EFA Director Ed Ketchabaw admitted, “They probably don’t care.”  But, he said, they should.  “It all relates back to the cost of production and the cost of food.  “It’s one more thing,” he said, and the effect was greater on smaller farms that didn’t enjoy the advantages of economies of scale.

Farmers were feeling the pinch between property tax, an increase in the minimum wage, surcharges on fuel, the increasing price of energy sources and other rising taxes, he said.