Changes coming in agricultural property assessments in Fayette

Fayette County homes on 10 acres or more have automatically qualified for a tax break originally intended for working farms.
Fayette County homes on 10 acres or more have automatically qualified for a tax break originally intended for working farms. cbertram@herald-leader.com

The Herald-Leader and reporters John Cheves and Linda Blackford have done an excellent job identifying an area of tax law long overdue for modernization.

In doing so, they caused what otherwise may not have happened — the various levels of government, including property valuation administrators, the Department of Revenue and the legislature each making this a priority at the same moment, which is critically important for change to be effected.

Up to this point, I have administered agricultural assessments in a manner ensuring all property owners of 10 acres or more (other than commercial property) are treated exactly the same.

Over time, the legal requirements for qualifying as agricultural land have devolved to the point that the only remaining quantifiable requirement is acreage. All other factors are ambiguous at best and other seemingly obvious requirements, including agriculturally derived income, have been deliberately removed from the statutes.

Therefore, nearly every PVA and the Department of Revenue now operate under a requirement of agricultural “capability” rather than actual agriculture “use.”

Obviously, the current policies draw into question whether all other property owners are treated fairly and equitably relative to those who own the larger tracts — an intolerable situation no one desires.

Without state legislation that clarifies these complex issues, unilateral changes by my office could create additional levels of inequity that could not be sustained over time. However, now that some of the necessary parties are at the table, under the public spotlight and discussing solutions, I will take the following steps immediately:

1. Ten-plus acre residential estates will no longer qualify for agriculture values unless the parcel retains a total land area of 10 acres, excluding land used in connection with the house, lawns, driveways, flower gardens, swimming pools and other areas devoted to family recreation (per KRS 132.450 (2.a.)). The implementation will follow a modified grandfathering approach (per KRS 132.450 (3)):

▪ Land that has been assessed as agriculture and owned by the same person for five or more years will retain the agricultural classification until it changes ownership.

▪ Properties that change ownership on or after Jan. 1, 2016 will be assessed and taxed at 100 percent fair cash value going forward.

▪ Properties that changed classification or ownership between Jan. 1, 2012 and Dec. 31, 2015 will be assessed at fair cash value as of Jan. 1, 2016.

2. I will request an official legal opinion from the Department of Revenue on the precise definitions of “agriculture land” or “agriculture use.”

In the event that the department reverses its previous opinions and advises me to reclassify properties based on a requirement of use, I will implement necessary reclassifications based on a grandfathered approach similar to that outlined above, beginning Jan. 1, 2017.

Many citizens have asked why I do not require an application, as is the case in Jefferson County. Simply put, there is no need for an application if there is no requirement for actual agriculture use. Jefferson’s application process creates nothing more than an honor system, which would be no fairer than our current policy.

With 1,263 total parcels receiving agriculture values versus 382 actual working farms per the U.S. Department of Agriculture, Jefferson has achieved no discernible difference than Fayette in the ratio of working farms to agriculturally assessed parcels.

3. I will publicize on FayettePVA.com the precise criteria used on Jan. 1 of each year when I reassess potential development land for reclassification from agriculture to commercial or residential use. I will also keep an up-to-date list on the same web page of all such properties.

4. I will continue to deploy the allowable resources of my office, and whatever political capital I may have accumulated, to bring the various parties together to develop immediate and permanent legislative and administrative solutions.

5. I will make myself available to answer any and all questions Fayette citizens have on this issue in order to build public confidence that our property-tax laws are administered fairly within the limits of the law and to gather input on the process of implementing solutions.

The public is invited to a question-and-answer session in the Farish Theater at the Main Branch of the Lexington Public Library, 140 E. Main St, Thursday, March 3 at 5:30 pm.

I regret I was unable to make this issue a higher priority before now. As a responsible public official, I must make a budget, make decisions on priorities, then develop a plan and execute it. I typically prioritize areas where we will reap the greatest benefit to the tax roll for each man-hour expended by my office. Even though there is no direct correlation between the size of the tax roll and the money appropriated to run my office, I still must justify my appropriations request each year. Return on taxpayer investment is the most obvious way to do that.

However, basing priorities so heavily on revenue potential has resulted in a bit of tone deafness on my part. The agricultural assessment issue actually speaks more directly to fairness than it does to revenue, and that is a distinction and a mistake I will not be making again any time soon.

The delicate balance between the striking beauty of our rural character and the vibrancy of our urban and commercial core is a significant factor in the economic success Lexington has enjoyed, even during times of recession. I support the progressive and nationally recognized policies Fayette County pioneered for generations that protect us from uncontrolled sprawl, including the Urban Service Area, Purchase of Development Rights Program, zoning, and an active and empowered planning commission.

For this reason, I have been reluctant to step too far away from my strict non-policymaking role. I pledge to work with stakeholders with caution to ensure that I do not inadvertently interfere with their missions, or the best interests of our farmers.

David O’Neill is the Fayette County property valuation administrator.

Public session on how property tax laws are administered

When: Thursday, March 3 at 5:30 p.m.

Where: Farish Theater, Lexington Public Library Main branch, 140 E. Main St.