Click here for: Open land preservation programs

By VICKI URBANIK

The stories seem to be the similar from owners of land, large and small.

Tax bills that used to be no more than $50 or so for undeveloped, non-farmed parcels of land have now soared into the hundreds.

Some real-life examples:

An approximately one acre parcel in Westchester Township used to have a tax bill of $50 but now it’s $260. The tax bill on a Jackson Township lot used be around $50 a year, but now exceeds $600.

The $908 bill on four small lots in Center Township equaling about one homesite has jumped to $1,900. A seven-plus acre Liberty Township tract described as swamp now has a tax bill of $698, up from $320.

These and other parcels might be viewed as highly desirable for new development, but the owners have no intention of building. Or, they might be hard to build on, either because septics in unincorporated areas need at least one acre or because the land consists of wetlands or because of strange lot configuration.

But under the latest reassessment, land is now taxed much higher than it used to be, and some owners are getting hit hard.

Kurt Barrow, director of assessment for the Indiana Department of Local Government Finance, said assessors should take into account wetlands and other factors that could make land unbuildable. But he agreed that landowners with perfectly suitable land for development are pretty much out of luck when it comes to their recent tax bills.

Indiana’s new property tax system is not based on what the owner plans for the property in the future -- whether it’s a shopping mall or a wildlife habitat -- but on comparative sales that have already occurred in a given area.

Not only has land been under assessed in many areas, Barrow said, but also, land that has been sold has gone for top dollar.

This might be particularly true in Porter County, where wooded lots are said to be the most prized for residential development.

Could the higher tax bills prompt a rush to sell off vacant lands? Liberty Township Assessor Jean Swanson has said that that’s been the initial reaction among some landowners in her township.

And that worries open space advocates like Herb Read of Westchester Township.

“This would seriously impact the attempt by private owners to preserve open space,” he said. “It would make it practically impossible except for millionaires.”

Read, as he has done many times before, is now calling for a beefed-up effort by the county to acquire land for future parks or to enact an open space ordinance giving landowners a tax break if they keep their property as open space.

He pointed to Porter County government’s land use plan as suggesting that private developers will take the lead in open space preservation within new developments. Now, with higher taxes from reassessment, that wishful thinking “goes down the toilet,” he said.

Land Undervalued

Like other property, vacant lots and wooded tracts are now taxed based on what they would fetch on the open market.

Farm land, by contrast, is based on the land’s productivity. While the average sale price of farm land in Indiana is $2,200 per acre, the average tax value is now $1,050 per acre, with soil types and other factors affecting the final value, Barrow said.

If farm land was sold for a new subdivision or shopping mall, it remains assessed as farm land until the new development actually occurs.

Barrow said land was always supposed to be assessed based on fair market value, with County Land Valuation Commissions setting those values. But assessors no longer have a land order from their respective commissions, but must determine the value themselves based on “what a willing buyer would pay a willing seller.”

The state has found that many land commissions didn’t quite do their jobs, as they set the value of land artificially low or increased the values arbitrarily. In many cases, the value has been far below what land actually sells for on the open market.

Barrow pointed to the Miller Beach community in Gary in particular. Lots there have sold for $180,000, boosting the value of all other parcels, even the lots that used to be valued at no more than $30,000.

Land Tax Breaks

Property owners who wish to preserve their land but with the higher taxes do have some alternatives. And one needs to look no farther than the town of Beverly Shores.

Resident David Drake spearheaded the town’s new Green Space Committee, a program that encourages landowners to donate their undeveloped lots to the town. Property owners avoid paying property taxes, but they can also deduct the market value of their property on their federal income taxes, up to 30 percent of their taxable income.

“It can be very significant,” Drake said of the tax benefits.

Drake began his pursuit for land preservation in Beverly Shores by assuming that there would need to be a land trust established. But then, he said, he realized that the municipality can serve as the land steward. The only problem, he said, is that small towns like Beverly Shores lack the resources to handle all the administrative work involved.

So, he came up with the idea of a committee that would act as the agent for the town in preparing all the legal work needed for the land transfer and tax benefits. The donated land either remains as is or developed into town park land. An ordinance establishing the program was passed just in November.

“We knew this was coming,” he said of reassessment.

There have already been two donors who have come forward, and Drake said he’s expecting many more.

Of course, there is a flip side to donating or selling land for preservation. The land gets removed from the assessed valuation, and, however slightly, increases the tax rates for everyone else.

Drake said the impact of removing land from the town’s assessed value was, indeed, explored in great detail, especially since his town is on the verge of bringing in a municipal water system and needs the tax base. But he also said preserving open space will increase property values, particularly if the town’s census remains pretty much stable, and that many people would much rather live next to an undeveloped lot than one with a big house.

“Most people are willing to pay more in taxes if there’s appreciation in something they can sell,” he said.

He added that because the town council is the one that accepts the land donations, the council could cease taking land if too much is being removed from the AV.

Read laughed at the idea that local government would be hurt by setting aside land for preservation. The new revenue generated by the County Economic Development Income Tax more than replaces the lost property taxes, he said, and the amount of taxes involved is a drop in a bucket compared to the tax dollars that come, or should come, from profit-making businesses.

State Impacts

Elsewhere in the state, the Indiana Department of Natural Resources has already seen an increased participation in its two tax incentive land programs, said Jack Nelson, administrator of the classified forest program in the DNR’s Division of Forestry.

Division foresters used to get about one application per week but, ever since the new tax bills under reassessment, are now handling about four to five requests per week, he said.

Nelson said a landowner in Jennings County used to pay $60 in taxes for his 20 acres of woods but has now been hit with a $6,000 tax bill. That property owner is planning to turn the land into the classified forest and will now pay a bill of around $1,800 a year.

The two programs –Classified Forest and Classified Wildlife Habitat – have similar provisions. The forest program requires at least 10 acres of dense forest land and the wildlife program requires at least 15 acres, with up to 9.9 of those acres forested.

The tax break is now more substantial than before. Nelson said, for example, if a landowner paid $2 per acre in taxes – the state average -- the taxes on the classified forest used to be about 10 cents per acre. But now, using that same comparison, if the taxes are $3 per acre, the taxes on classified land is less than 4 cents per acre.

There is a penalty for taking land out of a classified program: repayment of up to 10 years of full back taxes plus a penalty of up to 10 percent. While that sounds significant, Nelson said the total is “pocket change” if the land is being sold for a lucrative development.

Begun in 1921, the classified forest program is believed to be the oldest in the nation. The program began because state lawmakers at the time were concerned about the dwindling forest lands, Nelson said. In pre-settlement times, Indiana was about 87 percent forested but by 1910, only 7 percent remained wooded.

Indiana now has more than 435,000 acres of classified forests, which represents about 11 percent of the total privately owned forested acreage.

In Porter County, 1,235 acres representing 37 separate wooded tracts are classified forests.

Nelson said that doesn’t appear to be significant.

“But then again, there’s not a lot of woods left in Porter County,” he said.

Open land preservation programs

Indiana Classified Forests: Parcels must be at least 10 acres with a density of 400 trees per acre. A drawing and legal metes and bounds description must be prepared by a surveyor. A management plan is prepared for the property, and the classification is recorded on the deed and stays with the property even if sold. Land taken out of classification can be subject to repayment of 10 years of back taxes plus a 10 percent penalty. Contact district forester Steve Winicker, (574) 896-3538.

Indiana Classified Wildlife Habitat Program: The program has similar provisions as the forest program above, but requires a minimum of 15 acres, which can consist of up to 10 acres of woods. Same contact as above.

Southern Lake Michigan Coastal Wetlands Project: With federal funding from the North American Waterfowl Conser-vation Act, land in the Lake Michigan watershed is purchased from willing sellers if deemed a habitat for migratory birds. Eleven area organizations are participating in the program, including the Coffee Creek Watershed Conservancy, 926-1842.

Shirley Heinze Land Trust: The trust purchases ecologically significant lands in the Lake Michigan watershed. Phone: 879-4725. www.heinzetrust.org.

Woodland Savannah Conser-vancy: This newly formed organization accepts donations of property and can work with property owners on conservation easements for various types of property, including natural lands, farmland and historic sites throughout Porter County. Contact Paul Kohlhoff, 465-5669.

Nature Conservancy: The land trust purchases ecologically significant lands. (317) 951-8818. www.nature.org/indiana

Posted 12/11/2003