In past years, assessments for farmland in Illinois could only legally fluctuate by 10 percent per year. 

Recently, Monroe County farmers have been seeing changes to this reflected on their property tax bills. 

This can be explained by a 2013 amendment to the Farmland Assessment Law.

In order to understand how this amendment impacts one’s property tax bill, one must understand the history of how farmland is – and was – assessed in Illinois.

Before the Farmland Assessment Law of 1977, farmland was assessed based on fair market value. It eventually became apparent this was not best practice, as it was not necessarily reflective of the land’s value from a farming standpoint.

Under a fair market value assessment system, land of the same soil quality in one part of the state could be assessed at a much higher value than that in another part of the state.

Brenda Matherly, director of local government with the Illinois Farm Bureau, said this was largely due to differences in developmental pressure.

“In Northern Illinois, if you have a soil that has a medium productivity potential and it’s located around a big city that’s developing, it was selling more than the same quality of land in Southern Illinois, which didn’t have that amount of development pressure,” Matherly said of how farmland was assessed prior to the law. “The land in Northern Illinois was at risk of being assessed much higher just because of development pressure, but really, that development pressure has no impact on the quality or quantity of commodity you produce. So, it just wasn’t fair and equitable.”

Monroe County Treasurer/Collector Kevin Koenigstein said assessing farmland based on fair market value alone would make taxes so high that many farms in Monroe County would not be able to operate.

Because of instances such as these, legislators and the Illinois Farm Bureau saw there needed to be a change in how farmland was assessed, and the Farmland Assessment Law of 1977 was introduced. 

Under the law, farmland was assessed based on “a formula that determines its potential to produce an income,” Matherly said.

This formula heavily relies on each soil type’s productivity index, or PI. Each PI correlates to a particular monetary value per acre, Monroe County Supervisor of Assessments Carl Wuertz explained.

“Farmland is assessed based on soil type and productivity, and its use, (such as) whether it’s tillable ground, trees or other, permanent pasture or waste. Each different soil type is given a PI number, or a productivity index number,” Wuertz said. “Each productivity index number correlates to a dollar amount per acre of assessment. In 1977, the Farmland Assessment Law was enacted, calculating based off of the productivity index numbers.”

Matherly further explained the process of determining an acre of farmland’s PI.

“We’ll look at soil quality in the state – and we have a lot of soil types in the state of Illinois – and we will assign them kind of a high, medium, low range ability to produce and then we’ll assess them accordingly,” Matherly said. “Obviously, the lower quality soils, or lighter soils, will carry a lower assessment than the good black soils that we have in the center part of the state.”

The PI ranges from 82, which represents some of the poorest soils in Illinois, to 130, which represents the highest yielding soils in Illinois, Matherly said. 

Koenigstein said most of Monroe County’s soil falls in the 80s and 90s.

In 1986, an amendment was introduced that said the assessed value for each soil type could not increase or decrease more than 10 percent from the previous year, which created “certified values” for each PI. 

This rule was applied despite what the formula determined was an equalized assessed value of the farmland of each particular soil type.

According to Matherly, this 10 percent was formed in the interest of both the farm community and taxing bodies. If farm communities were to see a 10 percent increase it would be detrimental to them, while a 10 percent decrease would greatly harm taxing bodies. 

A big factor in this rationale is the fact that the certified values created from the 10 percent limit help determine the taxable value of farmland.

“(Back in the 1980s,) the farm economy was very weak, in large part because interest rates were so high, and because of that the assessed value of farmland was dropping significantly every year … Well, taxing districts started saying ‘Listen, if we lose any more value in property, we’re not able to keep our doors open.’ So they introduced legislation that says no matter what the value of the formula is, farmland shouldn’t be able to drop more than 10 percent. So they were interested in it not going down more than 10 percent. On the flip side, (representatives of the farm community) agreed to that legislation saying … it can also not go up more than 10 percent,” Matherly explained.

A large gap between the certified values, which remained somewhat stagnant over the years, and the equalized assessed values emerged and continued to grow over time. 

As Matherly noted, the income earning potential was increasing and the taxes were not reflecting that.

She also said application of the 10 percent limit created another wide gap: one between assessed value of poorer soils and the high quality ones, which was not reflective of actual yield potential.

“It also was especially restrictive on the poorer soils while the higher-quality soils had a little bit more liberty to move,” Matherly said. “So, in addition to the growing gap between the certified value and the EAV, there was also a huge gap in assessed value between the poorer soil and the better soil – a gap that was not in any way reflective of the actual yield potential.”

As Wuertz explained, this required a change.

“To save the integrity of the Farmland Assessment Law, legislators changed the way farmland is (assessed),” Wuertz said.

This change occurred with a 2013 amendment. Under this amendment, assessed values for each soil type cannot increase or decrease more than 10 percent of that of the median soil PI, which is 111.

Because Monroe County does not contain soils with high PIs compared to other parts of the state, their certified values will continue to gradually increase per the 2013 amendment until they are more reflective of the equalized assessed values. 

This is why many farmland owners in Monroe County have seen their property taxes increase in recent years.

Both Koenigstein and Matherly said this could take many years. Koenigstein said many Monroe County farm owners are paying in the teens per acre on their property taxes.

“What I believe is going to happen is the Central Illinois counties are going to be paying in the mid $40-50 per acre, and in Monroe County, we should be between $20-25 per acre in real estate taxes when this is all said and done,” Koenigstein said.

On the 2020 tax bills payable this year, Koenigstein said farmland owners may notice such increases.

“We are seeing a 15-20 percent increase in the assessed evaluation as well as the corresponding tax amounts for farm property owners in Monroe County,” Koenigstein said.

While these increases may be surprising to some given these percentages were somewhat stagnant roughly six years ago, Matherly stressed the alternative – going back to assessing farmland on fair market value – would have caused many Illinois farmers to struggle immensely.

“If we lose the law because of a constitutional challenge through the courts or a legislative repeal through the General Assembly, the assessor has no other … statutory option than to apply a market value (approach to assessing farmland). They can’t come up with their own way of assessing farmland just because somebody doesn’t like how this one is working, they then have to go to a market value (approach), which would be a significant increase overnight in the taxable value of farmland,” Matherly said.

For a detailed explanation of the property assessment process, see previous coverage at republictimes.net. 

To compare how property tax bills have changed over the years for a particular parcel of land, visit monroecountyil.gov.