Written by Frank Lopez
Last year, when a revised edition of the split roll property tax ballot initiative was filed that would require taxes on commercial and industrial properties to be assessed at market value, while leaving taxes on residential properties based on the purchase price, it seemed that agricultural land was exempt.
California Attorney General Xavier Becerra stated in the title and summary of the chief purpose and points that exempted from the changes would be “residential properties; agricultural properties; and owners of commercial and industrial properties with combined value of $3 million or less.”
It turns out, the “split roll” initiative, titled the California Tax on Commercial and Industrial Properties for Education and Local Government Funding Initiative, which will be put before the voters this November, will apply to certain agricultural properties.
While the split-roll measure will not be applied to the land or soil itself, it will be applied to any structures or improvements.
Agricultural facilities such as barns, dairies, processing plants and wineries — and certain crops and orchards — would all be reassessed annually at current market value if the measure passes.
The initiative would not require row crops, such as corn and cotton, to be reassessed, as those are exempt under the California Constitution, but they will face higher property taxes when the crops go to packing facilities and processing areas.
Under the California Constitution, vineyards are only exempt for the first three years after the season in which they are planted, and orchards are only exempt for the first four years after the season they are planted in.
“The heart of the matter in terms of how this is going to affect agriculture is that the authors of this proposition — the groups behind it — don’t really understand agriculture and how complex it is,” said Jamie Johansson, president of the California Farm Bureau Federation. “We’ve found as they look at agricultural land, they don’t take into account all that we do on our farms and ranches, particularly on the value added side.”
Johansson said that many processes in the agricultural industry, such as moving a dairy farm to a more robotic system, or the bottling and labeling of olive oil, are commercial processes that will not be exempt under the initiative.
John Roeloffs, owner of J R Dairy in Tipton that covers about 1,000 acres in Tulare County, has been working on his family’s dairy farms since he was a young boy.
Roeloffs said that demand for milk itself is down, but all the byproducts of dairy — cheese, sour cream, yogurts, etc., are selling well. Even so, he said that he has seen friends in the dairy industry go out of business because of regulations, red tape and higher taxes.
Roeloffs said he has made his system more efficient because the amount of hours his employees are allowed to work has gone down, and the associated improvements will see higher taxes if the initiative is passed.
“We’re always trying to innovate to keep it in the black, and now they’re going to start taxing our innovations,” Roeloffs said. “That will make things really hard. My property taxes are already huge, and now I’m going to have more.”
According to an “Agricultural Land Fact Sheet” released by Schools and Communities First campaign, a coalition in support of the initiative, “a dairy barn, food processing facilities, and wineries would be reassessed as they are commercial and industrial.”
The current tax law defines “real property” as land, improvements, and fixtures, which for farmers means that real agricultural property is defined as not only the land, but also fixtures such as irrigation systems, and improvements — barns, processing facilities, and fruit trees and vineyards once they reach maturity.
“What’s interesting to me when I look at the initiative is how the five most value added crops or commodities in California; Dairy, wine grapes, beef and meat, nuts — pistachios, almonds, etc., — for those top 5 commodities, there are three of the top agricultural industries that are going to be most impacted by this initiative,” said Robert Spiegel, policy advocate for the California Farm Bureau Federation.
Johansson said that getting into farming is a very capital intensive, and that most beginning farmers will be looking into value added additions as processing plants, tasting rooms and fruit stands. If the split-roll measure is passed, it will change how farms are assessed, possibly discouraging new farmers in the state.
The consumer will eventually end up paying higher prices in the grocery store, Johansson added. He also said that it could undo efforts of buying from local farmers because crops from the state could be more expensive than ones coming from other states or foreign countries.
Johansson said he wants voters to remember in November that Prop 13 gave more predictability to the property tax rates, and that taking away its protections will hurt California’s already volatile agricultural market.
“Its about protecting the investments we’ve made in our rural communities, keeping our local food affordable, and keeping California competitive, both on the farm and in our commercial operations,” Johansson said.