Technology is awesome. For example, the pinpoint accuracy of storm data can save a family in Kansas because they watched the radar and saw that a F-4 tornado was bearing right down on top of them so they fled and a good thing because their home was destroyed. However, technology is also an overwhelming amount of data. Apparently a news reporter that a lot of time on their hands searched the entire tax database of Johnson County, Kansas to figure out how much taxes developers were paying on vacant lots. Apparently paying low property taxes is now evil. Enter the big bad developer.
Here is the news article link: Developers get huge tax breaks for property label agricultural
Here is the editorial post link: Cul-de sac “farms” are a mockery of fairness, good sense
I had a hard time knowing which one was news and which one was editorial. I also may have missed something in the last three years of the news cycle but I thought developers and the construction industry were hurting badly. They are struggling to stay open and keep their employees busy with jobs. One family owned construction company kept on employees that were part of their “family” while their owners didn’t take a salary at all for two years but then still had to let them go as the business totally dried up. They are not building or developing anything but yet they still own the land. Some consider this land to be the most expensive best land available and think the big bad developer is just sitting there watching their money grow on the idle land. However, in reality they are on the verge of bankruptcy or tax liens.
The Kansas City Star has attacked developers and basically accused them of fraud. I do not know the tax issues in other states but in Kansas we are an agricultural based economy and the legislature setup the tax structure so that agricultural land would be taxed less. Taxes on most land across Kansas are less than $1000 per year and $50 or $100 is not uncommon on 40 acre parcels. I would guess nearly all of the land is agricultural but there are also tracts of land scattered across the state that have no apparent current use. They are not suitable for large scale farming but they are classified as such and pay a low property tax rate. So paying a lower property tax rate on agricultural classified land is entirely legal. It is not a loophole it is the law.
A while back I wrote an article for LandThink called a Tale of Two Parcels and this is a prime example of this very issue. One parcel stayed in agricultural use and one tried to convert and was hoping for big development. Neither happened. Probably never will in my lifetime as growth shrinks and moves back inward to the suburban cores. One parcel is farmed and one is grass that is mowed for hay. Are they both agricultural? Should they both pay the same in taxes? They are adjacent properties and there are no plans in the future for development to occur anywhere near the properties. There is no new construction and there is no big bad developer lurking around waiting. So we wait. Maybe 5 years, maybe 20 years but maybe never. In the meantime the county is receiving a reasonable property tax payment for the current value and the owner is able to make the payment. I attend several tax deed foreclosure sales a year in Kansas. There are no big bad developers there because more often than not their properties are in the foreclosure auction sale. They were unable to make the tax payments for several years and the county took the property back and is now trying to sell it for anything at all to get it off the books. I watched a bidder that was an adjacent property owner to a vacant lot that was previously taxed at residential rates in the real estate boom buy the lot for $50 at a tax sale. They now have a bigger yard and will gladly pay the $25 per year property tax rate and mow it. All because of the re-classification to agricultural tax rate. The county will now receive $25 per year instead of zero. The county was trying to tax the property at a residential rate even though there was no residence there and now likely ever will be because the growth has screeched to halt and no new homes have been built in the subdivision since 2007. The developer of the property and the builder both went out of business. The county never received the $1500 per year they were trying to get. Plus, the county has spent thousands on attorney fees to foreclose on the property. Where is the Big Bad Developer now? I think someone should cry Wolf.