Real estate group nets tax break designed for farmers
SUN PRAIRIE -- Talk about a cash crop.
Well-connected real estate developers who just sold land for a new Target store here also scored nearly $100,000 in breaks on their 2007 property taxes -- in part because of a few rows of winter wheat.
Prairie Development Ltd. claimed it qualified for a lower tax rate under a state law designed to help farmers because a portion of its holdings were planted in wheat. Sun Prairie's city assessor disagreed and so did the city's tax assessment review panel.
Not happy with that outcome, Prairie Development principals Jerry Connery and Ron Fedler took their case to the Sun Prairie City Council, which in January voted in favor of cutting taxes for the development group.
"Basically, the council took $10 out of the pocket of every other taxpayer in the city of Sun Prairie and gave it to these guys," says Sun Prairie Assessor Jim Young, who ran for governor in 2002 as the Green Party candidate.
Sun Prairie Council President Jon Freund tells a different story, however. He maintains the city was only following the letter of the law in taxing the Prairie Development Ltd. property as farmland under the state's "use value" law -- which says agricultural land must be assessed on its value for growing crops, not its potential value as new homes, offices or shopping center.
"We got an opinion from our city attorney and we went with that," says Freund, who has acknowledged he received $200 in campaign contributions from Prairie Development Ltd.
Those contributions caught the attention of Mike McCabe, president of the Wisconsin Democracy Campaign, which has advocated for campaign finance reform.
"As someone who grew up on a family dairy farm, this story is offensive to me because use value assessment was intended to help farmers," McCabe says. "It was not intended to help developers."
McCabe notes that former Sun Prairie Ald. Mike Bruhn, who also sided with the developers, received contributions as well from Prairie Development Ltd. A top aide to State Rep. Scott Gunderson, R-Waterford, Bruhn lost a re-election council bid in April.
But Bruhn maintains it's "absolutely ludicrous" to infer that his vote on the tax issue was linked to any campaign financing. He says he contacted the state Department of Revenue for an opinion on the issue and visited the development site personally.
"For Mr. McCabe to even insinuate something like that leaves me speechless," says Bruhn.
GRAY AREAS
With new sidewalks, fresh asphalt and installed electrical boxes, the area along West Main Street doesn't resemble the typical Wisconsin farm field. At least that's what Young thought when he visited the property in 2006 and decided it should be taxed as commercial property.
"I think anybody who looks at this would have a hard time saying it's farm land," says Young, walking the site on a recent afternoon.
To Young, it appeared the developers waited until the last minute to plant a crop in order to be able to claim an ag use exemption.
Under use value, agricultural lands still in production must be taxed based on their value as farmland. But although the law has been on the books in Wisconsin since 1995 and was upheld by the Supreme Court, there are still conflicts over what is a legitimate farm operation.
"When you get into those gray areas the assessor has to make a judgement," says Bruce Jones, an agriculture economist at the UW-Madison. "It can be appealed and then it's up to the citizens to decide and make the final call."
Despite some conflicts, Jones said the use value law is doing what was intended: lowering property taxes for farmers near urban areas in hopes they will keep farming.
"I think it has helped slow the conversion of ag land," he says. "It may also force developers to pay more for farm land and I like that, too."
Attorney Mike Lawton, who represents the Sun Prairie developers, says his clients would have likely pursued the case in Circuit Court if the council had not changed the assessment. He also notes that the city had been using some of the site and part of the tax settlement involved compensating the Fedler-Connery group for letting the city use the site.
"My guys are believers in the law," Lawton says. "I know some others like Jim Young have disputes with use value. But our opinion is that everything that can be farmed should be farmed."
USE VALUE
Passed by the Legislature and signed by Gov. Tommy Thompson, the state's use value law required that land be taxed on its value as farmland -- not its development value.
The change was designed to slow urban sprawl and preserve farmland by giving farmers a tax break while providing an economic incentive to keep farming instead of selling to developers.
The law was fully implemented in 2000 and withstood a constitutional challenge in the state Supreme Court brought by the Wisconsin Alliance of Cities.
Over the past years, the law has had the intended effect of shifting millions in property taxes from farms to other types of property including homes and business. The state Department of Revenue in 2003 estimated the change that year alone shifted $230 million in taxes from farms to other uses.
Use value is also one reason that homeowners' share of Wisconsin's property tax burden has more than doubled since World War II, according to a Wisconsin Taxpayers Alliance study. The residential share of the property tax burden hit 72.5 percent last year, up from 39.7 percent in 1945.
As far as Prairie Development goes, work is scheduled to begin on the Target store this summer.
Minneapolis-based Target last month received approval from the city of Sun Prairie to downsize its proposed SuperTarget in the Prairie Lakes Development to a regular Target. The change shrinks the store at South Grand Avenue (County C) and Hoepker Road from 184,000 square feet to 134,000 square feet.
The council in February also approved a plan from Janesville-based Woodman's for a grocery store, oil-and-lube center and gas station with 10 pumps and a car wash covering about 225,000 square feet at U.S. 151 and C, south of the Target site. A 60,000-square-foot Copps grocery opened in March 2007 at Wisconsin 19 and C.
The Prairie Development parcels in question are north of West Main Street and may not be developed for some time as the real estate market has slowed and credit markets have tightened. The real estate group has recently told the city it plans to seek another agricultural assessment for that property even as work begins on the nearby Target.
"That's the beauty of urban agriculture," says council President Freund. "Farmers can keep farming right up until the land gets developed."
But in Young's mind, planting a few acres of winter wheat at the last second is not how the law was supposed to work. He says the property owners are violating the spirit of the law if not the letter of it in trying to skirt their tax obligations.
"We've got other developers out here like Veridian who play by the rules," he says. "They're not trying to abuse the system."
Mike DeVries/The Capital Times
Prairie Development got a tax break on a portion of its Sun Prairie parcels after claiming it as farmland.
