A fragile school-district truce in Chester County

Straddling the western border of Chester County where the imposing mansions of the Philadelphia exurbs surrender to rolling hillsides and lush green horse farms, the Octorara Area School District is situated in one of the region’s most pastoral settings.

Historic Mill Rates - Octorara

It also has been a battleground, where property owners have learned that open space can come with a price. With thousands of acres designated as “farmland,” off-limits to taxation, the district has some of the highest property tax rates in the region.

But after an era of sharply rising levies and taxpayer agitation, administrators have promised something for 2014-15 that residents of the 2,550-student district are not used to: A fiscal cease-fire.

District officials say Octorara – with the highest school-tax rate in Chester County after a spike of 68 percent in the last decade – has enough surplus to stave off a fresh increase.

“Our taxes are still high,” said Thomas Newcome, longtime superintendent of the district, which has an 83 percent graduation rate and above-average state scores in math, reading, and writing at the junior-senior high school.

“We are a poor rural school district with a low tax base and all the requirements of all the districts that are wealthier, and it all falls on our homeowners, so that hasn’t changed.”

Spread over 93 square miles, the district encompasses eight towns, including two in Lancaster County, which stand to get a slight tax decrease.

School officials and activists agree that although the tax news is good, it speaks to a new normal for many of Pennsylvania’s beleaguered school districts – that after five years of tax increases and contentious spending cuts since the 2008 financial crisis, schools have reached a fragile equilibrium.

Newcome said Octorara was using $1.4 million of its reserve to stave off tax increases, and was avoiding program and salary cuts. Overall, its $48 million proposed 2014-15 budget represents a 1.8 percent increase.

“I really think that we need to take a hard look at these increases in the budget and pull them back,” said Timothy Alexander, a low-tax activist who was elected to the school board last year.

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4 responses to “A fragile school-district truce in Chester County

  1. It seems clear to me that as long as farms are supported by home owners there will always be a heavier burden on home owners in our district. To me this is more clear evidence that the entire property tax system for funding schools needs to be eliminated. We will never share an equal burden under this system regardless of how high the taxes go or if cuts are made and taxes stay the same. It will always be a disproportionate burden on the home owners.

    • I was on the fence for a while regarding the Property Tax Elimination Act (still HB 76?), but I believe I have been converted into a full supporter at this point. The current property tax system is broken beyond repair.

  2. Tax ‘Farms’ Owned By Rich Provide ‘Shelter’ From Taxes
    (This makes sense–in a sick sort of way! Cut out property taxes and school revenue for the public school system and you plunge entire generations into poverty and ignorance!)

    This Tax Day, ‘Farms’ Owned by the Rich Provide Massive Tax Shelter

    The Nation — For all those feeling the pinch this Tax Day, rest assured America’s wealthiest one percent have no idea what you’re going through. Not only have they shaved a projected collective $121 billion off their income taxes thanks to Bush’s tax cuts for the rich, but, thanks to misuse of agricultural tax breaks, many will not end up paying their fair share of property taxes, either.

    Take Michael Dell, founder of Dell Computers and the second-richest Texan, who qualified for an agricultural property tax break on his sprawling 1,757-acre residential ranch in suburban Austin and saved over $1 million simply because his family and friends sometimes use the land as a private hunting preserve to shoot deer. Or take billionaire publisher Steve Forbes, who got more than a 90 percent property tax reduction on hundreds of acres of his multimillion dollar estate in upscale Bedminister, New Jersey, just by putting a couple of cows out to pasture. They are not alone. All across the country, a huge number of America’s wealthiest are tapping into agricultural tax breaks—and none of them have to do any real farming to qualify.

    Not only are agricultural tax breaks allowing wealthy landowners to shift their tax burden onto other less-affluent taxpayers, but they are also helping bankrupt public schools, which derive the bulk of their funding from local property taxes.

    Agricultural tax breaks got their start in the 50s and 60s, as a response to the explosive growth of suburban development, which was encroaching on farmland and raising agricultural property values to the point where farmers were having paying their tax bills. Fearing that this would pressure farmers into selling out to developers, states began granting exemptions that allowed agricultural land to be assessed at rates well below market value. The practice, called use-value assessment, is today used by all but one of the fifty states to artificially deflate the value of farmland, frequently by 90 percent or more.

    The plan looked good on paper, but in the real world it was quickly manipulated to steer money to the rich.

    Many states expanded the definition of “agricultural land” beyond land that was farmed to land that simply had not yet been developed. In South Carolina, all it takes is five acres of trees to qualify for a tax exemption. New Jersey requires that a landowner have five acres, but also sell $500 of agricultural goods a year from their farm. Publishing magnate Steve Forbes and his wife, Sabrina, qualify for their exemption by breeding show cows on their 450-acre Bedminster estate. “You don’t make money selling hamburger meat. You make money breeding show cows; that’s the name of the game,” Forbes told Fortune magazine in 1996. Florida requires a couple of cows or a herd of goats, which don’t have to be on the property all the time. Texan law is so broadly defined that the PGA Tour golf resort in San Antonio has been trying get recognized as a “nature preserve” to get a farm tax break.

    “You can go out and cut some brush, put out some feed and count the deer once a year and qualify,” a tax appraiser from Travis County in Texas told The American-Statesman.

    That’s exactly what Michael Dell did with the suburban Austin ranch he uses as a second home. Periodically hunting and maintaining a “well-managed deer herd” reduced the property’s 2005 market value from $71.4 million to an agricultural value of $290,000, which saves him—and costs Texas—$1.2 million a year.

    It’s all perfectly legal under Texan law. As long as property owners stick to the state guidelines, country officials have no right to deny them agricultural status. Korea’s Samsung Electronics qualified for a “wildlife management” agricultural tax exemption on 54 acres of land outside its semiconductor plant in the Northeast Austin by putting up a few birdhouses, eradicating ants, and taking a wildlife “census,” which reduced its tax bill from $21,080 to just over $135 (a reduction of over 99.4%), reported the Wall Street Journal in 2007. If wildlife isn’t your thing, dedicating a few acres to Christmas trees is enough to qualify for a property tax exemption under “timber production,” which is exactly what Hewlett-Packard opted for on its corporate campus in Houston. The company saved half a million dollars in property taxes in 2004, despite the fact that it openly plans to develop that land.

    The exemption is such a money-saver that it’s hard to find rich Texans who aren’t moonlighting as farmers on their estates, and that includes President George W. Bush.

    Bush has used the farm-tax dodge scheme on at least two properties in the last two decades. When he was governor of Texas, Bush’s lakeside home near Athens, nestled in a secluded pine forest shared with a few other high-powered homeowners, lost its agricultural tax exemption, but was then promptly redesignated as “scenic land” under a similar law and taxed at massively reduced value of $101,770. In 1998, his tax bill was a measly $543.07. (The owner of a $100,000 home in a drab tract development on the very outskirts of Austin would pay somewhere around $3,000.)

    Bush was cleared for another agricultural tax exemption a few years later on his new 1,582-acre ranch in Crawford, Texas, which reduced its taxable value from $2.1 million to $950,000, according to an AP investigation. In 2003, the year American invaded Iraq, the tax break saved Bush $23,679 in property taxes. Bush might have been a disastrous president, but he sure is good at tax-avoidance schemes—which is good for him, considering that Texas has one of the highest property tax rates in the nation.

    While there is no definitive national study about the use of agricultural tax breaks, a patchwork of reports and investigations carried out by local news organizations over the past decade makes it clear that the exemptions are not being used as originally intended. All across the country, agricultural land is being used by wealthy landowners to dodge paying their share of property taxes. And it has been going on for decades.

    Here are just a few examples:

    * In the mid-1970s, then-California Governor Ronald Reagan was approved for an agricultural exemption by agreeing to not develop his 688-acre Santa Barbara ranch, which shrunk his tax bill from $12,600 to $1,100. The ranch was classified as farmland, despite the dubious fact that it sat on land “too rugged for serious ranching and almost impossible to farm,” reported UPI in 1974.

    * In Florida, Walt Disney World planted a few trees and flowers and put some cows to pasture on its 1,600 acres of undeveloped land adjacent to the theme park. The company told the AP that it planned to develop the land in the future. In the meantime, Disney was content to pay taxes on the $194-million property as if it was worth only $12.3 million. Disney isn’t the only one taking advantage of Florida’s tax loophole. In 2004, two-thirds of the top 60 tax exemption recipients in South Florida were not farmers.

    * A recent investigation by New Jersey’s Asbury Park Press found widespread abuse of agricultural tax breaks throughout the Garden State, where “fake farmers” qualified for tax exemptions simply by growing weeds or letting cows roam on their front lawns. Jon Bon Jovi, Steve Forbes and the billionaire heirs to the Johnson & Johnson fortune (one of whom is trying to build a helicopter pad on his “farm”) are just a few of New Jersey’s megarich who pay pennies on the dollar in property taxes.

    While there are plenty of real farmers who legitimately claim the tax exemption on their land, every year tens of billions of dollars in state and municipal revenue is lost due to farm tax breaks claimed by those who abuse the loophole.

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