An investigation of the effects of urban expansion on the ownership, use and taxation of agricultural land

The property tax, though a relatively minor source of total public revenue, is ths major source of income for local units of government, especially school districts. The real estate portion presents numerous problems in administration and is frequently criticised as being "unfair," particularly to owners of farm land. The problem stressed in this study is whether land should be assessed at "market" or "use" value. St. Louis County experienced a significant shift in land use as its population increased 73 per cent from 1950 to 1960. The transfer of land from agriculture to commercial, industrial and transportation uses has reduced the amount in farms more than 15 per cent since 1950. Of concern here is not removal of land from agriculture, but procedures for making an orderly shift to urban uses; for retention in present use until that time, and avoidance of idle tracts which are bypassed and held only for speculation. Fifty-three per cent of the acreage transferred in the Florissant area from 1950 to 1962 (1,258 acres) was purchased by real estate interests; none had been developed by 1962. To avoid these undesirable features of land use transfer, present tax policies will have to be altered. The Florissant area of St. Louis County was chosen for the study because it combines the characteristics of land desired for both urban and agricultural uses. The entire county was appraised by private firms in the period 1958 to 1960, thus providing a basis for objective value comparisons. Assessment, taxation and transfer data were obtained on 267 rural tracts and on the lots in a recently developed subdivision. Assessments before and after the 1958-1960 appraisal were compared. Wide variations in value adjustments were noted. In general, land assessments increased; improvement assessments decreased. From 1958 to 1960 the assessed valuation of the land itself increased 121 per cent; that of improvements decreased 23 per cent. Small tracts were increased more than larger tracts. Real estate interests had their land values increased more than farmers and other owners. Among tenure groups, partnerships had the greatest increases. Small tracts increased 167 per cent, those held by real estate interests 171 per cent, and those held in partnership 213 per cent. Changes in assessments of individual tracts ranged from an increase of 625 per cent to a decrease of 55 per cent. Taxes per acre were compared and related to farm income. Payments were highest on snail tracts, those held in partnership and those used in agriculture. Payments on small tracts were 33 per cent above the average, on tracts held by partnerships 51 per cent above and on agricultural tracts 10 per cent above. The average per acre land tax, excluding improvements, was 74 per cent of estimated gross farm income. Several proposed tax remedies were applied to the study area. They included preferential assessment, public purchase of the land or the right to its development, and deferred taxation. Planning and zoning were suggested as the basic tools for effecting a more orderly shift in land use. Of these three alternatives, deferred taxation appeared to be the most acceptable from the standpoints of "fairness," legality and adequacy for the revenue needs of local units of government. Preferential assessment is considered by many to be a special favor to land owners and would also reduce public revenue. Public purchase of land or development rights in it is politically unpopular and would involve large public expenditures. The conclusion was that deferred taxation would improve economic conditions in urban fringe areas if adopted in conjunction with planning and zoning.