Saturday, August 23, 2008

To Be Or Not To Be (A Farm) . . . That is the Thousand $ Question

Twice in the past six months, political campaigns have exploded in accusations about candidates claiming and receiving a tax break for property that they claimed was a farm. Those accusations, along with our budget woes, led me to look into the law on this little-known tax policy, to see if we were giving away dollars we shouldn't be.

My conclusion: this cloudy issue definitely requires regular and proactive oversight and enforcement, but I'm confident that this oversight is being provided by the Hamilton County Auditor's Office.

The basic law: in Ohio, like most other states, property owners can have their properties assessed at a far lower rate if that property meets the standard to qualify for what is called the CAUV Program. The CAUV stands for the Current Agricultural Use Value of the property, which is generally going to be a lower assessed value than the full market value of the property. For a large property, the distinction can lead to tax savings in the tens or even hundreds of thousands of dollars. For smaller properties, it can mean hundreds or thousands of dollars in savings.

O.R.C. 5713.30 lays out the guidelines of how one qualifies for the CAUV. Essentially, the parcel of property must be devoted "exclusively to agricultural use," and that use must be commercial (ie. not a pet horse). Types of qualifying uses can include: animal or poultry husbandry, aquaculture, apiculture, the production for a commercial use of field crops, tobacco, fruits, vegetables, nursery stock, ornamental trees, sod, or flowers, and commercial timber. There is also a woodland provision, where a property with noncommercial timber that abuts a CAUV property also gets the lower tax rate. For all the details on these rules, and other of the fine details (and there are many), you can go to:

CAUV in Hamilton County: Hamilton County has about 28,000 acres that have CAUV status--more than 1,200 parcels of property. Collectively, the CAUV status of this property eliminates about $100 million in tax value from that land. Not suprisingly, most of the properties are situated on the more rural West Side of the County (Colerain, Crosby, Whitewater and Harrison Townships). But the area with the greatest amount of property value under CAUV status is Indian Hill.

The issue: It's quite clear that there's a huge incentive to claim CAUV status from a tax savings perspective. For an owner of a large property, in fact, spending some dollars to have your property meet the minimum legal standards of commercial agriculture can be worth far more than the investment because of the tax benefit. Because of this incentive, if not monitored or enforced proactively and intensively, this CAUV program could become a heck of a loophole around paying full value, particularly for large properties. This is especially important to watch closely in a county like our's, where farmland is disappearing and being converted into residential property.

My inquiry: My office took a close look at the process, and had a detailed discussion with the Auditor's staff, who oversee this complex and complicated law. We also took a close look at a sample of properties that benefit most from the CAUV status.

After doing so, I am confident that the Auditor's staff is getting the job done. In addition to reviewing the required annual applications for CAUV status/renewal (and rejecting those that do not qualify), the office conducts at least annual site visits to ensure the properties serve the agricultural/commercial purpose their owners claim they do. (If a property owner benefitting from CAUV is found by an inspection NOT to be in compliance, that owner must pay the full value of the property going back three years.) Positively, they have made the process even more proactive/intensive over the past year. And if there is a sale or subdevelopment of a property, they will also watch closely to ensure that the property remains CAUV-eligible.

Of the sample of properties my office looked at directly, the vast majority indeed appeared to be working farms or at least undertaking active agricultural activity of some sort (although we could only see them from the street). A few did seem to be dormant/fallow, or non-operating. But there is a provision that allows these properties to be fallow temporarily (one year), as long as there use remains consistent with the agricultural use (as opposed to being developed for a different purpose). I pointed a few of these out to the staff to look at more closely.

The bottom line is that this is definitely an area to watch closely and regularly to avoid any temptation to turn this law into a property tax loophole and windfall. But it's also the case that the standards to achieve this CAUV benefit are not that difficult to achieve (which is an issue of state law).

But as there should be, there's a process in place at the County that looks to be getting the job done in sorting out who really should qualify, and who should not--and it's gotten more robust over the past year.

I'll continue to keep a watchful eye on this issue. And as the Auditor offered to me, if there are ever any properties people have questions about, please forward them along to me.

Thursday, August 21, 2008

Marketing and Tourism: An Investment That Is Paying Off

The last couple years, we've had a little tussle at the County Commission and City Hall about whether or not it was a wise investment of dollars to market our region to promote conventions and tourism.

A majority of us believed it made sense to take excess dollars from the hotel occupancy tax (above what was needed to pay off the Convention Center debt payments) and reinvest those funds to market our region to the broader Midwest and nation. (Under state law, these dollars can not be spent on general county or city operations, by the way).

We did this, in part, because surveys of conventioneers had found that they had little to no understanding of Cincinnati, Hamilton County, or what our region had to offer. Compared to our peer cities, we simply weren't on the map, and had no "brand" to speak of. And without visitors, tourists and conventioneers spending money in our city, we were squandering one of our most important potential sources of economic growth. So we took some dollars and invested them in a well-targeted marketing strategy to tell our story near and far, and get people from all over to visit us.

Others disagreed with our investment, attacking this entire approach under the rhetoric of a "pet project."

Well, the results are starting to come in (measured in terms of revenues from hotel nights), and despite a tough economy, those results show that our strategy is bearing fruit.

The second quarter of 2008 generated $3.184M in revenues from the hotel/motel tax, the highest second quarter we've ever had. It is 35% higher revenue than what was generated just four years ago!

And despite the fact that the third quarter of each year is always the best revenue-generator for any year, the 2008 second quarter was the second best quarter we've ever had (only the third quarter of 2007 was higher, at $3.194M). Again, this is all at a time that travel costs have been so much higher in the air or on the road, yet people are still coming.

And all this good news does not even include the NAACP Convention that was such a success this summer, which will be recorded in our third quarter numbers this year.

Thanks to all those great organizations around the County, working hard to tell our story far and wide, for driving this critical source of economic growth. And remember, for every hotel stay, we have visitors touring our many wonderful sites and institutions, patronizing our restaurants and stores, and putting money into our sales tax coffers every step of the way.

Long-term, it is strategic growth investments like these--investments that let us compete with our peer regions--that will drive long-term growth and success.

Wednesday, August 20, 2008

A Sad Day for Ohio

What tragic news it was to hear about the passing of Stephanie Tubbs-Jones.

I had the privilege and pleasure of meeting her a number of times, largely because we both were active supporters of the Hillary Clinton campaign. And I loved watching her on cable television, where she did so many interviews over the past year in that role.

She was an historic figure in Ohio. But that history aside, it was her sheer force of personality that I always found so striking. Whether in person, or on TV, she was spirited, direct, tough and so full of energy--positive energy. No matter how intense or heated the moment, she always was enthusiastic, beaming an enormous smile as she delivered one verbal roundhouse after the next. Which made her all the more formidable.

All of Ohio lost a great leader with her far too premature passing today.

Tuesday, August 19, 2008

Manufacturing Controversy: When Politics, Politicians and the Media Mix

Politics (and politicians) have a funny way of turning things on their head--manufacturing controversy where none exists, or creating a false impression of reality to the public. And sometimes, the media unintentionally helps. Last week's discussion over the port authority and eminent domain provides a case study of how this works . It's like an adult version of the old "telephone" game, where by the end, the facts are lost in a cloud of confusion and "spin" . . . .

The Facts

- last week, the County Commission approved expanding the power of the port authority--which the city had done a few weeks before. Prior to the change, the Port Authority had jurisdiction over the riverfront and brownfields in the City and County; now, it has jurisdiction throughout the City and County.

- prior to the change, and since 2000, the Port already had the power of eminent domain in all of its work; the one limitation on that power involved properties the County or City owned or leased, where the Port had to seek and receive approval from the County or City before exercising that power. If 60 days passed after it requested that power, and the request was not rejected, then it was deemed approved. (For all other property -- ie. NOT owned or leaded by City or County, no request for approval was necessary at all). This rule had been in place for years, and was approved by the City Council in 2000 (prior to my arrival, by the way), although I don't believe it was ever exercised.

- Last week, when we amended the port's power, while we generally maintained its previous power of eminent domain, we took the restiction that it must seek City/County approval (that previously applied only to City/County owned land) and applied it to ALL instances where it sought eminent domain anywhere in the County or City. The bottom line was that now, any attempt to use eminent domain would require approval of the elected bodies.

- Finally, we also, for the first time, changed County policy to require transparency and accountability that never before existed in the process. For the first time, notice and a public hearing now have to take place, and the Commissioners must hold a public vote, on any request for eminent domain by the County. Unlike before, if there is no vote within 55 days, the request is REJECTED by the County. So eminent domain can only occur with the approval of elected officials. The City is considering the same more restrictive policy, and I have already approached the City in order to amend the overall agreement to reflect this change.

Simple summary of the facts: eminent domain power is actually more constrained, and requires far more transparency and accountability, under the new agreement. Unlike the prior agreement, approval must be sought for any use within the County or City. And unlike before, the County requires a vote by its elected officials in all instances--and lack of a vote will lead to denial of the request.


Even though he had approved the 2000 Agreement that put into place the more liberal eminent domain approach, and had lived under it for eight years without concern, Commissioner DeWine saw this new agreement, which constrained the eminent domain power he had previously approved, as an opportunity to voice his opposition to eminent domain, a hot button issue.

- the first story appeared here, where it was explained (inaccurately) that the County was somehow changing/expanding the Port's eminent domain power: Commissioner DeWine described the possibility of a "little old lady" having her house taken without a vote by elected officials, and puts out the message that the Port is being given a new eminent domain power it did not have before.

- even after we approved a new policy REQUIRING a vote by elected officials for any request for eminent domain, this opposition continued. In this story, the disagreement is described in a pretty balanced way.

- other media outlets pick up on the rhetoric that a new eminent domain power was being added, and repeat the inaccuracy that the new agreement gave eminent domain power to the port, as if it was a power it had not previously possessed:

- and a new item in CityBeat suggests the same, that we voted to give the Port Authority a new power--including "the ability to force the sale of property from unwilling owners using eminent domain". (although at the bottom it explains a more nuanced view)

- not suprisingly, one reader of the Enquirer has read all of this, and wrote a letter expressing anger that myself and Todd Portune somehow have taken a step that introduced some new eminent domain power (worried that now the "average Joe" will lose his house), as opposed to the reality that we had tightened them. While he's wrong about what happened, it's hard to blame this citizen for not being clear on the facts.

And for months to come and beyond, I can guarantee you that other citizens also will express their passionate disapproval for last week's vote, even though, ironically, it took things in the very direction they support.

Just one case study in the topsy turvy world of politics, politicians and the media. And people wonder why the public view of all three is so low these days.

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