Some East Valley landowners and real estate developers are reaping low property tax bills by farming their investment property.
Mark Reeb, an East Valley real estate developer, said there is a big savings on farm property until it is developed.
"An astute developer would take advantage of it," Reeb said. Maricopa County farms, ranches and dairies are designated as agricultural land. State law requires taxing agencies to value agricultural land based on the income it brings in, not its market worth.
The result is that agricultural land receives lower assessed values than property with other designations, which equates into significantly lower annual property tax bills.
"This was put up there to protect farmers from the potentially high cost of property tax," said James Meulemans, a deputy Maricopa County assessor. "For a lot of them, we could easily tax them out of farm status."
Meulemans said it is fairly common for developers to receive the agricultural designation and farm their land to reduce property taxes. Typically, they will lease the land to farmers, who grow crops and keep the profits.
"It's kind of a win-win situation," said Mike Berryhill of the assessor's office.
An example is a roughly 27-acre plot of farmland near the northeast corner of Extension and Baseline roads in Mesa.
Torry Lofgreen, CEO of Millett Properties in Mesa, said the land is temporarily being used to grow alfalfa until it is developed in two to three years.
The full cash value of the 27 acres is $189,390, the assessed value is $30,302 and the yearly tax bill is approximately $3,000, according to the assessor's office. The property tax bill would be much higher if the parcel sat idle, Lofgreen said.
"It's a typical strategy that all real estate developers use to keep costs down," Lofgreen said.
Two nearby parcels illustrate the difference in tax bills.
A 209,088-square-foot parcel with the agricultural designation on the northeast corner of Extension and Baseline roads has full cash value of $6,480 and a yearly tax bill of about $100, Meulemans said. The parcel is owned by a company called Extension and Baseline LLC.
Just to the north, a vacant 169,318-square-foot parcel designated as vacant land has a full cash value of $600,000 and a yearly tax bill of about $9,600, Meulemans said. Epitronics Corp. of Tempe owns the parcel, assessor records show.
Most of the land designated for agriculture in Maricopa County is used by people in the agriculture industries, Meulemans said.
Of the roughly 5.9 million acres of land in Maricopa County, approximately 530,000 acres are designated for agricultural use, according to the assessor's office. The total includes 258,000 annual crop acres, 211,000 ranch acres and 18,000 dairy acres.
In Maricopa County, the assessor's office grants agricultural designations. County officials are required to inspect the land at least once every four years to ensure the land is being used for an agriculture-related purpose. Once development occurs, the designation is changed. The county receives approximately 3,000 applications for agricultural status each year. About 1,200 applications are for new agricultural designations with the remainder for renewals, Berryhill said.