In spring 2003, Wisconsin Wetlands Association (WWA) conducted landowner outreach with the goal of increasing enrollment in the federally funded Wetland Reserve Program (WRP). Despite economic incentives for wetland restoration, which include compensation up to the agricultural value of the land and cost share for up to 75% of restoration expenses,we found that landowners were reluctant to enroll lands in WRP because they could not afford to shoulder an increase in their property tax burden. Upon further exploration, WWA learned that, in some cases, converting drained agricultural lands back to wetlands resulted in property tax increases as high as 300-400%. Furthermore, this finding is not limited to WRP lands, or even wetland restoration projects, but applies to a variety of conservation enrollment programs (e.g. federal programs to restore grasslands or wildlife habitat) and voluntary conservation measures implemented on agricultural lands outside of a structured enrollment program.
This disparity is believed to be linked to the passage and implementation of Wisconsin’s Use-Value Assessment tax program (1995). Under use-value, agricultural lands are assessed at their production value rather than fair market value. While good for farmers and farmland preservation, use-value is perceived to shift the tax burden in a given jurisdiction away from agricultural lands and onto other classes of lands, including restored lands. The economics of use-value render it cost-prohibitive for farmers to do anything but keep their entire holdings in production (crop or pasture). Except in very limited circumstances, agricultural lands restored to a “natural state” are no longer considered agricultural lands and are therefore assessed at higher rates, penalizing farmers for conservation and restoration efforts. WWA has found abundant anecdotal evidence that taxation issues are limiting farmers’ willingness to restore lands, and are even driving landowners to rip out years of conservation work. Restoration program managers at both the Natural Resource Conservation Service and the United States Fish and Wildlife Service cite problems such as cancelled contracts, decreasing enrollment backlogs and dissatisfaction with existing contracts due to tax increases. Some tax relief is already on the way for wetland property owners. Undeveloped land, which includes wetlands, has been assessed at 50% of fair market value as of January 1, 2004. Though a step in the right direction, if agricultural taxes per acre remain significantly lower than wetland taxes per acre, the disincentive for restoration remains.
It is the position of WWA that Wisconsin’s tax policies should encourage and reward landowners who voluntarily enhance the ecological services provided by wetlands on their property, and that tax breaks awarded for economic development purposes should be consistent with state programs and policies designed to protect and enhance Wisconsin’s wetlands.
To advance this position, WWA has undertaken a research initiative to evaluate how use-value assessment and other state policies have influenced valuation of wetlands for property tax assessment purposes.We are in the process of analyzing a data set provided by the Wisconsin Department of Revenue for trends in wetland taxes at the state, county, and local scales. We will determine whether or not increases in wetlands taxes are disproportionately large compared to other classes of lands. We will also be able to provide landowners interested in converting marginal agricultural lands back to wetlands with reasonable estimates of how their property taxes may change.
The ultimate goal of this project is to determine tax policy remedies that will encourage landowners to protect wetlands. We will evaluate and promote legislative, administrative and programmatic options to remove tax disincentives and to create economic incentives that reward farmers and other landowners for holding and restoring wetlands. For more information on this project contact the WWA.