1. 1 Property Tax and Appraisal Issues in Georgia David H. Newman newman@warnell.uga.edu Center for Forest Business Warnell School of Forestry & Natural Resources The University of Georgia Atlanta, GA – February 2, 2007

2. 2 Discussion outline Property taxation and growth Relative impacts of current taxation Impact of CUVA and Preferential Agricultural Assessment What this all means

3. 3 Recent population growth in Georgia

4. 4 Total taxes = $8.854 billion Sources of property tax revenue in Georgia in 2005 Source: DOR, Summary of Ad Valorem Taxes Levied in Georgia Counties in 2005 $200.6 mm $13.1 mm $47.1 mm $15.2 mm

5. 5 Changes in industrial timberland tax/acre in Georgia from 1999 to 2003 Source: Company supplied data

6. 6 Change in FMV/Acre for 5 companies in GA between 1999 and 2002 (value = % change from 1999-2002) 39.7%32.4% 16.3% 21.7% 48.0% 31.0% Source: Collected company data

7. 7 Average timberland tax/acre found across the country in 2003 Source: Tammy Cushing WestSouthNortheastMidwest

8. 8 Percentage reduction in LEV from state taxes across the South State After Property Tax After Severance/ Yield Tax After State Income Tax Louisiana7.8%14.5%23.0% Georgia10.5%14.4%21.5% N. Carolina9.6% 20.3% S. Carolina8.6% 17.6% Virginia6.0% 14.1% Mississippi7.3%8.0%13.9% Texas13.6% Arkansas3.6% 12.8% Kentucky6.3% 12.8% Florida10.7% Alabama3.4% 9.6% Tennessee4.1% Source: Tammy Cushing

9. 9 Percentage reduction in LEV from all taxes based on ownership type StateIndividualsCorporateInstitutional Louisiana44.3%74.4%17.1% Texas37.9%68.5%18.2% Georgia41.4%67.6%19.8% N. Carolina41.7%67.2%12.8% Arkansas34.8%63.7%4.8% Florida31.1%63.6%14.3% S. Carolina38.8%63.3%11.4% Virginia35.4%62.9%8.0% Mississippi33.1%57.7%10.5% Alabama28.7%55.6%4.6% Kentucky30.2%55.0%8.4% Tennessee19.1%45.1%5.5% Means34.7%62.1%11.3% Source: Tammy Cushing

10. 10 Some simple mathematics on timberland returns Assume an LEV of $682/acre (@ 5%) for timberland in GA which falls to $546 after federal income taxes The annualized net return/acre is $27 Using 2003 data, Georgia’s property and timber taxes take $98 off the top ($4.90/acre), reducing the after federal tax land value by 18% Inclusion of state income taxes reduces the value by 26.7% As taxes rise, it is harder for timber to compete with other land uses Impact will be felt strongest on those lands in which meaningful alternatives exist

11. Your House as Seen by... Your Lender Yourself Your BuyerYour Appraiser Your Tax Assessor

12. 12 The impact of assessments Wide variability in assessments by region with increasing total values over time Piedmont and Mountain regions especially hard hit with increasing change in the Coastal Plain Property taxes have risen 6.8%/year since 1996 Source: GA DOR-PTD Assessed values rising 8.0%/year since 1995

13. 13 CUVA covenants and acreage timeline Source: DOR Annual Reports and Consolidation Sheets 88.2 84.8 77.4

14. 14 Preferential Agricultural Assessment covenants and acreage timeline Source: DOR Annual Reports and Consolidation Sheets 160 157 152 153

15. 15 Distribution of CUVA covenants across Georgia in 2005 111,371 Covenants 9,825,308 Acres

16. 16 Number of Preferential Agricultural Assessment Covenants in 2005 12,713 Covenants 2,037,303 Acres

17. 17 Percentage of rural land enrolled in CUVA or PAA Programs in 2005

18. 18 Combined CUVA and PAA acres in Georgia counties in 2005 # of Acres 124,084 Covenants 11,862,611 Acres

19. 19 Possible Policy Ideas Acknowledge that Georgia’s tax policies are affecting the competitiveness of the state’s land use sector Expand CUVA and PAA to corporate entities and remove the 2,000 acre cap Focus on the appropriate assessment of rural lands that acknowledges current use