Neil and Deb Krueger raise Christmas trees on land in Lake Elmo that’s been in their family for more than 50 years. But because their land is considered non-agriculture land, or non-productive land, they could face penalties down the road when they transfer it to their children, under changes to the Green Acres program.
“We’ve taken the steps and have a plan in place to pass our farm onto our children,” Neil Krueger told the House Agriculture, Rural Economies and Veterans Affairs Finance Division Jan. 21. “We have always run an environmentally friendly, sustainable Christmas tree farm. We don’t want our children penalized. I think the transferring process in place needs to change.”
The division heard testimony from several people on the Green Acres program because of changes made to the law in 2008, changing the definition of land allowed in the program.
Deb Krueger described their tree farm as a “complete ecosystem of marshes, wetlands, streams and woods. It is a complete ag unit and it is not non-productive land.” She said it takes 10 to 15 years to grow an average sized Christmas tree, and for every tree that is cut down, two or three are planted to replace it. “Everything is equal part in our farm to the whole system. Sometimes fields will sit idle for a while to give the soil a chance to rest. We choose to keep our farm open, green and complete.”
According to the 2008 changes, any land considered “non-productive” will face penalties of up to seven years of back taxes once that “non-productive” land is transferred or sold to someone else. The changes do not apply to “productive” land, or land considered tillable. So any land currently enrolled, productive or not, is grandfathered in and taxes will remain at the Green Acres value. The only way penalties will arise is if the non-productive land is transferred or sold.
“I believe there is a synergistic relationship between the acres where crops might actually be planted and the surrounding landscape in that unit,” said Rep. Al Juhnke (DFL-Willmar), division chairman. “It doesn’t matter if you’re housing bugs and bees to help pollinate or whether you’re preventing soil and other things from eroding off into the wetlands. I think we have to recognize that a farm unit or a production unit isn’t necessarily just the tillable acres.”
Juhnke said the division will hear several bills on the Green Acres issue the week of Jan. 26, which will then be combined and sent on to the House Taxes Committee.
At the beginning of the 2008 legislative session, the Office of the Legislative Auditor presented its audit of the more than 40-year-old Green Acres program to the House Tax Relief and Local Sales Tax Division. The report found several problems with the program, said Rep. Paul Marquart (DFL-Dilworth), division chairman. “They found it wasn’t doing what it was supposed to do,” he said. “Somehow we allowed the program to change into something it was not intended for.”
In a lot of instances this property tax benefit was benefitting wetlands and hunting and recreation land, which it was never intended to do, he said. Also, not all counties were using the program when they had land that could be enrolled.
After the property tax division heard the report, Marquart directed Rep. Lyle Koenen (DFL-Clara City) and Rep. Randy Demmer (R-Hayfield) to work on the issue. Their recommendations were a part of the property tax division report, which then became a part of the omnibus tax bill that left the House floor and was ultimately signed into law, Marquart said. “No one should have been caught off guard that we were making changes to Green Acres.”
“In tough economic times and times where property taxes are going up around the state, it’s vitally important that our programs are benefitting and doing what they’re supposed to be doing and not unfairly putting higher property taxes on others. That’s the real key,” he said.
According to some legislators, controversies over the 2008 changes arose after being signed into law, though there were ample opportunities to voice concern before that. Nine public hearings on the program’s proposed changes were held during the 2008 session.
Rep. Ann Lenczewski (DFL-Bloomington), House Taxes Committee chairwoman, said a lot of people misunderstood what happened from the beginning. She said some of the issue is that many legislators don’t understand that the state doesn’t pay for Green Acres — other property taxpayers do.
“They think, ‘OK, now my constituents are losing this tax preference that the state needs to pay for them, and they want it back.’ That’s not accurate,” she said. “The state has never paid for it. It is a shift between local property taxpayers. So who’s been paying for it? Their neighbors.”
In 2007, Green Acres shifted $35 million to local property taxpayers who live near land enrolled in the program. Next year, it is projected to shift $55 million.
“If we’re going to do that, it better be legitimate,” Lenczewski said. “We found out it wasn’t. We’re not taking it away from the purpose of the program; we just want people to follow the rules. We don’t want people in equal situations paying extremely different taxes.” For land in the Twin Cities metropolitan area, the Green Acres program reduced the taxes of land enrolled in 2007 from an average of $13,800 per acre to $3,600 per acre. Which means about $10,000 per acre was shifted to other property taxpayers.
Also, Green Acres was never a conservation program, or a “green” program, like we think of it today, Lenczewski said. “It’s actually the anti-green. It’s till-everything-up-and-throw-dirt-to-the-wind. It was never a conserve program. But there is a common purpose of conserving ag land for the future so that if someday we need to feed our people we have a way to do it.” But, according to the current law and its original intent, ag land does not include wetlands or wooded areas used for recreation.
“So,” Lenczewski said, “you can imagine if you’re the next property over and you don’t have producible ag land, you may already resent that you’re paying your neighbor’s taxes. Now you find out they’ve got a whole bunch of land in there that’s not supposed to be in there and you’re paying for that too.”
Some legislators wanted to eliminate the program, Lenczewski said, but instead it was brought back to what it was intended to be.
“What’s the net effect of that? You’re probably going to hear in the hearings from people who were getting the benefit and are not getting it now,” she said. “What you won’t see are all the people who’ve been paying for it because they’re not tracking this.”
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