FOX6 Investigators: Property owners taking advantage of law loophole, pretending to farm, dodging taxes
We all have to pay taxes on any property we own, but some developers and real estate investors have found a way to avoid paying taxes on property, by pretending to run a farm for at least one day a year. It's all because of a loophole in the state's "Use Value Assessment" law, that has allowed non-farmers to snatch up farmland, and dodge millions of dollars in taxes.
Fairway Woods in Twin Lakes is a once-promising upscale golfing community, that is now sitting dormant thanks to the sluggish housing market. It has paved streets, street lights, electrical service, and subdivided lots for sale. The only crops appear to be natural gras and weeds, but according to state law, Fairway Woods is a farm, for tax purposes anyway.
The law was intended to stave off the development of farmland, especially near cities, where urban growth was driving up market values, and in turn, driving up taxes. Farmers were selling off their land, because they couldn't afford the property taxes. So, in 1995, state lawmakers passed a bill that allows farmland to be taxed on its use value, instead of its market value. A legislative audit released last year, found that loopholes in the "Use Value Assessment" law have allowed non-farmers to snatch up this farmland, and dodge the taxes.
Rocco Vita is the assessor for Twin Lakes and other Kenosha County communities where real estate developers are taking advantage of the loophole in the law, giving special treatment to agricultural land. Most of the lots in Fairway Woods are now owned by Megara Properties of Northbrook, Illinois, and they hired a local farmer to cut the weeds and bale hay. The farmer does this in the summer, and then pictures are sent to Vita to prove the work was done. The hay was cut and baled once per year, and that's all it takes to consider the property "actively farmed," and dodge the property taxes.
The farmer says he hauled away 17 bales of "weed-infested hay," and says the hay was in such poor shape, he couldn't even feed it to his cows. He says the work was a pain, but he had to do it, because it's all part of a package deal. In exchange for doing the work, Megara Properties leases a neighboring tract of land to the farmer, for growing corn. The work done by the farmer (i.e. the 17 bales of hay) in turn, saves Megara Properties and other local investors $120,000 in taxes, or $7,000 per bale of hay.
Kenosha Assemblyman Peter Barca says if people are taking advantage of the loophole in this law, the law needs to be tweaked. Twin Lakes taxpayers like Betty Loranger agree. Loranger paid $5,000 in Twin Lakes property taxes this year, while the average Fairway Woods lot owner paid $1.88!
"That isn't fair. I feel sorry for the developers, but everybody is having a problem right now, and we're not getting loopholes. Like everybody else here, if you own the land, you should have to pay taxes on it," Loranger said.
Walter Graeber is a Twin Lakes appraiser, and one of Vita's employees. He's the one who actually appraised the Fairway Woods lots, and as it turns out, he owns seven of them! According to the records prepared by Graeber's boss, the lots are worth $90,000 on the open market, but Graeber valued them at $100 each. Graeber applied the full-ag-use tax break to one of his own properties, which is heavily wooded, meaning it can't ever be farmed. As it turns out, Graeber paid a total of $13 in taxes for all seven of his lots last year. Twin Lakes taxpayer Loranger feels that this is a conflict of interest, but the Wisconsin Department of Revenue says there is nothing prohibiting an assessor from assessing his own property.
Graeber isn't a farmer, but says that next year, he just might become one. He is intending to sell Christmas trees on his property, which, under the state law, would qualify for the tax break.
Earlier this week, FOX6 Investigator Bryan Polcyn called Ageliki Stamelos, the owner of Megara Properties in Illinois, who said the company does absolutely no residential development, and that their only interest in Fairway Woods Properties is to farm them. Stamelos then asked of Polcyn was with the Agriculture Department, and when he said he is a reporter working on a news story, Stamelos said she was late for a meeting and hung up.
As far as the state audit that exposed this loophole is concerned, no one has yet called for a hearing to discuss the findings - not even Barca, who was in charge of the Audit Committee last year, or Republican Samantha Kerkman, who is in charge of the committee now, and lives near Twin Lakes. Barca says Governor Walker has vowed to oppose any changes in the "Use Value" law, so there was no point in having a hearing. Kerkman sent a written statement that didn't answer specific questions about the tax break for Fairway Woods.