Wednesday, April 6, 2011
If a penny saved is a penny earned, some of Lafayette's most affluent property owners are making a killing, and they're doing it at the public's expense.
By Heather Miller Photos by Robin May
The ever-expanding commercial playground known as the southside of Lafayette is as urban as it gets for city dwellers here. From Camellia Boulevard to Kaliste Saloom Road to Ambassador Caffery to the Mall of Acadiana and beyond, the area has been consecrated by a continuous boom of restaurants, retail centers, financial institutions, a traditional neighborhood development - and an abundance of "farmland" nestled cozily in between.
Wednesday, April 6, 2011
If a penny saved is a penny earned, some of Lafayette's most affluent property owners are making a killing, and they're doing it at the public's expense.
By Heather Miller Photos by Robin May
The ever-expanding commercial playground known as the southside of Lafayette is as urban as it gets for city dwellers here. From Camellia Boulevard to Kaliste Saloom Road to Ambassador Caffery to the Mall of Acadiana and beyond, the area has been consecrated by a continuous boom of restaurants, retail centers, financial institutions, a traditional neighborhood development - and an abundance of "farmland" nestled cozily in between.
Farm livin' with a penthouse view, you say? Boutiques, Italian eateries and sporting goods adjacent to sugar cane, soybeans, cattle or one of the state's other top crops? Not quite. Next time you're gridlocked in traffic on Ambassador Caffery between Super Target and the Vermilion River bridge, check out the sprawling hay farm on the undeveloped property that faces the Academy Sports and Outdoors store.
The vacant land on Ambassador Caffery is among the 4,085 acres in the city of Lafayette classified as agricultural use - and just one example of how landowners in Lafayette have been hoarding prime property for years - and paying next to nothing in property taxes.
The Louisiana Constitution mandates that "bona fide" agricultural, horticultural, marsh and timber property be assessed under the land's use value rather than fair market value, or the process used to assess commercial property. While commercial landowners pay 10 percent of the commercial land's fair market value, ag land is assessed at a rate that in urban areas can be less than half of 1 percent of its market value, according to Lafayette Parish Tax Assessor Conrad Comeaux.
Case in point: Parc Lafayette developer Glenn Stewart purchased 13.5 of these coveted acres from the Saloom family in 2009 with the intention of opening a retail center and luxury hotel at the corner of Camellia and Kaliste Saloom, across the street from upscale TND River Ranch. Stewart, who inadvertently pitted himself into the public arena when he asked for the City-Parish Council's approval on two special taxing districts to help turn his luxury boutique hotel into a much bigger five-star hotel and convention center, paid $7.1 million for the tract.
Lafayette Parish Tax Assessor Conrad Comeaux
Assessor Comeaux says Stewart's purchase price is actually higher than what the land would have been valued at under a fair market commercial valuation. But for the past two years, Stewart has paid ag use property taxes on his site, which equates to $42 in 2009 and $42 in 2010. Had Stewart been paying property taxes based on the land's "fair market" commercial value, which Comeaux says is $8 per square foot - even though Stewart bought it for $12 a square foot - he would have paid more than $48,000 in 2010 alone.
Fair market value is defined as the price a "willing and informed buyer and seller" would agree upon under normal circumstances; it's the highest estimated price based on how much money the property would yield if "exposed for sale on the open market." The property in this area, however, has so much commercial potential that developers are willing to pay prices much higher than what the assessor deems fair market value.
And here's the kicker: If "agricultural" property like this is sold, the sale triggers a reclassification at the assessor's office. When Stewart purchased his property in January 2009, the assessor's office moved the acreage into the commercial assessment class. But Stewart, obviously keen on the open secret, simply filled out and returned to the assessor an agricultural use application used statewide that asks four questions: name, address, description (for which Stewart penciled in the name of his company, Stewart Family LLC), and whether the property is "devoted" to agriculture, horticulture, timber or marsh lands.
The statute "is very clear," says Iberia Parish Tax Assessor Rickey Huval, president of the Louisiana Assessors Association, though the state law does not specify how much agricultural activity has to be taking place on the property to constitute farm use, nor does it outline a dollar amount the landowner must take in from the unknown farming operations as long as the land is three acres or more. That's about as clear as the manure found on undeveloped properties housing a cow or two to maintain agricultural status. "If it's three acres or more, and it has hay, animals ... the law is we have to put it in use value," Huval says. "[The law] doesn't say one [bale of hay] or 1,000. We could get very technical with all of that. I can't spend all my time in fields seeing how much hay's out there. If I see hay on the property, the law doesn't say you put it at fair market value."
If the property in question is less than three acres, the landowner must show receipts to the tax assessor proving that he or she has earned agricultural income of at least $2,000 per year on the property for the past four years to receive the ag use classification.
So what kind of agricultural enterprise constitutes the drastic difference in taxes paid by Stewart and countless others who have been lining their land with hay and their wallets with cash that would have gone to fund schools and police protection had they been paying their fair share? Comeaux's not sure what Stewart was planting, cutting or feeding at Parc Lafayette, though he says he and his staff use aerial maps to verify that some type of ag activity is taking place when the request for use value is made.
Stewart did not return calls to his cell phone for comment on what type of agricultural business he had at the property before he began the preliminary work to turn it into a commercial "lifestyle center," breaking ground on his project last year.
Also included in the ag use application is a clause telling landowners that when the land no longer meets the vague requirements for ag use, the landowner has 60 days to notify the assessor's office. But whether the hay cutting or cow grazing continues after the landowner applies for the special tax rates - well, that's for the landowners to know and the assessor to find out.
Has there been abuse? What do you think?
"They're following the law," Comeaux says. "It irritates me, but my hands are tied. That's the problem, people say why don't you go to the Legislature and change that?
How do you change that so that it wouldn't impact the farmers adversely? Who's to say the hay being cut isn't being used? Someone's buying it. [Landowners] are attesting to the fact that it's used as agriculture. If it's not, I guess that would constitute fraud. One of the problems we've had in the past is we haven't had an adequate staffing level that would allow us to go out and check these on a periodic basis. We're so busy with just what we have. With the new technology and tools I'm acquiring this year, it'll allow us to do a much better job of that in the future."
The collective property tax bill for the 4,085 acres of agricultural land in the city limits was a little less than $9,200 in 2010, according to Comeaux. Had the acreage been assessed using a fair market valuation of only $1 per square foot (keep in mind some of this very property has sold as high as $18 a square foot), the revenues to the parish would have totaled $1.5 million. Side note: Commercial property surrounding the Mall of Acadiana - also still inexplicably classified as "ag" land - would have a "fair market value" of $5 per square foot, according to Comeaux's assessments; the more than 100 acres of Boustany family agricultural land along Ambassador Caffery would be valued at $8 a square foot. Those fair market values could increase in 2012 when reassessment takes place; property in the parish is reassessed every four years.
This vacant lot at 209 Kaliste Saloom, near its intersection with
Pinhook Road, is next door to a new hotel under construction and
also neighbors a large office building complex. The land,
however, is assessed at an agricultural use value and paid
roughly $42 in property taxes in 2010.
Comeaux could not say whether all 4,085 acres of what's currently ag classified remain undeveloped. But if development or a change in what the property is used for begins after Jan. 1 of any given year, the property tax assessment remains the same until the following year. The assessment change into commercial use can happen in a number of ways, Comeaux explains, such as someone reporting the land, issuing a building permit on the land - or simply an assessor's office employee driving by a property and observing the change.
"I did not review each parcel to determine if some type of development was taking place on it or not," Comeaux says. "Our new aerial photographs should be delivered in two to three months, at which time we would have a better idea as to whether or not development has occurred."
Although this property tax puzzle seems to have slipped under the radar, Tim Supple, a software company owner and former real estate investor, has been preaching to politicians about this issue for more than 10 years. He cites Stewart's property and the loads of land surrounding Stewart's upcoming Parc Lafayette as a perfect example of how little the landowners have contributed - and how much the landowners have gained from vast infrastructure improvements made in the area such as the widening of Kaliste Saloom Road and more recently the Camellia Boulevard extension. New roads and other taxpayer-funded improvements mean those who own the land in question can command even higher prices for their property.
When Supple began researching the disparities in property taxes about a decade ago, he found 5,000 acres of agricultural use property in the city of Lafayette. The 5,000 acres, at the time, had been billed a total of $13,000 in property taxes for the given year, according to Supple.
"[The Salooms] have been paying $40 a year in property taxes [on the 13.5-acre tract] for the last 20 or 30 years, and before that it was less than that," Supple says. "What you're rewarding is nondevelopment. If they sold it and invested,
Iberia Parish Tax Assessor Rickey Huval,
president of the Louisiana Assessors Association
Tim Supple, software company owner and vocal opponent
of prime land being valued as agricultural property
they couldn't make a better return than they do by sitting on it. It's the best investment you can make. They don't sell it until they need the money. They're not bad people. They're just businessmen. But it stifles development, and it rewards doing nothing."
Seldom one to hold his tongue, Supple is in the minority among those willing to speak out publicly on this issue. Developers contacted for the story all said they believe the current system has hindered development in otherwise active corridors and point to the lack of accountability for those who claim to be operating legitimate agriculture businesses. But none would go on the record, fearing the influential owners of this prime land would use their opposition to lock them out of potential deals.
On the other side of the cattle guard are the landowners, like Danny Saloom, who say the vast amounts of property his family owns have been farmed for the past few decades. The city's own manifest destiny has forced him and family members to sell their cattle and decrease the amount of agricultural activity that once occupied the properties, he says, but Danny maintains he still owns a barn for his horses and grows rye grass for hay on some of the family's acreage in the city. It's unclear how many acres the Salooms own, and how many of those are strictly agricultural use. The assessor's office maps show at least 128 acres of ag property owned by the Salooms or Pine Farm Limited, a Saloom company, but even Danny says with the partial ownership of some properties and full ownership of others, it's hard to say exactly how much acreage belongs to him or his family.
According to a map from the assessor's office, vacant lots
like these along Bertrand Drive are labeled as agricultural property.
Danny says as one of the city's large landowners, his family has donated portions of their land, particularly along Camellia, to the city for the neighborhood park near the subdivision off Camellia and Starling Road, a road he says was made possible thanks to his family's donation. The sidewalks, he says, were built on land the city received for free. When the Camellia extension was built, Danny says the city purchased the property at a steep discount. "It was an extremely cheap price, and it was because it benefited the city," he says.
"We've had people approach us about different projects on the property, but we didn't feel they were what was appropriate for the land or the neighborhood near it, and we didn't feel it was best for the city," he continues. "The issues with local developers, sometimes they don't bring the plans and the money that are necessary to develop large property properly. Realtors on a local level get frustrated when large landowners don't want them to come in and develop five acres. There's an emotional attachment to the land ... As in any farm, you don't have to utilize 100 percent of your acreage for any one thing at any particular time. If they want me to plant soybeans, I'll tear down the oak trees and plant soybeans tomorrow."
For Danny Saloom, who is all too familiar with the arguments against the tax rates he and others have been paying for their property, the fight stems from "greedy" developers who want to force the families with generations worth of land in the city to sell it at the cheapest possible rate.
"If they tax them the way some of these people would like to see them taxed, you would never have a River Ranch, never have a Parc Lafayette because the astronomical values on the amount of property some farms have means they would have to sell in a hurry," Danny says. "They would have to sell it piecemeal. This whole issue is being brought up by a few developers who feel that larger landowners are in competition with them. It's about money. If you're looking at larger areas like River Ranch, the city will make more money in one year with that than in 10 years of taxing agricultural tracts.
"If everyone is valued at highest and best use, you would have a flood of real estate, an oversupply, and it would decrease the value of homes and businesses here," Danny continues. "You throw taxes on them, and I can promise you about every acre on that property would be for sale in a hurry, but this thing would be the shabbiest development, and I don't think that's what the city wants. You'll have turmoil in the market you wouldn't believe. I don't think economically it would make sense, but it would make sense to developers, shall I say carpetbaggers, who want to take people's property by forcing the tax rate so high that they can't afford to keep it. This whole effort has been hijacked by developers."
Huval, however, says the law was written to protect farmers who own large amounts of land but don't get nearly as much financial return from the land as commercial developers. As benevolent as the law's intent is on the surface, Supple, whose family owns 4,000 acres of farmland in Iberville Parish, counters that most large-scale farms are not owned by the people who farm them.
"The guy on the tractor doesn't own the land; he's leasing it from the Supples, who live in Lafayette," Supple says. The statute, Supple says, doesn't help the farmers - it "helps the landowner."
If Supple's attempts to approach local and state lawmakers are any indication of what, if any, changes in state law might come, it appears the city and parish may be sitting pretty on hay and little to no tax revenues from the prime vacant properties. Those tax coffers will have to wait patiently for local landowners with names like Boustany, Saloom, Chappuis, Stutes and Hamilton and out-of-state companies like Acadiana Land Associates (former Mall of Acadiana owner Robert B. Aikens & Associates) to dive into the commercial development pool or sell their property.
"It's not my job as an assessor to legislate," Huval says. "We can take a stand. We try to let the Legislature know what something is for the taxpayers, what's being fair."
Huval says assessors have lobbied the Legislature before on other issues, like in early March when several assessors went before legislative committees to request a rule change that would allow them to assess horizontal drilling pipes, or those used for natural gas drilling at the Haynesville Shale in north Louisiana. Assessors also went to bat in 2009 for a bill that would have raised the state's homestead exemption, which clears homeowners from paying taxes on the first $75,000 of their homes.
But as for agricultural use land and how it impacts local revenues, "that's not an issue the association would take up," Huval says.
Supple and others who oppose the tax rates aren't surprised by the lack of muster to change the statute. Danny says the statute guards families from "having to sell" instead of just "being able to sell." Public officials have often agreed with Supple when he explains the inequities, but he says no one has yet to take on the issue.
"What does [the special tax rate] give us as a community, as a state?" Supple asks. "My family's been on the dole for 100 years, and I appreciate you guys doing it - but why?"
Breakdown of where property taxes went in 2010 in Lafayette Parish:
School Board 39.6%
City-Parish Government 24.2%
Sheriff 19.8%
Library 7.7%?
Economic Development 2.3%
Airport 2.0%
Assessor 1.8%
Teche-Vermilion 1.5%
Bayou Vermilion 1.1%
Breakdown of how the 24.2% of city-parish government property taxes are divided:
General Fund 2.3%
Courthouse & Jail 2.8%
Jail 2.4%
Health Unit 1.2%
Drainage 3.9%
Juvenile Detention 1.4%
Roads & Bridges 4.9%
Mosquito Control 1.8%
Bond Debt 3.5%
Breakdown of how city property taxes are divided:
Playgrounds & Recreation 10.7%
Streets & Roads 7.2%
General Fund 30.2%
Public Buildings 6.3%
Police & Fire Departments 17.7%
Police Salaries 16.7%
Fire Salaries 11.1%
All courtesy of Lafayette Parish Tax Assessor's website