By Alan Prendergast
By Michael Roberts
By Michael Roberts
By Amber Taufen
By Patricia Calhoun
By William Breathes
By Michael Roberts
By Melanie Asmar
Many home sites here have been sold by a man named Leon Bachman. County property records show that the 35-to-40-acre plots have fetched anywhere from $75,000 to $90,000. Yet the 40-acre plots are assessed at only $1,120. The yearly tax bill: $29.
That's because the property owners lease the land to Wayne Bauman, whose family has been running cattle in the Golden Gate area for generations. The family has never owned the land, though; they simply rent it. When Bachman divides up more of the property for sale, he transfers the Bauman lease to the new homeowner, guaranteeing that the land remains classified as agricultural, despite its high sale price and residential ownership.
"It's a real good tax break for people who aren't really farmers or ranchers," says Jeffco's Mikus. "Every four or five years a cow walks by and it's called a ranch. And the thing is, it's perfectly legal."
"The grazing isn't comparable to eastern Colorado," concedes Bauman, who says his eighty cattle are spread out over 5,000 acres in Golden Gate. "But," he warns, "you might see a cow every day."
Renting a herd of cows also makes big tax sense for developers, thanks to the giant home-building company MDC Construction.
In 1987 MDC purchased 1,200 acres of land in the town of Superior for a healthy $12,735,000. Although the property had been used for farming for decades, the town recently had zoned it for planned development. Indeed, since then the property has been developed as a residential community called Rock Creek.
Nine years ago, however, MDC simply had a piece of land and some sketches. So it leased the land to two local ranchers and claimed its use as agricultural.
In 1988 the Boulder County assessor disagreed. Noting the high price that MDC paid for the land and its non-agricultural zoning, the county designated the property as vacant/commercial, qualifying it for much higher taxes.
MDC unsuccessfully appealed the case all the way through the county Board of Equalization and then the state Board of Assessment. Finally the state Court of Appeals found in the developer's favor. And in 1992 the Colorado Supreme Court agreed. The judges reasoned that the landowner himself did not have to use the land for agricultural purposes; it was sufficient for him to lease it to someone who did.
That decision cleared the way for what has become standard operating procedure in Colorado today: A developer buys a valuable chunk of land for millions of dollars and then, while he waits for his various regulatory approvals, leases it to a genuine farmer or rancher. In this way the developer receives an enormous property tax break, regardless of how much money he paid for the land.
"Since the MDC thing, none of us has even bothered to challenge the law," says Pettit, Jeffco's assessor.
"It's now a well-established practice," adds Mary Huddleston, administrator for the state Division of Property Taxation.
Recently, the developer's loophole has gotten even larger--courtesy of one of the largest real estate developments in the Denver area, Highlands Ranch.
Developed by Mission Viejo Business Properties, Highlands Ranch tract homes now swarm along the southwestern stretch of C-470 in north-central Douglas County. In 1989, though, several large chunks of the former ranch had yet to be developed. So Mission Viejo, following MDC's lead, leased the land to real ranchers and set about enjoying the agricultural tax break.
When they investigated, however, Douglas County appraisers discovered that a relatively small piece of land, sixty acres, was not being grazed. Indeed, the developer didn't even have a grazing lease for it. So the county pulled the site's agricultural status and classified it as commercial/vacant. Instead of the 67.5 acres being valued as grazing land at $1,550, the county now pegged its worth at $5.9 million.
Mission Viejo appealed to the county equalization board. McNish, the Douglas County attorney, recalls his argument: "Our point was, hey, if you don't graze the property, you don't get the break." Mission Viejo lost.
Next the company made its case to the state Board of Assessment Appeals, arguing that the lack of a grazing lease was "an oversight" and that with such a big piece of property you couldn't expect cows to be on every parcel of land. This time the company won.
In April 1995 the Colorado Court of Appeals upheld the decision. The Supreme Court has agreed to hear the case later this year.
In the meantime, says Douglas County Attorney Hannen, in order to get the agricultural tax break, "all the developer now must prove is that he had the intent to graze the land."
Wait for the Legislature to Loosen the Law Even More
Every few years, state lawmakers can't resist the temptation to designate something else as agricultural and thus eligible for a tax break that can be sloughed off on other taxpayers. In 1990 it was Christmas trees.
More generally, all wood products, from wood shavings to pi–on nuts. The new law granted lower tax rates to anyone who owned at least forty acres and could prove that he produced "tangible wood products that originate from the productivity of such land for the primary purpose of obtaining a monetary profit." The landowner also had to submit a forest management plan.