I.L.O. Neighbours – Property Tax Relief

Intensive livestock operations may incur liability to neighbours and the surrounding community for adverse effects on the environment and interference with property use. Those living in close proximity to such facilities may well be concerned about diminishment in the value of their property. Are such concerns valid? If so, should the municipalities in which such facilities are located be concerned about deterioration of these property values for property tax assessment purposes?

The Nebraska Court of Appeals recently considered a property tax appeal by a tax payer living within one mile of a hog farrowing facility housing 5,200 hogs. The tax payer’s position, supported by expert appraisal evidence, was that the hog farrowing facility and associated manure spreading would result in at least a 30% reduction in the assessed value of his property. In allowing the tax payers appeal from an earlier decision of a review tribunal which had upheld the higher assessment, the Court concluded:

    “No reasonable fact finder could conclude that in the real estate marketplace, a potential buyer would not notice, and react economically, to having a large hog facility very nearby while living in a remote location. Thus, the (review tribunal’s) decision upholding that valuation was arbitrary and capricious.”

In coming to this decision, the Court determined that, for the purpose of property tax assessment, a property must be assessed at market value and not cost. Essential to the consideration of market value is “the affect of the house’s location next to a hog facility and manure easement.” The Court stated:

    “The whole concept of determining value must assume both a willing buyer and seller…In the context of negotiations between a willing buyer and seller to arrive at fair market value, the neighbouring hog facility and the house’s location would unquestionably affect the market value of (the taxpayer’s) house. Any other conclusion would mean that two identical houses, one located next to the railroad switching yard and the other next to the country club golf course, have identical values – an obviously arbitrary and illogical conclusion that no reasonable person would reach….

    “That many potential buyers would not look favourably upon the hog facility, and judge the home’s value with reference thereto, is demonstrated by (other cases) in which homeowners have successfully sued hog facility owners for damages caused by interference with the use of their nearby homes.”

Neighbours of intensive livestock operations may recover from the operators of such facilities compensation for the impacts these facilities have on the environment and neighbouring property owners’ use and enjoyment of their property. Of some small comfort to these landowners, these adverse impacts may also justify a reduction in the property tax assessment of their properties. This erosion of assessment values and reduction of the tax base should be of concern to municipalities permitting the construction of these facilities.