Farm banker Carl Axness says he thinks a recent change in how Wisconsin taxes farm land was heaven-sent, but now he must pray it isn't repealed.

Known as "use-value assessment" and enacted in many other states, the new approach was adopted as part of the 1995-1997 Wisconsin budget. The method assesses farmland for tax purposes based on its use instead of on market value or a potentially more valuable use such as residential development.

Some urban-oriented groups have challenged the new law's constitutionality, charging that inequitable taxes on farmland would violate a tax uniformity provision in the state Constitution.

The problem for farmers has been that, as urban areas expand, demand for housing and new retail outlets has raised rural land values - and taxes - jeopardizing farmers' ability to continue farming.

This trend has also put rural bankers in the unlikely role of favoring slow growth, trying to hold residential development at bay to help their longtime farm customers.

Use-value assessment is "trying to keep some of this land in agriculture for a longer time period, rather than pricing it out of the market," said Mr. Axness, president of $28 million-asset Union Bank of Blair. He is the bank representative on a committee helping to carry out the changes.

Most states, including many midwestern farming states, have had some form of use-value tax assessment for many years.

Wisconsin had tried other ways to solve the problem, such as a property tax rebate based on income, that "didn't really answer the overall tax problem," said Roger Cliff, executive director of governmental relations for the Wisconsin Farm Bureau in Madison.

Jim Atchison, vice president at Banc One Janesville, has seen a growing urban population send land values skyrocketing for residential development. Some of his farm customers' land has been assessed at a higher value for tax purposes, though a few have appealed successfully. However, he said, "I saw it as an issue that was only going to get worse."

Mr. Axness concurred: Under the old system, "they'll be pressed out of the market sooner because they can't make it economically viable."

Now, basing farmers' land-tax assessments on use "will definitely help farmers that wish to retain the land for farming purposes and keep their costs down," said Rick Risberg, vice president of $100 million-asset F&M Bank-Kaukauna.

Moreover, taxes "tied to the farmer's ability to pay (are) going to take some of the strains off of farmers' cash flow," said Bruce Jones, an associate professor of agricultural economics at the University of Wisconsin, Madison. He, too, is on the implementation committee. "In the good years," he said, "the taxes will be up; in the bad years, taxes will be down."

Wisconsin plans to phase in the farmland assessment changes over 10 years beginning in 1998. Agricultural land assessments are frozen at 1995 levels this year and next.

Use value will be based on the land's rental value for farming purposes. Penalties are provided for speculators who sell such land after owning it less than five years.

Meanwhile, however, the League of Wisconsin Municipalities and Wisconsin Alliance of Cities have filed a petition asking the state's supreme court to review the issue.

If the challenge to use-value's constitutionality were upheld, bankers and other observers said, they expect the state Legislature to revisit the issue.

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