So how are these “new” agricultural assessment rates calculated, you ask? The Florida Legislature states that an income approach should be used to calculate these rates. To calculate the rates using the income approach, divide the income value by a cap rate. The two other approaches, market and cost approaches, are either rarely used or are used in support of the income approach for the agricultural assessment purposes.
In depth, a typical income rate is derived by subtracting typical expenses from typical gross profit to result in a typical net income. The net income is then divided by a cap rate to result in an assessed value. Most county appraisers use inferential statistics on compiled county data to obtain the “typical gross income” and “typical expenses.”
Example: if there are several hundred nurseries in, say, Miami/Dade County and the average annual gross income for a nursery operation (per acre) is, say, $1,000 and the typical expenses are $600, then the typical net income is $400. This income stream is then divided by a cap rate derived from either bank rates or real estate sales. Say the cap rate is 10% (.10); then the agricultural rate would be $4,000 per acre. This rate is then recalculated with a moving average and after five years is re-evaluated. If more information on this subject is needed, much of how the appraiser is supposed to calculate the assessed rates for agricultural use is found in the agricultural section of the Classified Use Real Property Guidelines of the Manual of Instructions.
I must reiterate the word “typical” in this section. As stated in the DOR, “production, income, expense, acreage, and other data should be based on a typical operation. Typical is defined as that which most frequently exists or occurs in the particular situation or area under consideration. A typical agricultural operation may be confined within one county or embrace an area of several counties.”
The previous information is provided in the General Section of the the Agricultural section of the Classified Use Real Property Guidelines of the Manual of Instructions. Section II provide guidelines to assess woodlands such as slash pine operations, Section III provides guidelines for assessing pasture land, Section IV is for Citrus land, and Section V is for Cropland (not including fruit grooves, orchids, etc.)