Wednesday, August 26, 2009

A Dangerous Tax Grab

Loss of funds to preserve land worries farmers

Operations may shut down

It’s one of dozens of little nips and tucks that are part of the recently approved state budget, but the $32 million cut from a four-decade-old agricultural preservation program could lead to more farmland being bulldozed for development.

The elimination of state funding for the Williamson Act land conservation program has left many farmers wondering about the future of the program, which has helped preserve more than 16.5 million acres of agricultural land in California.

In Ventura County, where about 128,000 acres are covered by the program, farmers are lobbying Sacramento and working with local lawmakers, said John Krist, CEO of the Ventura County Farm Bureau.

Under the program, farmers commit to keeping their acreage in agriculture for 10 to 20 years in exchange for a property tax break. Instead of paying taxes based on the market rate assessment of the land, farmers pay on whatever is lower: the production value of the land, its acquisition value under Proposition 13, or its current market value.

County Assessor Dan Goodwin oversees how the land is assessed, while officials in the county’s planning department help to manage the program. Goodwin is at a conference this week and could not be reached for comment.

With so much development pressure and such a high value for land, the Williamson Act has helped preserve prime agricultural land, said Krist. The state cut means the cost of administering the program will fall to counties. In Ventura County, it costs about $325,000 a year to manage the program.

“We’re working on two fronts,” Krist said. “The California Farm Bureau is lobbying hard to keep the subvention funding in the budget and on the local level, I’ll plan to urge the supervisors to continue to participate in the program.”

A lot of local farmers are paying close attention to what happens, said Leslie Leavens-Crowe, a Farm Bureau board member and partner in her family’s farming company, Leavens Ranches, which operates lemon and avocado orchards here and in Monterey County.

The Williamson Act is particularly helpful for land purchased for farming in the past 10 to 15 years.

Often it takes several years before farmland starts producing. For orchards, it might take more than five years. To be assessed on the market value of the land, which in Ventura County can be $100,000 to $200,000 an acre, and not the production value would be unworkable, Leavens-Crowe said.

“For some of the land we have adjacent to cities that we’ve purchased at market rates in the last 10 to 15 years, it would be difficult if not impossible to make a profit” without the program, she said.

It’s unclear what will happen with the program here and statewide, whether each county will be willing to carry the cost of managing it. That throws uncertainty into the system and complicates an already difficult business.

“It could add another big incremental cost of doing business and shut down some operations,” said Leavens-Crowe.


Tyrone said...

A sobering first reminder of who really owns your land.

So much for buying local if you don't have anything local to buy.

w said...

That's right, raise the taxes on the largest local industry and last major industry that we actually make something.

With the housing boom and speculation in general farmland prices are totally screwed up anyway.

Farming is under a total assault right now.

- no labor policy
- fertilizer and fuel prices
- dramatically increases in bureaucratic paper pushing under the guise of food safety and environmental protection
- major new air quality requirements for equipment such as wells, pumps, and tractors.
- water restrictions and price increases
- invasive pests from Asia and Central America requiring massive increases in pesticide applications for crops that were more sustainably grown in the past.
- weak demand
- trade policy that freely allows products into the United States from countries with weak regulation and slave wages
- tight credit

There are two groups who will make it out of this. The super wealthy families who own everything they farm (deservedly so) and the industrious new mostly latino farmers who have insanely low overhead, access to loyal labor, and creative tax accounting.

Peripheral Visionary said...

"With so much development pressure and such a high value for land . . . "

Are they living in an alternate reality? Where is this phantom "development pressure" coming from?

But if they want to preserve the agricultural land (and I am all for that), there are simple ways to do it. The easiest would be to put in place ironclad zoning that keeps agricultural land agricultural; much lower taxes, but no option to redevelop. That would mean that farmers would have to give up their little piggy bank of the option to develop their land, but that's the cost of protection from taxes.

The other solution is to not allow for land to be redeveloped unless developers can show that they have the financing lined up to sell *every* *single* *home* in the new development. No more "zoning arbitrage"--buying farmland on the cheap, talking friends in the zoning committee into rezoning it as residential, then partioning into lots and walking away with a stack of cash for having done next to nothing.

There are solutions here, but most of them (unfortunately) require zoning boards to show some spine and stand up to the developers. That should be much easier now that the developers are on life support, but still, I'm not holding my breath.

Property Flopper said...

PV - Oregon had(still has?) a program like that in place. Ag land is taxed much lower BUT when you want to develop it, you have to pay the new tax value retroactive for the last ten years.

Yup, you can develop it, but it tacks on a big chunk of cost.