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HomeMy WebLinkAboutAgenda - 05-06-1998 - 10bI u ORANGE COUNTY BOARD OF COMMISSIONERS Action Agenda Item No 16-16 ACTION AGENDA ITEM ABSTRACT Meeting Date: May 6, 1998 SUBJECT: AGRICULTURAL LAND PRESERVATION PROPOSAL 1 -------------------------- - - - - -- ------------------------------- DEPARTMENT County Commissioners PUBLIC HEARING YES NO _x- -------------------------------- ------------------------------- BUDGET AMENDMENT: _YES NO ATTACHMENT(S): INFORMATION CONTACT Commissioner Bill Crowther PACE Program TELEPHONE NUMBER Questions and Answers Hillsborough 732 -8181 Agricultural Trends Chapel Hill 968 -4501 Mebane 227 -2031 Durham 688 - 7331 ----------------------------------------------------------------------- PURPOSE: To consider allocating $200,000 in the Capital Investment Plan for a Purchase of Agricultural Conservation Easements (PACE) program. BACKGROUND: After hearing recent recommendations from the Agricultural District Advisory Board and a report on land -use taxation, it is clear that we should re- address the issue of declining agricultural land resources. The competition for land - especially productive agricultural land - will intensify as more people come to our area to live and work. The irreplaceable land that produces food and fiber and provides scenic vista, wildlife habitat, and clean water is increasingly at risk. As commercial and residential development patterns continue to reach out into the countryside, there should also emerge a pattern of natural resource preservation. Agricultural land should be an integral part of our natural resource infrastructure. This capital investment represents approximately one -third of one cent on the tax rate and is less than the average annual amount of deferred taxes the County receives when farmland is removed from the use -value taxation program. Over the last 5 years, $1.2 million has, been returned to the County in deferred farm -use taxes. This revenue from deferred taxes is generated when farmland is sold, often for the creation of new parcels for residential or other development purposes. These funds should be re- invested in farmland that will be voluntarily preserved for the long term. 2 Preserved farmland will provide lasting benefits to Orange County. Primarily, it will ensure the continued availability of high - quality agricultural land for present and future farming activity, an important factor in the County's economy. At this time, a $200,000 allocation would enable the purchase of conservation easements on approximately 65 -70 acres of farmland. This allocation could also provide a base for matching funds, from either the Federal Farmland Protection Program, or from a future State program. RECObVENDATION: Approve an annual allocation of $200,000 in the Capital Investment Plan for a Purchase of Agricultural Conservation Easements (PACE) Program and prior to the release of funds, amend the Farmland Preservation Ordinance to explain the PACE program in detail. f 3 PURCHASE OF AGRICULTURAL CONSERVATION EASEMENTS (PACE) PROGRAM: QUESTIONS AND ANSWERS What is a Purchase of Agricultural Conservation Easement program? A purchase of agricultural conservation easements program (PACE), commonly referred as a purchase of development rights program, is a voluntary farmland protection technique that compensates landowners for restricting future development on their land. Landowners hold a bundle of rights in their property, including the right to build on the property in accordance with local zoning regulations and the right to farm. An easement separates certain rights from the bundle and conveys them to another party. PACE programs enable landowners to sell the right to develop their land to a government agency while retaining full ownership. The right to develop the property is subsequently retired, preventing conversion to non - agricultural uses. How many PACE programs are found in the United States? As of July 1996, State programs are authorized in 12 States: Connecticut, Delaware, Kentucky, Maine, Maryland, Massachusetts, Michigan, New Hampshire, New Jersey, Pennsylvania, Rhode Island, and Vermont. The Maryland, Pennsylvania, and New Jersey State programs are augmented by county participation. In addition, free - standing local programs exist in California, Colorado, New York, North Carolina, Michigan, Virginia, and Washington. The availability of Federal funding through the 1996 Farm Bill's Farmland Protection Program is expected to encourage the formation of additional State and local easement acquisition programs. How do the PACE programs determine which land to protect? In general, the PACE program places highest priority on protecting the highest quality farmland. A set of criteria are used to rank applications and allow administrators to emphasize attributes that are consistent with the program's conservation goals. A primary concern is land productivity based on NRCS's Soil Capability Classifications. Other considerations include jeopardy or the threat of development, and proximity to other protected farms and farm services. Finally, programs factor in the acquisition price and the existence of historic, scenic, or environmentally significant resources on the site. The USDA's Land Evaluation and Site Assessment System (LESA) has served as a useful framework for identifying which parcels to protect. A modified versions of LESA would be employed by Orange County's PACE program. How is the value of a conservation easement determined? The value of the conservation easement is usually determined by conducting a professional appraisal. A qualified, professional appraiser assesses the difference between the fair - market value, often using comparable sales, and its restricted value. In some jurisdictions restricted value, or its value for agricultural use, is based on comparable sales, while other programs employ a formula incorporating land rents and soil productivity, Easement values vary as a proportion of the full -market value, depending on the degree of development pressure and market demand. For example, intense development pressure inflates market value above the land's value for agricultural use, increasing the price of the conservation easement. As an alternative to the appraisal process, one local farmland protection program employs a point system for valuing development rights, assigning a cash value to points earned based on the land meeting certain program goals and objectives. What are the terms or restrictions found in a typical easement, how do they protect farmland? The easements generally restrict non -farm development and subdivision. Some allowances for farm- related housing may be allowed but these are stipulated in the easement. Generally there are few restrictions on improvements and construction related to the farming operation. The easements become part of the land deed and are recorded in the local land records. Therefore, the easements will govern any future use of the land and will legally bind any future owners. M Are all agricultural conservation easements the same? The basic purpose and structure of all agricultural conservation easements are the same. Each easement is tailored, however, to the specific farm being protected. Exact language in the easement may reflect future expansion plans of the operators including the need of their heirs. How do the easements affect other rights of ownership? The land owner still controls all other rights of land ownership and use of the land not covered by the easement. The land is still owned in -fee by the landowner and can be transferred, deeded, or sold just as any other piece of property. The easement does not require any provisions for public access, unless such access was negotiated as part of the easement purchase transaction. Does a conservation easement affect a farmer's ability to borrow money? The experience of those fanners who have participated in the existing State and local PACE programs is that their ability to borrow operating funds for the farm is not affected by the presence of the conservation easement. If a lending institution holds a lien on a property, they must subordinate the sale of the conservation easement just as they would need to sign -off on any transaction on the property. Since a farm loan is usually based on the ability of the farm operation to carry the loan, a conservation easement, which only affects nonfarm development activities, not the farm operation, would not have a bearing on the performance of the loan. How are the proceeds from the sale of a conservation easement treated for tax purposes? The easement sale proceeds are treated like any other capital gain for Federal, State and local income tax purposes. Some programs have provisions that allow for installment purchases or have utilized securitizable tax - exempt bonds as a method of payment. Are these programs popular with farmers? The collective experience of the existing State and local programs is that they are very popular with farmers. A survey of program administrators from selected counties in Pennsylvania and California, and the States of Connecticut, Maryland, Massachusetts, New Jersey, and Vermont in July 1995, found that demand exceeded available funds to purchase conservation easements by an average of 15 percent; for every farmer who voluntarily sells a conservation easements, 6 more are waiting in line. What if a preserved farm becomes surrounded by development? Can the conservation easement be terminated, and can the landowner buy back the development rights? All state programs, with the exception of New Jersey, have escape clauses that allow a landowner, in extreme circumstances, to repurchase the development rights after a 25 -year period. The burden is on the landowner to prove that farming can no longer be possible without economic loss and considerable conflict with non -farm neighbors. Furthermore, the landower would have to pay for the development rights at the current market value based on an appraisal. The request to repurchase development rights must be approved by the local governing board. Massachusetts requires additional approval by the state legislature and Commissioner of Agriculture. Forsyth County, NC is the only local PACE program that has actually completed a repurchase agreement with a landowner. This case involved a farm being surrounded by an industrial park. The owner paid the County $300,000 to repurchase the easement, and those funds are being used to purchase new agricultural conservation easements. prepared by the Orange County Planning Department for the Agricultural Districts Advisory Board 5 f Agricultural Trends in Orange County The Past Ten Years: - Steady, continual decline in number of dairy producers (25 today, 48 in 1986). Attributable to many factors, including declining profit margins, value of land for development, lack of interest on part of succeeding generations. - Increase in Nursery and Greenhouse production. A few full time, large growers. Many small specialty nurseries. - Large increase in the number of small horse farms (10 -20 acres) and horse owners, mostly through subdividing larger farms. - Decline in the number of swine producers. All feeder pig production has switched to market hog production. Influenced by marketing changes and inability to adapt to current large volume market conditions. - Increased number of small vegetable growers selling locally through farmers markets and local retail outlets and restaurants. Primarily part time growers. - Tobacco producer numbers have remained fairly stable. There has been some consolidation of smaller allotments into larger farms. Total pounds grown is dependent on adjustments to allotments determined by supply and demand and regulated by USDA. A few have diversified their operations (five new broiler- breeder poultry houses, turfgrass production). - Beef cattle and other livestock operation numbers have remained fairly stable with only a slight decrease in the numbers of beef operations and cattle. - Timber sales and harvesting has increased dramatically in the last few years with the opening of additional markets in surrounding counties. - Continual increase in the number of landscape' contractors and landscape maintenance operators associated with increasing population. - Pressures associated with residential growth and accompanying increases in traffic and land values, along with growth in tax rates on equipment and personal property shit harder to farm. - Increased governmental regulations related to environmental issues such as federal soil conservation requirements, state laws such as .0200 regulations, and Senate Bill 1217 • affecting confined livestock operations have required unplanned capital expenditures. The Next Several Years: Continued decline in the number of dairy farms. Due to low milk prices and inability to economically comply with environmental regulations. Five producers indicate the may sell out by the end of this year. - Continued slow growth in the nursery, greenhouse, ornamental, and landscape sectors due to increasing population of the region. - Number of horse farms will stay steady or slowly increase with an increasing urban population. - Small increase in the number of small fruit and vegetable growers, particularly organic growers. There will be some attempts by traditional agriculture producers to diversify into this area. - Tobacco production is dependent upon government action. - There will be a slow decline in the number of beef cattle producers due to retirement and high land values. - Timber harvesting and forestry will continue to be a viable alternative source of income. - Increase in hay production by former dairy and tobacco producers. I - The amount of farmland in production will continue to decline slowly, primarily being developed versus being left fallow. - Environmental regulation will continue to be a factor for farmers remaining in business. Implementation of the Neuse River Nutrient Management Plan is one example. This plan and other environmental concerns will probably result in farms needing to further monitor' and limit the amount of fertilizers and pesticides used to produce crops. This may not necessarily negatively effect farm production and income, but will add to the pressures associated with trying to remain a viable agricultural producer in a rapidly changing area'_, Prepared by: Royce Hardin, Agricultural Extension Agent NC Cooperative Extension Service - Orange County Center For Orange County Agricutural Districts Advisory Board September 17, 1997 6 Comparison of Gross Farm Value of Agricultural Commodities Produced in Orange County in 1986 and 1996 Commodity 1986 1996 Milk and Dairy Cattle $11,163,400 $9,124,112 Flue Cured Tobacco 4,334,034 7,654,629 Eggs and Poultry 2,501,800 5,699,248 Nursery and Greenhouse 1,125,000 5,310,000 Beef Cattle 1,965,785 2,293,950 Forestry 539,860 2,091,450 Horses 546,700 1,041,900 Hogs 1,348,741 640,800 Hay 126,585 329,000 Vegetables and Berries 1 51,400 266,248 Soybeans 421,950 201,000 Corn 3,500 78,200 Small Grains 69,195 56,200 Other 336,463 80,901 TOTAL GROSS FARM INCOME $24,534,491 $34,867,638 7