Beating plowshares into townhomes: the loss of farmland and strategies for slowing its conversion to nonagricultural uses.

• Author: White, Jeanne S.

1. INTRODUCTION

   Despite efforts to preserve prime agricultural land for production, farmland continues to be converted at a rate of around 1.5 million acres per year in the United States.(1) Farming is a productive industry which generates revenue and contributes to local economies. It also provides jobs to rural residents and is the cultural cornerstone of many rural communities. Farmland has significant environmental value for wildlife habitat, is a land use compatible with wetlands protection and stormwater filtering, and provides scenic open space and natural buffers between conflicting land uses.

   The farming industry has an important role in rural communities. It supports many rural jobs and undeniably contributes to, if not shapes, much of rural culture. For example, in Hood River and Sherman Counties, Oregon, and Klickitat County, Washington, the agricultural sector represents 20.2%, 31%, and 13.3%, respectively, of the total employed population in each county.(2) The agricultural sector employs 12.7% of the total employed population in the Mid-Columbia Economic Development District, which covers five counties along the Columbia River.(3) Another example is California's Central Valley, where one in ten jobs statewide "is tied to farming,"(4) and urban sprawl is expected to destroy 12% of the state's farmland in the next forty-five years.(5) These numbers reflect, and likely underestimate, the importance of agriculture for many other rural communities throughout the United States.

   In rural areas, farming operations have a mutually dependent relationship with nonfarming industries which either supply farm services or incorporate farm output into marketable products. These supporting industries supply the production inputs, the transportation and the marketing needs of the farm operation,(6) and offer many of the nonfarm jobs in an area. Farming also supports jobs for rural people who use farm products to make specialty foods or artistic items to sell to tourists, urban areas, or local residents. If farming is no longer a viable industry in rural communities, other dependent industries and services will experience a decline. This will result in a gap in the job market for rural residents.(7)

   Preserving agricultural land also benefits the local tax base. Local governments typically rely upon property taxation to fund public services. Many of these governments have operated under the myth that new development is an effective tool to increase the property tax base. Ironically, this approach results in revenue losses due to the relative revenue contribution and costs of residential development compared to farmland, open space, or forest land preservation. In studies of land use development in Minneapolis and St. Paul, Minnesota(8) and three Massachusetts towns.(9) the relative revenue contribution of farmland to the cost of servicing farmland results in a surplus to county governments. For every dollar raised from taxing farmland, open space, or forest land, the cost of services averaged fifty cents in the Minnesota study,(10) and averaged thirty-three cents in the Massachusetts study.(11) Meanwhile, the cost of delivering services to expanded residential development outweighed the increase in apparent revenue produced. The costs associated with roads, sewers, parking lots, schools, and police and fire departments resulted in a revenue to cost of services ratio of $1 to $1.04 in Minnesota,(12) to $1 to $1.12 in Massachusetts,(13) Because agriculture contributes to the local tax base without the costs attributed to urban development, it is an important asset for communities to preserve.

   In response to its decline, governments at the federal, state, and local level have pushed to develop policies to protect farmland. During Washington's King County Farm Advisory Committee's study of programs designed to conserve farmland, the group identified over seventy strategies being used throughout the country.(14) These strategies aim to prevent direct conversion of farmland to nonfarm uses, or indirect conversion of farmland due to harsh financial and legal conditions,(15) In describing in detail some of the efforts at the county, state, and federal level to protect farmland, this Article concludes that the farmland preservation program, which addresses all or most of the social and economic factors that influence farmland conversion, will be the program most effective in achieving its goals. In addition, those programs which continue to evolve to address changing social and economic circumstances, and those which address fairness to individual landowners will more likely prevail in protecting farmland. The efforts described in this Article range from agricultural districts, exclusive agricultural zoning, taxation methods, and the purchase of development rights through transfer of development rights programs and conservation easement programs. Review of these individual programs suggests that the best approach may be to borrow and combine attributes from each one. This would result in a program with exclusive agricultural zoning, the purchase of development rights, and legal and financial protections for individual farmers.

   Although not directly discussed in this Article, many governmental bodies use taxation to encourage farmers to keep their land in production or to discourage developers from engaging in speculation.(16) Most of the programs discussed below incorporate some form of taxation in order to influence behavior. Because the financial benefit resulting from tax incentives or penalties is small compared to the value of farmland on the open market, taxation alone will not likely result in the long-term protection of farmland.(17)

   The most typical taxation methods employed by local governments are differential assessments, deferred taxation, and restrictive agreements. Under the pure differential assessment method, agricultural land is taxed at a value that reflects only its agricultural use, despite its development potential.(18) Because this method has no penalty provision for converting farmland to nonfarm uses, it is merely a financial buffer for current farmers, yet has limited value for preventing conversion. Under deferred taxation schemes, all of the tax savings which resulted from the differential tax must be repaid upon conversion of the land from agricultural purposes.(19) This penalty tax, or recapture of lost taxes, is likely to become a cost of business for developers or farmers whose profit from the sale far exceeds any penalty.

   Restrictive agreements are a binding, contractual agreement between landowners and the government. In exchange for the landowner's promise to keep the land in agricultural use, the local government may have limited authority in making land use decisions within the agricultural area, and must tax at the agricultural value. A breach by the landowner subjects the landowner to a heavy tax penalty.(20) For example, under the Williamson Act(21) a landowner agrees to a minimum ten-year contract period(22) with automatic yearly renewals(23) and a ten-year notification of non-renewal.(24) However, the timing requirement favors developers who can afford to buy and hold land for the contract period and incur no penalty. None of these methods can protect farmland over the long-term since the speculative value of the land would exceed either the tax saving or the tax penalty. The profit motive is particularly exaggerated in areas subject to intense development pressure.

   A primary factor in the conversion of productive farmland is the real estate market's speculative pricing of farmland. Real estate speculators stand to profit exorbitantly from purchasing a parcel in low-density use and converting it into a high-density marketable product. Low-density farming operations which lie on the fringe of urban development are particularly vulnerable "[s]ince suburban land values average 1800% more when utilized for building purposes than for cultivation or grazing."(25) Also, developers purchase rural land because it is relatively inexpensive, and it is in large, contiguous parcels of land suitable for commercial, industrial, recreational, and housing development. Farmland is perfect for nonfarm development because it is in "large parcels of level land that are relatively free of vegetation and with adequate drainage."(26) Investors from the United States and even from abroad view land purchases as a wise investment which often outperforms the general price index and the common stock market.(27) Controlling the effects of land speculation on rural, yet developable, land is crucial to long-term farmland protection.

   Farmland protection policy must address the social and economic factors which influence individual farmers' decisions to continue farming or enter into farming. Without resolving these issues, only the farmland base may be preserved while the culture that understands how to farm it will inevitably die out. This would clearly be a failure in farmland protection policy. The combination of rising land prices leading to rising property taxes and the potential to profit from developers' offers to buy will influence many farmers to retire from farming, and deter many farmers from entering the business or expanding their production levels. In King County, for example, recent sales prices indicate that the asking price for farmland has reached $100,000 per acre in some areas.(28) If farmland is unaffordable for actual farmers to buy, the preserved land base may be aesthetically pleasing, however, the economic and cultural values of farmland will be lost.

   A farmer's age, health, interest in a nonfarm occupation, interest in moving to another part of the country, and children's interest in fanning, will undoubtedly influence his or her decision to sell his or her farming operation. The King County Advisory Committee reports that 50% of all United States farm assets are held by...