Preserving Farmland and Farm Communities

In terms of sheer acreage, farmland is the kind of land that is most directly affected by sprawl and population growth. About 1 million acres of land per year are lost to development, according to the American Farmland Trust, and much of this land is prime agricultural land that can never be replaced. But like so many other constituencies harmed by sprawl, farmers are not likely to protect their interests unless they can find new ways to collaborate with new allies on a regional basis. For their part, smart growth advocates in the city and suburbs have their own self-interests in joining farmers to help preserve their land. 

The federal government has played a relatively minor role in promoting farmland protection. Yes, there are federal farm subsidy and loan programs, which help farmers maintain a living income, but these are not directly coordinated with farmland protection policy. And the Farmland Protection Policy Act of 1981, while a welcome advance that has raised consciousness about the costs of farmland conversion, is limited in its effectiveness. 
 In their insightful and comprehensive Holding Our Ground: Protecting America's Farms and Farmlands, Tom Daniels and Deborah Bowers explain that "the federal government has nothing close to a coherent strategy to protect farmland. And there is no federal farmland policy that states and local governments are required to follow. Instead, the federal government has viewed land-use matters as the domain of states, counties and municipalities." ¹  (Daniels and Bowers' book may be the best single introduction to farmland protection.) 

States, then, play a pivotal role in helping preserve farms. Their powers can be felt in four key areas: regulation (land-use planning, zoning), spending (roads, schools, sewers), taxation and the acquisition of land. In each of their realms, policy must protect prime soils from development; minimize land use conflicts in agricultural areas; and protect enough farmland so that a sufficient market remains for agricultural support services. Below, a review of the most promising tactics. 

Land Use and Zoning Strategies. Many states allow localities to formally designate lands as protected agricultural districts. Farmers in these areas acquire special protections: A town cannot take farmland through eminent domain takings (to build new roads and sewers for development, for example). Neighbors cannot sue the farmer for normal farming activities, such as early-morning chores, spreading manure or running noisy farm machinery -- activities protected under the state's "right to farm" law. Finally, land in agricultural districts is assessed for tax purposes for agricultural uses only, and not for the market value reflecting development pressures. 

In Pennsylvania, agricultural zoning imposes even stricter protections. Even low-density residential development is not allowed, and any new landowners are warned that agriculture is the primary economic activity of the area, which may cause disruptions for other uses. 

One of the most effective land use/zoning strategies to preserve farmland is Oregon's urban growth boundaries, which exist for all 241 towns and cities in the state. The adoption of UGBs in the 1970s have largely shielded that state's farmland from sprawl. Some 16 million acres have been zoned Exclusive Farm Use, with parcels classified by different Soil Conservation Service categories of soil quality. This land use regime has helped ensure that farmlands are valued for agricultural uses, and not residential development. "This means that farmers can reduce their unit costs by expanding their operations at prices that reflect farm values," writes Ken Buelt, an Oregon farmer. ²

Tax Reforms That Help Preserve Farmland. In many cases, tax policies -- especially property and inheritance taxes -- contribute significantly to farmland loss. In an excellent book, Zoning for Farming, the Center for Rural Pennsylvania advocates property taxation of farms based on agricultural uses, not on the fair market value of the land (which includes the land's value for development). 

Urban expansion in or nearby agricultural areas pushes up the market value of farmland. Since farmers need large amounts of land, the rise in land values results in tax burdens that are not supportable by agricultural production. This problem affects farmland owners both when they face their yearly property tax bills and when their heirs must pay inheritance taxes. ³

Property taxation based on agricultural uses avoids this problem, reducing taxes by 50 percent or more (although scattered development in a farming region can raise infrastructure costs enough to offset this tax savings and make farming unsustainable). Pennsylvania law grants farmers this right to have their land assessed for agricultural purposes rather than the market value. State law also stipulates that farmlands be appraised at "use value" when state inheritance taxes are calculated. ⁴

Federal tax legislation in 1997 offers another tax opportunity for farmers to keep their land intact. Under a new provision in the Taxpayer Relief Act of 1997, landowners who commit their lands to conservation easements rather than residential or commercial development can obtain a 40 percent estate tax exemption. The bill applies only to lands within 25 miles of a federally designated metropolitan statistical area, (which covers most land in East Coast states), and sets a $500,000 cap on tax benefits, which will be phased in by the year 2002. Despite these limitations, the amendment should help many farm families avoid having to sell their land to pay inheritance taxes. 

Purchase of Development Rights. A number of states have created aggressive programs to purchase the development rights of agricultural lands, thereby keeping them as open spaces in perpetuity. Under such arrangements, a farmer sells the rights to develop the land to a local trust or estate agency while retaining title to the land, the right to farm on it, and all other rights and responsibilities of private landowners -- except the right to develop it. If a farm is worth $6,000 per acre on the open market, but its value if restricted to agricultural production is $4,000, the state will pay the farmer the difference of $2,000 an acre. The farmer agrees to a perpetual easement to keep farming the land or preserve it for open space uses -- provisions that are binding on any future owners as well. 

After losing nearly 2 million acres of farmland over the past forty years, the State of Maryland has aggressively used this technique to preserve its farmland. Using a real estate transfer tax on all real estate transactions, the state's agricultural land preservation program had a budget of $10 million in 1996 (and another $1 million from the 1996 federal farm bill) to buy farmland. Maryland has spent some $140 million to save more than 130,000 acres and more than 2,000 farms, making it the most successful state farm protection program of any state in the nation. In New Jersey, voters in about two dozen towns have approved taxes on local property -- e.g., a 2 cent tax on every $100 of value -- that goes to a land preservation fund, allowing towns to buy the development rights of farms. In West Windsor, New Jersey, a town of 16,000, this tax raises about $414,000 a year to buy farms or development rights. ⁵

 "In counties where PDR [purchase of development rights] has been practiced for ten or more years," write Daniels and Bower, "regions of preserved farms have begun to emerge and are stabilizing local agricultural economies. Because the land is restricted in perpetuity, the result is substantial -- with the cost of buying the easement paying for itself in less development to service, an active farming economy, and a beautiful landscape year after year, decade after decade. ⁶

Transfer of Development Rights. Many municipalities around the country have programs that allow a developer to buy development rights at one location -- where there is an historic site, wetlands, special natural site, etc. -- and transfer the right to develop to another place within the jurisdiction. In Montgomery County, Maryland, for example, some 89,000 acres have been designated a "preferential agriculture zone," which allows only one residential unit per 25 acres. Land bought there brings with it "development rights" that can be transferred elsewhere in the county. The idea is to channel market pressures for development away from rural areas into designated growth areas. Since 1983, the county has processed more than 4,000 transactions and obtained permanent easements on more than 20,000 acres of farmland.⁷

This farmland preservation technique can work, but it is difficult to establish because it also requires that the community have a comprehensive land-use plan with designated development areas. But the concept has the advantage of making private developers compensate private landowners for easements and open spaces. It also works to channel development into the pre-selected areas that already have the needed infrastructure. Daniels and Bowers examine the transfer of development rights in their book, Holding Our Ground. 

Land Trusts as Agents of Preservation. As described in the preceding section, private land trusts can play an invaluable role in helping to preserve endangered land. When no government funds are available, or a farm is not within a protected agricultural district, land trusts can step in to help craft a feasible private transaction. 

When the owners of Gray Ranch in New Mexico were threatened by subdivision into "ranchette" and hobby ranches, the Nature Conservancy bought the property and then resold it to a local foundation after establishing conservation easements that protect the land from development. As described by a reporter: "Other area ranchers are allowed to graze cattle on the ranch in exchange for conservation easements on their land, which by lowering their property values helps reduce their estate tax." ⁸

Research to Clarify Problems and Solutions. The American Farmland Trust, a nonprofit advocacy group at the forefront of farmland preservation, has produced a number of valuable reports documenting the loss of farmlands to sprawl. But there is a great need for state governments and the U.S. Department of Agriculture to make official inventories of farmlands and develop policies that pro-actively help to preserve farmland. It would be useful for state governments to identify and evaluate the specific parcels that are most valuable and most at risk of development. With such data, government can track the fate of farmlands and intervene with appropriate policies and programs. 

Federal agencies should also document the environmental consequences of farmlands being converted into development. Developed land is more likely to lose topsoil to wind and water erosion, carrying with it the nutrients and chemicals (nonpoint pollution) that degrades waterways. Developed land is also more likely to destroy wildlife habitats and impose a greater fiscal burden on municipalities than farming does. Farmers could benefit from research examining how state and federal policies are driving up land values at the perimeter of specific metro areas, to the detriment of both farmers and inner-city residents. The American Farmland Trust recently released such a study to show how public expenditures and policy affects farmers in the metro Atlanta area. 

 ¹ Daniels, Tom and Deborah Bowers, Holding Our Ground: Protecting America's Farms and Farmland (Washington, D.C.: Island Press, 1997), p. 75-76.
 ² Ken Buelt, "Land Use Planning: A Farmer's Perspective," in Land Use in America, pp 237-243.
³ Center for Rural Pennsylvania, Zoning for Farming: A Guidebook for Pennsylvania Municipalities on How to Protect Valuable Agricultural Lands (September 1995), p.5.
 ⁴ See National Trust for Historic Preservation, Smart Cities, Better Communities, "Farmland Preservation in Pennsylvania," pp. 165-171.
⁵ The New York Times, December 29, 1996.
⁶ Daniels and Bower, Holding Our Ground, p. 146.
⁷ Diamond and Noonan, Land Use in America, p.40.
⁸ "With True Grit and Donations, A Ranch is Saved," The New York Times, November 23, 1997, p. A1, A11.