Save California farmland from Governor Schwarzenegger — and developers

This post is about the California state budget, and so may seem relevant primarily to Californians. However, what happens to California agriculture affects most Americans, as California is the only U.S. producer of almonds, clingstone peaches, figs, persimmons, artichokes, dried plums, olives, pomegranates, raisins, and walnuts (PDF).

As suburbia roars into farming and ranching areas, the new housing and offices bring the possibility of higher property-tax rates for farms and ranches, which means more money in the coffers of local government. If owners of working farms and ranches are required to pay property taxes based on their land's residential or commercial valuation, they usually have no choice but to sell the land to developers. A 1965 California law known as the Williamson Act helps preserve farms and ranches by allowing those who enroll in the program to have their land taxed at a rate based on actual use, not potential use. The state then compensates cities and counties for the revenue loss.

According to a fact sheet from the Division of Land Resource Protection (PDF), "nearly 16.9 million of the state’s 29 million acres of farm and ranch land are currently protected under the Williamson Act." It is an immensely successful program. But, like many programs that get in the way of powerful development interests, it is at risk.

A May 24 editorial in the SF Chronicle alerted me to the governor's plan:

BURIED IN Gov. Arnold Schwarzenegger's budget plans for next year is a small but truly bad idea. He wants to save $40 million by canceling a farmland preservation program.

He thinks he can dump the costs on rural and suburban counties, a favorite gambit of Sacramento budget balancers. In this case, however, he will unhinge a successful state plan that rewards agriculture and local government for staving off sprawl.

...Ditching [the Williamson Act] won't mean that hard-pressed counties will step in and take over the subsidies. It will likely result in land sales, a decline in farming and ranching, new development in unprepared areas and a giant monkey wrench tossed into efforts to control and plan California's growth.

Scrapping the Williamson Act will save $40 million in a budget proposal of $103.1 billion in general fund spending and $145 billion in total spending--less than 0.05% of the total budget. Prisons, meanwhile, are slated to get over $10 billion in Schwarzenegger's budget.

If you live in California, write or phone your state representatives asking them to fully fund the Williamson Act. You can find the address and phone number of your assemblymember and senator here. If you live in another state, tell your California friends and family about the Williamson Act, and check if your state has a farmland protection program like the Williamson Act and its status. Once a farm or ranch is covered with houses, parking lots, shopping centers or office buildings, the land is gone from agriculture forever. We desperately need to preserve the farmland that remains.

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5 Responsesto “Save California farmland from Governor Schwarzenegger — and developers”

  1. cookie jill says:

    thanks for the heads up. This is wrong.

    I think they should focus on those water allotments given to the land zoned as agriculture but are used as private gardens.

  2. Steven Frisch says:

    Thanks for presenting this information about the Williamson Act. The Williamson Act has been an important and effective tool for the preservation of farm and ranchlands in California for more than 40 years and should be fully funded in our state budget. I encourage everyone reading to contact legislators and tell them to preserve the Williamson Act.

    But the sad truth is that the Williamson Act, and the limited amount of local property tax relief it provides, is woefully inadequate to protect farm and ranchlands in California from development. Agriculturalists may see property tax relief of a few dollars and acre as a result of the Williamson Act. An analysis done in Plumas County California shows a landowner savings of about $1.37 per acre of ranchland. For the average landowner this is welcome relief, but nowhere near enough to affect their long-range decisions about land management and eventually sale for rural residential subdivision.

    The real problem in California is much more complex that the retention or elimination of the Williamson Act.

    Proposition 13, passed by California voters in 1978, capped property tax to no more than 1% of the value of real property per year. Prop 13 also created a new 2/3 threshold for future increases in taxes, including sales and income taxes, and capped the growth of value in real property to no more than 2% per year. That means that if your real estate base value was $100,000, and real value increased 25% in 5 years (to $125K) your tax would be calculated on the capped 2% per year (or $110K). Multiply this inequity over 30 years in a state with 60% home ownership and you begin to understand the problem.

    This had the effect of lower property taxes in California by approximately 57% and disrupting the entire finance structure of the state.

    It does not take a rocket scientist to figure out what this did to the financial structure of the state. Property owners were protected and enriched by Prop 13, but all kinds of new taxes were created that encouraged the conversion of land from agricultural uses to rural residential, commercial and industrial uses.

    Property owners who owned property for a long time have benefited from inequities built into the system in the amount of local property tax paid based on reassessment at time of sale, leading to dramatic differences in taxes paid on similar properties.

    Commercial real estate developers benefited by keeping property in the same corporation while deeding or merging it to new owners, thus retaining lower property tax rates.

    Affordable housing has disappeared as the cost of development of new property has skyrocketed in order to make up for the tax base lots with the passage of Prop 13.

    California education was gutted as local tax revenue declined and new schemes to fund education through state government were concocted.

    Today in California cities and counties compete like vultures for sales tax dollars (as evidenced by the dueling big box stores circumnavigating our urban centers), for transient occupancy tax dollars (as evidenced by the sprouting cookie cutter lodging centers facing the big box retailers) and for impact fees (as evidenced by the trading of corporate welfare for sales tax dollars by negotiating fees through development agreements).

    The bottom line in California is that the property tax collected does not even begin to pay for the services in the form of infrastructure, public safety and public good that property owners receive.

    All of this leads to the annual dance. The governors (Davis and Schwarzenegger) propose the elimination of services and taxes to local governments, the locals scream unfair and negotiate a deal at the last minute, the Williamson Act (and other proposed cuts) get saved at the last minute and everyone thinks they have done something important.

    Meanwhile the core issue, the unfair and unconscionable government subsidy of services to property owners through Proposition 13, which is the greatest welfare program ever perpetrated on the citizens of California, is unchanged and unchallenged. The poor, the ill housed, those without health care and the clients of public education suffer.

    The proposals to kill the Williamson Act will continue, year after year, until California voter overturn Prop 13 and come up with a more fair and equitable tax structure that appropriately shares tax revenue between local and state government and eliminates the subsidy that favors the propertied over those starting out in life.

  3. Steven --
    Those are all great points. The untouchability of Prop. 13 has gone on for far too long, especially with corporations holding onto land for decades (or probably forever through corporate shell games). The state needs to completely revamp the taxation system.

    I also recall reading an Op-Ed in the newspaper a while ago that pointed to the distribution of tax revenues as a cause of many of California's woes. My recollection is fuzzy, but it might have gone something like this: all of the income tax and most of the sales tax goes to the state, while property taxes and miscellaneous taxes (e.g., special taxation districts for parks or education) stay local (or was it the other way around). Thus, local governments have an incentive to build, build, build (with an emphasis on commercial because that brings in the highest tax revenue).

    Sharing of tax revenues between cities is rare, and so cities also have an incentive to battle each other to build more and more, faster and faster, otherwise the neighbor will get the retailer or office park client.

  4. Brikelike says:

    When the state first passed the Williamson Act (1965), it allowed local government to enter in contracts with farmers who were willing to have their land valued at the agricultural value of the land in return for restricting the uses of their land to agricultural uses for a minimum of 10 years. At that time, it did not offer to provide any funding for the property tax revenue the local government would forgo. Not many counties took the state up on the offer.

    Fast forward 6 years, and the state passed the Open Space Subvention Act of 1971, an amendment to the 1965 Land Conservation Act (Williamson Act). This created a funding mechanism to replace the foregone property tax revenues for local governments.

    I do not know the specific details, but I believe that in the 1970s, the state provided much if not all of the foregone property tax revenue. Most county's created Williamson Act programs as they were more or less revenue neutral.

    In the prop 13 era, the amount of state money provided by subvention back to the local government to replace their lost property taxes has steadily shrunk. Today, the $40 million the state returns to local government for foregone property taxes represents less than 10 percent of the lost property tax revenue (even under Prop 13) and so local government now funds 90% of the cost of Williamson Act contracts.

    It is very true that this reduction in property tax is very important for many farmers, and especially ranchers whose income on a per acre basis is measured in dollars (it is entirely possible for a 1,000 acre ranch to only net $10,000 a year). However, the Williamson Act is at best only a stopgap measure, since it provides no permanent protection to the land, and the land (and water) values mean that the next generation of farm owners is very likely to end (nonrenew) their Williamson Act contract if there is development pressure (and high land value) and make money the same way most non-farmers in California make it (through real estate). If the state were to be serious about farmland protection, it would follow in the footsteps of Delaware, Maryland, New York and Vermont (among others) that are providing annual funding to permanent farmland protection through the purchase of agricultural conservation easements. Such programs allows farmers who want to permanently protect their farmland to be paid to do so.

  5. We have 3,000 acres of cattle range in Mariposa County. Gross income is about $36,000 a year for a grazing lease. Out of that comes taxes, insurance, equipment maintenance and repair, and material and supplies for fences, gates, roads, insurance. I don't know right off the top what is left of the $36,000 after costs but, say, it's $30,000. That's not much of a return on a life time of land payments. We would rather keep it in range land and not sell it for development. If the Williamson act is removed, the lease will go up and the leasees would have a hard time with the increase. There are hundreds, possibly thousands,of situations like this in California. I think a lot of farm and ranch land would be developed without the Williamson Act.