My recent article about the land use program spurred a great deal of debate, which I think should always be the purpose behind any reporting. However, I think some of the debate came about due to some misunderstandings for the purpose underlying my writing of the article. So I hope to clear up those misconceptions, and also propose some policy options that can help maximize protections for farmers and open land without losing out on state funding for education.
One reason I started looking into the Land Use Program was a lack of easily available information regarding the program itself, and any impact it had on the revenue collected by Pulaski County. Since I am regularly reading about how the County lacks the funds to finance new school construction, it seemed to me that we should at least have an idea of what programs and services the County is currently spending money on as well as its overall financial position. As I said to one person, reasonable debate requires information.
Following the article, I also did some more research. I learned that when Virginia calculates the amount of funding that it will provide to assist with the education of students it calculates the local contribution in order to decide on the state’s share (the Local Composite Index or “LCI”). One of the inputs to LCI is the “Local True Value of Property” which means the full taxable value of all real estate held within Pulaski County (regardless of the Land Use Program, Elderly and Disabled Tax Relief Program, or any other tax credits issued by the County). While the formula is incredibly complex, effectively Virginia thinks it should contribute about 55% of the school system’s budget. The LCI represents their estimate of a locality’s ability to contribute to the budget; wealthier communities pay a greater share and those communities like Pulaski that are relatively economically disadvantaged pay less. The formula estimates that we should pay about 31.05% of the school budget, but that is artificially inflated because the Land Use Program reduces our tax base by $154 million in value. If the farmland in question was in fact reduced in value, then the formula would estimate that we should pay about 30.22% of the budget. The Pulaski County school budget is about $40 million. So if the County’s farmland was actually assessed at $520 an acre, the state would provide approximately $330,000 in additional school funding.
Now the immediate follow-up question is how does a county encourage landowners to reduce the assessed value of farmland without hurting local farmers, since the land can be one of the most significant sources of wealth for those families. My proposal has three components, though the policies could be implemented jointly or separately. The first is for Pulaski County to either (a) encourage private land owners to donate a conservation easement on all or a portion of their land, for instance to the New River Land Trust, or to (b) purchase the private development rights of farmland, which would both lower the assessed value of the land and also preserve both the rural character of the county as well as provide funds for farmers to invest in their land. A donation of a conservation easement, which has already occurred on several properties in Pulaski County, would allow for both federal and state tax relief to the landowner that can be spread over a period of 12-16 years or even, in the case of the Virginia tax credit, sold for cash. Sale of development rights/conservation easements should immediately reduce the assessed valuation of the property and help to increase state school funding up to $330,000, while payment could be pro-rated over a period of years or in a smaller lump sum depending upon the needs of the farmer in question.
Since the purchase of development rights would require funds, the second component would be for the County to enact a review of the property currently in the Land Use Program. Pulaski County merely requires landowners to certify that the property meets the requirements of the Land Use Program, but the application form does not on its face require any submission of documents. Montgomery County uses a system which requires property owners to furnish 5 years of tax returns showing the Schedule F (farm losses/profits) or other documentation (“feed receipts, fertilizer receipts, receipts from a sale of livestock/crops”). Since almost 200 out of 445 farms in Pulaski County are less than 50 acres, there could even be a reduction in requirements for small farms or a grace period to allow for the collection of the documents.
The final component is that there could be an increase in the Land Use Program from the $520 per acre valuation that could be tied to funding the purchase of private development rights. Our value has been the same since 2007, but Wythe County is increasing their Land Use valuation to $600 per acre, as it is currently in Carroll County; and Bland County is currently at $850. Just to be clear, even a $100 increase in per acre valuation would only increase taxes by $0.64 per acre. If there is currently about 70,000 acres in the program, that’s a total revenue increase of about $45,000. Compare that to beef prices (Pulaski’s primary farm product), which were $89.50 per 100 pounds in 2007 and are currently at $119.00 (their lowest level since 2011). So there has been about 33% increase in sale prices, but no increase in the Land Use program over the past 10 years. While some other inputs on cattle prices have certainly increased, pastureland and hay represent the largest cost for a cattle operation of almost 50%.
Any or all of these steps would both increase our revenue (either directly or from Virginia) and continue to help local farmers stay in business as well as maintain the rural character of the county. These changes would allow for greater investment in our capital programs, including a new middle school, and limit tax increases.