Clovis News

Farmland tax breaks fail to hit goals

For almost a half-century, California has given tax incentives to farmers in an effort to protect their land from urban sprawl.

Now, the state's budget crisis has placed that program's future in jeopardy, and local governments in farming regions like the San Joaquin Valley are fighting to save it.

But are the tax breaks even working? Not really, according to several studies of the Williamson Act, a 45-year-old law that assesses farmland at rates based on its agricultural use instead of its potential development value.

More than half of California's farmland is enrolled in Williamson Act contracts. In Fresno County, more than 1.5 million acres are covered under the Williamson Act or a related provision, Farmland Security Zones. But only a tiny fraction -- about 3.5% -- lies in areas that regional planners say are threatened by urban sprawl over the next 40 years.

"People like to talk about the Williamson Act as a way to slow sprawl, but when you actually look at it, you find out that it's not being used in that way," said Robert W. Wassmer, chairman of the Department of Public Policy and Administration at California State University, Sacramento.

In reality, the program gives tax breaks to farmers even if their land is miles from any potential source of development pressure. In fact, farmers whose land adjoins existing cities are the least likely to use the program.

As a result, a map of Williamson Act and Farmland Security Zone contracts shows what Wassmer calls a "ring" of unprotected land encircling most Central Valley cities.

Rather than curbing growth of cities, the contracts provide at most a short-term tax break to farmers waiting for development to reach them. That's almost never enough to drown out the siren song of a builder bearing a big check.

Take, for example, Paul Betancourt. He farms more than 700 acres in western Fresno County, including 27 acres next to his home on land abutting Kerman's sphere of influence -- the city's reserve for growth.

Seven years ago, Betancourt said, land across Highway 180 from him sold for $43,500 an acre. That prompted him to consider selling out.

"The farmland value, even with almonds on it, is only $10,000 an acre," he said. "It's kind of hard to turn that [$43,500] down."

When the housing market crashed a few years later, Betancourt back-burnered the idea. But when the cycle turns up again and builders begin offering more money for developable land, the pressure to sell will return, said Ryan Jacobsen, executive director of the Fresno County Farm Bureau.

"No matter what the tax break is, you're not going to be able to offset the lure of development" on land adjacent to cities, Jacobsen said.

Selma grower Todd Hirasuna said that for high-value crops such as fruits and vegetables the Williamson Act benefit is typically too small to be a factor in any such decisions.

"Don't get me wrong -- every little bit helps," he said. "But whether or not a piece of land is currently enrolled in the Williamson Act is a secondary concern when it comes to land development."

Changing course

Farmers on the urban fringe often withdraw their land from the Williamson Act -- a process called "non-renewal" -- when development draws near.

A decade ago, Pat Ricchiuti, a fruit grower on the northern fringe of Clovis, notified Fresno County that he wanted to terminate Williamson Act contracts on more than 500 acres near the northeast corner of Willow and Shepherd avenues. That started a 10-year phase-out period, now ending, after which the land will be eligible for development.

Ricchiuti did not respond to a request for comment. Other observers, however, suggest that the primary effect of the Williamson Act may be to save money for farmers, not to deter development.

"If it's a way for people to keep their taxes lower, that's a good thing. But to the extent it's supposed to be a way of managing land use, I don't think it's very effective," said Jeff Reid, secretary of the Valley Taxpayers Coalition and a former Fresno city manager.

At the heart of the Williamson Act is a simple deal. In exchange for agreeing to keep land in agriculture for 10 years (20 years for Farmland Security Zone), landowners get a property tax cut typically ranging from 20% to 75%.

Every year, the contracts are renewed automatically for one additional year unless one side or the other opts out, in which case they expire after a nine-year phase out (19 years for Farmland Security Zone contracts). There are also provisions allowing local governments to cancel contracts outright in special cases.

In its early years, when land was typically assessed at market value, the Williamson Act gave farmers major tax breaks. Proposition 13 in 1978 reduced that advantage by lowering property tax rates and restraining growth in assessments for land that doesn't change hands. Now, when land is taken out of a Williamson Act contract, its assessed value reverts to what it would be under Proposition 13, which may still be considerably less than its market value.

Still-sizable effect

Nevertheless, in Fresno County, the Williamson Act now takes almost $3 billion in potentially taxable property value off the books. Land enrolled under Williamson Act and Farmland Security Zone contracts is carried on the tax rolls at slightly more than $3 billion, but would be valued at roughly $6 billion without the contracts, according to records from the Fresno County Assessor's Office.

One year ago, the assessor's office calculated the resulting loss in county tax revenue to be $8.3 million, enough to make a significant dent in the county's expected $32 million decline in general-purpose revenues for the year that began July 1.

Since 1972, the state has partly reimbursed some local agencies for the tax revenue they lose to Williamson Act contracts. In the 2008-09 fiscal year, Fresno County collected about $5 million, offsetting more than half of the lost revenue. But for 2009-10, Gov. Arnold Schwarzenegger vetoed all but $1,000 of the Williamson Act reimbursements. As a result, Fresno County's share this year was about $150. And that was the largest share for any jurisdiction in the state.

Local officials have predictably protested the reduction.

Fresno County Supervisor Judy Case said the county may have to phase out the contracts if the state reimbursements are not restored. But she said she doesn't want that to happen.

"My hope is that with a new governor," she said, "we can get it back in the state's budget. Without that, I think it's going to be difficult to maintain."

Case said she sees the Williamson Act as being intended to help farmers stay in farming by protecting them from property tax increases, and not as a tool to restrain urban growth. That fits the evidence that academics like Wassmer have found.

If the Williamson Act were truly effective at limiting urban sprawl, Wassmer said, then existing cities would be surrounded by a "greenbelt" of contracted land. Instead, he said, the opposite is true. Vast swaths of rural land are covered by contracts -- except right next to cities.

"It's largely being used in the Central Valley in rural areas, and not where there is a real threat of development," Wassmer said.

The reason is simple -- for farmers who lie in the path of urban development, the potential rewards from selling their land to developers far outweigh the benefits of a tax cut.

"Tax incentives are usually not enough for farmers right on the fringe of an urban area," said Jeffrey A. Onsted, an assistant professor of geography at Florida International University. His 2007 doctoral dissertation at the University of California at Santa Barbara dealt with the effectiveness of the Williamson Act.

Beyond that, Onsted said, there is wide variation among counties in how they implement the Williamson Act.

"The purpose of the Williamson Act is to prevent the 'unnecessary and premature conversion' of agricultural lands," he said. "Individual counties may interpret that any way they wish."

Better than nothing

Nevertheless, Onsted is among those who say that an imperfect Williamson Act is probably better than none at all.

"It has, I think, forced more growth to the cities," said Alvin Sokolow, public policy specialist emeritus at the University of California Cooperative Extension in Davis, who has studied the act for more than three decades.

For example, Sokolow said, in the 1960s and 1970s, a prime concern of California leaders was "leapfrog development" -- the eruption of unplanned cities far from established urban areas. Sometimes those new communities lacked basic services such as sewers, water lines and even decent roads.

Along with related measures, the Williamson Act has helped curtail such development, Sokolow said. But he said it has been less effective at limiting growth of existing cities.

Almost two years ago, the multicounty San Joaquin Valley Blueprint Planning effort drew up maps to predict how much farmland would be consumed by the region's cities in 2050 under current growth patterns. The maps showed a nearly unbroken mass of development between Fresno and Sanger, for example, and amid the southeastern Fresno County cities of Fowler, Selma, Parlier, Reedley and Kingsburg.

The Blueprint effort is intended to forestall that vision, but landowners in those areas may already be anticipating the trend. Land that the Blueprint identified as threatened by sprawl is less likely to be covered by Williamson Act contracts than land elsewhere. Even where such contracts exist, many are being allowed to lapse.

Wassmer maintains that to be effective on the urban fringe, the Williamson Act would have to offer farmers much more money. That could be a hard sell at a time when state funding has headed in the opposite direction.

Local officials throughout the state have threatened to stop renewing contracts themselves if the state money is not restored. If that happens, the effects could be far reaching -- not just on urban growth, but on the farm economy, which has come to expect the tax breaks that the contracts provide.

"The Williamson Act was an agricultural preservation program ... but it has become a program to reduce costs for farmers, and farmers have become used to that," Wassmer said.

Onsted is more direct: "The Williamson Act is often the only thing keeping a farmer solvent."

Without the state payments, he said, "it could be interesting to see what happens."

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