Building Assets for the Rural Future
Safeguard Farmland for Agricultural Uses
Safeguard Farmland for Agricultural Uses
The Opportunity
Only three states lost more acreage of prime farmland than North Carolina from 1992 to 1997.[1] Then, during the next decade spanning 1997 to 2007, North Carolina lost almost 1 million more acres. The loss of farmland trended upward over the course of time, with more land lost in the second half of that decade than the first.[2] As farmers age and retire, and as North Carolina’s population continues to grow, the loss of working farmland is likely to increase.[3] When farmland disappears, the state loses more than scenic open spaces—it loses agricultural productive capacity.
Economically productive agriculture is not the only reason that communities seek to preserve local farmland for agricultural uses. Cost studies suggest that agricultural uses are easier on local government coffers than residential development, because farmland earns more local tax revenue than is paid out for government services connected to that land, whereas the opposite is true for most residential development.[4] Additionally, agricultural uses are often viewed as essential to the culture and heritage of rural areas.[5] Several communities have therefore sought to preserve farmland using available legal and organizational tools.
How the Tactic Is Applied
- Reduce the number of forced sales of farmland as heirs’ property
- Offer succession planning for farmers
- Establish a community-owned forestry program
- Employ statutory tools for local farmland preservation
Reduce the Number of Forced Sales of Farmland as Heirs’ Property
Land Loss Prevention Project (North Carolina)
Southern Coalition for Social Justice (North Carolina)
When an owner of farmland dies without a will, it is a recipe for the loss of that farmland. The reason is that the farmland is automatically passed to the farmer’s descendants as a group, rather than being divided into parcels among them.[6] Because the land is jointly owned by many heirs, no single heir can take control of the property in order to put the land to productive use.[7] The land is often left idle, but it is still subject to the annual levy of property tax. As back taxes accumulate, heirs may choose—or be forced by circumstances—to sell fertile farmland to developers in order to pay off the taxes or to avoid the legal difficulties associated with putting the land back under single ownership.[8]
Additionally, the North Carolina property legal regime tends to encourage this result. Even if only one heir sells his or her small interest in the property to a developer, that developer (now part owner) can force a sale of the entire parcel. Facing this forced sale, the remaining heirs sometimes find that the easiest way out is to sell their portions to the developer, too.
The Land Loss Prevention Project and other legal services organizations conduct educational workshops around this issue and offer free legal services to avoid the result described above. As an example, one county recently hosted one of these land loss workshops. At the workshop, county residents learned of the consequences of heirs property, and attorneys were available to draft wills for owners seeking to protect their farms.[9]
Inevitably, some farmland owners will pass property to heirs without a will. Legal expertise is required to clear title and place the land under productive ownership. The Southern Coalition for Social Justice assists families facing this situation. In one case, a group of heirs owned approximately 180 acres of farmland in Wilson and Edgecombe Counties. Attorneys from the Coalition helped the heirs clear title to the land and keep it economically productive by establishing a prawn farming facility on one parcel and leasing another parcel to a farmer.[10]
Offer Succession Planning for Farmers
North Carolina Farm Transition Network (North Carolina)
Pennsylvania Center for Farm Transitions (Pennsylvania)
Farmers are aging. According to the Census of Agriculture, about one-quarter of all farmers in the state are age 65 or older, and the average age is 55.[11] This portends a substantial transfer of farmland ownership in the coming years, but a 2004 survey indicated that less than one-quarter of North Carolina’s farmers had identified a successor to their farm operations.[12] Succession planning is viewed as one means of keeping farms active and devoted to agricultural use. However, because so few farmers participate in succession planning and such planning requires specialized knowledge of business planning (and often estate planning), farmers often need assistance in learning about and implementing succession plans.[13]
The North Carolina Farm Transition Network (NCFTN) was created to assist the state’s farmers with developing transition plans for their farms. NCFTN’s assistance comes in the form of educational workshops held throughout the state to inform landowners and farmers about succession planning.[14] In Pennsylvania, the Pennsylvania Center for Farm Transitions provides individualized business planning and succession planning services to farmers seeking to retire and transition their farms to new owners.[15]
Establish a Community-Owned Forestry Program
Arcata Community Forest (California)
Hoke County and Town of Raeford (North Carolina)
A community-owned forest is owned and managed by a municipality or nonprofit organization for the benefit of the broader community. Properly-managed community forests have generated jobs and revenue—well in excess of operating costs—from wood products, renewable energy, and recreation.[16] Two factors are contributing to the expansion of community-owned forests in the South: first, forestland is being sold in increasing amounts from timber companies to investment firms, creating ownership turnover that presents purchase opportunities; and second, increased demand for sustainable wood products has made community forestry more economically viable.[17]
Start-up costs are high. The primary hurdle is raising capital to purchase the forestland. Successful projects are typically financed with a creative combination of loans, tax credits, and grants from public and private sources.[18] Expertise in forest management is also required to operate the forest properly, and most community forests rely heavily on a cadre of committed volunteers and employees.[19]
An established community forest in rural Northwest California, the Arcata Community Forest, illustrates how a community forest is capable of generating a sizeable annual revenue stream. The original forestland was acquired to protect the city’s water supply in 1955, but since that time, the city has gradually acquired more forestland through purchases from city residents and private companies in or near the city. The forest’s primary logging revenue sprung from its 1998 certification as an environmentally sustainable forest, permitting its timber products to be marketed as sustainable wood products.[20] Although the city spends around $200,000 annually to manage the Arcata Community Forest and two other community forests it owns, annual revenues total $500,000 to $700,000 from logging those forests.[21] More recently, the city entered into a contract with an electricity company to commit 20% of Arcata Community Forest to growing trees for the storage of carbon for carbon credits. The sale of those carbon credits will garner another $400,000 for the city over four years.[22]
The first community forest in North Carolina was established in Hoke County through a partnership between the county government, the Town of Raeford, the United States Department of Defense, The Conservation Fund’s Resourceful Community Program, and several community groups. The Conservation Fund purchased more than 530 acres of forestland in 2006 from International Paper after the county and the Department of Defense expressed interest in establishing a community forest.[23] The forest will be conveyed to the county subject to a long-term forest management plan. Under the broad terms of the plan, the forest will be used for sustainable timber products, pine straw raking, recreation and ecotourism, and as a site for the restoration of longleaf pine trees.[24] Revenue-generating activities had not commenced as of this writing, but tree restoration and development of recreation services were underway.[25]
Employ Statutory Tools for Local Farmland Preservation
NC Agricultural Development and Farmland Preservation Trust Fund (North Carolina)
North Carolina statutes provide local governments with three tools for encouraging the preservation of working farmlands: countywide farmland preservation plans, agricultural districts, and agricultural conservation easements. A farmland preservation plan is a comprehensive, countywide plan that sets forth how a county will employ farmland preservation tools—namely agricultural districts and conservation easements as discussed below—to preserve its agricultural economy.[26]
In an agricultural district, a farmer gains certain benefits in exchange for a promise not to develop or use the land for nonfarm uses during a ten year period. Benefits include favorable tax treatment on the property and priority in grant award decisions by state agencies.[27]
As an alternative to agricultural districts, counties possess authority to purchase permanent farmland conservation easements outright.[28] The advantage of paying farmers for these easements is particularly clear in the case of land-rich but cash-poor farmers on the economic margin. Struggling farmers are sometimes faced with selling farmland parcels—perhaps to developers seeking to use the land for non-agricultural purposes—in order to remain solvent during tough times. When the farmer instead sells a conservation easement to the county, the local government accomplishes the dual goals of building the financial assets of the working farmer while simultaneously preserving the land for agricultural uses. The North Carolina Agricultural Development and Farmland Preservation Trust Fund supports these efforts by providing matching grant funds and other support for county governments and nonprofit groups establishing agricultural plans or purchasing conservation easements. In the 2008-2009 funding cycle, the Trust Fund provided more than $3.3 million for the purchase of conservation easements across the state.[29]
Learn More
Chris Brook | Monica McCann
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On the Internet
Land Loss Prevention Project, Ten Ways to Save Your Land
http://landloss.org/
National Community Forestry Service Center
http://www.conservationfund.org/nationalcommunityforestryservicecenter (Archived snapshot from archive.org, Oct. 12, 2011)
Hoke Community Forest
http://www.conservationfund.org/projects/hoke-community-forest
[1] American Farmland Trust, Farming on the Edge: Top 20 States (2002), available at http://www.farmland.org/resources/fote/states/top20.asp (reporting that North Carolina was 4th in a list of states that lost high-quality farmland from 1992 to 1997).
[2] National Agriculture Statistics Service, 2007 Census of Agriculture: North Carolina State and County Data 7 (2009), available at http://www.agcensus.usda.gov/Publications/2007/Full_Report/Volume_1,_Chapter_1_State_Level/North_Carolina/ncv1.pdf.
[3] This point is addressed further in the succession planning approach to this tactic.
[4] See e.g, Mitch Renkow, The Cost of Community Services in Henderson County (2008), available at http://www.cals.ncsu.edu/wq/lpn/PDFDocuments/HendersonCountyCOCSReport7.pdf; American Farmland Trust, Planning for an Agricultural Future: A Guide for North Carolina Farmers and Local Governments 5, 10 (2007), available at http://www.farmlandinfo.org/sites/default/files/FINAL_NCP4Ag_AFT_1.pdf Mitch Renkow, The Cost of Community Services in Alamance County (2006), available at http://www.cals.ncsu.edu/wq/lpn/PDFDocuments/alamanceCOCS.pdf; Mitch Renkow, The Cost of Community Services in Orange County (2006), available at http://www.cals.ncsu.edu/wq/lpn/PDFDocuments/orangeCOCS.pdf
[5] American Farmland Trust, above note 4, at 10.
[6] All heirs’ property owners have the right to use the entire parcel of the land and have the right to sell or transfer their interest in the land without asking the other owners. However, when a single owner sells his or her share to someone outside the family, the land is made vulnerable to a partition sale, which means the entire property must be sold at court, with the proceeds divided among the owners. Although studies remain inclusive, some argue that partition sale prices are lower than the fair market value of the property because they are in essence forced sales of property. See Thomas W. Mitchell, Stephan Malpezzi, & Richard K. Green, Forced Sale Risk: Class, Race, and the “Double Discount,” 37 Fla. St. U. L. Rev. (forthcoming 2010).
[7] Other problems are associated with heirs’ property. Because ownership is not clear, the property will not qualify for loans or assistance programs, such as home repair or weatherization programs.
[8] Heirs’ Property Retention Coalition, Preserving your Property: A Guide to Heirs’ Property in North Carolina 3 (2009), available at http://southerncoalition.org/hprc/sites/default/files/NCheirspprop.pdf. Although there have been few studies looking at the prevalence of heirs’ property and/or partition sales in this state, a recent study of Orange County, NC shows that about 2% of the county’s land is heirs’ property and that partition and estate sales increased in number in 2007 and 2008. See Southern Coalition for Social Justice, Heirs’ Property in Orange County, North Carolina 2 (2008) (on file with authors).
[9] Interview with Chris Brook, Staff Attorney, Southern Coalition for Social Justice (Mar. 18, 2010).
[10] Ibid.
[11] National Agriculture Statistics Service, above note 2, at 44.
[12] Brittany F. Whitmire, Who Will Fill the New Boots? Examining the use of Succession Planning in Farm Businesses, 72 Popular Government 34, 36 (2007).
[13] Ibid. at 41.
[14] See North Carolina Farm Transition Network, Planning the Future of your Farm, http://www.nj.gov/agriculture/sadc/farmlink/resources/farmtransition.html
[15] See Pennsylvania Center for Farm Transitions, About the Center, http://goo.gl/zwCPrV
[16] See Nils Christoffersen et al., The Status of Community-Based Forestry in the United States 9, 14-15 (2008), available at http://www.usendowment.org/images/Full_Community_Based_Forestry_Report_3.17.pdf (“[Community-based forestry] projects across the country have served as incubators for new products and businesses and demonstrated the capacity to grow new jobs.”). See also Martha West Lyman, Community Forests: A Community Investment Strategy 14-15 (2007), available at http://www.northernforest.org/data/uploads/Sustainable%20Forestry/Community_Forests_Report_1.7MB.pdf (providing examples of economic benefits of community forests, including revenues from the forest and full- and part-time jobs for loggers and forest managers).
[17] See Lyman, above note 16, at 14-15 (reviewing changes in timberland ownership in past two decades, including the increase in sales of timberland due to the change of forest ownership from the timber industry to investment organizations). See also David N. Wear, et al., The U.S. South’s Timber Sector in 2005: A Prospective Analysis of Recent Change 24-25 (2007), available at http://www.srs.fs.usda.gov/pubs/gtr/gtr_srs099.pdf (reviewing causes and consequences of change of timber ownership, including the observation that greater timber ownership by timber investment management organizations seems to result in increased turnover in forest ownership thus creating opportunities for the purchase of forestland).
[18] See Lyman, above note 16, at 17; Communities Committee, Acquiring and Managing a Community-Owned Forest: A Manual for Communities 17-23 (2008), available at http://www.communitiescommittee.org/pdfs/Acquiring_and_Managing_a_Community-Owned_Forest.pdf; Interview with Monica McCann, Associate Director, Resourceful Communities Program, The Conservation Fund (Nov. 19, 2009).
[19] See Lyman, above note 16, at 13-19.
[20] City of Arcata, Arcata City Forests, http://www.cityofarcata.org/departments/environmental-services/city-forests.
[21] Jim Carlton, Into the Woods: Looking to Rein in Development, More Cities are Taking Control of Local Forests, Wall Street Journal, June 15, 2009.
[22] John Driscoll, Arcata Forest Signs on to new Carbon Program, The Times-Standard, Sept. 25, 2009.
[23] Interview with Monica McCann, Associate Director, Resourceful Communities Program, The Conservation Fund (Nov. 19, 2009). The Conservation Fund and the county are working on a plan for the county to purchase the land from The Conservation Fund.
[24] Ibid.
[25] Ibid.
[26] N.C.G.S. § 106-744(e) (2009). As of the end of March 2010, only 11 of North Carolina’s 100 counties had enacted farmland preservation plans. See N.C. Agricultural Development and Farmland Preservation Trust Fund, Farmland Protection Plans, available at http://www.ncadfp.org/documents/FarmlandProtectionPlanMap3-26-10.pdf.
[27] N.C.G.S. § 106-740.
[28] An “agricultural conservation easement” is a voluntary deed restriction a landowner places on his or her land to protect the land from non-agricultural uses such as residential, commercial, or industrial development. See N.C.G.S. § 106-744(b).
[29]See N.C. Agricultural Development and Farmland Preservation Trust Fund, 2009 Annual Report 7 (2010), available at http://www.ncadfp.org/documents/CycleIIIADFPAnnualReport_000.pdf.