Supporters of real estate transfer tax answer questions

Published 2:30 pm Friday, October 10, 2008

The Bulletin recently submitted questions to Judy Heinrich, Dave Slater and Doug Harmon, members of the Polk County Farmland Preservation Committee. The committee supports the county&squo;s proposed real estate transfer tax that is on the ballot in a referendum on Nov. 4.

If approved by voters, the 0.4 percent tax would be assessed on all real estate transactions. The seller of a house or parcel of land that sells for $200,000 would be assessed an $800 tax.

The N.C. General Assembly passed legislation in 2006 authorizing the tax. So far, referendums for the tax have failed in all 20 counties where they have been held. Counties that held referendums planned to use the funds for a variety of purposes.

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Current Polk County commissioners have pledged to use the funds from the new tax solely for farmland preservation. They also have indicated that, if the referendum is approved, they would ask the General Assembly to pass a bill allowing Polk County to permanently dedicate funds from the tax for farmland preservation.

1). How much acreage in the county is currently in working farms?

48,278 acres are currently designated as working farms as defined by qualifying for the &dquo;present use value&dquo; (PUV) taxation established by the state for horticulture, agriculture and forestland (timber) properties. The PUV criteria includes both income and acreage-use requirements.

2) Do you have any figures showing how much that total farmland acreage has changed in recent decades?

We have not found a source for that information ‐ Tax Assessor John Bridger may call back with information in which case we&squo;ll provide the Bulletin an update.

3) How many individual farms are there in the county, and how many of those farms do you expect will be interested in selling agricultural easements to the county?

The US Census shows 260 farms in Polk County. Initially we would expect interest from the 6,500 acres currently involved in the county&squo;s voluntary agricultural districts and from some if not all of the 11 property owners who applied for state grants in 2007 (some overlap between those groups).

4) Who will determine which of the interested farms is selected if the county does not have sufficient revenue to purchase agricultural easements from all of those interested in any given year?

The county will look to the existing Agricultural Economic Development & Farmland Preservation Board for guidance and it may be that a subset of that board is developed with additional members added from related disciplines or state advisors, for example.

There already has been a ranking system developed to establish priorities among farm properties applying for Farmland Preservation. With the addition of the new county Agricultural Economic Development Director as a resource, that system is being compared to other models in use around the country to be sure the final product reflects the best practices in use as well as Polk County&squo;s unique needs. A partial list of criteria would include size and shape of site; soil characteristics; percent of site in agricultural use; compatibility of surrounding uses; availability of water and agricultural support services, as well as non-agricultural factors such as development pressure and other public values, which could include open space value; historic value; environmental limitations or sensitivity. &bsp;

It should also be noted that the program will work in partnership with existing local, state and national conservation groups (such as the Pacolet Area Conservancy, Upstate Forever, the Soil and Water District, and American Farmland Trust) to actually hold the easements; the choice of which conservation group to work with would be entirely up to the property owner.

5) How much money does the county expect to generate annually from this land transfer tax? Does the total estimated revenue reflect the current, much slower real estate market?

Revenue would vary with the total property sales in any given year. But using the figures in a recently published report on deed stamp revenue, the transfer tax revenues for 2007 and 2006 would have been $995,734 and $1,050,222 respectively. 2008 is expected to be significantly lower but, as realtors stated in the recent Bulletin article, the fall months are usually their best sales months.

20. How much farm acreage do you expect the county can preserve each year by using the tax&bsp;&bsp;&bsp; revenue to purchase agricultural easements?

That would vary based on the RE sales and subsequent LTT revenues. As noted, the times of high RE sales would relate directly to development pressure and correspond with the need to more aggressively seek to preserve farmland, and vice versa.

6). How do you think the sale of agricultural easements will benefit individual farms?

It will remove or lessen development pressure, which often causes a domino effect on agricultural areas and the ultimate loss of the agricultural economy. When a viable farming community is maintained, individual farmers can count on agricultural supporting businesses such as equipment and supply vendors and services; those businesses can be lost when the agricultural community shrinks due to development pressure.

Placing agricultural easements on farmland would also lower the market value of farm properties, which would lower property taxes and help keep farming affordable. Then another farmer could better afford to buy the farm to keep it in farming when the original farmer wants to retire or sell. It would also lower inheritance taxes on farm properties, which is one of the primary reasons farm families have to ultimately sell land.

7) How do you think the purchase of agricultural easements will benefit Polk taxpayers?

&ull; Preserving farms will support the mandate of keeping Polk County rural, as overwhelmingly reflected in both county surveys and all county meetings.

&ull; Preserving farms will keep property taxes low for all property owners through the lower &dquo;cost of community services&dquo; that farms require. According to American Farmland Trust and Clemson University studies (Clemson&squo;s covering our own region of the country), for every dollar of property tax paid, farms and forestland require only 34 cents worth of county services like schools, sheriff, EMS, libraries and so forth. In contrast, residential development requires $1.15 to $2.26 for every dollar of tax paid. That is a net loss that will eventually require increased property taxes from everyone. Keeping land in farming provides a tax benefit to the county and subsidizes the cost of services for others.

&ull; Preserving farms will expand an important economic base for the county. Agriculture is one of the county&squo;s top industries, creating jobs, selling farm products and generating agri-tourism.

&ull; Preserving farms will lower demand on water supplies compared to residential development (consider a 100 acre farm with one or two families compared to 100 acres with multiple homes).

&ull; Preserving farms will protect natural resources and the environment by doing things like recharging groundwater, trapping carbon dioxide and providing habitat for wildlife.

&ull; Preserving farms will keep locally grown food available, providing higher quality at lower cost because you don&squo;t pay for shipping; plus it eases concerns about food security because you know where it was grown.

&ull; Preserving farms will ensure that land will remain available for future generations to grow food on.

8) What happens to the preserved farmland if farmers sell their property and the new owner does not use it as farmland? Would the county be responsible for maintaining the land in a condition suitable for use as farmland, or would the county have no maintenance responsibility and allow it to eventually return to forest?

Through the purchase of development rights, the county is not assuming any ownership or operating interest in farms or farmland so it would have no responsibility for maintaining the land under any circumstances. If an owner does not want to farm him or herself there are options: lease land to a farmer; leave the land simply as open space; return the land to forest ‐ which, incidentally, timber/forestland is one of the three categories of farming.

The benefit is that the land would still be restricted from development so it would remain available for the next owner or next generation to farm. Once land is developed, that option is gone forever.

9) Supporters of the land transfer tax have said farmland is less of a burden on taxpayers than developed land. However, some people say more upscale developments, particularly those that draw buyers interested in lots for second homes or investment, provide a net gain for taxpayers since buyers do not live here full time and do not require much in services. Polk County has seen several such developments, and its budget appears to have benefited recently, producing significant increases each year in the county&squo;s fund balance or reserves. Can you still make the claim that farmland has greater benefits for taxpayers even if the county has to pay to preserve the farmland and it does not generate as much net tax revenue as these types of developments?

We do have some developments that fit that category of second or vacation homes and it&squo;s reasonable to assume their cost of services would be less than full-time residential development. However, considering that those homes would be occupied at least some portion of the year, (summer for Floridians, winter for Northerners?) would their overall COS be less than acres of farmland that is not &dquo;occupied&dquo; at all? Not likely. A Land Use study commissioned by Macon County, N.C., concluded that the second home/vacation home category was not the &dquo;tax positive&dquo; that they initially thought it might be.

Another consideration is that we can&squo;t count on all future development to fit into that very upscale second-home category, and then you are into the net tax loss that typical residential development brings.

Editor&squo;s note: Look for more questions and answers related to the proposed real estate transfer tax in upcoming issues of the Bulletin.