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CPPC 10-13-03 Meeting AgendaCOUNTY of FREDERICK Department of Planning and Development 540/665-5651 FAX: 540/665-6395 TO: Comprehensive Plans and Programs Subcommittee FROM: Christopher M. Mohn, AICP, Deputy Planning Directo DATE: October 6, 2003 RE: October Meeting and Agenda The Frederick County Comprehensive Plans and Programs Subcommittee (CPPS) will be meeting on Monday, October 13, 2003, at 7:30 p.m. in the first floor conference room of the County Administration Building, 107 North Kent Street, Winchester, Virginia. The CPPS will discuss the following agenda items: AGENDA 1) Rural Areas Study. 2) 2003 Update of the Comprehensive Policy Plan. 3) Other Please contact our department if you are unable to attend this meeting. Thank you. Access to the County Administration Building for night meetings that do not occur in the Board Room will be limited to the back door of the four-story wing. I would encourage committee members to parkin the countyparking lot located behind the new addition or in the Joint Judicial Centerparking lot and follow the sidewalks to the back door of the four-story wing. The door will be locked; therefore, please wait for staff to open the door. File Copy 107 North Rent Street • Winchester, Virginia 22601-5000 ITEM #1 Rural Areas Study Issues Identification: The Rural Economy and Rural Community Centers During the September 8, 2003, meeting of the CPPS, the committee agreed upon a framework for the Rural Areas Study consisting of seven distinct policy areas. These policy areas will be used to organize the issues and opportunities identified during the study process, and will further serve as the principal components of a Rural Areas Policy Plan under which analysis and policy will be articulated. Specifically, the study framework will consist of the following policy areas: 1) The Rural Economy 2) Rural Community Centers 3) Public Services and Facilities 4) Transportation 5) Natural, Cultural, and Heritage Resources - "The Green Infrastructure" 6) Land Development and Design 7) The UDA - Rural Areas Relationship The committee agreed that discussion concerning the rural economy and rural community centers should occur at the outset of the study effort. Indeed, issues associated with these two policy areas will contribute to an understanding of the realities and opportunities shaping the future of Frederick County's rural areas. Thus, by first discussing the rural economy and rural community centers of Frederick County the committee will establish the context for examination of the remaining policy areas and their myriad interrelationships. The Rural Economy Agriculture has historically served as the foundation of Frederick County's rural economy. In particular, Frederick County is associated with the apple industry and its various support services. However, agricultural activities occur on both a large and small scale in the rural areas, with open land devoted not only to orchards, but also to hay production, cattle grazing, and crop cultivation. The central role of agriculture to the rural economy translated into the land use patterns that shaped the rural landscape traditionally associated with Frederick County. Understanding the current condition of the rural economy and envisioning its future are therefore essential to recognizing the forces influencing land use decisions and catalyzing change in the rural areas. When considering the rural economy of Frederick County, perhaps the underlying theme of committee discussion should be opportunity. As such, it is necessary to explore and advocate policies and programs that both buttress existing agricultural enterprises and enable opportunities for diversification. The enhancement of economic opportunity in the rural areas may ultimately involve a diverse array of approaches ranging from the complex, such as purchase of development right (PDR) programs and incentives for agricultural and open space land uses, to the more mundane, such as amending the Zoning Ordinance to allow additional non-residential uses in rural zoning districts. Regardless of the methods promoted through the study process, efforts to stimulate and support the rural economy will be critical to expanding the land use options available to rural landowners. Rural Community Centers The land use chapter of the Comprehensive Policy Plan identifies rural community centers as "relatively small centers of population and activity in the rural areas of Frederick County" (p. 6-44). A study of the characteristics of rural community centers and identification of their potential locations occurred through the efforts of a sub -committee of the Planning Commission in the mid 1980's. It was recommended through this process that each potential center be considered individually to establish appropriate long-range land use plans that accommodate the unique attributes of these places and their respective roles within the rural areas. Subsequent to this study, the Round Hill Community Land Use Plan was adopted in 1996 as the first, and thus far only, small area land use plan for an identified rural community center. The Rural Areas Study offers an ideal opportunity to revisit the rural community center concept and the role of these unique places in the future of Frederick County's rural areas. Indeed, as existing nodes of activity, it is logical to consider the rural community centers as locations for more intensive land uses than may be appropriate elsewhere in the rural areas. Through the study process, alternative methods for providing central water and sewer service to certain rural community centers may be explored and opportunities for these places to more effectively accommodate the diverse needs of the dispersed rural areas population should be identified. Moreover, consideration of guidelines and techniques intended to ensure that new development proposed within and adjacent to rural community centers is complementary and compatible with existing land use patterns would be appropriate. Supplemental Reading aterials This agenda includes supplemental reading materials intended to further our individual and collective understanding of rural land use issues. The following items have been attached with this agenda: Readings Especially Relevant to the October 13, 2003 Discussion FACT SHEET - Aglicultural Economic Develop meat. September 1998. American Farmland Trust - Farmland Information Center. 2. FACT SHEET - The Farmland Protection Toolbox. October 2002, American Farmland Trust - Farmland Information Center. * NOTE: TDR programs are not enabled for counties in Virginia. The matrix provided with this fact sheet indicates that TDR programs are possible as a local program in Virginia, which reflects a program in the Town of Blacksburg. FACT SHEET - Agricultural Protection Zoning. September 1998. American Farmland Trust - Farmland Information Center. 4. Deciding to Diversify: A Case Study of Seven Virginia Farm Businesses. Keith Dickenson. "Horizons," March/April 2003 Edition, Published by Virginia's Rural Economic Analysis Program. Other Readings of Interest: Farmland Preservation Policies: What Works, What Doesn't and What We Don't Know. Arthur C. Nelson, Ph.D., ASCE, FAICP. A paper presented at the American Farmland Trust National Research Conference - "The Performance of State Programs for Farmland Retention." September 1998. *Note: This is an academic piece that is quite informative. Dr. Nelson is now the director of Virginia Techs Metropolitan Institute located in Alexandria. 2. Prosperity for Rural Virginia: The Continuing Stoly of Rural Virginia. August 2000. Rural Virginia Prosperity Commission. ITEM #2 2003 Update of the Comprehensive Policy Plan from September 27, 2000 through October 1, 2003 Following are the ComprehensivePolicy Plan amendments that have occurred from September 27, 2000 through the present date. These amendments will be presented to the Comprehensive Plans and Programs Subcommittee (CPPS), the Planning Commission, and the Board of Supervisors for ultimate inclusion in the December 2003 update of the Comprehensive Policy Plan. The amendments, as noted by staff, are as follows: Amendment • Carbaugh property UDA Expansion- approximately 82 acres • Crooked Run Regional Sewer Service Area - Shenandoah project and vicinity • Route 277 SWSA Expansion- approximately 199 acres of land located south of Route 277 • Perry property SWSA Expansion- approximately 57 acres • Shoemaker property SWSA Expansion - approximately 10 acres • WWW property SWSA Expansion- approximately 50 acres • Russell property UDA Expansion - approximately 7 acres • Town of Stephens City Joint Land Use Plan • NELUP Amendment- Introduction of Planned Unit Development (PUD) and Expansion of UDA - approximately 1,200 acres Date October, 2000 April, 2001 February, 2002 April, 2002 June, 2002 May, 2003 February, 2003 July, 2003 August, 2003 Staff would ask that the CPPS verify the amendments listed, and to please let staff know of any additional amendments which may have been omitted. Please call Abbe Kennedy, Senior Planner with any additions or concerns. U:\COMNIIT F,ES\CPPS\Agendas\2003 Agendas\October 13, 2003.wpd October 13t'' Readings AMERICAN FARMLAND TRUST Al%►4&AL FARMLAND INFORMATION CENTER Z4 FACT SHEET AGRICULTURAL ECONOMIC DEVELOPMENT ..PA Lib Ameman Farmland "bort TECHNICAL ASSISTANCE Herrick Mill, One Short Street Northampton, MA 01060 TeL (413) 586-4593 Fax: (413) 586-9332 Web: www.farmlandinfo.org NATIONAL OFFICE 1200 18th Street, NW, Suite 800 Washington, DC 20036 Tel: (202) 331-7300 Fax: (202) 659-8339 Web: www.farmland.org September 1998 DESCRIPTION FARMLAND INFORMATION CENTER Farmers often say that the best way to protect farmland is to ensure that farming is profitable. Many farmland protection programs are designed to prevent development of productive land. Protecting the land base is an investment in the infrastructure of agriculture. Building and maintaining a strong agricultural economy is just as important to the viability of farms and ranch- es. An increasing number of states, communities, organizations and producers are promoting investment in agriculture through loan and grant programs, the development of high-value agricul- tural products and services, direct marketing of farm products and diversification. HISTORY For most of U.S, history, agriculture was the foundation of local economies. Food was pro- duced, marketed and sold close to home. Farmers and ranchers reaped most of the profits from the sale of food and fiber products. With the emergence of national and global markets, supermarkets and changes in the structure of agriculture, the producers' share of food and fiber profits decreased substantially. Since the 1970s, state and local governments and nonprof- it organizations have been helping farmers and ranchers develop new products, processing facili- ties, services and marketing strategies to increase farm profits. FUNCTIONS & PURPOSES State and local agricultural economic develop- ment programs provide technical assistance to farmers, ranchers and agricultural communities and facilitate access to capital for agricultural business development and expansion. They are designed to build and support local agricultural economies and to improve the economic health of individual farms and ranches. Some jurisdic- tions also use agriculture as a foundation to develop other industries, such as food processing and tourism. Programs use different strategies to achieve different objectives. STRATEGIES Planning for agricultural viability Some local governments are incorporating agri- cultural business strategies into their traditional economic development plans. Four local govern- ments in Maryland employ economic develop- ment specialists who advise farmers on new products, services, marketing strategies and man- agement techniques to increase profitability. New York's county Agricultural and Farmland Protection Boards have the authority to receive state matching funds to develop and implement county agricultural and farmland protection plans. Many of these plans include the promo- tion of economic development initiatives for agri- culture. Business planning and capital investment Preparing a business plan can allow farmers and ranchers to examine a range of strategies to increase profits. A new Massachusetts program gives farmers access to a team of agricultural, economic and environmental consultants. Team members assess farm operations and make rec- ommendations to improve performance. Farmers may receive state grants for capital improvements based on their business plans. In return, the farmers agree to sign five- or ten-year covenants restricting development of their land. The plans and grants are designed to make farms more profitable; the covenants give the strategies time to work. Canada has a national program that provides incentives for farmers to develop busi- ness plans through cost-sharing and grants. Purchase of agricultural conservation easement programs Purchase of agricultural conservation easement programs compensate property owners for restricting the future use of their land. Selling an easement allows farmers and ranchers to cash in a percentage of the equity in their land, thus cre- ating a financially competitive alternative to development. Producers often use PACE program The Farmland Information Center is a publidprivate partnership between American Farmland Trust and the USDA Natural Resources Conservation Service that provides technical information about farmland protection. AMERICAN FARMLAND TRUST • FARMLAND INFORMATION CENTER AGRICULTURAL ECONOMIC DEVELOPMENT s—lAL—lb Amenu=Farmland Taut funds to buy and improve land, buildings and equipment, to retire debt and to increase the via- bility of their operations. Loan programs and economic development incentives Farmers need access to capital to purchase land and equipment and to invest in the development of new products, services, production technolo- gies and marketing strategies. Yet commercial banks often are reluctant to lend money to farm- ers for agricultural enterprises. Public economic development programs are generally targeted to the industrial and service sectors and do not con- sider loans to agricultural businesses. State and local governments can facilitate agricultural eco- nomic development by treating farms as other businesses, making loan funds, tax incentives and technical assistance available to producers. Twenty-four states offer public agricultural financing programs. Many of these programs are targeted to beginning farmers. Few, if any, have the capital to meet the demand for credit among farmers. One promising approach is a private ini- tiative in Maryland that is experimenting with getting commercial banks to participate in an agricultural loan program through the commit- ment of Community Reinvestment Act funds. Direct Marketing Growers who market agricultural products directly to customers usually receive higher prices than farmers and ranchers who sell wholesale. Counties and towns can encourage the develop- ment of agricultural retail businesses by specifi- cally permitting roadside stands, pick -your -own operations, nurseries and other agricultural uses in their zoning by-laws. Many communities also have developed and distributed maps showing the location of farmstands, pick -your -own opera- tions and farmers' markets, and some have post- ed signs directing drivers to farm businesses. Farmers' markets Farmers' markets give growers access to a large base of customers. Most markets are open-air public spaces where farmers gather to sell home- grown products. Farmers may travel hundreds of miles to downtown markets in big cities. The markets are good for the city as well as the farm- ers, as they attract customers who patronize other downtown businesses. Marketing to restaurants and food retailers Much of the retail price of food pays for market- ing and distribution. By selling directly to food retailers, farmers and ranchers can capture more profit. A growing number of natural and special- ty food stores are expressing interest in selling local farm products. Several nonprofit organiza- tions are working to establish links between growers and chefs. Encouraging restaurants to use local produce and meats and promote them on their menus may help build a retail customer base for both local farms and dining establish- ments. Contact with restaurants and food retail- ers also helps keep farmers informed about trends in the food industry. Community supported agriculture Community supported agriculture is a relatively new form of direct marketing. CSA farm cus- tomers pay for a share of the harvest at the beginning of the year and receive a weekly bun- dle of vegetables and fruits throughout the grow- ing season. This system takes some of the risk out of farming and shifts the time that growers must spend on marketing to the beginning of the year. Some organizations are working to build CSA networks that would allow individual grow- ers to offer a larger selection of farm products to their customers. AMERICAN FARMLAND TRUST AGRICULTURAL ECONOMIC DEVELOPMENT For additional information on farmland protection, the Farmland Information Center offers publications, an on-line library and technical assistance. To order AFT publications, call (800) 370-4879. The farmland information library is a searchable database of literature, abstracts, statutes, maps, legislative updates and other useful resources. It can be reached at http://Www..farmlandinfo. org. For additional assistance on specific topics, call the technical assistance service at (413) 586-4593. Amerman Farint—i"A-t Diversification FARMLAND INFORMATION CENTER Agricultural operations that specialize in com- modities such as corn or milk are vulnerable to economic shocks caused by low prices or bad weather. State departments of agriculture, Extension agents and economic development agencies promote diversification to reduce risk and increase profits. Diversification can mean planting new crops or shifting to a different mix of crops and livestock, developing new products or services or targeting new markets. New products and marketing strategies State and local governments and agricultural organizations are helping growers create and market specialty products such as cheese, wine, preserves and sauces, potato chips and cereals. These products can be sold year-round - a big advantage in cold climates - and some can be marketed through the mail. Several states are investigating the feasibility of public commercial kitchens that could serve as incubators for farm - based food businesses. An organization in Virginia is developing a brand of local farm and seafood products, and an organization in Maine is experimenting with selling farm products on the internet. Agritourism Several state and local governments offer work- shops for farmers who are interested in develop- ing recreational businesses. Agricultural tourism is increasingly popular in farming communities near urban areas. Entrepreneurial growers are offering educational and recreational services such as school tours, hay and sleigh rides, crop mazes, petting zoos, restaurants, ranch vacations and bed -and -breakfast facilities. These services bring in new customers and promote farm prod- ucts. Grower Cooperatives Growers who sell wholesale can increase their access to lucrative markets by forming coopera- tives. High-volume retailers such as supermarkets that find it too difficult to buy from individual producers may welcome the opportunity to pur- chase locally -grown food from a well -organized cooperative. Cooperatives can also offer a diverse selection of products to retailers at a competitive price. Reducing the costs of production Most agricultural economic development strate- gies are designed to help producers increase rev- enues, but a few help them cut costs. A project in Vermont is training dairy farmers to implement pasture -based management. By switching from growing and storing feed crops to grazing, dairy farmers can cut costs and improve their quality of life. Other organizations promote the use of integrated pest management and organic farming, which reduce the cost of inputs and may increase the prices that growers can demand for their products. Purchasing cooperatives for seeds and other agricultural supplies also can reduce pro- duction costs. American Farmland Trust works to stop the loss of productive farmland and to promote farming practices that lead to a healthy environment. AMERICAN FARMLAND TRUST • FARMLAND INFORMATION CENTER e FARMLANI,I IIeTFORMATION CENTER VR FACT SHEET THE FARMLAND PROTECTION TOOLBOX AmericmFamdand Tfwt TECHNICAL AssisTANCE One Short Street, Suite 2 Northampton, MA 01060 Tel: (413) 586-4593 Fax: (413) 586-9332 Web: www.farmlandinfo.org NATIONAL OFFICE 1200 18th Street, NW, Suite 800 Washington, DC 20036 Tel: (202) 331-7300 Fax: (202) 659-8339 Web: www.farmland.org October 2002 DESCRIPTION This fact sheet provides a brief description of the tools and techniques that state and local govern- ments are using to protect farmland and ensure the economic viability of agriculture. Some of the techniques result in programs that are enacted and administered at the state level, others are used primarily by local governments. Sometimes, municipal governments adapt and strengthen state laws to meet unique local needs. Many of the most effective farmland protection programs combine regulatory and incentive -based strate- gies. PROGRAMS THAT ARE GENERALLY ENACTED AT THE STATE LEVEL Agricultural District Programs Agricultural district programs allow farmers to form special areas where commercial agriculture is encouraged and protected. They stabilize the land base and support the business of farming by providing farmers with an attractive package of incentives. Typically, programs are authorized by state law and implemented at the local level. An exception is Calvert County, Md., which has its own independent agricultural district program. There are a total of 18 state agricultural district laws in 16 states. Minnesota and Virginia autho- rize statewide and local agricultural district pro- grams. Provisions vary widely, but most agricul- tural district laws are intended to be comprehen- sive responses to the challenges facing farmers in developing communities. To maintain a land base for agriculture, some agricultural district laws protect farmland from annexation and eminent domain. Many laws also require that state agencies limit construction of infrastructure, such as roads and sewers, in agri- cultural districts. Three states offer participants eligibility for purchase of agricultural conserva- tion easement programs, and two states include a right of first refusal in district agreements to ensure that land will continue to be available for agriculture. Agricultural district laws help create a more secure climate for agriculture by preventing local governments from passing laws that restrict farm practices, and by providing enhanced protection from private nuisance law- suits. To reduce farm operating expenses, seven pro- grams offer either automatic eligibility for dif- ferential tax assessment or property tax credits to farmers who enroll in agricultural districts. Some states encourage local planning by limit- ing district authorization to jurisdictions with comprehensive or farmland protection plans; requiring the adoption of land use regulations to protect farmland; involving planning bodies in the development and approval of districts; and limiting non-farm development in and around agricultural districts. Conservation Easements Every state in the nation has a law pertaining to conservation easements. The National Conference of Commissioners on Uniform State Laws adopted the Uniform Conservation Easement Act in 1981. The Act was designed to serve as a model for state legislation to allow qualified public agencies and private conserva- tion organizations to accept, acquire and hold less -than -fee -simple interests in land for the pur- poses of conservation and preservation. Since the Uniform Act was approved, 21 states have adopted conservation easement -enabling legisla- tion based on this model and 23 states have drafted and enacted their own conservation easement -enabling laws. In Pennsylvania, con- servation easements are authorized by common law. Oklahoma and Wyoming do not have sepa- rate provisions of state law authorizing the con- veyance of conservation easements, but state agencies are given the power to hold title to easements in their authorizing legislation.# # Stefan Nagel, State Conservation Easement Legislation (Washington, D.C.: National Trust for Historic Preservation, 1995). The Farmland Information Center is a public/private partnership between American Farmland Trust and the USDA Natural Resources Conservation Service that provides technical information about farmland protection. AMERICAN FARMLAND TRUST • FARMLAND INFORMATION CENTER THE FARMLAND PROTECTION TOOLBOX Agricultural conservation easements are designed specifically to protect farmland. Grantors retain the right to use their land for farming, ranching and other purposes that do not interfere with or reduce agricultural viability. They continue to hold title to their properties and may restrict public access, sell, give or transfer their property as they desire. Producers also remain eligible for any state or federal farm program for which they qualified before entering into the conservation agreement. Conservation easements limit land to specific uses and thus protect it from development. These voluntary legal agreements are created between private landowners (grantors) and qualified land trusts, conservation organizations or government agencies (grantees). Grantors can receive federal tax benefits as a result of donating easements. Grantees are responsible for monitoring the land and enforcing the terms of the easements. Easements may apply to entire parcels of land or to specific parts of a property. Most easements are permanent; term easements impose restric- tions for a limited number of years. All conserva- tion easements legally bind future landowners. Land protected by conservation easements remains on the tax rolls and is privately owned and managed. While conservation easements limit development, they do not affect other pri- vate property rights. Agricultural conservation easements are a flexible farmland protection tool. Private land trusts and other conservation organizations educate farmers about the tax benefits of donating easements, and state and local governments have developed programs to purchase agricultural conservation easements from landowners. In addition, agricul- tural conservation easements can be designed to protect other natural resources, such as wetlands and wildlife habitat. Executive Orders Governors of at least 10 states have issued execu- tive orders that document the importance of agriculture and farmland to their states' econo- my, environment and culture. Some executive orders direct state agencies to withhold funding from projects that would result in farmland conversion. Others have created task forces to investigate farmland conversion. State executive orders have the potential to build public and institutional support for other farmland protec- tion programs. By restricting the use of state funds for projects that would result in the loss of agricultural land, executive orders also can influence the actions of local governments. To the extent that they call attention to the prob- lem of farmland conversion and facilitate dis- cussion about solutions, executive orders can serve as a building block of a comprehensive farmland protection program. Growth Management Laws Growth management laws are designed to con- trol the timing and phasing of urban growth and to determine the types of land use that will be permitted at the local and regional levels. At least 12 states have laws that control develop- ment or set planning standards for local govern- ments, but only seven - Hawaii, Maryland, Minnesota, New Jersey, Oregon, Vermont and Washington -address the issue of farmland con- version. These seven laws vary in the controls that they impose on state and local governments and in the extent to which they protect agricul- tural land from development. Growth management laws take a comprehensive approach to regulating the pattern and rate of development and set policies to ensure that most new construction is concentrated within designated urban growth areas or boundaries (UGBs). They direct local governments to identi- fy lands with high resource value and protect them from development. Some growth manage- ment laws require that public services such as water and sewer lines, roads and schools be in place before new development is approved. Others direct local governments to make deci- sions in accordance with comprehensive plans that are consistent with plans for adjoining areas. I AMERICAN FARMLAND TRUST • FARMLAND INFORMATION CENTER Oregon has one of the nation's strongest growth management laws. As a result of the state's 1972 Land Conservation and Development Act, every county in Oregon has implemented agricultural protection zoning, protecting more than 16 million acres of agri- cultural land. Washington's Growth Management Act (CMA), passed in 1990 and strengthened in 1991, also is proving to be an effective farmland protection tool. Most of Washington's counties have developed invento- ries of important agricultural land, and several have implemented farmland protection tech- niques, such as agricultural protection zoning, purchase of agricultural conservation easement programs and transfer of development rights programs since the enactment of the GMA. Growth management laws in Hawaii, Vermont, New Jersey and Maryland have been somewhat less effective in preventing farmland conversion and promoting the development of local farm- land protection programs. Purchase of Agricultural Conservation Easement Programs Purchase of agricultural conservation easement (PACE) programs pay property owners to pro- tect their land from development. PACE is known by a variety of other terms, the most common being purchase of development rights. Landowners sell agricultural conservation ease- ments to a government agency or private con- servation organization. The agency or organiza- tion usually pays them the difference between the value of the land for agriculture and the value of the land for its "highest and best use," which is generally residential or commercial development. Easement value is most often determined by professional appraisals, but may also be established through the use of a numeri- cal scoring system that evaluates the suitability for agriculture of a piece of property. State and local governments can play a variety of roles in the creation and implementation of PACE programs. Some states have passed legis- lation that allows local governments to create PACE programs. Others have enacted PACE pro- grams that are implemented, funded and admin- istered by state agencies. Several states work cooperatively with local governments to purchase easements. A few states have appropriated money for use by local governments and private nonprofit organizations. Finally, some local gov- ernments have created independent PACE pro- grams in the absence of any state action. Cooperative state -local PACE programs have some advantages over independent state or local programs. Cooperative programs allow states to set broad policies and criteria for protecting agri- cultural land, while county or township govern- ments select the farms that they believe are most critical to the viability of local agricultural economies, and monitor the land once the ease- ments are in place. Involving two levels of gov- ernment generally increases the funding available for PACE. Finally, cooperative programs increase local government investment in farmland protec- tion. PACE programs allow farmers to cash in a fair percentage of the equity in their land, thus creat- ing a financially competitive alternative to selling land for non-agricultural uses. Permanent ease- ments prevent development that would effectively foreclose the possibility of farming. Removing the development potential from farmland gener- ally reduces its future market value. This may help facilitate farm transfer to the children of farmers and make the land more affordable to beginning farmers and others who want to buy it for agricultural purposes. PACE provides landowners with liquid capital that can enhance the economic viability of individual farming operations and help perpetuate family tenure on the land. Finally, PACE gives communities a way to share the costs of protecting agricultural land with farmers. Right -to -Farm Laws State right -to -farm laws are intended to protect farmers and ranchers from nuisance lawsuits. Every state in the nation has at least one AmenranFarmlandTiay AMERICAN FARMLAND TRUST • FARMLAND INFORMATION CENTER THE FARMLAND PROTECTION TOOLBOX right -to -farm law. Some statutes protect farms and ranches from lawsuits filed by neighbors who moved in after the agricultural operation was established. Others protect farmers who use generally accepted agricultural and management practices and comply with federal and state laws Twenty-three right -to -farm laws also prohibit local governments from enacting ordinances that would impose unreasonable restrictions on agri- culture. Right -to -farm laws are a state policy assertion that commercial agriculture is an important activity. The statutes also help support the eco- nomic viability of farming by discouraging neigh- bors from filing lawsuits against agricultural operations. Beyond these protections, it is unclear whether right -to -farm laws help maintain the land base. Tax Relief Circuit Breaker Tax Relief Credits Circuit breaker tax programs offer tax credits to offset farmers' property tax bills. Four states have circuit breaker programs. In Michigan, Wisconsin and New York, farmers may receive state income tax credits based on the amount of their real property tax bill and their income. In Iowa, farmers receive school tax credits from their local governments when school taxes exceed a statutory limit. The counties and munic- ipalities are then reimbursed from a state fund. In Michigan, landowners that wish to receive cir- cuit breaker credits must sign 10 -year restrictive agreements with their local governments to pre- vent farmland conversion. In Wisconsin, counties and towns must adopt plans and enact agricuI- tural protection zoning to ensure that tax credits are targeted to productive agricultural land. The Wisconsin program has facilitated the adoption of agricultural protection zoning in more than 400 local jurisdictions. Like differential assessment laws, circuit breaker tax relief credits reduce the amount farmers are required to pay in taxes. The key differences between the programs are that most circuit breaker programs are based on farmer income and are funded by state governments. Differential Assessment Laws Differential assessment laws direct local govern- ments to assess agricultural land at its value for agriculture, instead of its full fair market value, which is generally higher. Differential assess- ment laws are enacted by states and implement- ed at the local level. With a few exceptions, the cost of the programs is borne at the local level. Every state except Michigan has a differential assessment law. Differential assessment is also known as current use assessment, current use valuation, farm use valuation, use assessment and use value assessment. Differential assessment programs help ensure the economic viability of agriculture. Since high taxes reduce profits, and lack of profitability is a major motivation for farmers to sell land for development, differential assessment laws also protect the land base. Finally, these laws help correct inequities in the property tax system. Owners of farmland demand fewer local public services than residential landowners, but they pay a disproportionately high share of local property taxes. Differential assessment helps bring farmers' property taxes in line with what it actually costs local governments to provide services to the land. PROGRAMS THAT ARE ENACTED AT THE LOCAL LEVEL Agricultural Protection Zoning Zoning is a form of local government land use control. Zoning ordinances segment counties, cities, townships and towns into areas devoted to specific land uses and establish standards and densities for development. Agricultural protection zoning (APZ) ordi- nances designate areas where farming is the AMERICAN FARMLAND TRUST • FARMLAND INFORMATION CENTER primary land use and discourage other land uses in those areas. APZ limits the activities that are permitted in agricultural zones. The most restrictive regulations prohibit any uses that might be incompatible with commercial farming. APZ ordinances also restrict the density of resi- dential development in agricultural zones. Maximum densities range from one house per 20 acres in the eastern United States to one house per 640 acres in the West. Some local ordinances also contain right -to -farm provi- sions and authorize commercial agricultural activities, such as farmstands, that enhance farm profitability. Occasionally, farmers in an agricultural zone are required to prepare farm management plans. In most states, APZ is implemented at the county level, although towns and townships may also have APZ ordinances. Zoning can be modified through the local political process. Generally, the enactment of an APZ ordinance results in a reduction of permitted residential densities in the new zone. This reduction in density, also called downzoning, is generally controversial because it can reduce the market value of land. A change in zoning that increases permitted residential densities is known as upzoning. A change in the zoning designation of an area—from agricultural to commercial, for example—is known as rezoning. Successful petitions for upzoning and rezoning in agricul- tural protection zones often result in farmland conversion. APZ stabilizes the agricultural land base by keeping large tracts of land relatively free of non-farm development. This can reduce the likelihood of conflicts between farmers and their non -farming neighbors. Communities can use APZ to conserve a "critical mass" of agri- cultural land, enough to keep individual farms from becoming isolated islands in a sea of resi- dential neighborhoods. Maintaining a critical mass of agricultural land can ensure that there will be enough farms to support local agricultural service businesses. By restricting the development potential of large properties, APZ limits land speculation and helps keep land affordable to farmers and ranchers. Finally, APZ helps promote orderly growth by preventing sprawl into rural areas, and benefits farmers and non -farmers alike by protecting scenic landscapes and maintaining open space. Cluster Zoning Cluster zoning ordinances allow or require hous- es to be grouped close together on small lots to protect open land. The portion of the parcel that is not developed may be restricted by a conserva- tion easement. Cluster developments are also known as cluster subdivisions, open space or open land subdivisions. Cluster subdivisions can keep land available for agricultural use, but generally they are not designed to support commercial agriculture. The protected land is typically owned by developers or homeowners' associations. Homeowners may object to renting their property to farmers and ranchers because of the noise, dust and odors associated with commercial agricultural produc- tion. Even if the owners are willing to let the land be used for agriculture, undeveloped portions of cluster subdivisions may not be large enough for farmers to operate efficiently, and access can also be a problem. For these reasons, cluster zoning has been used more successfully to preserve open space or to create transitional areas between farms and residential areas than to protect farm- land. Comprehensive Planning Comprehensive planning allows counties, cities, towns and townships to create a vision for their joint future. Comprehensive plans, which are also known as master or general plans, outline local government policies, objectives and decision guidelines, and serve as blueprints for develop- ment. They typically identify areas targeted for a variety of different land uses, including agricul- ture, forestry, residential, commercial, industrial m AmmbanFarmland Trust AMERICAN FARMLAND TRUST • FARMLAND INFORMATION CENTER THE FARMLAND PROTECTION TOOLBOX For additional information on farmland protection, the Farmland Information Center offers publications, an on-line library and tech- nical assistance. To order AFT publications, call (800) 370-4879. The farmland information library is a searchable database of litera- ture, abstracts, statutes, maps, legislative updates and other useful resources. It can be reached at www.farm- landinfo.org. For additional assistance on specific topics, call the technical assistance service at (413) 586-4593. and recreational activities. Comprehensive plans provide a rationale for zoning and promote the orderly development of public services. A comprehensive plan can form the foundation of a local farmland protection strategy by identi- fying areas to be protected for agricultural use and areas where growth will be encouraged. It may include policies designed to conserve natural resources and provide affordable housing and adequate public services. Some counties have used the comprehensive planning process to encourage their cities and towns to develop urban growth boundaries and adopt agricultural protection zoning. Others have incorporated the use of PACE and transfer of development rights into their master plans. Mitigation Ordinances and Policies Mitigation ordinances are a new farmland pro- tection technique. In 1995, city officials in Davis, Calif., enacted an ordinance that requires devel- opers to permanently protect one acre of farm- land for every acre of agricultural land they con- vert to other uses. Developers can place an agri- cultural conservation easement on farmland in another part of the city or pay a fee to satisfy mitigation. While most of the regulatory farm- land protection techniques restrict the property rights of farmers, the Davis mitigation ordinance makes developers pay for farmland protection. In 2000, Yolo County, Calif., where the City of Davis is located, adopted an agricultural land mitigation program that is modeled on the 1995 City of Davis ordinance. In Massachusetts, Executive Order 193 seeks to lessen the extent to which state activities con- tribute to the conversion of agricultural land. The Massachusetts Department of Food and Agriculture, based on its interpretation of EO 193, seeks mitigation for projects involving state funds. It has negotiated the removal of top soil from development sites for use by local farmers and funds for agricultural land protection. King County, Wash. has a "no net loss of farm- land" policy in its comprehensive plan. The pol- icy prohibits removal of land from the agricul- tural production district (APD) unless an equal amount of agricultural land of the same or bet- ter quality, adjacent to the APD, is added. Right -To -Farm Ordinances Local governments around the nation are enact- ing their own right -to -farm laws to strengthen and clarify weak language in state laws. Local right -to -farm laws are most widespread in California, where the state farm bureau devel- oped and distributed a model right -to -farm ordinance during the 1980s. A local right -to -farm ordinance can serve as a formal policy statement that agriculture is a valuable part of the county or town economy and culture. Some require that a notice be placed on the deed to all properties in agricul- tural areas, cautioning potential buyers that they may experience noise, dust, odors and other inconveniences due to farming and ranch- ing operations. Local ordinances help educate residents about the needs of commercial agricul- ture and reassure farmers that their communi- ties support them. Transfer of Development Rights Transfer of development rights (TDR) programs allow landowners to transfer the right to devel- op one parcel of land to a different parcel of land. Generally, TDR programs are established by local zoning ordinances. In the context of farmland protection, TDR is used to shift devel- opment from agricultural areas to designated growth zones closer to municipal services. The parcel of land where the rights originate is called the "sending" parcel. When the rights are transferred from a sending parcel, the land is restricted with a permanent conservation ease- ment. The parcel of land to which the rights are transferred is called the "receiving" parcel. Buying these rights generally allows the owner AMERICAN FARMLAND TRUST • FARMLAND INFORMATION CENTER to build at a higher density than ordinarily permitted by the base zoning. TDR is known as transfer of development credits (TDC) in California and in some regions of New Jersey. TDR is used by counties, cities, towns and townships. Two regional TDR programs for farmland protection were developed to protect New Jersey's Pinelands and the pine barrens of Long Island, N.Y. TDR programs are distinct from PACE programs because they involve the private market. Most TDR transactions are between private landowners and developers, Local governments approve transactions and monitor easements. A few jurisdictions have created "TDR banks" that buy development rights with public funds and sell them to devel- opers and other private landowners. Some states, such as New Jersey, have enacted special legislation authorizing local govern- ments to create TDR programs. Other states have consistently refused to give local govern- ments such authorization. Counties and towns have created TDR programs without specific state authorizing legislation; municipal govern- ments must work with their attorneys to deter- mine whether other provisions of state law allow them to use TDR. TDR programs can be designed to accomplish multiple goals including farmland protection, conservation of environmentally sensitive areas and the preservation of historic landmarks. They prevent non-agricultural development of farmland, reduce the market value of protected farms and provide farmland owners with liquid capital that can be used to enhance farm viability. TDR programs also offer a potential solution to the political and legal problems that many com- munities face when they try to restrict develop- ment of farmland. Landowners often oppose agricultural protection zoning (APZ) and other land use regulations because they can reduce equity. APZ can benefit farmers by preventing urbanization, but it may also reduce the fair market value of their land, When downzoning is combined with a TDR program, however, landowners can retain their equity by selling development rights= While dozens of local jurisdictions around the country allow the use of TDR, only a few of them have used the technique successfully to pro- tect farmland. TDR programs are complex and must be carefully designed to achieve their goal. Communities that have been most successful in using TDR are characterized by steady growth, with the political will to maintain and implement sirong zoning ordinances and planning depart- ments that have the time, knowledge and resources to administer complex land use regula- tions. OTHER STRATEGIES TO PROTECT FARMLAND AND SUPPORT AGRICULTURE Most farmers say the best way to protect farm- land is to keep farming profitable. State and local governments have created a variety of initiatives to support the economics of agriculture. For example, the Massachusetts Farm Viability Enhancement program was created in 1994 to improve farm income and environmental stew- ardship. The program has two phases. In Phase 1, participating farmers work with a team of consul- tants to evaluate the current operation and devel- op a plan. Plans may call for product diversifica- tion, direct marketing, value-added products and/or agri-tourism. They also may recommend conservation practices. In Phase II, funding is available to implement the plan. Farmers may apply for grants of $20,000 or $40,000 in exchange for five or ten year term easements. The Massachusetts program has served as a model for initiatives in Connecticut, New Jersey and New York. American Farmland Trust works to stop the loss of productive farmland and promote farming practices that lead to a 1lmencanFmmland Ttrut healthy environment. AMERICAN FARMLAND TRUST - FARMLAND INFORMATION CENTER FARMLAND PROTECTION ACTIVITIES BY STATE Agricultural Agricultural Circuit Differential PACE Fight -to -Farm* TDR State Districts Protection Zoning Breaker Assessment Alabama .......... A ....... . .... A . . ................. .... .. .... . � � 1-- 11 11.1 1 . ...... Alaska ...... . . .... . ........ - ......... .. ... ... ....... . . ............................................. A .............. .......... I ........ .... . . ............. ......... . ..... . .. A .... ..... . ....... ..... .... .............. ..... . ...... .... . . ... ... . ... � 11 --.- ..... ...... Arizona ...... . .... . ... . ...... ... . .. .. ........ . . ................. . .. ...... ... .... . ....... .... . A A ................ .. . .. ......... A . ... .. . . .. .. ... . ........ . ..... ... ... Arkansas .. ..... ....... ... ....... ..... I ..... ...... .. . A .............. .......... I ... .......... .......... .. . ........ ..... AL I I . -... . ...... California A .......... . ..... .. .... A A 4P A 4. Colorado A A A ConnecticutA . ........ A A N. ............. Delawa-r-e, . .... __A ............................ . . ................. ..... . . .... ..A....... A . .. ...... ...A. ............ . ... ......... . . I.".. .... Florida I .. A A A 4. Georgia .. ....... . . ......... A - Hawaii A A Idaho *.,. .1 1- ". , I A, 4. Illinois A 4. A 0 A Indiana 4- •1 A . .. .... . A - 1 1".., . .... IowaA . ..... ... .... A . ...... ..... A A KansasA .. . . ............ . ..... ........ . .. .... . ... ........... ... .. ... ......... .... .. . .......... ... .. . ............ .. ................... .................. . . ............ - A ....... Kentucky_ ........ A A A'• A LouisianaA . .. . ..... . ...... . .... ...... A Maine .. ... ...... . ...... .. . .................. . A .. .... . .. .. ... ......... A A ... . ......... 4. A A A Massachusetts .... . ...... . ....... . ..... . ..... . .... . .... . . . .... A .. ..... .. A . . . ...................... ... ...... ... .. A .... ... ...... .. ... .. ..... 4- ichigan A ........... - - A A Minnesota A 4- .. .......... ...... . .. ............. ... 4- . ...... A A - Mississippi . . ......... A .... . -A Missouri Montana 4- A A A 4. Nebraska .. ........ ... ............... . ... 4. . ....... ........ . ....... . . .. ........... ....... . ...... ....... . ....... A .............. ... ........ .. .......... - . .... . . A Nevada ..... . . .... .......... .. .. ._. . ..... A .... ... .......... A ... .. ........... ... - ..... . ...... .. . I � - . . .. . . .... .. .... New Hampshire A A4— A New Jersey A .......... ............ . ..... ...... - ... ...... .. ........... A A NZ, ..... ......... .... - A 4. New Mexico A New York A A A AA.- A 4. Nior-t'- h - Carolina A A , Dakota .... .... .. • A I............................................................... ......................................A....... .... ........ .. ........ ..... . .......North Ohio_........A Oklaoma A A Oregon" -A ... .... .. .... ......... ... . A Pennsylvania A . . . . .. .. .... ..... . ................... ........ ...... . . ...... . ... .... .... . .... ....... . . . A A A Rhode Island A South Carolina A South DakotaA .......... . .. ....... . ......................... .. . . .... .... A Tennessee..... ...... . ....... .......... ... ....... . ........ .. . . ....... ....... ........ . . ....... . ............ . ... .......... A ............ ... ... . ....... ....... � 11 1-1- A. - . .... ... Texas . . . .... . ..... A A .... ..... Utah . A 4. A A A VermontA ... . A A 4- Virginia .............................. A -*e .......... ........ . A A -0- ♦....... A Washington .I I I ... . .... . ... 4. -A.''. A A WestVirgnia . . .. .. .... ... . . ................ ..... . ........... - ... ..... ..... ........ .... . ....... A . ..... .. . . A -A Wisconsin ........ ...... ... 4- A . . ....... ... .. ... .. .. ..... ...... A A Wyoming..- .410. . ......... . ..... ....... .1 . ....... . .. ...... . ... .......... .. ..... A ................ A TOTAL 16 25 4 49 26 50 17 A State program Local program *A number of local jurisdictions also have enacted right -to -farm ordinances. We do not have a complete inventory. AMERICAN FARMLAND TRUST FARMLAND INFORMATION CENTER r4liv,L)NN FACT SHEET AGRICULTURAL PROTECTION ZONING Amerran Farml4nd Trust TECHNICAL ASSISTANCE Herrick Mill, One Short Street Northampton, MA 01060 Tel: (413) 586-4593 Fax: (413) 586-9332 Web: www,farmlandinfo.org NATIONAL OFFICE 1200 18th Street, NW, Suite 800 Washington, DC 20036 Tel: (202) 331-7300 Fax: (202) 659-8339 Web: www,farmland.org DESCRIPTION FARMLAND INFORMATION CENTER Agricultural protection zoning refers to county and municipal zoning ordinances that support and protect farming by stabilizing the agricultur- al land base. APZ designates areas where farm- ing is the desired land use, generally on the basis of soil quality as well as a variety of locational factors. Other land uses are discouraged. APZ ordinances vary in what activities are permitted in agricultural zones. The most restrictive regula- tions prohibit any uses that might be incompati- ble with commercial farming. The density of resi- dential development is limited by APZ. Maximum densities range from one dwelling per 20 acres in the eastern United States to one residence per 640 acres in the West. In practice, the specific areas designated by APZ are generally called agricultural districts. In the context of farmland protection, however, these zoning districts, which are imposed by local ordinances, are easily confused with voluntary agricultural districts created by farmers under statutes in 16 states. To avoid confusion, American Farmland Trust refers to the mandato- ry agricultural areas as agricultural protection zones, and the voluntary areas as agricultural districts. APZ ordinances contain provisions that establish procedures for delineating agricultural zones and defining the land unit to which regulations apply. They specify allowable residential densities and permitted uses, and sometimes include site design and review guidelines. Some local ordi- nances also contain right -to -farm provisions and authorize commercial agricultural activities, such as farm stands, that enhance farm profitability. Occasionally, farmers in an agricultural protec- tion zone are required to prepare conservation or farm management plans. The definition of APZ varies with jurisdiction and by region of the country. A minimum lot size of 20 acres, combined with other restrictions, may be sufficient to reduce development pres- sures in areas where land is very expensive and farming operations are relatively intensive. Several county APZ ordinances in Maryland per- mit a maximum density of one unit per 20 acres. In areas where land is less expensive and exten- sive farming operations such as ranches predomi- nate, much lower densities may be required to prevent fragmentation of the land base. In Wyoming and Colorado, counties are not permitted to control subdivision of lots that are larger than 35 acres. The 35 -acre provision has led to the creation of hundreds of 35 -acre 11ranchettes" in both states, fragmenting ranches into parcels that are too small for successful commercial ranching. Many towns and counties have agricultural/resi- dential zoning that allows construction of houses on lots of one to five acres. Although these zon- ing ordinances permit farming, their function is more to limit the pace and density of develop- ment than to protect commercial agriculture. In fact, such ordinances often hasten the decline of agriculture by allowing residences to consume far more land than necessary. AFT defines APZ as ordinances that allow no more than one house for every 20 acres, support agricultural land uses and significantly restrict non-farm land uses. HISTORY The courts first validated zoning as a legitimate exercise of police power in the 1920s, giving local governments broad authority to regulate local land use. Rural counties in California, Pennsylvania and Washington began using zoning to protect agricultural land from develop- ment during the mid-1970s. In 1981, the National Agricultural Lands Study reported 270 counties with agricultural zoning. In 1995, an informal AFT survey found nearly 700 jurisdic- tions in 24 states with some form of APZ. FUNCTIONS & PURPOSES APZ helps towns and counties reserve their most productive soils for agriculture. It stabilizes the agricultural land base by keeping large tracts of land relatively free of non-farm development, The Farmland Information Center is a public/private partnership between American Farmland Trust and the USDA Natural September 1998 Resources Conservation Service that provides technical information about farmland protection. AMERICAN FARMLAND TRUST � FARMLAND INFORMATION CENTER AGRICULTURAL PROTECTION ZONING For additional information on agricultural protection zoning and other farmland protection programs, the Farmland Information Center offers pub- lications, an on-line library and technical assistance. To order Agricultural Protection Zoning: What Works, a 34 page com- prehensive technical report ($14.95), or other AFT publica- tions, call (800) 370-4879. The farmland information library is a searchable database of literature, abstracts, statutes, maps, legislative updates and other useful resources. It can be reached at http.//www.farmlandinfo. org. For additional assistance on specific topics, call the technical assistance service at (413) 586-4593. ..&r 1& Anim an Farmland l;wt thus reducing conflicts between farmers and their non -farming neighbors. Communities also use APZ to conserve a "critical mass" of agricultural land, enough to keep individual farms from becoming isolated islands in a sea of residential neighborhoods. Maintaining a critical mass of agricultural land and farms allows the retention of an agricultural infrastructure and support ser- vices, such as equipment dealers and repair facili- ties, feed mills, fertilizer and pesticide suppliers, veterinarians, spraying and seeding contractors, food processors and specialized financial services. All of these agricultural businesses need their farm customers to stay profitable. APZ can also limit land speculation, which dri- ves up the fair market value of farm and ranch land. By restricting the development potential of large properties, APZ is intended to keep land affordable to farmers. A strong ordinance can demonstrate to farmers that the town or county sees agriculture as a long-term, economically viable activity, instead of an interim land use. Finally, APZ helps promote orderly growth by preventing sprawl into rural areas, and benefits farmers and non -farmers alike by protecting scenic landscapes and maintaining open space. BENEFITS APZ is an inexpensive way to protect large areas of agricultural land. By separating farms from non-agricultural land uses, APZ reduces the likelihood of conflicts between farmers and non -farming neighbors. APZ helps prevent suburban sprawl and reduces infrastructure costs. Compared to purchase of conservation easement and transfer of development rights programs, APZ can be implemented relatively quickly. APZ is easy to explain to the public because most landowners are familiar with zoning. APZ is flexible. If economic conditions change, the zoning can be modified as necessary. DRAWBACKS APZ is not permanent. Changes in APZ ordinances can open up large areas of agricultural land for development. APZ can reduce land values, which decreases farmers' equity in land. For this reason, farmers sometimes oppose APZ, making it difficult to enact. APZ may be difficult to monitor and enforce on a day-to-day basis. County APZ ordinances do not protect agricultural land against annexation by municipalities. Source: American Farmland Trust, Saving American Farmland: What Works (Northampton, Mass., 1997). American Farmland Trust works to stop the loss of productive farmland and to promote farming practices that lead to a healthy environment. Virginia's Rural Economic Analysis 4�t 1 -t V. y F Ho r i zons 2003 Volume 15 Number 2 Deciding to Diversify: A Case Study of Seven Virginia Farm Businesses Keith Dickinson How to keep land in agriculture is a frequently asked question. Value added, specialty crops, and agri-tourism have all been offered as the solutions to the question. For many Virginia farmers, traditional crops and livestock are their mainstay because they have experience with producing them. But interest in value-added production, specialty crops, and agri-tourism has been consistently increasing among the mainstream of agricultural producers in Virginia. This trend can be easily seen as one drives through the countryside and sees the increasing number of signs along the highways for corn mazes, pick -your -own farms, pumpkin patches, and the like. Extension agents are getting an increasing number of questions from producers requesting information on how to implement some of these enterprises. Even the farm press is diverging from the usual stories of "who has the biggest farm" to some of the more diverse and unique enterprises. During the summer of 2001, seven diversified farm business managers/owners across the Commonwealth (Table 1) were interviewed to study the motivations for and issues related to adding new enterprises to the farm business. This study sought to answer the "why" and "how" questions about farm diversification to help producers understand the key issues they will face as they seek to diversify their farms. The farmers Table 1. Summar, who were interviewed were purposefully varied in size, geographic Region region, and primary commodity Southwest Dai produced on the farm. Some Northwest Dai examples of new enterprises added Northwest Ore include pumpkins, corn mazes, retail Northern Dai farm markets, and pick -your -own Southside To strawberries. Central Ha "... about two months out of the year you are backed clear up against the wall, but rest of the year you can go your own pace. " Motivation for Farm Diversification The primary motivation of all the farmers interviewed for this study on diversification is to increase the net income of the farm business. Risk management, increased family living expenses, and creating opportunities for the future of the farm were all secondary motivations for farm businesses to diversify. Most participants cited decreasing prices for the traditional commodities from their farms and increasing prices of farm inputs as primary factors resulting in the need to increase the farm income. Common Themes Be Patient when Diversifying A common piece of advice given by the farmers who had been involved in diversification for several years was to be patient with new enterprises. New enterprises take time to establish and often will not appear successful in the early of Case Studv Farm Businesses y Principal Acres in enterprises farm Diversified enterprises ry 250 Produce, pumpkins, beef cattle, agri- tourism ry, apples 300 Pumpkins, produce, agri-tourism hard 1,000 Retail stand, produce, agri-tourism ry, grains 1,200 Produce, agri-tourism bacco, produce 750 Produce, agri-tourism ,tobacco 300 Produce, cattle Southeast Grain 2,200 Cotton, strawberries Keith Dickinson is the agricultural extension agent with Virginia Cooperative Extension in Fauquier County. Horizons (ISSN 1075-9255) is a publication of the Rural Economic Analysis Program (REAP) in the Department of Agricultural and Applied Wola Economics and the College of Agriculture and Life Sciences at Virginia Polytechnic Institute and State University. Please address all correspondence ®Tech to REAP, Dept. of Ag. and Applied Econ. 0401, Virginia Tech, Blacksburg, VA 24061; phone: (540) 231-9443; email: reap0l@vt.edu. Southeast Grain 2,200 Cotton, strawberries Keith Dickinson is the agricultural extension agent with Virginia Cooperative Extension in Fauquier County. Horizons (ISSN 1075-9255) is a publication of the Rural Economic Analysis Program (REAP) in the Department of Agricultural and Applied Wola Economics and the College of Agriculture and Life Sciences at Virginia Polytechnic Institute and State University. Please address all correspondence ®Tech to REAP, Dept. of Ag. and Applied Econ. 0401, Virginia Tech, Blacksburg, VA 24061; phone: (540) 231-9443; email: reap0l@vt.edu. stages. Many related experiences where they had nearly given up on an enterprise after the first year or two but found them to be profitable given more time. This time lag is particularly true in the case of agri-tourism and direct marketing enterprises. Those farmers who had added these types of enterprises experienced few customers in their first year or two of operations while they were "getting the word out" about their businesses. It was not until at least the second year and sometimes the third year that they saw their customer levels high enough to provide income as high or higher than the original farm operation. The participating farmers were quick to point out that not all new enterprises or activities will be successful. Farmers trying to diversify their farm businesses need to be able to handle both emotional and financial disappointments along the way. "...you got to stick with it to see what it (is) going to do. " Stretched Too Thin One of the consequences of adding enterprises to the farm was increasing the work load of the producers. New activities often required additional hours of work during the seasons when various enterprises overlapped: the primary downside to the addition of new enterprises, according to most participants. The farmers juggled the costs of additional work with the benefits of a more secure financial situation. Occasionally some jobs would not get done completely or effectively, which would result in reduced yields or performance of the various enterprises. Several farmers related that they did not foresee the full impact that the addition of new enterprises would have on their existing enterprises. However, in spite of the drawbacks, the participants largely felt content in their decisions. While not all were completely satisfied with their work loads, they felt that the extra work was worth the rewards that they received in both additional income and a reduction in stress over financial issues. The additional work was a continuing concern, and many felt that they would have difficulty in trying to take on any additional work load if it became necessary. Enjoy What They Do Success and motivation of the farmers who diversified their farms is explained in great part because they enjoy what they do. The theme has many levels. Producers not only need to enjoy what they do but also need to enjoy the way that they do it. While participants began diversifying their farm businesses because they needed to increase their income, the selection of specific enterprises was shaped in large part by the desire of each producer to do something that he/she would enjoy. The enterprise selected was not always the one with highest potential income; sometimes a life-style motivation was more important than the financial motivation. Since adding a new enterprise to the farm usually increases the work load for the farm family, selecting enterprises that provide personal satisfaction and enjoyment make the increased work load more tolerable. Financial rewards alone do not appear to be enough of a motivation to accept the long hours and hard work associated with a diversified farm. Keep Changing Interviewed farmers new to diversification were focused on the initial change and did not foresee the changes that might be needed in the future. On the other hand, participants involved in diversification for a number of years recognized the importance of continually changing the product mix, advertising, production practices, and so forth of the enterprises on the farm. Participants' advice to others is to continually add enterprises through small changes rather than making wholesale changes to the entire farm business. They recommend that farmers wanting to diversify keep changing the enterprise until it works rather than trying it one way, finding that way does not produce the desired results, and giving up. "...I think that the future of agriculture is promising to the person that can see past the way their dad did it— " Go against Tradition The farmers participating in this study could be described as innovators with their farm enterprise decisions. They actively sought new, emerging agricultural activities and enterprises. Producers need to learn to avoid letting tradition alone dictate their diversification decisions. A common observation made by the participants is that producers often fail to see beyond the range of vision of previous generations on the farm. This state of "having the blinders on" limits producers from realizing new and emerging opportunities. The participants in this study saw this condition as a common constraint for many of their peers and questioned their own willingness to pursue diversifying as a result. Virginia Tech does not discriminate against employees, students, or applicants on the basis of race, color, sex, sexual orientation, disability, age, veteran status, national origin, or political affiliation. Anyone having questions concerning discrimination should contact the Equal Opportunity and Affirmative Action Office. Quality of Life Perspective Changes with Experience The perception of quality of life issues changed as the participants' lifestyles changed to accommodate the added enterprises. Although all participants recognized that reaching the goal of increased farm income would make them feel more secure financially, they did not anticipate the positive quality of life changes that a successful new enterprise might bring. What started with misgivings because of long hours became hope of future security and the satisfaction of a more rewarding lifestyle. The reduction of financial burdens was a great relief to these participants. They found that as their financial worries decreased, they were able to enjoy the work more and did not mind the increased work load that the new enterprises brought with them. Some participants anticipated this change early in the planning of their new enterprises, while others focused on the worries of longer hours. Implications What do these common themes mean to other farm families thinking of adding new enterprises to their farms? ➢ Farmers should look for enterprises that they would enj oy. They must realize that new enterprises will often lead to longer working hours during certain times of the year. If they enjoy the work involved with that enterprise, dealing with the long hours is much easier. ➢ Farmers need to be careful to not let tradition keep them from trying new ventures. ➢ Keeping up with changing markets and production conditions is necessary even for managers/owners of diversified farm businesses. ➢ Labor and resource management is critical with diversification. Farmers need to plan for the resource strains that new enterprises will place on the farm. you've got to keep on your toes and see what's going on... " Adding new enterprises to the farm does not follow a single path or process. The way these enterprises become part of an existing operation is as diverse as the enterprises themselves and the people who seek to implement them. Farmers who add new enterprises need to be patient and prepared both emotionally and financially for the possibility of failures along the way. The way that farmers think about themselves and their farms needs to change as they add new enterprises. Farmers must have the desire and ability to learn new and different types of marketing, management, and production skills. Editor's Note The original version of this article appeared in the Farm Credit Leader and is used with permission of Valley Farm Credit, ACA. Other Readings of Interest FIL - Ohio Conference - Nelson http://www.farmlandinfo.org/fic/ft/ohio/nelson,htrn Table of FARMLAND PRESERVATION POLICIES Contents ,What Works, What Doesn't and What We Don't Arthur C. Nelson, Ph. D, ASCE, AICP Professor of City Planning and Public Policy Georgia Institute of Technology ABSTRACT The Lord said to Moses ... Command the people of Israel, that they give to the Levites ... cities to dwell in; and pasture lands round about the cities ... The pasture lands of the cities ... shall reach from the wall of the city outward a thousand cubits all around. Numbers 35: 1-4 Burn down your cities and leave our farms ... and your cities will spring up again as if by magic; but destroy our farms and the grass will grow in the streets of every city in the country. William Jennings Bryan All states attempt to preserve prime agricultural farmland in some manner. Some policies seem to work yet others seem to fail perhaps with perverse consequences. There is much we do not know, however. This paper has four parts. The first part melds Burgess' urban ecology theory with Von Thunen's agricultural ecology to demonstrate the nature of land use conflict along the urban -rural fringe. The paper then complicates this picture by introducing the effects of inefficient speculation for urban development combined with leap frog development patterns. The third part of the paper introduces the common tools by which states attempt to preserve farmland and assesses the extent to which they are effective. The last part of the paper presents an outline of what researchers and policy analysts do not know about farmland preservation techniques, and calls for systematic research into addressing those shortcomings. Much is at stake for if effective farmland preservation policies are not used, the United States' may become a net importer of food and its balance of trade with the world may worsen during the next generation. A CLEAR AND PRESENT CRISIS With one of the world's largest supplies of prime agricultural and forest land, the United States is the world's leadingexporter of food and fibre.! It is also the world's leading importer of goods from other countries. Although imports exceed exports by more than $150 billion annually,Z without agriculture and forest exports the deficit would surely be higher. Over the next two generations, the world's population will double. With international trade barriers loosening, it is possible that much of the present trade imbalance can be offset by future exports of American agricultural and forest goods. Yet, research by the American Farmland Trust (1997) indicates that this golden opportunity may not be realized for the simple reason that America is consuming far more farmland than its population is growing. Entire regions, principally the southeast and the far west, may see their agricultural economies decimated by laissez-faire public and private decision-making which views farmland as the next low density exurban subdivision, not a critical element of a diversified economic base. Preserving the best of such land will enable future generations to capitalize on future opportunities. This paper has four parts. The first melds urban ecology theory with Von Thunen's agricultural ecology to demonstrate the nature of land use conflict along the urban -rural fringe. It then complicates this picture by introducing the effects of inefficient speculation for urban development combined with leap frog development patterns. The third introduces the common tools by which states and their local governments attempt to preserve I of 29 9/29/2003 3:03 PM FIL - Ohio Conference - Nelson http://www.farmlandinfo,org/fic/ft/ohio/nelson.htin farmland and, through a brief literature review, assesses the extent to which they are effective. The paper concludes with an outline for research into farmland preservation policies. GENERAL MODELS OF LAND USE Two of the most general and conceptually universal models of regional land use were devised one hundred years apart. In 1826, Johann Heinrich von Thunen published Der Isolierte Staat in Beziehung auf Landwirtshaft (The Isolated State in Relation to Agriculture), in which he described the nineteenth century ecology of agriculture. Figure 1 illustrates his theory. In general, agricultural activities conformed to a concentric pattern based on a combination of perishability and weight. The more perishable a product, the more crucial is was to produce it near urban centers for marketing lest it rot before being offered for sale. Likewise, the weightier the product the more crucial is was to produce it near urban centers lest the cost of its transport reduced profit to zero. Six zones were conceptualized. The innermost was devoted to the most perishable of commodities at that time such as milk and vegetables. The next zone was devoted to firewood and timber, which are bulky products that are costly to transport. The third zone was devoted to raising rye grain -- a stable of von Thunen's time, while the fourth and fifth were composed of declining proportions of rye with pasture and fallow crops. The outermost zone was occupied by land -extensive use of livestock which, after all, could transport themselves to market at very low cost and without perishing en route. Von Thunen did not pay close attention to the ecology of urban areas. In 1925, Ernest W. Park wrote "The Growth of the City: An Introduction to a Research Project", a chapter in the volume The City edited by himself with Robert E. Park and R. D. MacKenzie in which he described the ecology of urban development. His general model was of an urbanized area composed of ten concentric zones ranging from the central business district through residential zones of differing income levels to a "commuter's" zone (see Figure 2 . As one zone grows, such as the central business district, it would invade and succeed parts or all of the next zone, which would then invade and succeed in the zone adjacent to it, and so forth. Implied by Burgess was that agriculture exists beyond the commuter's zone. About one hundred fifty years after von Thunen and fifty years after Burgess, Robert Sinclair (1967) brought agricultural ecology into the twentieth century. His model of the agricultural landscape was composed of five principal zones, illustrated in Figure 3. The innermost zone was where "urban farming" occurred, which we know commonly as "truck" farming. Because of the perishable nature of products raised by truck farms, this zone conforms comfortably with von Thunen's innermost zone. The next zone, however, is very different: It is really nothing more than land waiting for urbanization. It is either vacant or underproductive. In Megalopolis, Jean Gottman (1961) also wrote of this zone, finding that it extends many miles away from built up urban areas. With some trepidation, I attempt to merge and reconcile urban and agricultural land use models into one grand model of regional land use. It is shown in Figure 4. From Burgess, the first nine zones are more -or -less his. Burgess' tenth zone is Sinclair's first because it is in the "commuting" zone where both urban or truck farming and low density residential development can be found, sometimes side-by-side. Sinclair's second through fifth zones are my eleventh through fifteenth zones. I add a sixteenth zone, which is wood fibre. The regional model of land use makes all the necessary assumptions to keep it simple, such as a uniform plain, internalized trade, one center of economic activity (e.g., there are no edge cities), constant returns to scale, homogeneity of tastes and preferences, perfect information, internalization of externalities, no transaction costs, and the rest. Because the real world is not so easy to model and certainly violates pure assumptions, we turn our attention now to the effect of market dynamics on farmland. 2 of 29 9/29/2003 3:03 PM FIL - Ohio Conference - Nelson 0 2. WI R 0 http://www.farmlandinfo.org/fie/ft/ohio/nelson.btm Figure 1. The von Thunen (1826) regional landscape with respect to concentric zones of agriculture. Concentric zones correspond to: 1. Perishable commodities such as milk and vegetables. 2. Firewood and timber, which are bulky and therefore costly to transport. 3. Rye grain, which was a staple of von Thunen's time. 4. Mostly rye but some fallow. 5. Mostly fallow but some rye. 6. Livestock grazing and cheap transportation of livestock to market. 3 of 29 9/29/2003 3:03 PM FIL - Ohio Conference - Nelson @(D 161 http://www.fannlandinfo.org/fic/ft/ohio/nelson.htm Figure 2. The Burgess (1925) regional landscape with respect to concentric zones of urban development. As one zone grew, it invaded and succeeded into part or all of the next, causing that zone to invade and succeed into part or all of the next. Concentric zones correspond to: 1. Central business district. 2. Wholesale and light manufacturing. 3. Lower income, high density urban residential. 4. Middle income, moderate density urban residential. 5. Upper income, low density urban residential. 6. Heavy manufacturing estates. 7. Outlying, low intensity business districts. 8. Residential suburbs to inner city. 9. Residential suburbs to industrial zone. 10. Commuting zone. 9/29/2003 3:03 PM 4 of 29 FIL - Ohio Conference - Nelson http://www.farmlandinfo.org/fie/ft/ohio/nelson.htm Figure 3. The Sinclair (1967) regional landscape as a modernization of the von Th❑nen regional landscape with respect to concentric zones of agriculture. Concentric zones correspond to: 1. Urban farming, usually composed of truck farms and nurseries. 2. Vacant and grazing zone, which later researchers would call the zone of the "impermanence syndrome" (Berry 1978). 3. Field crops and grazing. 4. Dairying and field crops. 5. Specialized feed -grain livestock. 5 of 29 9/29/2003 3:03 PM FIL - Ohio Conference - Nelson m to to is t� bttp://www.farmlandinfo-org/fic/ft/obio/nelson-httn Figure 4. The Nelson (1998) regional landscape, putting it altogether with respect to all major land use activities of a metropolitan region. Concentric zones are: 1-9. The Burgess (1925) zones (they remain surprisingly robust 75 years later). 10. Burgess' commuting zone and Sinclair's zone of urban farming. 11. Sinclair's (1967) vacant and grazing zone, also Berry's (1978) impermanence syndrome zone and Gottmann's (1961) zone of underused farmland. 12-15. Sinclair's (1967) zonal modernization of von Thunen's (1826) landscape. 16. Forestry and other hinterland, land extensive activities (such as bombing ranges). Burgess' invasion and succession principles very much at work. MARKET DYNAMICS AND FARMLAND There are some who argue that there is no compelling need to preserve resource land since there is so much of it. There are about 540 million acres of arable farmland, according to the U. S. Department of Agriculture, of which nearly 400 million acres are in cropland use. There is more than 700 million acres of forested land, or nearly twice as much as cropland. Estimates of additional cropland needed for food production by the year 2000 range from 22 million acres (Batie and Healy 1983) to 113 million acres (Sampson 1981). A doubling of land used for urban purposes would not significantly affect the supply of arable land. Moreover, land developed for urban uses can be converted back to resource uses if economics justify it, and technology may soon do away with the need for soil in which to raise crops anyway (Fischel 1982). Given those considerations, resource land preservation policies may be unnecessary. However, not all arable cropland is of high productivity or in the best location. There are 9/29/2003 3:03 PM 6of29 FIL - Ohio Conference - Nelson http://www.farmlandinfo.org/fic/ft/ohio/nelson.htm about 384 million acres of prime farmland (Soil Capability Class I and II) in the contiguous 48 states of which about 250 million acres are cultivated. About 50 million acres of such prime farmland are within 50 miles of the 100 largest urbanized areas (Furuseth and Pierce 1982). Most prime farmland is located within the suburban and exurban counties of metropolitan areas (Nelson 1990b). In effect, the very land that is most important for its location and productive qualities is also the most vulnerable for development (Solomon 1984). Between 500,000 and 1 million acres of prime agricultural land is lost each year to urban or scattered suburban development (National Agricultural Lands Study ["NALS"] 1981; Dideriksen and Sampson 1976; Berry and Plaut 1978). These losses are presently compensated by putting lower quality, marginal land into production at greater economic and environmental cost (Platt 1985). As prime farmland is lost, marginally productive land is brought into resource uses through brute force means such as heavy applications of chemicals, but this has adverse environmental effects (Platt 1985)_ The Urban Land Institute (1982), for instance, argues that new farmland can come from land presently in swamps or forest, or other land that may be intensively irrigated and heavily fertilized. But conversion of swamps and forests to agriculture has come under criticism in recent years. Increased reliance on irrigation runs contrary to present concerns about wise use of water, especially in semiarid climates. As the U.S. Department of Agriculture (1975) notes, preservation of resource land for food, fibre, and other forms of production at least guards against future uncertainties since such land requires fewer economic and environmental inputs relative to marginal lands. There are four ways in which resource land is at a disadvantage relative to urban development: (1) overvaluation of land for urban development; (2) urban spillovers on resource land; (3) failure of the land market to reflect the value of resource land to society; and (4) the impermanence syndrome that induces resource land operators to withdraw from resource activities prematurely. Overvaluation of Land for Urban Development One of the problems with prime farmland preservation is that such land is sometimes made more valuable in the market for urban uses through subsidies such as (1) inefficient inducements to industrial development through tax concessions and subsidized utility extensions; (2) inefficient home construction caused partly by tax concessions given to home owners through the federal income tax system; (3) inefficient urban land allocation caused by local government planning policies oversupplying land for lower densities while undersupplying land for higher densities thereby forcing more lower residential development than is efficient; and (4) inefficient public facility pricing resulting in higher density development in urban areas --where facility costs are relatively low per unit --paying the same rates and thereby subsidizing suburban lower density development --where facility costs are relatively high per unit (Sullivan 1988; Frank 1989a, 1989b; Harvey and Clark 1965; Clawson 1971; Gurko 1972). The urban land market internalizes these economic subsidies into higher valued land at the urban -rural fringe. The effect is more land used for low density urban development than would occur without those subsidies. Another effect is inefficient speculation of farmland for potential conversion to urban development. While speculation, per se, is an important element of an efficiently operating urban land market, it has adverse effects on land markets when speculative behavior is induced through policy. Urban development subsidies signal speculators to expect more lower density development than they would without such policies (Clawson 1962, 1971; Harvey and Clark 1965). Of course, resource land also receives subsidies in the form of preferential taxation and federal commodity price supports. To some extent, resource land subsidies offset urban land subsidies. However, urban land subsidies are many times higher than resource land subsidies along the urban -rural fringe. Moreover, resource land subsidies tend to go where urban development pressures are the minimal. 7 of 29 9/29/2003 3:03 PM FIL - Ohio Conference - Nelson http://www.farmiandinfo-org/fic/ft/ohio/nelson.htm The overall effect of public policies is to make land more valuable for urban uses than for resource uses along the urban fringe. This is illustrated inFigure 5. mat S{alfaY'�r`G � CiM f. ma 3;€t`,ibisinn' and gym, 1o"T t: C# 4: 02 - !at Figure 5 P, r. In the absence of urban subsidies and spillover effects of urban development on farmland, equilibrium in land used for urban and farming activities is at Q1. One effect of subsidies given to urban development --such as mortgage interest deductions, inefficient pricing of public facilities, and inefficient pricing of highways --is that the value of land for urban uses rises above its value for farming, shown here as the different between U2 and U1. However, the effect of urban spillovers on farmland is to lower the value of land for farming shown here as the different between R2 and R1. The overall effect is inefficient urban development, also called urban sprawl. Spillovers and the Undervaluation of Land for Farming Another factor giving urban development disproportionate advantages over resource land is spillovers. As urban development invades rural areas, it imposes spillovers on farmland. These spillovers reduce the productivity of resource land, thereby making such land less valuable for resource uses and more attractive for speculation. The following are five common spillover effects are: Regulation of resource activities deemed nuisances by nonfarm residents in rural areas. These include restrictions on fertilizers, manure disposal, smells, slow-moving farm vehicles on commuter roads; limitations on use of pesticides and herbicides; restrictions on farm noises and hours of operation; restrictions on dust and glare; limitations on irrigation; and restrictions on other activities that may upset the lifestyle of urban households located in rural areas (Berry 1978). 9/29/2003 3:03 PM 8 of 29 FIL - Ohio Conference - Nelson http://www.farmlandinfo.org/fie/ft/ohio/nelson.htm • Increased property taxation to pay for new schools, roads, services, and facilities intended to serve needs of urban households. Resource land operators pay for those new facilities and services on the basis of the amount and value of land they own and not necessarily on how much they use such facilities and services (Keene et al. 1976). • Air pollution damage to crops and trees caused by automobiles, industrial activity, and even residential space heating (Prestbo 1975). • Destruction of crops or equipment or harassment of farm animals by urban households living in rural areas. Theft of tree crops, berries, and vegetables is common (Berry, Leonardo, and Bieri 1976). • Use of eminent domain to acquire at relatively low cost resource land for public uses serving primarily new residential development (Berry and Plaut 1978). Use of eminent domain for roads and reservoirs is common. (For timber land, an additional spillover occurs when urban households living in rural areas oppose timber harvesting sometimes ostensibly on environmental grounds but often for the real reason that the loss of trees removes an amenity urban households enjoy without cost.) The effect of these and related spillovers is that resource land is made less valuable for resource uses the closer it is to urban development in the manner illustrated in Figure 6. Indeed, as urban development becomes scattered throughout rural areas, spillovers are imposed everywhere and the value of land for resource uses falls. This is illustrated in Fiqure 7. Eventually, spillovers can reduce the supply of resource land to a level below the critical mass needed to sustain the regional resource economy base. ,. M.«...,,.....,.., f.,,�.....e,...-...� Aim rM T, �. .. ... 6}fiifA:.tCN �! "s�6114;t:at'11:1k',a tl�^Yt' Uxf9 d.��i� 4i4>'Yi&fl$Kilfl9Lr�lil;�"S :01t *0 Vr^a`kSPltidi o syrdv" X411'J'V ce wan 9m%durs-re. it -,;, m ,ft W4?tAygws9S€ 9 of 29 9/29/2003 3:03 PM F1L - Ohio Conference - Nelson Figure 6 http://www.farmlandinfo-org/fic/ft/ohio/nelson.btrn This figure shows the effect of urban spillovers on the value of farmland beyond the boundary of urban development; value rises with distance from urban development. The impermanence syndrome affects the area shown emanating from the boundary of urban development outward to the location where urban spillovers are not felt. In the area affected by the impermanence syndrome, farmland owners (or speculators acquiring farmland for future conversion) disinvest in farming. Figure 7 IFt A44MA04010 Of W-0 VW09,&" fUS 11W!JWWAiA416t7WA Ntf�if . f�C�ilwp �RRS�t� fit ,.MCMC +Ctk:PRu�r� This figure shows the effect of leapfrog urban sprawl on a region's farmland. Studies have suggested that urban spillovers and the impermanence syndrome can be felt by farmland owners three or more miles beyond the boundary of urban development. The effect of leapfrog development is to riddle the regional landscape with pockets of urban development, thereby greatly expanding the area affected by the impermanence syndrome. Such development patterns can, and do, eliminate the critical mass of farmland needed to sustain a region's agricultural and timber economic base. Unpriced Benefits Resource lands offer value to society in ways that are reflected in the land market. Common societal benefits include groundwater recharge and water purification, flood and erosion control, air cleansing, and scenery. Moreover, the value of such lands to future generations may be greater than it is to the current generation. In sum, farmland has important features making it inherently worthy of preservation (Lee 1979). 9/29/2003 3:03 PM 10 of 29 1'�y�;: �:Itot�N'dl4ristr�urr�+�rne �� nxcsr�stScM n�,tbw�rL (r.��r�+ iF3rtj EtCvkN�;'f16P". �'Y�a.Wiff4 a TT y, 4 VOL* to W'd gar Irwo u Awa This figure shows the effect of leapfrog urban sprawl on a region's farmland. Studies have suggested that urban spillovers and the impermanence syndrome can be felt by farmland owners three or more miles beyond the boundary of urban development. The effect of leapfrog development is to riddle the regional landscape with pockets of urban development, thereby greatly expanding the area affected by the impermanence syndrome. Such development patterns can, and do, eliminate the critical mass of farmland needed to sustain a region's agricultural and timber economic base. Unpriced Benefits Resource lands offer value to society in ways that are reflected in the land market. Common societal benefits include groundwater recharge and water purification, flood and erosion control, air cleansing, and scenery. Moreover, the value of such lands to future generations may be greater than it is to the current generation. In sum, farmland has important features making it inherently worthy of preservation (Lee 1979). 9/29/2003 3:03 PM 10 of 29 FIL - Ohio Conference - Nelson http://www.familandinfo.org/fic/ft/ohio/nelson.htm The Impermanence Syndrome The combination of overvaluation of resource land for urban development and undervaluation of resource land because of urban spillovers is the impermanence syndrome (Keene et al. 1975; Currier 1978; Nelson 1992). The impermanence syndrome is characterized by resource landowners who believe that resource activities in their area has limited or no future and that urbanization will absorb their holdings sooner than later. It is manifested through disinvestment in inputs, sale of tracts for hobby farms, ranchettes, or small woodlots, and shifting of crop selection away from high to low investment options. The impermanence syndrome causes many resource landowners to become speculators in their own land. The result is vast areas of underutilized and idle land near and between urban areas (Gottmann 1961; Berry 1976; Vining, Bieri, and Strauss 1977). There is some evidence to suggest that for every acre of resource land that is urbanized, another half - acre to one acre becomes idle due to the impermanence syndrome (Plaut 1976.) Ultimately, the critical mass of farming production needed to sustain key components of the local farming economy collapses (Berry 1976; Daniels and Nelson 1986; Daniels 1986; Lapping and FitzSimmons 1982). Thus, a fundamental purpose of a resource land preservation scheme is to remove the impermanence syndrome (Plaut 1976; Berry, Leonardo, and Bieri 1976; Berry 1978; NALS 1981; Nelson 1984, 1986). FARMLAND PRESERVATION TOOLS Nearly two-thirds of the nation's total farmland is within or near the fringes of a metropolitan area (Nelson 1992). Not surprisingly, state and local governments have taken a variety of steps to protect farmland from encroaching urban development. All fifty states have some type of right -to -farm law protecting farmers from legal actions by residential neighbors. In at least twenty-two states, local governments can apply special protective zoning to agricultural land (Walmer 1990). While agricultural preservation programs are adopted primarily for the purpose of protecting viable farms and agricultural resources from urban development, they are often components of a more comprehensive urban containment program. In fact, many programs now included under the urban containment banner owe their origins to state and local agricultural programs adopted in the 1960s and 1970s. Resource land preservation policies are used to protect resource operations from incompatible urban sprawl development and to slow or prevent the premature conversion of productive resource areas to urban land uses. A variety of resource land preservation techniques are available, but few are really effective by themselves. These techniques fall into broad categories characterized as taxation policies, right -to- farm, acquisition of development rights, and resource land -use districting. This section reviews commonly used farmland preservation tools. Where possible, it also reviews what we know and do not know about their effectiveness. But first some context. Taxation Policies Real property taxes can consume as much as 20 percent of a farmer's net farm income (Keene et al. 1975). In urban fringe areas, real property taxes can equal or exceed net farm income (Leutwiler 1986). This occurs when farmland is assessed not for its farm use or productive value but for its potential value as urban development. Farmers owning land close to urban development incur a property tax burden considerably in excess of the benefits received because such taxes help pay for urban facilities and services that farmers do not use (Gloudemans 1974). To respond to this apparent inequity, all fifty states use some form of tax incentive or disincentive to slow, if not prevent, the conversion of farmland to urban uses. In theory, if the tax burden can be reduced, resource landowners will defer selling out to speculators and thereby keep their land in production for a longer period of time than may be the case under higher property taxes. The major taxing techniques fall into the categories of property tax incentives and disincentives, income taxes, and capital gains penalties. 1 l of 29 9/29/2003 3:03 PM FIL - Ohio Conference - Nelson http://Www.farmlandinfo.org/fir,/ft/ohio/nelson.h= Property Tax Incentives and Disincentives By far the most common taxation techniques are property tax incentives and disincentives. Such tax policies include differential assessments and deferred assessments. Differential Tax Assessments. Forty-eight states employ some form of differential assessment of resource land. Differential assessment usually involves (1) reducing the tax rate that is applied to the assessed value of farmland so that taxes are assessed only for certain services; (2) reducing the assessed value of resource land to a percentage relative to urban land; or (3) assessing the value of resource land based on its use value and not its value as urban development. The principal objectives of differential assessment are to reduce the property tax burden on resource land near urban development, delay the sale and development of such land for urban uses, and recognize that such land typically places far less demand on local government for the facilities and services that are financed from property taxes (Keene et al. 1975; Currier 1978; Plaut 1977). There are two major forms of differential assessment: preferential assessment and restrictive agreement or contract assessment. Under all variations of preferential assessment, resource land is taxed only on its productive value, which is typically established by state agricultural experts. There are three variants of preferential assessments: pure preferential assessments, preferential assessments with conveyance or use penalties, and deferred assessments with rollback penalties (Currier 1978; Plaut 1977; NALS 1981; Rose 1984). Seventeen states use pure preferential assessments wherein property taxes are based on the productive value of resource land as established by state agencies. There is no penalty for converting resource land to urban development. There is also no penalty for idling land once it has been designated for preferential treatment. In Indiana, for example, all resource landowners receive pure preferential assessment, whether they use the land or not. In other states, the local assessor may revoke pure preferential assessment for land that is removed from production over a number of years. Since there is no direct penalty for development land, enrollment in pure preferential assessment programs is popular among speculators. Not surprisingly, preferential assessment policies do not slow the conversion of resource land to urban uses; indeed, such programs may facilitate conversion (Forkenbrock and Fisher 1983). Near urban areas, pure preferential assessment policies increase speculative value and do not increase productive value. Such programs may actually push some urban development farther away from urban areas when speculators owning land near urban areas use low property taxes to subsidize their holding costs, thereby affording them the luxury of withholding their land from development. To counteract the potentially perverse effects of pure preferential assessment, seven states penalize conversion with conveyance or use -change taxes. The penalty is triggered when preferential status is revoked. The penalty may be assessed if the use changes simultaneously with sale of the property, as when an option on a property is exercised by a developer who then proceeds with development. More typically, it is assessed when the owner voluntarily withdraws from preferential assessment status, usually in anticipation of use change. Least typically, it is assessed when the local tax assessor determines the properly has not been used as farmland in recent years. In some states, the tax is a percentage (10 percent to 30 percent) of the difference between agricultural use value and market value. Restrictive agreements or contract assessments require resource landowners to enter into long-term contracts with counties in exchange for receiving preferential assessment. If land subject to such agreements is developed while the contract is in force, property tax penalties are assessed. In California, for example, the principal technique for preserving farmland is the Williamson Act, a state law that provides tax breaks to rural landowners who keep their property in agricultural uses. Under the act, a landowner and a county enter into a contract in which the landowner agrees not to develop the land for ten years in exchange for county commitments to assess the property on the basis of its value as agricultural land, rather than its market value to developers. Contracts exclude 12 of 29 9/29/2003 3:03 PM FIL • Ohio Conference - Nelson http://www.farmlandinfo-org/fic/ft/ohio/nelson.btm nonagricultural uses and are binding on succeeding owners. Contracts are automatically renewed for one-year periods unless nonrenewal notice is given by either the local government or the landowner. Contracts are canceled if development occurs. The owner is assessed a cancellation fee equal to 12.5 percent of the then full market value of the land. A landowner wishing to remove the land from a contract may usually do so only through nonrenewal of the contract. Under nonrenewal, property assessments will rise gradually over a ten-year period, after which the property is available for development. The Williamson Act is credited with limiting sprawl in the vast Central Valley region of California, where 90 percent or more of all land remains in agricultural production. Its usefulness around metropolitan areas, however, is questionable. Recent state statistics show that most of the state's nonrenewal land is located in the rapidly urbanizing areas of southern California, especially Riverside, Ventura, and San Diego counties. Furthermore, the Williamson Act has contributed to the financial problems of rural counties. To compensate the counties for lost tax revenue, the state provides subventions of between $0.40 and $8.00 per acre per year. The fact that this amount has not been increased since 1976 has led to political unrest among some rural counties (Fulton 1990). State Income Tax Credits. Michigan and Wisconsin use "circuit breaker" programs in which property tax relief for resource landowners takes the form of a state income tax rebate. In Michigan, an income tax rebate is triggered when local property taxes assessed on a farmer exceed 7 percent of her or his net farm income. The state refunds income taxes equal to the property taxes paid in excess of that threshold. The program applies only to those landowners who contract with the state for at least a ten year period. Michigan landowners who do not renew their contracts must repay the state the last seven years' rebates. Landowners allowed to withdraw from the program before contract expiration must repay the state all property taxes rebated plus six percent interest. Such programs have little effect on preserving farmland and actually encourage reduced productivity to reduce net farm income to a level that would qualify for property tax rebates. Participants in the programs are typically retired, other low- income nonfarm households, farmers earning a few thousand dollars annually, and farmers who lost money (Barrows and Bonderud 1988). Speculators can purchase existing farms and maintain them at minimal levels until conversion --all the while enjoying subsidized holding costs in the form of rebates by placing title for tax purposes in low -earning corporate entities. The penalty at conversion is minimal compared to the costs of development. The policy thus reduces farmland productivity but increases speculative value. Less than 5 percent of Michigan's land base is enrolled in this program (Barrows and Bonderud 1988) and such land is located within or near metropolitan areas. Capital Gains Penalties. Two states, Connecticut and Vermont, attempt to discourage land speculation by assessing a special capital gains tax on it. Vermont's land sales tax applies a sliding scale to all land sold or exchanged within six years of purchase. For land sold within one year of purchase, the tax ranges from 30 percent on any gain of less than double the purchase price, up to 60 percent on gains of more than triple the purchase price. Parcels of less than ten to fifteen acres in size (depending on location) are exempt. The practical effect of the capital gains tax is to withhold land from the market until the tax is too small to matter (or until the capital gains no longer applies). This has the perverse effect of driving land values up by restricting urban land supply everywhere. The policy does initially slow the pace of conversion, though once a full six-year cycle has run its course, farmland may actually be traded at a faster rate for higher prices to accommodate pent-up demand. Effectiveness of Tax Programs. By themselves, these various tax programs do little to preserve resource land and actually stimulate speculation while also displacing urban development from areas near cities to areas farther away. One simple correction to all such programs would be imposing a tax penalty equal to the present value of all property taxes not assessed between initial enrollment and development. Another solution would be to assess a lump sum tax equal to the difference between the market value of land at the time of development and the value of such land for resource uses. No states have such 13 of 29 9/29/2003 3:03 PM FIL - Ohio Conference - Nelson http://www.farmlandinfo.org/flclft/ohio/nelson.htm corrective policies. The result is inefficient land -use behavior near urban areas that must be corrected with land -use planning schemes. Right -to -Farm Laws Right -to -farm laws protect farmers from land use actions or restrictions over which they have little or no control (Leutwyler 1986). The central feature of such laws is to make it difficult for nearby nonfarm residents to restrict operations through nuisance suits. Without right -to -farm, neighbors are free to allege nuisance due to chemical spray drift, smells, noises, hours of operation, and so forth. Right -to -farm laws attempt to tip the balance in favor of farmers through statutory declarations that standard farming practices are reasonable land uses, despite their possible adverse impacts on neighboring property. Such laws often go further by stating that the social utility of farming outweighs, to some degree, incidental harm to nearby properties. Moreover, such laws put new residents on notice that they may be "coming to the nuisance" if they choose to live near a farm. Right -to -farm laws have several shortcomings. First, they do not prevent farmers from converting land to urban uses or selling it to speculators. Second, right -to -farm laws may not apply to the operations of a succeeding owner; the practices of one owner may become ineligible for right -to -farm protection if they are continued by a new owner. Third, right -to- farm laws may not protect nuisance suits brought against operators who change agricultural practices, no matter how insignificant the change may appear (Lapping and Leutwiler 1987). Fourth, farmland that is fallow during the year in which new development occurs nearby may not be protected from conversion to more intensive use in the future. Fifth, local governments often retain statutory power to regulate (and ban) the use of fertilizers, pesticides, and herbicides as an expression of the their police power rights to protect the health, safety, and general welfare of residents (Rose 1984). An even more insidious problem is that right -to -farm laws address nuisance, not trespass. Traditionally, courts have required plaintiffs to demonstrate physical invasion of property in order to show trespass. The trespass test has evolved in recent years, however, to the point where a plaintiff may need only demonstrate that the actions of another deprived the plaintiff of exclusive possession of their property. Under this broadened test, chemical drift, odors, and airborne particulate matter would constitute a trespass. Even with right -to -farm laws, farmers may become vulnerable to this attack (Bradbury 1986). Acquisition of Development Rights Recognizing that taxation and zoning programs are limited, if not often counterproductive, in their ability to preserve resource land, many local governments have sought to acquire development rights to such land especially near urban areas. It is hoped that by placing development rights in the hands of local government or third parties, speculative value can be reduced and productive value increased. Three techniques are used to acquire development rights on resource land: (1) transfer of development rights; (2) purchase of development rights; and (3) conservation easements. Transfer of Development Rights (TDRs). The cornerstone of the TDR concept is the recognition that the possibility of developing land is a fungible commodity distinct from the land itself. A TDR program typically permits owners of land in development -restricted areas called sending districts to sever the development rights from their property and sell those rights to property owners in specified receiving districts. Landowners who purchase development rights are then able to increase the amount of development that can be built on the receiver site. TDRs can be used to save historic structures from demolition, prevent urbanization of farmland, and preserve unique environmental areas and scenic vistas. TDRs offer communities a compromise between acquisition and regulation. Few programs, theoretically at least, seem to offer so much for so little --the community retains the critical resource, the property owner receives property tax relief and compensation, and the local government bears responsibility only for initial implementation of the program. Early TDR programs did not work well, however, largely because they were 9/29/2003 3:03 PM 14 of 29 FIL - Ohio Conference - Nelson http://www.farmlandinfo.org/fic/ft/ohio/nelson.btm optional and because local officials had limited familiarity with how to operate them effectively. Second -generation programs have gone much farther toward fulfilling the original promise of the TDR concept. Specific state enabling legislation is not necessarily required prior to utilization of a TDR program. At present, TDR programs exist in states that do not have legislation specifically allowing such programs. Broad enabling legislation, coupled with case law granting wide latitude to municipalities to zone for the public welfare, seem to allow TDRs as a legitimate use of a municipality's zoning powers (Bozung 1983). To be successful, a TDR program must recognize a viable market for development rights. Suitable receiver sites, capable of accommodating the development to be transferred, must be identified. Receiver sites must be subject to sufficient growth pressure, and development regulations in the receiver area must be restrictive enough to provide landowners with an incentive to purchase development rights. One serious limitation of TDR programs is that they do not assure maintenance of a critical mass of resource operations. Viable, commercial scale agriculture in prime farmland regions requires very large areas of farmland on the order of thousands of acres (Lapping and FitzSimmons 1982). Random sales of TDRs will not prevent the scattered subdivision of farmland tracts to the acreage density allowed by zoning in all situations where TDR is used. Since subdivision and sale of farmland tracts into acreage rural residential sites is not prevented, it is possible that a regional farming economy can be so disrupted by such scattered development that it will no longer be able to support a commercial farming infrastructure (Furuseth 1980, 1981; Furuseth and Pierce 1982; Gustafson, Daniels and Shirack 1982; Nelson 1983a, 1983b; Daniels and Nelson 1986; Daniels 1986). Montgomery County, Maryland. Montgomery County adopted a farmland preservation program using TDR. The program was designed to reduce the effects of downzoning land in the agricultural reserve zoning district from one unit per five acres to one unit per twenty-five acres, the minimum size required to operate a profitable farm. Development in the agricultural district is further restricted by requiring a maximum lot area of 40,000 square feet, and requiring that all housing units be clustered within a confined area on the parcel. TDR is authorized by state statute in Maryland. That statute allows consideration of repurchase of development rights if, after twenty-five years, the petitioner for repurchase can demonstrate that farming is not feasible, and further provided that repurchase is authorized by the local governing body as well as by various state officials (Rose 1984). By the 1990s, development rights were fetching up to about $5,000 per unit. Under the Montgomery County TDR program, landowners are entitled to sell the right to develop one housing unit for each five acres of restricted land, less the number of residences already on the property. Upon sale of all available rights, the development potential is extinguished through the placement of a restrictive easement on the sending property. In TDR receiving areas, maximum density increases permitted with TDRs vary by residential district. This amount can be further increased if moderately priced dwelling units are included in the project. As an additional incentive, the provision of wastewater service is accelerated by at least four to five years upon purchase of the rights (Bozung 1983). An excess of available rights in sending areas has kept the price of a TDR too low for many farms to consider selling. Even though more receiving areas were added and the demand and utilization increased, the price of TDRs declined, indicating that more than simple supply and demand forces may have been at work. It appears that TDR entitlement based on acreage rather than land value makes it advantageous for landowners of lesser valued properties farther away from urban areas to sell. This helps keep the TDR price low and discourages those with more valuable land from entering the market. Despite these problems, however, the Montgomery County TDR program has been largely successful in preserving agricultural land and stabilizing farmland prices. Purchase of Development Rights (PDRs).Another way to preserve resource land for the public interest is for local or state governments to purchase development rights outright. Purchase of development rights does not result in purchase of title fee simple. Rather, the rights to all future development are acquired. To date, the use of PDR is rare. One 15 of 29 9/29/2003 3:03 PM FIL - Ohio Conference - Nelson http://www.farmiandinfo.org/fle/ft/ohio/nelson.htm economic problem with the programs is that they involve taxpayers paying twice for those rights, first through infrastructure investments and development patterns that create development value and again for such value created. Another limitation is that since PDRs are voluntary programs, they suffer from the same limitations as TDRs in not assuring preservation of the critical mass of resource land needed to sustain the regional resource economic base. King County, Washington. During the 1980s, King County purchased the development rights to about 13,000 acres of agricultural land (Spellman 1984). It is the only PDR program in place outside the northeastern United States. The rights were purchased from farmers who voluntarily negotiated the sale with the county. The county intends to apply nonexclusive agricultural zoning on another 17,000 acres in the same area. The cost was over $50 million. it will cost the 1.3 million King County residents an average $9 per person for eleven years to retire bonds floated to purchase those rights. This will have the effect of ensuring permanent open space for urban residents in exchange for tax burden shifting (from farmland to urban landowners); without such purchase there is no guarantee that open -space land would not be developed at some point in the future. King County residents thus face up to the value of open space by internalizing its value through a tax arrangement. In effect, the program shelters future generations of taxpayers from subsidizing farmers in return for owning development rights. Suffolk County, New York -in Suffolk County, on Long Island, New York, a similar program has worked to purchase a much smaller amount of farmland for much more money. Over 3,000 acres of farmland have been purchased for more than $200 million since the 1970s (Klein 1986; NALS 1981; Rose 1984). Bonds financing the purchases are retired by an increment on the property tax. Pennsylvania. The state of Pennsylvania offers funds to purchase development rights statewide. Funds are appropriated from the legislature and then distributed to counties on a more or less first -come -first-served basis. The state has few guidelines for using the funds. Consequently many purchases are not strategic and are not used to create the critical mass of land area needed to sustain agricultural operations. Indeed, the state actually works to undermine its own program by requiring counties to broadly advertise which development rights have been purchased and where. This results in developers subdividing land next to such farmland so as to build and sell at higher prices homes with exclusive farm views. Massachusetts. Under Massachusetts' Agricultural Preservation Restriction program, development rights to agricultural lands are bought and held by the Commonwealth, and future land use is limited to agriculture. The state also uses various land trusts to acquire and manage lands. Both of these programs, however, have been severely limited by state budgetary constraints and high land prices in recent years. Over the last ten years, the state has spent $45 million to protect 22,000 acres of farmland. But this represents only 3 percent of Massachusetts' active farmland; the rest remains zoned for conventional development (Arendt 1990: 5). Nantucket's state -approved land bank, financed by a 2 percent real estate transfer tax on island land transactions, has fared much better in implementing open -space -preservation objectives than have traditional growth management mechanisms. The measure represents an attempt to preserve public access to the shores and moors. Critics, however, suggest that the program tempts the land bank commission to pursue fee simple purchases instead of searching for more creative, and possibly more economically viable, solutions (Klein 1986). New Jersey. In an effort to protect farmland, New Jersey voters passed a $50 million bond issue in 1981. It provided funding to two programs --an eight-year deed restriction program that made farmers eligible for state cost-sharing conservation programs and protected them from nuisance suits, and a permanent easement sale program, which paid farmers for the development rights to their property. While the development rights program was initially the most popular, both programs have been successful and have protected a total 9/29/2003 3:04 PM 16 of 29 F1L - Ohio Conference - Nelson http://www.farn]andinfo.org/fic/ft/ohio/nelson-htm of nearly 43,000 acres of New Jersey farmland from development since their inception (York 1989: 31). Conservation Easements. Conservation easements involve the transfer of development rights from a property owner to a third party, such as the Conservation Foundation. Conservation easements enable landowner to retain title to an undivided tract and use it for resource purposes. The advantage to the landowner is reducing the value of land to its inherent value for resource activites. For many landowners, this enables them to continue living on their land without facing higher property taxes. It also gives them altruistic oppotunity to preserve resource lands as open space in perpetuity. Finally,since the easement is a gift to a qualified charitable organization, the difference between the market value of the land and its inherent resource land value becomes a deduction against taxable income.Local government can play a role in facilitating conservation easements by putting third parties active in acquiring conservation easements in contact with potentially receptive resource landowners. Local planners can review the nature of current and anticipated land -use regulations and market conditions. This information will be needed by appraisers who must certify the value of the easement. Agricultural and Forest Zoning Agricultural zoning, including forest zoning, is the most common method of resource land preservation used by local governments (NALS 1981). Such zoning restricts land uses to farming and livestock, other kinds of open space activity, and limited home building. It is sometimes used in tandem with regional urban containment planning (Nelson 1985b). Hawaii and Oregon require the use of agricultural zoning by all local governments that have prime agricultural farmland. The most important element of agricultural zoning is the extent to which it restricts the intrusion of new, nonfarm uses into established agricultural areas. In its purest form, agricultural zoning intends to prevent nonfarm activities in resource districts. Many exclusive farm (and forest) use zones have very large minimum lot sizes that are calibrated to about the minimum size necessary to sustain a viable farming operation, taking into consideration the production characteristics of the region. Four general approaches to resource -land -use zoning are reviewed here: nonexclusive use zoning, voluntary agricultural districts, exclusive use zoning, and agricultural buffers. Nonexclusive Use Zoning. Nonexclusive agricultural zoning usually includes (1) large minimum lot sizes, ranging from 10 to 640 acres and more; (2) entitlement to single-family home construction on any preexisting and newly created but conforming lot; (3) no requirement to demonstrate the effects on farm production of land partitioning at the minimum lot size; and (4) a wide range of uses allowed by conditional use permit, including commercial recreation, smaller than minimum lot size developments, patently nonfarm dwelling units, agriculturally related industrial activities, and planned developments (sometimes at higher densities). There is evidence that nonexclusive zoning can have perverse outcomes (Archer 1977; Daniels and Nelson 1986; Nelson 1983a, 1983b). Families wishing to own one or two acres near urban areas are forced to buy farms and leave all but one or two acres untended. While the surplus land may be rented to nearby farmers, rental agreements are short term and typically do not involve maintenance of or investment in major improvements such as irrigation systems, tiling, and buildings (Daniels 1986). Viable commercial farming operations fall in number and the local agricultural support economy suffers (Daniels and Nelson 1986). Over time, large acreage rural residential sprawl invades and succeeds in the region, resource land becomes underproductive or idle and more acres are taken out of production than would have been without such zoning (Archer 1977). As the agricultural economy is decimated, buyers of the large farm tracts should be expected over time to lobby for relaxing zoning restrictions to allow for smaller acreage development and perhaps low- density urban development. Productive value falls, but consumptive and speculative values rise. Voluntary Agricultural Districting. Voluntary agricultural districting involves farmers within a defined area petitioning a state agency to collectively form such a district. Within 17 of 29 9/29/2003 3:04 PM FIL - Ohio Conference - Nelson http://www.farmiandinfo.org/fic/ft/ohio/nelson.htm agricultural districts, farmers are protected to some extent from (1) state and local land use and building regulations on farming activities that do not threaten the public healthy, safety, and welfare; (2) special assessments for water, sewer, lighting, and other forms of utility districts; and (3) the use of eminent domain to acquire farmland for public uses (Berry and Plaut 1978; Geier 1980; Rose 1984; Bills and Boisvert 1988). Land within such districts receives differential property tax assessment, although such assessments are also available to outside landowners. Since the actual land -use restrictions are similar to those for nonexclusive zoning, these districts suffer from the same limitations. New York State. In New York state, such districts are approved by local and state agencies and administered by the host county. Petitioners must own 500 acres or 10 percent of the land in the proposed district, whichever is greater. The state commissioner of agriculture may also create districts of 2,000 or more acres to protect "unique and irreplaceable agricultural lands," but so far none have been created by the commissioner. By the 1990s, more than 8 million acres of farmland (25 percent of the entire state land area) were in about 400 districts. The number of districts actually fluctuates however, as district status can be changed by action of the county governing body (Bills and Boisvert 1988). Landowners can enroll in deferred taxation programs for which the tax penalty is five years' back taxes upon conversion. Many landowners eschew participation in this special tax program, although there is some evidence to suggest that participation increases in proximity to growing urban areas (Bills and Boisvert 1988). Exclusive Use Zonin- . Exclusive use zoning prohibits nonfarm activities in farming districts. Many exclusive use zones have very large minimum lot sizes that are calibrated to approximate the minimum size necessary to sustain a viable farming operation, taking into consideration the production characteristics of the region. When properly prepared and strictly administered, exclusive use zones show great promise for removing speculative value of resource land, thereby encouraging greater productivity of resource lands near urban areas than would be possible under speculative conditions. California. In California, Madeira County has minimum lot sizes of 640 acres and Tulare County has an 80 -acre minimum. Commercially viable agriculture in these areas requires large tracts of land. In Oregon, however, there is no explicit minimum lot size; land partitionings are approved only when there is evidence showing that partitioning will improve farming activities; dwellings are allowed only if demonstrably needed to support farming operations, although nonfarm dwellings are allowed by conditional use in certain, low -production soils; and commercial recreation and industrial activities are restricted to the least productive soils or subareas most impacted by nearby urban development. Oregon. Oregon's growth management program requires that all lands with productive soils located outside of designated urban growth boundaries be classified as exclusive farm use zones. Many counties using exclusive use zoning have no explicit minimum lot size. Land partitionings are approved only when evidence shows that farming will be improved. Dwellings are allowed only if needed to support farming operations, although nonfarm dwellings are allowed on certain, low -production soils. Commercial recreation and industrial activities are restricted to the least productive soils or small areas most impacted by nearby urban development. In 1993, the Oregon legislature required local governments to adopt minimum lot sizes of 80 acres in western Oregon and 160 acres in eastern Oregon in exclusive use zones. Urban growth boundaries (UGBs) are used in Oregon as a means by which to direct development into cities and preserve the countryside for agriculture and other open -space uses. Small -acreage homesites that cannot be accommodated within UGBs are directed to carefully restricted exception areas, which are areas of low resource productivity that are historically used for hobby farms or small woodlots. Lancaster County, Pennsylvania. Does effective farmland preservation require state intervention as is seen in Oregon and Hawaii? Not necessarily. All the techniques used in Oregon are being applied in Lancaster County, Pennsylvania, albeit on an area -by -area basis. Through negotiations with local government units, Lancaster County is gradually 18 of 29 9/29/2003 3:04 PM FIL - Ohio Conference - Nelson http://www.farmlandinfo.org/fie/ft/ohio/nelson.htm installing urban service limits around cities and placing large areas of farmland into exclusive farm use districts, The county is successful because it uses state PDR funds in a strategic manner. Rather than using scarce PDR funds anywhere, it targets those funds in situations where they can be used to effectively create urban growth boundaries and create exclusive farming areas of such size as to achieve a critical mass of land area needed to sustain economic activity (Daniels 1991). Agricultural Buffers One method used to reduce conflicts between urban and agricultural land -use activities is to require urban development to buffer itself from agriculture or forest areas. Buffer schemes vary considerably from just a few feet to three miles. As a general principle, the larger the buffer, the more protected agriculture and forestry is from urban development. California. The California Coastal Commission requires a 200 -foot buffer between developments and commercial agricultural lands (Schiffman 1989). Maine. Maine prohibits development and wells within 150 feet of any farm that is registered with a town government. The law also requires sellers of land adjacent to such registered farms to inform buyers of the buffer area (Schiffman 1989). Oregon. Oregon requires that destination resorts be at least three miles away from prime agricultural areas, which are mapped as exclusive farm use districts on local comprehensive plans. Development outside urban growth boundaries is regulated by local governments, which usually require a minimum 100 -foot setback and often as much as 500 feet. CALL FOR SYSTEMATIC RESEARCH In truth, we know very little about the effectiveness of farmland preservation policies. Part of the problem is that we actually do not know what the metropolitan regional landscape would be in the absence of externalities and market failure. Lacking this basic understanding, there is no way in which to compare farmland preservation techniques because there is no benchmark with which to compare them, Nevertheless, as in all pursuits of knowledge, there is much that can be done to evaluate farmland preservation policies. This last section of this paper presents an outline of systematic research into the effectiveness of farmland preservation policies. A Pure Landscape Richard Muth (1961) demonstrated theoretically that as the demand for food rises, farm commodity prices will rise, and farmland will become so valuable that it will stop suburban fringe development from consuming farmland, and even invade and succeed existing development. His theory made heroic assumptions about such things as fungibility of land, perfect knowledge, no transaction costs, no externalities, and the like. What is missing from the theoretical literature is a land use allocation model that does two things: (1) reflect current land use patterns considering such messy effects as imperfect information, transaction costs, externalities, diversity of tastes, development subsidy and commodity price support policies, investment risk and related factors, and (2) a landscape devoid of those factors. The "difference" between (2) and (1) is the amount of farmland lost to market failure. This would be the true benchmark against which farmland preservation policies could be measured and compared. Pricing Economists correctly observe that much of today's perceived market failures are actually 19 of 29 9/29/2003 3:04 PM FIL - Ohio Conference - Nelson http://www.farmlandinfo.org/fic/ft/ohio/nelson.htm caused by public policies that interfere with decision-making that, while is not perfectly efficient, is actually often more efficient than when tainted by policy -driven inducements. To some, such as professors Peter Gordon and Harry W. Richardson (1993), to reshape urban development patterns and to incidentally preserve land for farming or other open space uses, all we need to do is eliminate market subsidies, internalize externalities by charging the marginal social cost for gasoline or auction pollution rights, and acquire the development rights to lands the produce public goods. They are correct. The elimination of mortgage interest and property tax deductions to federal and state taxable income would remove a $150 billion shelter current taxpayers receive annually, enough to pay off half the nation's $5 trillion debt over time. Subsidies to urban development are roughly ten- times the $15 billion commodity support subsidies Congress gives to farmers -- and those subsidies are declining. Properly pricing gasoline to compensate society for air pollution, road construction and maintenance costs, and other externalities would result in five -dollar -per -gallon prices. The acquisition of development rights to farmland would come to a few hundred billion dollars paid by society as whole through higher taxes. The result is that people would buy smaller homes on smaller lots closer to employment, shopping, and services, and development would be stopped at the border of lands providing public goods. Numerous other market-based pricing and allocation mechanisms would also improve society. There is much research that is needed to characterize accurate the influence of pricing on regional land use with special emphasis on farmland preservation, including but not limited to the following. Development Subsidies. Urban development is patently subsidies by federal, state, and local policies. Mortgage and property tax deductions to taxable income are only one of many sets. Another form of development subsidy is utility pricing. Every analysis of the costs of serving alternative development patterns of which this writer is familiar shows that low density development costs more to serve than higher density development, yet because of flat rate and average -cost pricing, low density development merely pays the same rates as higher density development. The problem includes not only water and wastewater systems, but stormwater, electrical, natural gas, cable, and telephone systems as well. A final form of development subsidy is the underpricing of transportation. Although popular conventional wisdom is that highways are financed from gasoline taxes, in truth much of those costs are paid from state and local income, sales, and property taxes. A model of metropolitan land use patterns should be devised which characterizes land uses with and without those subsidies, and applied to each metropolitan region. One could then estimate and perhaps even identify the farmland that is jeopardized by current subsidies. Policies could then be evaluated in part for their effectiveness in preventing the development of such farmland. Commodity Subsidies. It seems inconsistent in public opinion that subsidies given to farmers are viewed with some suspicion when in fact they are less than ten percent of the value of subsidies awarded urban and suburban households. To level the playing field, and perhaps to see Dr. Muth's pure theory work as it should, there should be more commodity support subsidies, not less. But those subsidies would need to be targeted to those farmlands most susceptible to invasion and succession by suburban fringe development. This is clearly an avenue of research applicable mostly to metropolitan areas. Externalities Farmland is unique in producing both positive and negative externalities. On the positive size, farmland offers pleasant pastoral views that are valued by urban residential development which pays a premium for consuming it. On the negative side, farming engages in a variety of noxious and nuisance -type activities to which urban development objects. The positive externality is internalized only by urban development. To work 9/29/2003 3:04 PM 20 of 29 F1L - Ohio Conference - Nelson http://www.farmlandinfo,org/fie/ft/ohio/nelson.htm properly, farmland's positive externality must be internalized by farmland since it produces it. Instead, farmland often internalizes negative externalities such as when urban development uses courts to stop the spread of chemicals, or when residents of urban development help themselves to what farmers raise, or when pets of those residents kill or harass farm animals, or when urban air pollution reduces farming productivity. To be sure, the economic value of positive and negative externalities depends on many factors such as the terrain, perhaps the climate, development patterns and pressures, crop selection, technology, and so forth. There is very little research that characterizes externalities and none that decomposes them into their component parts. Acquisition of Development Rights Billions of dollars have been spent across the nation by local governments to acquire the development rights to farmland. Billions more have been sold to private development interests who use such rights to increase development density in urban "receiving" areas. Farmland has certainly been "preserved." The question is, however, is that farmland being used productively? This writer observes, only anecdotally, that some "farmers" in Washington's King County are actually urban residents in search of a acreage estate within an easy drive of Seattle or its edge cities. Much of that land is not used productively. Post hoc research should be undertaken to compare farmland productivity before and after development rights were transferred. Tax Incentives and Disincentives Every state uses tax incentives and disincentives in their attempt to preserve farmland. Oddly, there is no systematic research into their effectiveness, which seems further odd considering the opportunity for cross-section analysis among states using different approaches. This is not say the field is devoid of research on some specific programs. As reviewed earlier, tax incentive and disincentive programs suffer from the same or similar shortcoming -- the penalty for conversion is less than the present value of the taxes deferred or in other ways underpaid over time. Tax programs become essentially a mechanism used by speculators to hedge their holding costs. More, not less farmland is converted principally because development leap -frogs over farmland tracts that sit idle longer than is efficient. Research should be conducted that compares the percent of tax recovery associated with each program, and the pattern of both enrollment and conversion over time. Case study and cross-sectional analyses should be reasonably executed. Right -to -Farm Right -to -farm laws promise protection to farmers from latecomers who want a rural lifestyle without the rural life that goes along with it. Pitfalls of such laws were reviewed earlier. The trouble is, there is really no assessment in legal, planning, economic, or other literature on whether such laws make a difference. Since almost all states have such laws, content analysis of statutes combined with court interpretations and on -the -ground analysis of conversion patterns would be most useful. The legal arena could be tested in a different manner, however. Because there is insufficient demand to develop all farmland, the properly rights of farmers wishing to remain in farming will be taken by private sector actions that develop those few for which a market exists. It seems odd to this writer that while government action leading to taking without compensation is considered unconstitutional, similar taking by private actions is not. Perhaps a new constitutional theory of private taking of property rights without just compensation needs to be advanced and tested. This is clearly an avenue of research for legal scholars. 21 of 29 9/29/2003 3:04 PM FIL - Ohio Conference - Nelson Zoning http://www.fannlandinfo.org/fic/ft/ohio/nelson.ti-tm Every state enables the local use of zoning to preserve farmland. Most states employ non-exclusive zoning while some use voluntary agricultural districting using the same zoning approach. A few enable and fewer still require exclusive -use zoning, which prevents even the issuance of a building permit for a home on farmland unless the home is necessary to sustain farming. Although this writer has engaged in some research on the effectiveness of all such policies, in truth systematic research is needed. This research would focus on such things as the amount of land to which such zoning is applied, the characteristics of zoning (such as minimum lot size and exclusive -use), market parameters such as size and growth rate of the region, perhaps terrain, and crop selection typical of the area. Multi -variate, cross-section analysis and individual case studies may suffice to learn about the effectiveness of different approaches controlling for a variety of factors. There is the special case of "rural cluster zoning" (Arendt 1994) in which large farmland tracts are subdivided into homesites but most of the tract is retained for farm use. The question, naturally is, what is the difference in agricultural productivity with the use of rural cluster zoning? Performance -Based Systems There is growing interest in the use of "performance-based" land use evaluation systems, such as the land evaluation suitability assessment (LESA) approach. Very few local governments use them, but contingency analysis comparing those governments with adjacent "control" local governments could be useful. SUMMARY COMMENTS Left to its own devices, the nation's government, financing, and economic institutions may render agriculture essentially meaningless in the nation's economic picture by the end of the next generation. Public officials perceive the problem and every state enables local governments to do something about it. A plethora of farmland preservation techniques exist but a catalogue of their effectiveness is missing. Lacking information, public policy -makers are without the factual basis needed to reconsider those techniques that are not effective -- and especially through that lead to perverse outcomes. Systematic research is needed, now, to sow the seeds for new policy-making based on facts that will yield a strong agricultural economy for generations to come. References and Selected Bibliography Alonso, William. 1960. A Theory of the Urban Land Market. Papers and Proceedings of the Regional Science Association. 6: 149-157. Altshuler, Alan. 1979. The Urban Transportation System: Policies and Policy Innovation. Joint Center for Urban Studies (Cambridge, MA). American Farmland Trust. 1997. Farming on the Edge. Washington, DC. Archer, R.W. 1977. Policy and Research Issues in Subdivisions for Rural Residences, Hobby Farms, and Rural Retreats. 48th ANZAAS Congress, Melbourne, Australia. Bahl, Roy W. 1968. A Land Speculation Model: The Role of the Property Tax as a Constraint to Urban Sprawl. Journal of Regional Science 8(2). Barron, James C. and James W. Thompson. 1973. Impacts of Open Space Taxation in 9/29/2003 3:04 PM 22 of 29 FIL - Ohio Conference - Nelson http://www.farrnlandinfo.org/fic/ft/ohio/nelson.htm Washington. Washington Agricultural Experimental Station Bulletin 772, Washington State University (Pullman, WA). Barrows, Richard and Kendra Bonderud. 1988. The Distribution of Tax Relief Under Farm Circuit Breakers. Land Economics 64, 1: 15-27. Batie, Sandra and Robert G. Healy. 1983. The Future of American Agriculture. Scientific American 248, 2: 45-53. Baumol, William J. and Wallace E. Oates_ 1975. The Theory of Environmental Policy. Prentice -Hall (Englewood Cliffs, NJ). Berry, Brian J. L. and Donald C. Dahmann. 1980. Population Redistribution in the United States. In Population Redistribution and Public Policy ed. by Brian J. L. Berry and Lester P. Silverman. National Academy of Sciences (Washington). Berry, David. 1976. Idling of Farmland in the Philadelphia Region, 9930-9970. Regional Science Research Institute Discussion Paper Series No. 88. University of Massachusetts (Amherst). Berry, David. 1978. Effects of Urbanization on Agricultural Activities. Growth and Change 9, 3: 2-8. Berry, David and Thomas Plaut. 1978. Retaining Agricultural Activities Under Urban Pressures: A Review of Land Use Conflicts and Policies. Policy Sciences 9: 153-178. Berry, David; Ernest Leonardo, and Kenneth Bled. 1976. The Farmer's Response to Urbanization. Regional Science Research Institute Discussion Paper Series No. 92. University of Massachusetts (Amherst, MA). Bills, Nelson L. 1975. Extent of Local Efforts to Form Agricultural Districts in New York State. Journal of the Northeastern Agricultural Economics Council 4. Bills, Nelson L. and Richard N. Boisvert. 1988. Information for Evaluating Land Retention Programs: The Agriculture District Approach. Paper presented to the Resolving Rural Conflicts symposium, Mt. Allison University, New Brunswick, Canada. Blumenfeld, Hans. 1983. Metropolis Extended. Journal of the American Planning Association 52(3): 346-348. Boal, Frederick W. 1970. Urban Growth and Land Value Patterns. Professional Geographer 22, 2: 79-82. Boehm, Thomas and Joseph McKenzie. 1981. The Investment Demand for Housing. Office of Policy and Economic Research (Washington). Bradbury, Dana Ann. 1986. Suburban Sprawl and the Right to Farm. Washburn University Law Review 22: 448-468. Bryant, William and Howard Conklin. 1975. New Farmland Preservation Programs in New York. Journal of the American Institute of Planners. 41. Burchell, Robert W. et al. 1998. The Costs of Sprawl Revisited. New Brunswick, NJ: Center for Urban Policy Research, Rutgers University. 23 of 29 9/29/2003 3:04 PM F1L - Ohio Conference - Nelson http://www.farmlandinfo.org/ric/ft/ohio/nelson.h.tm Burgess, Ernest W. 1925, The Growth of the City. In The City ed. by Robert E. Park, Ernest W. Burgess, and R. D. McKenzie. University of Chicago Press (Chicago, IL). Buttel, F. H. 1982. The Political -Economy of Part -Time Farming. GeoJournal 6: 293-300. Catanese, Anthony James and Arthur C. Nelson. 1988. The Buying of America's Neighborhoods: The Planning Policy Implications of Neighborhood Buyouts. Center for Urban Planning and Development, Georgia Institute of Technology (Atlanta, GA). Clawson, Marion. 1962. Urban Sprawl and Speculation in Suburban Land. Land Economics. 99-111. Clawson, Marion. 1971. Suburban Land Conversion in the United States. The Johns Hopkins Press (Baltimore, MD). Conklin, Howard and William Bryant. 1974. Agricultural Districts: A Compromise Approach to Agricultural Preservation, American Journal of Agricultural Economics 56: 607-613. Correll, Mark R., Jane H. Lillydahl, and Larry D. Singell. 1978. The Effects of Greenbelts on Residential Property Values. Land Economics 54, 2: 207-217. Coughlin, Robert C., David Berry, and Thomas Plaut. 1978. Differential Assessment of Real Property as an Incentive to Open Space Preservation and Farmland Retention. National Tax Journal June: 165-179. Currier, Barry A. 1978. An Analysis of Differential Taxation as a Method of Maintaining Agricultural and Open Space Land Uses. University of Florida Law Review 30(5): 821-842. Daniels, Thomas L. 1986. Hobby Farming in America: Rural Development or Threat to Commercial Agriculture? Journal of Rural Studies 2(1): 31-40. Daniels, Thomas L., Robert H. Daniels and Mark B. Lapping. 1986. The Vermont Land Gains Tax. American Journal of Economics and Sociology 45, 4: 441-456. Daniels, Thomas L. and Arthur C. Nelson. 1986. Is Oregon's Farmland Preservation Program Working? Journal of the American Planning Association 52, 1: 22-32. DeGrove, John M. 1983. Land Growth and Politics. American Planning Association (Chicago). Dideriksen, Ray and R. Neil Sampson. 1976. Important Farmlands - A National Viewpoint. Journal of Soil and Water Conservation 31. Ely, R. T. and G. S. Wehrwein. 1940. Land Economics. McMillan (New York). Esseks, J. D. 1978. The Politics of Farmland Preservation. Policy Studies Journal. 6: 514519. Fischel, William. 1982. The Urbanization of Agricultural Land. Land Economics 58(2): 236-259. Fischel, William. 1983. The Economics of Zoning. Johns Hopkins (Baltimore). Forkenbrock, David J. and Peter S. Fisher. 1983. Tax Incentives to Slow Farmland 9/29/2003 3:04 PM 24 of 29 FIL - Ohio Conference - Nelson http://www.farmlandinfo.org/fic/ft/ohio/nelson.htni Conversion. Policy Studies Journal 11: 25-37. Frank, James E. 1989. The Costs of Alternative Development Patterns. Washington, DC: Urban Land Institute (Washington, DC). Fuller, Anthony M. and Julius A. Mage, eds. 1975. Part -Time Farming. Proceedings of the First Rural Geography Symposium (University of Guelph, Guelph, Ontario). Furuseth, Owen J. 1980. The Oregon Agricultural Protection Program: A Review and Assessment. Natural Resources Journal. 20: 603-614. Furuseth, Owen J. 1981. Update on Oregon's Agricultural Protection Program: A Land Use Perspective. Natural Resource Journal 21: 57-70. Furuseth, Owen J. and John T. Pierce. 1982. Agricultural Land in Urban Society. Chicago: Association of American Geographers. Geier, Karl E. 1980. Agricultural Districts and Zoning: A State -Local Approach to a National Problem. Ecology Law Quarterly 8:655-696. Gloudemans, Robert J. 1974. Use -Value Farmland Assessments. International Association of Assessing Officers (Chicago). Goldberg, Michael and Peter Chinloy. 1984. Urban Land Economics. John Wiley and Sons (New York). Gordon, Peter and Harry W. Richardson. 1993. "Market Planning: Oxymoron or Common Sense?" Journal of the American Planning Association 59(3). Gottmann, Jean. 1961. Megalopolis. Twentieth Century Fund (New York). Gustafson, Greg C., Thomas L. Daniels and Rosalyn P. Shirack. 1982. The Oregon Land Use Act. Journal of the American Planning Association 48, 3: 365-73. Hagman, Donald C. and Julian Conrad Juergensmeyer. 1987. Urban Planning and Land Development Control Law. West Publishing (St. Paul, MN), Hand, Jacqueline P. 1984. Right -to -Farm Laws: Breaking New Ground in the Preservation of Farmland. University of Pittsburgh Law Review 45: 297 et seq. Hanson, David E. and S. I. Schwartz. 1975. Landowner Behavior at the Rural -Urban Fringe in Response to Preferential Property Taxation. Land Economics 51, 4: 341-354. Hart, John Fraser, 1980. Land Use and Change in a Piedmont County. Annals of the Association of American Geographers. 70(4): 492-527. Harvey, Robert O. and W. A. V. Clark. 1965. The Nature and Economics of Urban Sprawl. Land Economics 41(1). Herbers, John. 1986. The New Heartland. Times Books (New York). International Association of Assessing Officers. 1975. Property Tax Incentives for Preservation: Use -Value Assessment and the Preservation of Farmland, Open Space, and Historic Sites. International Association of Assessing Officers (Chicago). 25 of 29 9/29/2003 3:04 PM FIL - Ohio Conference - Nelson http://www.farmlaDdinfo.org/fic/ft/ohio/nelson.htm Keene, John C. et al. 1975. Untaxing Open Space. Council on Environmental Quality (Washington). Kolesar, John and Jaye Scholl. 1972. Misplaced Hopes, Misspent Millions. The Center for Analysis of Public Issues. Princeton (Princeton, NJ). Knaap, Gerrit J. and Arthur C. Nelson. 1992. The Regulated Landscape, Cambridge, MA: Lincoln Institute of Land Policy. Lapping, Mark B. and J. F. FitzSimmons. 1982. Beyond the Land Issue: Farm Viability Strategies. GeoJournal6: 519-24. Lapping, Mark B. and Nels R. Leutwiler, 1987. Agriculture in Conflict: Right -to -Farm Laws and the Pari -Urban Milieu for Farming. In Sustaining Agriculture in Cities, edited by William Lockeretz. Ankeny, IA: Soil and Water Conservation Society of America. Lapping, Mark B., George E. Penfold, and S. MacPherson. 1983. Right to Farm Laws. Journal of Soil and Water Conservation. 38: 465-467. Lee, Douglass B. 1979. Market Failure. The Land Use Policy Debate in the United States. Praeger (New York). Leonard, H. Jeffrey. 1983. Managing Oregon's Growth. Conservation Foundation (Washington). Leutwiler, Nels R. 1986. Farmland Preservation Laws: What Do They Do? Can They Be Justified. Unpublished masters thesis. Department of Urban Planning. University of Colorado at Denver. Marchand, J. M. and K. P. Russell. Externalities, Liability, Separability and Resource Allocation, American Economic Review 63(4): 611-20. Meier, Bruce W. An Urban Induced Ring of Disinvestment by Farm Operators. Paper presented to 1988 conference of the Association of American Geographers, Portland, Oregon. Miami University (Miami, Ohio). Mills, Edwin S. 1969. The Value of Urban Land. In The Quality of the Urban Environment ed. by Harvey Perloff. Resources for the Future (Johns Hopkins University, Baltimore). Mills, Edwin S. and Bruce W. Hamilton. 1988. Urban Economics. Fourth Edition. Scott Foresman (Homewood, IL). Muth, Richard F. 1961. Economic Change and Rural -Urban Land Conversions. Econometrica 29: 1-23. National Agricultural Lands Study. 1981. Washington: US Department of Agriculture. National Association of State Development Agencies. January 1989. Farmland Notes. National Association of State Development Agencies Research Foundation Farmland Project (Washington). Nelson, Arthur C. 1983a. Comment on the Oregon Land Use Act. Journal of the American Planning Association 49, 1: 85-87. 9/29/2003 3:04 PM 26 of 29 FIL - Ohio Conference - Nelson http://www.fartnlandinfo.org/fic/ft/ohio/nelson.htm Nelson, Arthur C. 1983b. Comment. Natural Resources Journal 23, 1: 1-5. Nelson, Arthur C. 1984, Evaluating Urban Containment Programs. Portland, OR: Center for Urban Studies, Portland State University. Nelson, Arthur C. 1985. Demand, Segmentation, and Timing Effects of an Urban Containment Program on Urban Fringe Land Values. Urban Studies 22: 439-443. Nelson, Arthur C. 1985b. A Unifying View of Greenbelt Influences on Regional Land Values and Implications for Regional Policy. Growth and Change 16(2): 43-48. Nelson, Arthur C. 1986. Using Land Markets to Evaluate Urban Containment Programs Journal of the American Planning Association 52, 2: 156-171. Nelson, Arthur C. 1986b. Towards a Theory of the American Rural Residential Land Market. Journal of Rural Studies 2(4): 309-319. Nelson, Arthur C. 1987. How Regional Planning Influences Rural Land Values. In Sustaining Agriculture Near Cities. Soil and Water Conservation Society (Ankeny, Iowa). Nelson, Arthur C. 1988. An Empirical Note on How Regional Urban Containment Policy Influences an Interaction Between Greenbelt and Exurban Land Markets. Journal of the American Planning Association 52, 2: 178-184. Nelson, Arthur C. 1988b. Additional and Reduced Demand, Amenity and Disamenity Increment Recapture Considerations of Urban Containment Policies. Real Estate Issues. Nelson, Arthur C. and Kenneth J. Dueker. 1989. The Exurbanization of America. Journal of Planning Education and Research. (Forthcoming.) Nelson, Arthur C. 1992. "Preserving Prime Farmland in the Face of Urbanization: Lessons from Oregon." Journal of the American Planning Association 58(4): 467-488, Nelson, Arthur C. Nelson and James B. Duncan et al.. 1995. Growth Management Principles and Practices. Chicago, IL: American Planning Association. Office of Technology Assessment. 1995. The Technological Reshaping of Metropolitan America. Washington, DC: Congress of the United States, Pasour, E. C. 1972. The Capitalization of Real Property Taxes Levied on Farm Real Estate. American Journal of Agricultural Economics 52: 549-556. Peiser, Richard B. 1989. "Density and Urban Sprawl." Land Economics 65, 3: 194-204. Penfold, George. 1988. Right -to -Farm as a Method of Conflict Resolution. Paper presented at the Conference on Resolving Rural Development Conflicts, Mount Allison University, New Brunswick. Peterson, George E. and Harvey Yampolsky. 1975. Urban Development of Metropolitan Farmland. Washington: The Urban Institute. Platt, Rutherford H. 1985. The Farmland Conversion Debate. Professional Geographer 37(4): 433-442. Plaut, Thomas. 1976. The Effects of Urbanization on the loss of Farmland at the 27 of 29 9/29/2003 3:04 PM F1L - Ohio Conference - Nelson http://www.farm]andinfo.org/fic/ft/ohio/nelson.htTn Rural -Urban Fringe: A National and Regional Perspective. Regional Science Research Institute Discussion Paper Series No. 94. University of Massachusetts (Amherst, MA). Plaut, Thomas. 1977. The Real Property Tax, Differential Assessment, and the Loss of Farmland on the Rural -Urban Fringe. Regional Science Research Institute Discussion Paper Series No. 97. University of Massachusetts (Amherst, MA). Pope, C. Arden. 1985, Agricultural Productive and Consumptive Use Components of Rural Land Values in Texas. American Journal of Agricultural Economics 66, 1: 81-86. Prestbo, John. Ed. This Abundant Land. Dow Jones Books (Princeton, NJ). Radcliff, Richard. 1949. Urban Economics. Rose, Jerome B. 1984. Farmland Preservation Policy and Programs. Natural Resources Journal 24(3): 591-640. Rosser, J. Barkley, 1978. The Theory and Policy Implications of Spatial Discontinuities in Land Values. Land Economics 54, 4: 430-441. Sampson, Neal R. 1981, Farmland or Wasteland. Rodale Press (Philadelphia, PA). Shoup, Donald C. 1970. The Optimal Timing of Urban Land Development. Papers and Proceedings of the Regional Science Association. 25: 33-44. Sinclair, Robert. 1967. Von Thuenen and Urban Sprawl. Annals of the Association of American Geographers 57: 72-87. Schmid, A. Allen. 1968, Converting Rural Land to Urban Uses. Johns Hopkins (Baltimore, MD). Solomon, Barry. 1984. Farmland Protection: A Case of Quality Not Quantity. Land Use Policy: 357-366. Spectorsky, Auguste C. 1955. The Exurbanites. Lippincott (Philadelphia). Spellman, John. 1984, King County's Purchase of Development Rights Program. In Protecting Farmlands ed. by Frederick R. Steiner and John E. Theilacker. AVI Publishing (Westport, CT). Stoler, Frederick D. 1979. Farm -Use Assessment Revisited, Lincoln Institute of Land Policy (Boston). Thompson, Edward, Jr. 1982. Defining and Protecting the Right to Farm (Part 2). Zoning and Planning Law Digest. 5: 67 et seq. United States Department of Agriculture. 1975. Perspectives on Prime Lands. Background papers for a seminar on the retention of prime lands, July 16-17, 1975. Vining, Daniel R., Kenneth Bieri, and Ann Strauss. 1977. Urbanization of Prime Agricultural Land in the United States: A Statistical Analysis. Regional Science Research Institute Discussion Paper Series No. 99. University of Massachusetts (Amherst, MA). Vining, Daniel R., Thomas Plaut, and Kenneth Bieri. 1977. Urban Encroachment on Prime 28 of 29 9/29/2003 3:04 AM FiL � Ohio Conference - Nelson http://www.farmlandinfo.org/fie/ft/ohio/nelson.htm Agricultural Land in the United States. International Regional Science Review 2, 2. Volkman, Nancy J. 1987. Vanishing Lands in the USA. Land Use Policy 4, 1: 14-30. Von Thunen, Johann Heinrich. 1826. Der Isoliorto Staat in Boziohung auf Landwirtshaft (The Isolated State in Relation to Agriculture). Wakeford, Richard Wakeford. 1990. American Development Control. London: HMSO. Zeimetz, Kathryn A., Elizabeth Dillon, Ernest E. Hardy, and Robert C. Otte. 1976. Dynamics of Land Use in Fast Growth Areas. Agricultural Economics Report No. 325, Economic Research Services, United States Department of Agriculture (Washington). 1 Statistical Abstract of the United States reports that for 2000 the figure is about $60 billion. Back to Text. 2 Statistical Abstract of the United States. Back to Text. ARTHUR C. NELSON Chris Nelson is a Professor of City Planning in the College of Architecture at the Georgia Institute of Technology and holds joint appointments in the College of Management and the College of Engineering. He has earned teacher of the year and professional educator of the year honors, and his students recently won the national student project of the year award given by the American Institute of Certified Planners. He is President of the consulting firm, Growth Management Analysts, Inc. For the past twenty years, Dr. Nelson has conducted pioneering work in land use planning, growth management and public facility finance. he has made notable contributions to the areas of local government finance, farmland and forest land preservation, urban containment, and more recently the effect of metropolitan governance structures on metropolitan economic development. His work has been supported by such organizations as the National Science Foundation, National Academy of Sciences, U.S. Departments of Housing and Urban Development, Commerce, and Transporation, Federal National Mortgage Association, and Economic Development Administration, he is the author of six books and more than 100 scholarly and professional publications. "Proceedings. The Performance of State Programs for Farmland Retention. A National Research Conference." September 10 & 11, 1998. Columbus, Ohio. http://www.farmlandinfo.org/fic/fUohio/nelson.htmI Online via American Farmland Trust Farmland Information Center - Library (http://www.farmland info. ong) 29 of 29 9/29/2003 3:04 PM Prosperity for Rural Virginia: The Continuing Story of Rural Virginia Prepared for the Rural Virginia Prosperity Commission, Richmond, August 24, 2000 by Commission Staff from the Rural Economic Analysis Program, Virginia Tech and the Weldon Cooper Center for Public Service, University of Virginia. INTRODUCTION My purpose is to begin a process by which we come to a common understanding of the nature of the economic problems facing rural Virginia. We will hear lots of authentic, specific experiences from people at the grassroots level. It is necessary and proper that we listen and learn. But in that process, we risk not being able to see the forest for the trees—a trap we must not fall into. The economic problems that face rural Virginia are complex. They are rooted in a dynamic market economy. Those of us who have spent lifetimes studying and thinking about the economic problems associated with being rural know that we have less than perfect understanding of those problems and of solutions fiat might have some chance of affecting a positive change. We will not attempt to deal with possible solutions today. We have enough to do just to try to begin to understand the nature of the problem. Only when we have begun to define the problem will we be able to begin to consider possible solutions. Today, we will consider four questions: ♦ What is rural? ♦ What are the economic consequences of being rural? ♦ What must any region have to prosper? ♦ Will the economic problems of rural Virginia self -correct? I ask you to make a conscious effort to discard whatever intellectual baggage you brought here. Not your values, not your experience. We need those things. But let us stand back and try to get a big picture of the situation. We face a difficult challenge, and we will not be able to deal with it unless our minds are open and our thinking fresh. WHAT IS RURAL? We cannot talk about the road back to prosperity in rural Virginia without first spending some time thinking about what it means to be rural. We can define rural in many ways: ♦ Rural is where people make their living from resource-based industries—farming, forestry, fisheries, or mining. ♦ Rural is non -metropolitan. ♦ Rural is where population densities are low. ♦ Rural is where few business services exist. Resource -Based Economies Not so long ago, what being rural meant was fairly obvious. Rural areas were places where people made their living primarily from natural resources—from farming, forestry, fisheries, or mining. Today, that concept of rural is limiting. No counties in Virginia are primarily dependent upon forestry or fisheries for their economies, even though forestry and fisheries are elements of the local economies in a number of places. Only two counties in VirginiaHighland and Cumberland—are dependent on fanning for a significant part of their economy. In many other counties farming is important. Agriculture and agribusiness generate about 11 percent of all jobs and some 10 percent of economic activity in the state! These numbers will be much higher in counties where fanning is prevalent. But farming itself is so efficient that it is not the chief way many people make a living. Four counties in southwest Virginia are dependent upon mining— Buchanan, Dickenson, Russell, and Wise. The notion that the only areas that are rural are those dependent on resources industries is no longer acceptable (Figure 1). If resource-based is the only way to define rural, few rural areas are left in Virginia. Figure 1. Types of Economic Activity in Non -Metropolitan Counties, 1989 Type of economic activity r—1 ....--- — Source: Economic Research Service, USDA. http://www.ers.usda.gov/epubs/otherltypologltyp89va.txt. Accessed Aug. 12, 2000. Rural as Non-Metropolitad Rural development researchers have commonly defined rural as all that area not included within the Census Bureau's Metropolitan Statistical Areas (MSA), so rural by 1 David Lamie. The Economic Impact of Agriculture and Ag -Related Industries on the Commonwealth of Virginia. Va. Coop. Ext. Pub. No. 448-233/REAP R035. August, 1998. 2 US Department of Commerce, Census Bureau uses the terms metropolitan and non -metropolitan to define areas based on population concentrations. USDA, Economic Research Service uses the terms rural and urban also based on population concentrations. USDA breaks down each category into continuums. For our purposes, we are defining rural along a continuum and assume urban and metropolitan are synonymous and will use the term urban. 2 this definition means non -metropolitan. As a rough cut, that delineation works fairly well. In Virginia, 61 counties and cities are within: the most recent definition of MSAs (Figure 2). Yet in Virginia, as in other states, the way in which MSAs are defined includes counties adjacent (outlying) to metropolitan areas where workers commute into the metropolitan area (center). Hence, in Virginia, such counties as Amherst, Bedford, Botetourt, Clarke, Fluvanna, Greene, Isle of Wight, Scott, Warren, and Washington are not counted as rural since they are part of MSAs. Figure 2. US Census Bureau, Metropolitan Statistical Areas (MSA), 1996 Johnson City-King,port-Bristul, Pichmmd-Pct=butg MSA Trnn-V. MSA 0 Centa os Outlying JWCenter Outlying Wjyhiugton,DC-MD-VA-WV FMSA Nnvilk MSA �'] Center tlying [Ni111ok-Virgini f�center ottesville MSA a Beach -Newport [ Ccrota News, VA-NCMSA 0 Outlying 6J caua Gii Outlying I nchlutg MSA Center al Outlying Iyimolx MSA Cella Outyling �r Source: US Bureau of Labor Statistics. "Metropolitan Areas and Components, 1996, with FIPS Codes." http://Stats.bls.govl790metdf.htm. Accessed Aug. 12, 2000. Using the metropolitan/non-metropolitan delineation to define rural leaves a lot of places that would commonly be thought of as rural in non -rural or urban classifications. It may be one way to delineate rural areas, but it is an imprecise way. Population Density If we think of rural as being areas that are relatively sparsely populated, we have another way to define rural Virginia. Figure 3 shows the counties in Virginia divided between those that have fewer than 120 people per square mile, and those that have more than 120 people per square mile. A natural break occurs in the population numbers around 120, and this division fits our intuition in that only a few non -rural or urban areas are identified west of Roanoke. In 1998, 34 Virginia counties had population densities greater than this threshold. Some counties such as Pulaski and Warren lack substantial cities but have slightly more than 120 people per square mile; however, we think of them as rural. Other counties such as Frederick, Henry, and Montgomery with populations of significantly more than 120 people per square mile, we would probably also think of as primarily rural - 3 Still, counting as rural those counties with less than 120 people per square mile is one workable way to delineate rural Virginia. This lack of population concentration separates truly rural counties from those with more concentrated business activity. Figure 3. Population per square mile based on 1998 population estimates. Population per squarernfle I - 120 people per sq. rni. Opt Source: Weldon Cooper Center for Public Service. "1998 Final and 1999 Provisional Population Estimates," http://www.virginia.edu/coopereenterlvastatltxtlest9099a.html. Accessed Aug. 12, 2000. Business Services Another way to think of what is rural is to see rural places as those that are not urban based on some important measure. Urban places typically have a large and varied number of business services available—accountants, lawyers, consultants, people who service office equipment, etc. We can delineate Virginia counties based on how many business service establishments are located in each county. The number varies widely from one in counties like Lee to thousands in some of the counties in Northern Virginia. In Figure 4, we divide the counties based on those that have more business service establishments than Augusta County, including Staunton and Waynesboro, and those that have fewer. (Augusta was the "break" county with an estimated 120 people per square mile in 1998). Eleven counties (including their independent cities) in Virginia have more business service establishments than Augusta: a grouping in northern Virginia, a grouping beginning at Spotsylvania (including Fredericksburg) and moving down to the Richmond City area, a grouping in the Hampton Roads area, and then in Albemarle (including Charlottesville), Campbell (including Lynchburg), and Roanoke City and County (including Salem and Vinton). Using the number of business services as the criterion to determine what is rural leaves the greatest part of Virginia as rural. If population per square mile were overlaid on business services, the relationship between the two would be obvious. El! Figure 4. Business Services, 1996 Source: US Census Bureau. County Business Patterns, 1996. http://www.census.gov/epcd/cbp/view/ cbpview.html. Accessed Aug_ 12, 2000 No One Right Way We have no single right way to define rural Virginia. Rurality occurs along many different dimensions. Some counties have parts that are quite urban and other parts that are very rural. In Washington County, for example, Abingdon is a rapidly growing town. The strip along 1-81 from Abingdon to Bristol is now almost completely built up. Yet, once we leave that strip, we are in open country that most people would recognize as rural. Places can be rural in some ways and not in others. Places that are rural but near large and growing cities, like some of the counties in the lower Shenandoah Valley, have quite different economies and opportunities from those in extreme southwestern Virginia or in some parts of central Piedmont. Places near a major research university, like those in the New River Valley, have different possibilities from those in the Northern Neck. Places that have interstate highway access have different economic opportunities from places in the Piedmont between Lynchburg and Richmond City. We must not make the serious mistake of thinking that all rural places are homogeneous. ECONOMIC CONSEQUENCES OF BEING RURAL Being rural has economic consequences. It affects the economic comparative advantage of an area. Rural areas, with lots of land relative to people, have always had advantages in producing things that require large land areas. They have disadvantages in producing things that require close proximity to large numbers of people. These consequences manifest themselves in a variety of ways. As long as a large fraction of the population was required to be in farming to produce food for the rest of the population, rural areas were assured a substantial population. But increases in production technology, with regard to both labor and land, have reduced the 5 requirement for large numbers of people and large land areas to be devoted to agricultural production. While resource-based industries continue to be important in some parts of the Commonwealth, all resource-based industries (farming, forestry, fisheries, and mining), before measuring the total economic multiplier impacts, accounted for less than 1.5 percent of Virginia's Gross State Product in 1997. Moreover, increases in agricultural productivity have increased the worldwide supplies of agricultural commodities relative to demand so that the long-term trend in the prices has been downward for a generation or more. Farming, forestry, and fisheries may be able to provide prosperity for some parts of rural Virginia. But these resource-based industries are not likely to ever again produce enough income to support a population as large as the current population in many of the counties that are rural by two or more of the criteria we discussed. As the traditional economic base of rural areas has eroded, incomes in rural Virginia have declined relative to the urban parts of the Commonwealth. ♦ In 1998, 85 percent of all personal income received by Virginians went to those who live in the urban counties. ♦ In the 1996-98 period, 87 percent of all growth in personal income in Virginia occurred in the counties within MSAs. The difference in income between rural and non -rural continues to grow whether measured by population, business service index, or MSA. The rate of growth is accelerating in recent years. Average per capita income in 1998 was almost $10,000 higher in Virginia's urban counties than in the nual counties (Figure 5). Figure 5. Difference in per capita income, urban versus rural areas of the state, 1969-98 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 Population/square mile ©Business Service Index O Metropolitan Statistical Area Source: US Dept. of Commerce. Regional Economic Information System 1969-98. Bureau of Economic Analysis. RCN -0250 m CONSEQUENCES OF BEING RURAL Even acknowledging the issues of defining what is rural, one important economic consequence of being rural is that, on average, rugal people are likely to be poorer. And in recent years, they are getting poorer still. Whatever is driving the modern economy in Virginia does not appear to favor rural areas. Another consequence is that the brighter, better educated, and more ambitious young people migrate out of rural areas. Thus, they deprive the places they leave of the investments that have been made in their education as well as their potential leadership and entrepreneurship. Figure 6 shows that the high school dropout rate in the rural counties of Virginia does not differ much from that of the urban centers. Yet based on the 1990 Census, many rural counties had upwards of 40 percent of the population 25 years old or older who had not finished high school (Figure 7). And in five counties, over 50 percent of the population had not finished high school. That picture is likely to be only marginally better in the 2000 census because the younger and better educated continue to leave rural communities. Figure 6. Dropout rate, 1997-98 school year Dropout rate 1997-9B Q Less than 1.091 1.41.5 1.52.0 2.0.2.5 50 More than 25% r Source: Va. Dept. of Education. "1997-98 Superintendent's Annual Report for Virginia." Richmond, Va., 1999. 7 Figure 7. Percent of population over 25 without high school diploma or equivalent, 1990 Per cent over 25 with out high school or equivalent Q Lest than 20% ED 20-30% 30.40% 40-50% More than 50% 7 "sn Source: US Dept. of Commerce, Bureau of the Census. Selected Social Characteristics: 1990. Washington, DC, 1991. This differential migration leaves behind an older and less well educated population who are increasingly dependent upon transfer payments for a major part of their income. Transfer payments include some private pensions, but are primarily made up of Social Security and various types of public assistance. Figure 8 shows the percentage of all personal income in 1998 that was obtained from transfer payments. The higher percentages are in rural areas. Figure 8. Percent of income from transfer payments, 1998 Transfer payments Q 3.7-9.8% 0 9.8-14.8% 14.8-18.6% 18.6-21.5% 21.5-37.6% ..a - VVE., W es, YWII Source: US Dept. of Commerce. "Regional Economic Information System, 1969-98." Bureau of Economic Analysis, RCN -0250. 8 The bottom line is that rural areas with troubled economies become increasingly dependent upon transfers of various sorts from the growing urban centers. Not only are they dependent upon transfer payments as direct income to individuals, but also upon Hitergovern�nental transfers to support cchoolc and local Uoovemments. Figure 9 shows local contributions to the total local plus state budgets for local services. The smaller percentages of local funds are in the rural counties, suggesting state funds are being transferred from economically strong urban areas to rural areas. If rural areas cannot catch up, subsidies from urban to rural Virginia will continue and are likely to grow in the future. Figure 9. Local revenue as percent of total local plus state revenue, 1998 Local rewnue/Total local + state revere Lie- Less eLess than 425 42,553.9°/ 53.9f 5.5% D 65.577.0°/ Q More than 77.0% r� Source: Auditor of Public Accounts. "Exhibit A. General Government," Comparative Report of Local Government Revenues and Expenditures, Year Ended June 30, 1998. Richmond, Va.: Commonwealth of Virginia, April 1999. CHOICES We have three choices if rural communities are to improve important measures like per capita income. ♦ See more rural Virginians move to urban places; ♦ Subsidize rural communities with income earned in urban areas, and ♦ Find ways to "grow" the economies of rural places in Virginia; Allowing continued population losses in rural Virginia might increase per capita incomes in declining areas, but it will only add to congestion and growth problems in urban Virginia. It will also devastate existing local businesses that remain in our rural communities. Mass out -migration is not a very appealing option nor is it one we are likely to consider in any serious way. Increasing subsidization of rural communities is also not a very appealing option. First, it would make more and more rural Virginians dependent on handouts from their so urban neighbors. And second, subsidization begets subsidization. Third, it tends to encourage housing development and population growth in some areas of rural Virginia. Since research shows housing growth alone does not pay for required governmental services, the amount of subsidy would tend to grow at an increasing rate through time. The task of this Commission is the final alternative: to find a way to stimulate economic growth in rural Virginia communities. BASICS OF REGIONAL ECONOMIC GROWTH As individuals, we must sell something to the rest of the world in order to prosper. So too, must a community have something to sell to the rest of the world if it is to prosper. That part of the economy that produces goods and services primarily for sale to the rest of the world is called the economic base. We must remember: No place can grow and thrive unless it has something of value to sell to the outside world. Every place must have an economic base or else it becomes a subsistent economy. Generally, regions sell what they have in greatest relative abundance and what is in demand in the rest of the world. The traditional economic base of rural places was agricultural commodities, forest or fishery products, or the output of mines. Having an economic base in goods or services for which demand is not growing very fast, however, will assure that a region declines relative to other regions with goods and services for which demand is growing rapidly. The problem of resource—based economies is that the demand for homogeneous commodities is not growing rapidly. Hence, prosperity in rural Virginia requires that rural places find new economic bases, ideally centered on goods or services for which demand is growing fast. These new bases can sometimes be different and build on the output from resource-based sectors. However, they are more likely to be new activities not now being pursued in a particular rural community. In the years after World War R, several places in rural Virginia created new economic bases in manufacturing. Manufacturing grew using relatively low-cost surplus labor being released from farming. Indeed, so successful was that strategy that manufacturing became the largest source of income in many rural counties of Virginia (Figure 1). Such a strategy was successful when it focused on relatively mature industries in which production processes were well established and relatively unskilled workers could be trained easily to perform routine tasks. Rural Virginia has a lot of those workers. The conditions no longer exist that made a branch manufacturing plant strategy viable for much of rural Virginia. Those conditions have been destroyed by foreign competition. It was not just policies like NAFTA (North American Free Trade Association), the WTO (World Trade Organization), and GATT (General Agreement on 10 Tariffs and Trade) that brought that foreign competition. Improvements in the efficiency of handling goods in ports, improved communications that allow U.S. management to exercise control over far flung operations, and expanded basic infrastructure in developing countries have now made it possible to find still cheaper labor of the sort required by mature industries. Most of that new and cheaper labor supply is beyond the borders of the U.S. The domestic textile industry, especially, has found that it cannot compete effectively with establishments overseas on the cost of production of standardized products. Hence, not only does it appear that resource-based industries are no longer viable options for the economic base of much of rural Virginia, but neither does it appear that the sort of large- scale manufacturing that competes head-on with foreign production is a viable option. Manufacturing may still have a place as part of the economic base of some parts of nual Virginia. But it is highly unlikely it will take the form of big plants producing large volumes of standardized products for mass consumption. More likely, niche manufacturers will provide the manufacturing base. These operations will produce a special order, custom product which utilize lean workforces of skilled craflspersons or technicians capable of adapting rapidly to changing signals from the markets. Unfortunately, few rural places in Virginia have these kinds of workers. We must, therefore, ponder the big question as we proceed: What does rural Virginia have to sell to the rest of the world for which demand is growing and which can be sold at a profit? IS THE PROBLEM SELF-CORRECTING? Finally, we turn to the question: Is the problem of lagging ncomes in rural areas self- correcting? Many of us believe in market mechanisms and think most economic problems are self-correcting. Yet, we have powerful reasons to believe that the economic problems of rural Virginia will not fix themselves. The first reason, and the one easiest to understand, has to do with human capital -- education, skills, and ambition embodied in individual human beings. People can move. The better educated and the more adaptable they are, the better able they are to move. The more ambitious they are, the more likely they will move to places where opportunities are greatest. We have already seen that school dropout rates between rural and urban places in Virginia are not much different. But huge differences exist in the levels of educational attainment of adults across Virginia. Those numbers show that the rural areas already suffer from a "brain drain" Without the human capital that is being drained away by out- migration of the better educated, more adaptable, and more ambitious young people, rural Virginia will lack a vital component of any economic renewal—people who have the 11 abilities and commitment to bring about change. These people become the entrepreneurs—the important ingredient in any and all economic activity. They are the people who are increasingly hard to find in many of Virginia's rural communities. The other reasons are more complicated. But we have begun to understand that economic development is a bit like a chain reaction in nuclear physics. Once achieved, it tends to be self-sustaining. Achieving a self-sustaining reaction, however, requires first assembling a critical mass. That necessary critical mass is made up of many things: infrastructure, access to technology (especially information technology), financial capital, human capital (especially entrepreneurs), a skilled workforce, and the like. h7 economic development, the critical mass also relates to things like sufficient air travel to support an airport with frequent, direct flights to other major centers; a large, diverse pool of local skills and talents to allow firms to out-source specialized tasks; easy opportunities to interact informally and feed off the ideas of others engaged in similar activities; and all the other things that are possible in large urban centers but are not possible or are harder to accomplish in sparsely populated rural areas. Once that critical mass is achieved, places tend to grow to the point of congestion— and sometimes beyond. Those places that fail to achieve that critical mass either sink into poverty or shed population to reduce the ratio of people to resources. At some relatively low level of population, even the most remote places can provide a reasonably high per capita income for their inhabitants. After all, Alaska is one of our least populated states, but it has one of the highest per capita incomes in the U.S. The only foreseeable self-correction that market forces will bring to the economic problems of rural Virginia is out-migration of people and the accompanying population loss. The cost of accepting self-correction is high—for those who cannot easily pull up stakes and move; for the urban centers which must receive an influx of migrants ill- prepared to make a living in an urban setting; for those who have invested capital in the rural places that will be left behind; and for the urban areas that will have to subsidize the rural communities. We have to find a better way. By working hard and working together, we can and we will. SUMMARY ♦ What it means to be rural today is not as clear as it used to be. We can identify many ways to be rural, and we can describe many different types of rural places in Virginia. No "one size fits all" solution to rural prosperity is likely to work. ♦ Being rural carnes economic disadvantages. It always has! But the disadvantages are perhaps greater in this new economy than they have ever been. 12 ♦ The traditional resource-based industries can no longer support a sizeable population in rural Virginia. Prosperous fanning, timber, fisheries, or mining industries may be very desirable things in their own right, but they can never be prosperous enough to support very many rural residents at a level of economic well-being that will be acceptable. ♦ Neither can traditional manufacturing of standardized products be counted on to provide an economic base for rural Virginia. it cannot withstand competition from manufacturers located in low-wage, offshore economies. Thus, an economic development strategy that focuses on subsidizing relocation of manufacturing plants will not be sufficient in rural areas of the state. ♦ The problem is not going to self -correct. The longer income opportunities lag in niral Virginia, the greater will be the out -migration of the better -educated, more ambitious young people that any area must have to prosper. ♦ Prosperity in rural Virginia requires that rural places have something to sell to the global market economy. Unless they have something to sell for which demand is growing, incomes in rural places will lag. ♦ If a new economic base cannot be discovered and employed, either more young people will leave the rural areas and move to the urban areas, or increasingly greater subsidies will have to be provided to rural residents from the wealth of our urban areas. Our strategic problem is that the old economic base of rural. Virginia is no longer sufficient to support the population of natal Virginia at a level of income reasonably comparable to that of urban Virginia. New economic bases must be found. If new solutions are not found, the rural areas of the Commonwealth will either continue to see population declines or urban residents will increasingly be stuck with supporting their rural neighbors. The needed subsidies, in the form of various types (f transfer payments, will grow over time. As members of this Commission, we trust begin to think about what strategies and policies might help the communities of rural Virginia discover new economic bases. Think about what new things rural Virginians can sell locally, regionally, or worldwide that will allow their populations to prosper. Think about what policies or programmatic changes might be needed. Think about whether some new or different type of institutional presence needs to be established in the state to oversee policies and programs that will help rural communities help themselves. The challenge is a big one. We must find workable solutions to meet the challenge. 13 General Rural Community Center Policies of the Comprehensive Plan Land Use Rural Community Centers Rural community centers are relatively small centers of population and activity in the rural areas of Frederick County. Following the adoption of the 1982 Plan, the Rural Community Center Committee of the Frederick County Planning Commission was formed which proceeded to define rural community centers and to study their characteristics. The Committee held public meetings in 1984 and 1985 to solicit opinions on development policies and developed some recommendations on policies for the rural community centers. The following criteria were used to designate rural community centers: 1. Proximity to and access to collector or arterial routes. 2. Existing concentration of commercial services within the center. 3. Existing concentratior. of public services within the center. 4. Access from concentrations of existing population. 5. Actual population growth in the area. Frederick County 6-44 Comprehensive Plan Land Use 6. Access from concentrations of potential population (subdivided lots). 7. Proximity to other areas which could act as community centers. g. Physical characteristics of land in the area. 9. Public perceptions. 10. Existing public facilities, churches, and civic clubs. The potential Rural Community Centers identified, included the following: Gore Reynolds Store Gainesboro Round Hill Armel Shawneeland/North Mountain Star Tannery Whitacre/Cross Junction Albin Clearbrook/Brucetown Stephenson Provisions should be made in County policies to recognize the rural centers and to accommodate the differences between each center. Many of the centers are zoned for agriculture, which is not necessarily appropriate in relation to the functions of some of the centers. The Committee recommended that Armel, North Mountain/Shawneeland, and Reynolds Store/Whitacre/Cross Junction be treated similarly as the surrounding areas. The recommendations for all other community centers suggest that additional commercial development will occur in the rural community centers. Only the recommendations for Gore suggest encouraging increased amounts and densities of housing in relation to surrounding rural areas. The recommendations for all rural community centers promote improved public services. The recommendations for the Round Hill Community Center place particular emphasis on increased road improvements and the provision of public sewer and water service. Water and sewer issues are also important in the ClearbrookBrucetown and Stephenson areas. A study designed to investigate and develop recommendations on possible methods of treating wastewater in the Round Hill, Clearbrook, and Brucetown areas was conducted. A report was drafted and was finalized October of 1993. The County needs to develop land use policies and regulations which will allow these centers to continue to serve their traditional function without spoiling their rural character. Of all the identified Community Centers, the Round Hill Community has been experiencing the most intense development pressure due to its close proximity to the City of Winchester, the Route 50\37 interchange, central sewer and water, and the County's Urban Development Area boundary. As a result of this, the Comprehensive Plans and Programs Committee began the development of a long-range land use plan for the Round Hill Community first. Frederick County 6-45 Comprehensive Plan Land Use Table 12: Comparative Facts and Figures of Rural Communitv Centers de y �4F;.. ..N.Y .A� - Y .. _ K. . M .' _..� .. i.... d. .I f.,.V'-'§^,°rll�li..ir UTI � ..,>.,�,A C•i, -'�� HOUSING Single Family 122 266 101 346 158 Mobile Homes 13 14 23 229 26 Total 1 135 1 280 1 124 575 1 184 LOT SIZE Average 13 2.75 7.5 4 6.25 Residential 1 2.5 1 1.25 1 2.25 1 1.25 2 POPULATION 466 966 427 1,948 635 LAND USE Residential 288 338 220 545 354 Commercial 5 36 8 52 3 Mixed 5 46 4 80 7 Industrial 30 19 12 411 0 Public/Semi-Public 63 22 9 98 6 Agriculture/ Open 381 352 386 1,414 608 Vacant/Wooded 808 284 549 217 473 Total 1.,580 1,097 1,188 2,817 --] 1,451 Source: Frederick County Department of Planning and Development, 1985 - - r Frederick County 6-46 Comprehensive Plan 1 Land Use Rural Community Center Conclusion Rural community centers have been identified and specific policies have been developed for these centers. Potential rural community centers have also been identified. These should be evaluated and plans should be prepared for each according to need. Issues: ► All Community Centers need to be evaluated on an individual basis and appropriate land use policies developed ► There is a need to determine to what extent rural community centers will be the primary location of commercial and service uses in the rural areas. ► The extent to which additional commercial and residential development should be allowed in each rural community center needs to be determined. P. What density of housing development should be allowed in each center? A policy governing the provision ofpubl is services to rural community centers needs to be established. Frederick County 6-54 Comprehensive Plan