Plan to Keep Farmers on Land Symied by Subsidy
Sen. George McManus wants developer friendly bill
May 11, 2000 | By Keith Schneider
Great Lakes Bulletin News Service
Just when it seemed hopeless that anything would be done to tame sprawl and protect farmland in Michigan, Gov. John Engler himself popped up with a surprise.
Earlier this year, the governor proposed to help growers stay on their land by significantly reducing farmland property taxes. Engler also called for a new state-managed Farmland Preservation Fund to pay for conservation easements and other safeguards that permanently protect crop and pasture land.
By helping farmers stay in agriculture, and by preserving their land base, the governor’s proposals had the added benefit of slowing the spread of subdivisions and malls. In short, after steadfastly discounting the beating that the Michigan countryside has been taking from sprawl, Engler proposed the first comprehensive plan in a generation to modernize the state’s land use policy.
If all that sounds too good to be true, at the moment it is. After working with agriculture interests to shape the package, the governor’s aides entered into closed-door negotiations this spring with home builders and realtors. As a result, hidden amidst a strong package of farmland protection bills being debated this week in the legislature are two measures that instead of protecting farmland are almost sure to accelerate development.
When a state provides preferential tax treatment to farmland, it is only fair to "recapture" those publicly-funded benefits when the land is taken out of production and sold at much higher prices for development. Other states follow this principle. California, for instance, levies a fee equal to 12.5 percent of the market value when farmland is converted for development.
However, state Sen. George McManus Jr. (R-Traverse City), has authored two bills that depart from this idea. The "recapture" fee proposed in these bills is so low that it would mean next to nothing to speculators.
Consider the example of 235 acres of farmland in Livingston County with a taxable value of $158,000. A developer buys this land from a farmer for $3 million. If the land continues to be farmed, taxes will be based on the land’s agricultural value instead of the market value. In this case, the tax savings now being proposed in the legislature would add up to $61,562 per year.
Sen. McManus’s recapture fee formula would require the developer to repay a total of only $3,525 if all 235 acres is converted for development. That is just $15 an acre on land worth nearly $13,000 per acre. Sen. McManus’ recapture fee amounts to just 0.1 percent of the land’s actual market value.
If either SB 1246 or SB 709 pass as proposed, payments to an Agricultural Preservation Fund also would be inconsequential. Sen. McManus’ bills would generate only $1 million to $2 million per year for farmland protection, a pittance. McManus’ two bills, in effect, are designed to provide builders and land speculators with a taxpayer-funded land banking system to buy and hold farmland at markedly reduced property tax rates, and then make a killing once it is sold.
If passed as proposed, the bills would accelerate the loss of farmland in Michigan, erode the foundation of the state’s $4 billion farm economy, and transform miles of rural countryside into ugly and damaging sprawl. That would be more than a shame. It would be a mistake rued for generations.
Michigan farmers are receiving some of the lowest market prices of the century. They are also paying some of the highest taxes in the country. Michigan is one of only two states that taxes farmland on the basis of its value for development, not its farming value, which puts Michigan farmers in the highest bracket in the nation: Their property taxes are double the national farmland average.
The state’s farmers are now singularly unable to resist the lure of high returns that come from selling their land for development. Michigan as a result loses 75,000 acres of farmland a year æ more than 1 million acres in the last 15 years, the eighth highest amount in the nation.
Such swift conversion of agricultural land to sprawling suburbs destabilizes rural economies, pushes up municipal expenses, increases congestion, and harms the environment. It also erodes the principal natural resource æ abundant and rich farmland æ upon which the state’s second largest industry is based.
Although it took a decade, Gov. Engler has recognized both the need to reduce agricultural property taxes and raise funds to protect threatened farmland. Michigan residents, however, will not support new tax policy that tips the scale in favor of wealthy developers and land speculators. The current recapture fee proposals advanced by the home-building lobby are a subterfuge. The attempt is to mislead lawmakers and the public into thinking something is being done to stem the loss of Michigan farmland.