HJR 133/SJR 94: Open Space Lands and Farmland Preservation

August 23, 2006

The members of the Joint Subcommittee to Study Long-Term Funding Sources for the Purchase of Development Rights to Preserve Open Space Land and Farmlands are Senators Emmett W. Hanger, Jr. (co-chairman), John Watkins, and Mark R. Herring and Delegates Lynwood W. Lewis, Jr. (co-chairman), Robert D. Orrock, Sr., Thomas C. Wright, Jr., Benjamin L. Cline, Edward T. Scott, and Albert C. Eisenberg. Several state agency representatives were invited to make presen-tations at the meeting. The complete remarks by all of the guest speakers, handouts, and additional information may be found on the study website hosted by DLS.

Speakers

Nikki Rovner - Deputy Secretary of Natural Resources

Ms. Rovner presented an overview of the cur-rent state and federal land conservation programs, which protect lands from development by land-holders donating development rights to govern-ment entities and private land trusts (conservation easements) or by landholders selling land outright to these entities (fee simple sales). Fee simple sales include sales of land that are preserved as parks, wildlife management areas, and forests. Donations of conservation easements are usually perpetual and under state law can only be held by land trusts, conservation agencies, and local governments. Government agencies that are the beneficiaries of conservation easements or that are purchasers of fee simple estates include:

• Department of Conservation and Recreation,
• Department of Forestry,
• Department of Game and Inland Fisheries,
• The Nature Conservancy,
• Middle Peninsula Land Trust,
• Virginia Outdoors Foundation,
• Federal agencies, local governments, and soil and water conservation districts.

The Virginia Land Conservation Incentives Act of 1999 provides income tax credits to landholders who donate conservation easements or sell their lands outright to some of these entities. The attractiveness of the credit helps to pro-mote land conservation. Government funds that are used to purchase fee simple estates come from:

• State general fund appropriations.
• Treasury loans.
• State general obligation bonds.
• Virginia Public Building Authority bonds.
• Federal grants and appropriations.

The Virginia Land Conservation Founda-tion administers a competitive matching grant program under which state grants for land preservation are made on a matching basis to state agencies, local governments, and nonprofit organizations. $2.5 million has been appropriated by the Commonwealth for the grant program in both 2007 and 2008. Twenty-five percent of available unrestricted funds is automatically transferred to the Open-Space Lands Preservation Trust Fund and the remaining 75% is divided equally among the following four uses:

• Natural area protection.
• Open spaces and parks.
• Farmlands and forest preservation.
• Historic area preservation.

Bill Dickinson - Deputy Secretary of Agriculture and Forestry

Mr. Dickinson discussed efforts to pre-serve Virginia's working farms and forest lands by purchasing the developments rights of property. Local government initiatives include use value taxation, zoning for agricul-tural and forestal districts, and purchase of development rights programs. State initia-tives include the establishment of the Office of Farmland Preservation in 2001, which assists retiring farmers in transferring their businesses/farmlands to persons seeking to become farmers. The average age of a Virginia farmer is 56 and two-thirds of farmers have no retirement plan. The office is also responsible for developing:

• Model policies to establish local purchase of development rights programs (PDR programs).
• Criteria for certification of local PDR programs as being eligible to receive grants from public sources.
• Methods and sources of revenue for allocating funds to localities to purchase agricultural con-servation easements.

In 2004, the Farmland Preservation Task Force of the Virginia Department of Agriculture and Consumer Services developed a model purchase of development rights program for Virginia. Elements of the model program include:

• Local ordinance to establish the program.
• Valuation process.
• Agricultural enhancement strategy.
• Deeds of easement.
• Mandatory monitoring programs for easement donations.
• Periodic evaluations and required reporting.

In 2005, the Farmland Preservation Task Force proposed a state level program to com-plement local PDR programs. Key objectives of the state level program are:

• Provide farm and forestland protection assis-tance to all requesting localities by 2007.
• Localities to establish PDR programs by 2010.
• Seventy localities to establish PDR programs by 2020.

Staff Presentations

DLS study staff discussed the elements of Virginia's land preservation tax credit and the amendments to the credit proposed by the General Assembly and the Governor. The Virginia Land Conservation Incentives Act of 1999 established an income tax credit for the donation of land for preservation purposes. Under the Act, any allowable, unused tax credit can be sold or transferred to other taxpayers who then may use the transferred tax credit. Qualifying donations under the Act will be eligible for a federal income tax charitable deduction and a state income tax charitable deduction in addition to the state income tax credit.

Beginning on January 1, 2007, as a result of legislative changes adopted by the General Assem-bly on August 28, 2006, the tax credit will equal 40% of the fair market value of the donation. For donations that take the form of a conservation easement, the value of the donation equals the loss to the taxpayer in fair market value of giving up land development rights altogether or giving up the right to develop it at a higher density. A listing of the changes to the tax credit program effective January 1, 2007, include:

• Tax credits may be carried forward for 10 years, an increase over the previous five-years.
• Donations generating more than $1 million or more in tax credits must be approved by the Department of Conservation and Recreation.
• Land dedicated as open space in residential or commercial developments will no longer qualify.
• A fee equal to 2% of the value of the donation, not to exceed $10,000, will be charged on the transfer of any tax credits.

Next Meeting

Information regarding future meeting dates will be posted on the General Assembly Calendar and the study website when determined by the joint subcommittee members.

Co-chair:
The Hon. Emmett W. Hanger, Jr.

Co-chair:
The Hon. Lynwood W. Lewis, Jr.

For information, contact:
Mark Vucci, David Rosenberg, and Kevin Stokes, DLS Staff

Website:
http://dls.state.va.us/land.htm

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