HJR 692/SJR 401: Open-Space Land and Farmlands

October 24, 2007

The Joint Subcommittee to Study Long-Term Funding Sources for the Purchase of Development Rights to Preserve Open-Space Land and Farmlands held its third meeting at Pocahontas State Park in Chesterfield County with Senator Emmett W. Hanger, Jr., as chair and Delegate Edward T. Scott as vice chair. Other members of the joint subcommittee are Senators John Watkins and Mark R. Herring and Delegates Robert D. Orrock, Sr., Thomas C. Wright, Jr., Benjamin L. Cline, Lynwood W. Lewis, Jr., and Albert C. Eisenberg. The focus of the meeting was funding considerations for land conservation.

Presentations

Michael Kane, Land Conservation Officer, Piedmont Environmental Council
Mr. Kane indicated support for the three-pronged approach to preserve land made up of appropriations to the Virginia Land Conservation Foundation for land preservation, a state and local partnership to make funds available for local purchase of development rights programs, and continued use of the Virginia land preservation tax credit. These three conservation tools have accounted for over 300,000 acres being preserved in just the last 10 years.

Since the enactment of the land preservation tax credit in 2000, the Virginia Outdoors Foundation, an eligible holder of conservation easements granted by the program, has tripled the amount of land it has preserved from 135,000 acres to nearly 400,000 acres. Mr. Kane noted that of the 20 local purchase of development rights programs in effect in the Commonwealth, 19 have been created since 2000. Since 2000, the Virginia Land Conservation Foundation has awarded 84 grants that will ultimately conserve more than 31,000 acres.

Mr. Kane testified that 90% of all easements held by the Virginia Outdoors Foundation include land that has been designated as an ecological core by the Virginia Land Conservation Needs Assessment.

Under the Chesapeake 2000 Agreement, the Commonwealth committed to preserving at least 20% of its portion of the Chesapeake Bay watershed by January 1, 2010. Mr. Kane noted that of the land preserved through the Virginia land preservation tax credit, at least 80% is situated in the Chesapeake Bay watershed.

Mr. Kane pointed out that tourism is a leading industry in Virginia accounting for $16 billion in expenditures in the Commonwealth annually. Land conservation is key to tourism, because vacationers are attracted to historical sites, parks, and nature preserves. For instance, 34% of visitors to the Commonwealth visited small towns and 28% visited historic sites and monuments. Agriculture and forestry are the top industries in Virginia accounting for $47 billion in expenditures annually. Agricultural land and forest land are the foundation of these industries. However, between 1992 and 1997, approximately 68,000 acres per year of farmland and forest land were developed for more intensive uses. Mr. Kane made the following recommendations for implementation by the Commonwealth:

• Meet its commitment to preserve 20% of its portion of the Chesapeake Bay watershed by 2010.
• Continue to conserve lands to support its tourism and agriculture and forestry industries.
• Continue to preserve lands that are necessary for public drinking water, parks and trails, scenic landscapes, and diverse natural landscapes and communities.

These goals can be achieved by maximizing the Commonwealth’s three-pronged approach to preserve land.

Mr. Kane asked the joint subcommittee to support funding of local purchase of development rights programs at a level of $30 million in state funds per year over the next 10 years, or a total of $300 million. He also asked the joint subcommittee to support funding to the Virginia Land Conservation Foundation at the same level, $30 million in state funds per year over the next 10 years. Increased funding to the Virginia Land Conservation Foundation will result in the leveraging of state funds with non-state funds. Increased funding for purchase of development rights programs will present an opportunity to at least double Virginia’s conservation funding. In 2007, Virginia committed $4.25 million to local purchase of development rights programs, yet local governments were ready to match upwards of $45 million in state funding.

Mr. Kane asked the members to support retaining the land preservation tax credit in its current form. He suggested that if this is not done, it is unlikely that the Commonwealth will be able to meet its commitment under the Chesapeake 2000 Agreement. The tax credit program is the most cost-effective and efficient program for conserving land in the Commonwealth, accounting for over 260,000 acres conserved since 2000.

The issuance of bonds by the Commonwealth to meet the funding objectives described above was also discussed. One advantage of using bonds is that capital is quickly raised, which will allow Virginia’s conservation programs to move forward without delay. Data from the Trust for Public Land indicates that 25 statewide bond referendums in the United States for funding land conservation have passed since 1998. Specifically in the Commonwealth, 69% of voters voted for the Commonwealth of Virginia Parks and Natural Areas Bond Act of 2002. Mr. Kane reported the following as the likely costs to the Commonwealth of not funding land conservation:

• The likelihood of not meeting land conservation commitments under the Chesapeake 2000 Agreement.
• The loss of basic inputs for Virginia’s agriculture and forestry industries.
• The loss of scenic and historic landscapes that support tourism.
• The costs of degraded watersheds, especially those that are critical for public drinking water.

Mark Vucci and Kevin Stokes, DLS Staff Attorneys
The staff began by reviewing the estimated cost to meet the Commonwealth’s commitment of preserving 20% of Virginia’s portion of the Chesapeake Bay watershed by January 1, 2010. The cost to achieve this objective is estimated between $167.4 million and $278.9 million over the next two years. Assuming a 50/50 cost share with local governments, the Commonwealth and local governments each would be responsible for an additional $83.7 million to $139.5 million over the next two years. Estimates assumed that 111,578 acres would need to be preserved, which is in addition to the number of acres likely to be preserved under current appropriations for land conservation and through conservation easements donated under the land conservation tax credit.

REVIEW OF FUNDING SOURCES
Funding sources that have been previously looked at by the General Assembly for funding land conservation were reviewed. These revenue sources include current or existing sources of revenue, new sources of revenue, a mix of current and new sources of revenue, and bonds. State recordation taxes on home sales and license taxes on insurance premium receipts might have a natural nexus for funding land preservation.

In 2007, state recordation tax revenues totaled $583 million. Of this amount, $145 million currently is taken off the top and dedicated under law for transportation purposes. This would leave $438 million for the funding of other programs and services in the Commonwealth, including land conservation.

State license taxes on insurance companies totaled $385 million in 2007. Of this amount, $128 million or one-third is taken off the top and dedicated under law for transportation. This would leave $257 million for the funding of other programs and services, including land conservation.

Staff indicated there may be a means to capture the unsubscribed or unallocated portion of the $100 million in tax credits set aside on an annual basis under the land preservation tax credit program. In a particular calendar year, if there is less than $100 million in new tax credits subscribed or allocated under the tax credit program, the amount of the deficiency could be used to appropriate funds for land conservation.

NEW SOURCES OF REVENUE
Potential new sources of revenue to fund land conservation that had been previously discussed by members of the General Assembly were reviewed, including tipping fees and surcharges on farmowner, homeowner, and commercial multi-peril insurance policies. Staff explained that the issuance of bonds, regardless of the repayment source, would allow the Commonwealth to more quickly generate funds to meet the Commonwealth’s share in any state and local land preservation program.

Staff reported, regarding local sources of funding, that authorizing all counties to impose cigarette taxes and authorizing water and sewer authorities to charge a premium for land conservation are also potential new sources of local revenue that have been previously discussed by the General Assembly.

LAND USE AND ZONING STATUTES
Land use and zoning statutes and legislation that could be used to promote land conservation by limiting development were discussed. HB 1858 for example would have provided that a locality that establishes a purchase of development rights program would be authorized to accept proffers of cash for local purchase of development rights that would be dedicated as easements for conservation, open space, or other conservation purposes.

HB 3202 that became law in 2007 allows certain counties to establish urban transportation service districts and to impose broad impact fees on by-right development on agriculturally zoned land located outside of the urban transportation service district. The impact fees could be assessed for parks, open space, and recreation areas.

Dr. Sheryl D. Bailey, Executive Director Virginia Resources Authority
Dr. Bailey talked about how the Virginia Resources Authority (VRA) could raise funds for land conservation. The mission of VRA is to provide low-interest loans to local governments to finance municipal facilities, equipment, and infrastructure needs, including airports, transportation, wastewater, water, solid waste, flood prevention, brownfield remediation, federal facility development, public safety, wireless broadband, and because of new legislation in 2007, land conservation. In 2007, VRA invested over $377.5 million, impacting 51 communities. Since its inception, the agency has funded more than 750 projects across Virginia. Financing options offered by VRA include revolving loan funds, pooled financing programs, and equipment and term financing.

The VRA could establish a revolving loan fund for land conservation projects and then combine an initial capital investment in the revolving loan fund with an existing pooled financing program to maximize impact. She explained that under this approach an initial $10 million capital investment would generate $100 million of below-market loans in the first five years and over $200 million of below-market loans in 20 years. A one-time capital investment would provide long-term sustainable funding for land conservation. Dr. Bailey concluded by stating that existing VRA financing tools can be used to promote land conservation and to expedite land conservation projects by providing timely low-cost financing.

Next Meeting

The next meeting of the joint subcommittee will be held on November 20, 2007, in
Richmond.

Chairman:
The Hon. Emmett W. Hanger, Jr.

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

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

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