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

November 28, 2006

The Joint Subcommittee Studying Long-Term Funding Sources for the Purchase of Development Rights to Preserve Open-Space Land and Farmlands held its third meeting on November 28, 2006, with Senator Emmett W. Hanger, Jr., as chair and Delegate Lynwood W. Lewis, Jr., as vice chair.

Speakers

Larry Smith - Natural Area Program Manager, Natural Heritage Program, DCR
Land Conservation Data Collection
Mr. Smith stated the mission of the Department of Conservation and Recreation (DCR is identifying, protecting, and conserving Virginia's biological diversity. He discussed Governor Kaine's goal of protecting 400,000 acres of land. In keeping with this goal, Virginia has protected 65,763 acres of land in fiscal year 2006 and 15,084 acres of land since July 1, 2006. Mr. Smith concluded that the Commonwealth must protect 319,153 acres of land to achieve the Governor's goal of protecting 400,000 acres of land.

Conservation Lands Website
Mr. Smith demonstrated access and use of the DCR Conservation Lands Database, which is the Commonwealth's "first comprehensive, continually maintained GIS data layer for Virginia's protected conservation lands." The database includes mapped boundaries and attributes for public and certain private lands in Virginia that have potential significance for serving a variety of conservation, recreation, and open-space roles. The DCR website user also has the ability to display the location of protected lands. The URL for the DCR Conservation Lands Database is: http://www.dcr.virginia.gov/dnh/conslandindex.

Land Conservation Planning
Mr. Smith discussed how land conservation planning is furthered by DCR's reporting requirements and its designated categories for biodiversity management.

Pat O'Connell - President, Evergreen Capital Advisors
Mr. O'Connell delivered a presentation entitled "Financing Land Preservation in the Commonwealth of Virginia," which proposed three "tools in [the] local preservation toolbox."

• A locality may acquire loans or issue bonds and use the proceeds of such loans or bonds to pay cash at closing to the owner of the land over which the locality acquired fee simple or a permanent easement. This "tool" is somewhat problematic, however, because a county, which generally contains the desirable land for preservation because of its rural characteristics, is constitutionally forbidden to contract debt (e.g., acquire loans; issue bonds) for land preservation purposes unless the county first obtains voter approval at a referendum.
• A locality may enter into installment purchase agreements. An installment purchase agreement (IPA) is a contract between the buyer (i.e., locality) and the landowner. Under the IPA, the buyer promises to buy the land or an easement thereon for land preservation purposes. Moreover, the buyer agrees to pay the purchase price of the land or easement at the end of the IPA term, which does not exceed 30 years. Furthermore, the buyer promises to pay semiannual tax-exempt interest during the term of the IPA. The benefits to landowner are manifold. Namely, a landowner who enters into an IPA with a locality may (1) use the cash to pay the estate tax, (2) deduct the charitable contribution discount from 100% of income for up to 16 years, (3) sell the IPA to bond investors for cash prior to maturity, (4) receive tax-exempt interest on full sale price, and (5) defer capital gains tax associated with the land/easement purchase over his land. Currently, the City of Virginia Beach enters into IPAs with land owners for land preservation purposes. Mr. O'Connell also stated that the City of Chesapeake is likely to enter IPAs with landowners for the same purposes within the next few months.
• A locality may create a pension program, in which it pays cash to the owner of land of which the locality acquired in fee simple or a permanent easement. Under this pension for preservation program, the landowner establishes when his payments will begin, how long his payments will continue, and any rights of his survivors. Though the value is set at closing, the locality is responsible for paying for any incremental value in the owner's land before his retirement.

Recommendations and Discussion

Mark J. Vucci, Attorney, DLS Staff
Mr. Vucci recommended that the members set objective standards for a purchase of development rights program. He also suggested that, since the number of participants in the Virginia Land Conservation Tax Credit program is likely to balloon within the next several months, additional study time to obtain better figures as to preservation costs is necessary to set objective standards. Other recommendations included:

• Consider the appropriate level of cost sharing, if any, between the Commonwealth and local governments in establishing a statewide purchase of development rights program. Possible options include a 50-50 cost sharing, allocation of state grants to local governments, and fixed, annual appropriations to each Virginia locality.
• Consider proposing financing options for the Commonwealth's cost share, if any, in a statewide purchase of development rights program.
• Consider proposing financing options for local governments' cost share, if any, in a statewide purchase of development rights program.

The Commonwealth may finance its share of the cost by appropriating funds from the annual surplus, dedicating revenue from an existing tax, making a general fund appropriation, appropriating funds from a new source of revenue, or issuing bonds for up-front capital to meet the January 1, 2010, Chesapeake Bay preservation objective. Likewise, local governments may finance their respective cost-share by borrowing from the Virginia Resources Authority (VRA) if VRA is statutorily permitted and by dedicating revenue from an existing local tax for land preservation/tourism purposes. Specifically, county governments may finance their respective cost-share by borrowing for land preservation without first conducting a referendum if constitutionally permitted. Actions the joint subcommittee could take are:

• Agree to the reauthorization of the study.
• Propose a bill that authorizes the VRA to raise capital for land preservation purposes.
• Put forward the idea of amending the Constitution of Virginia to allow counties to borrow for land preservation without first conducting a referendum.

Several members spoke of the desire for poorer counties to raise more money for land preservation purposes and to treat urban counties, which resemble cities, as cities for borrowing purposes.

Reauthorization of the Study

In a resolution to reauthorize the study, the joint subcommittee formally agreed to recommend funding for the Office of Farmland Preservation and the Virginia Farm Link program, as well as a start-up appropriation in 2007 for a statewide purchase of development rights program.

Chairman
The Hon. Emmett W. Hanger, Jr.

Vice 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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