Use and Fund Conservation Easements to Protect Farmland

Who can implement this: State, county, and city officials; communities; governmental organizations; advocacy organizations; and agricultural producers

To protect land for future generations, state and local policymakers should work together to fund conservation easements. A conservation easement is a legally binding agreement that restricts the uses of land and/or prevents a piece of property from being developed. It limits certain rights—often the owner’s right to subdivide or develop—associated with that property. A private organization or public agency then enforces the landowner’s promise not to exercise the restricted rights. Landowners essentially forfeit these restricted rights in perpetuity, but in certain cases, conservation easements can be established for finite periods of time, though these short-term easements tend to be continually renewed.[1]

An easement selectively targets and restricts only those rights necessary to protect specific conservation values and is individually tailored to meet a landowner’s and community’s specific needs. Because the land remains privately owned with the remainder of the rights intact, an easement property continues to provide economic benefits through its association with job creation, economic activity, and property taxes.

Conservation easements operate similarly to transfer of development rights programs, except that the development rights need not be evaluated by a government agency and sending and receiving areas do not need to be established. Landowners either voluntarily donate or sell an easement, which allows them to trade a portion of their property value for a significant one-time income or tax benefit while still retaining many private property rights. A landowner and an easement purchaser, typically an agency, negotiate the fair market value of the development rights being restricted, and then those rights are sold and documented via the recording of a conservation easement.

Donating conservation easements is considered a charitable donation under the federal tax code, and those who donate are eligible for federal income tax deductions. In 2015, the U.S. Congress enacted an enhanced federal tax incentive for conservation easement donations, which, depending on the value of the easement, permanently increased the tax deductions possible for landowners.[2]

Conservation easements can shield farmers from pressures to sell land to developers and allow them to continue their farming operations or retire with significant income, passing their agricultural operations to those who will continue farming on the land. The reduction in property value resulting from the conservation easement makes selling the land to a farmer, rather than a developer, more feasible.

Conservation easements should be created only on lands that are likely to be viable farms for many years to come. Otherwise, the easement will serve to only restrict development without guaranteeing continued food production.

Because of the limited funding available for conservation easements, it is also important to target the most irreplaceable lands, such as orchards, for preservation.

Implementation:

Although a number of private and public organizations are already involved in managing conservation easements in Utah, Utah County may want to charter its own agricultural land trust with a board of directors comprising local farmers and others. Such a trust would preserve local control of easements. The trust could seek and hold funding, buy development rights of farmland, advise county officials on a variety of agricultural issues, and coordinate with all conservation districts in the county.

  • Existing government and nonprofit organizations should work together to specifically treat agriculture as a valuable resource by promoting conservation easements in Utah County.
  • The Utah Legislature should explore new and existing options and implement long-term mechanisms for buying conservation easements on critical farmland best suited for long-term agricultural production.

The biggest challenge to establishing conservation easements is funding. Below are several options for providing a large and reliable pool of money for conservation easements.

Funding Options for Conservation Easements:

  • Roll-back taxes - When greenbelt designated farm lands are removed from agricultural use, invest the required “roll-back” taxes into a county farmland fund such as one managed by a county agricultural land trust as suggested above. The rollback tax is the difference between the lower taxes paid while the land had greenbelt designation and the taxes which would have been paid without the designation.
  • Property tax fraction - Apply some fraction of the county's share of property taxes to a farmland fund. This funding option could be limited to years with adequate or increased tax receipts to minimize impact on other county responsibilities.
  • Federal matching grants - The 2014 Farm Bill made billions of federal dollars available dedicated to match other conservation funding used to protect farmlands, ranchlands, grasslands, wetlands, and forests across the country. This federal bill and many other funding agencies require matching funds, usually at a 1:1 ratio. The county should therefore set up a mechanism such as the agricultural land trust mentioned above to attract, hold, and manage the funds required to match federal and other available funds.
  • Bonding - Allow county voters to vote on a bond issue for farmland preservation. Critical wildlife and/or recreation areas could be included in the bond if that is more attractive politically. The Trust for Public Lands can advise on the best ways to publicize and organize how to pass such a bond.
  • Tax credits – The Utah legislature could pass a bill awarding state tax credits to those who contribute to a conservation easement.
  • Real estate transfer taxes: To purchase conservation easements, many counties across the country rely on taxes that are generated as a percentage of real estate sales. In Utah, the price of real estate transactions is not disclosed. However, sales are public information, and a small fee could be applied to real estate transfers based on a county assessment before the sale. This tax would essentially require those who benefit from destroying agricultural land to pay a fee to help preserve it in other places.
  • Sales taxes - The state legislature has made attempts to pass a bill allowing for a local sales tax of 1/8 of 1% on the purchase of agricultural land and conservation easements for open spaces.
  • Special district taxation: If agricultural conservation districts were established as “special districts,” they would be authorized to tax or spend public funds that receive tax-exempt status.

The LeRay McAllister Critical Land Conservation Fund provides grants to support the conservation of critical agricultural lands, wildlife habitats, and other lands vital to different communities across the state. This fund is highly dependent on receiving money from the state legislature and is not as reliable a resource as it could be.[3]

County lawmakers and stakeholders are interested in developing a narrower, more focused farmland fund that would receive more consistent funding from the legislature. County and state lawmakers would have to work together to address and resolve challenges resulting from rising real estate prices and the pressures on farmers to sell land to developers.

Examples:

Utah has many conservation easement programs of varying scales and for different areas. Some of these programs and organizations include: the Bear River Land Conservancy, the Ogden Valley Land Trust, the Summit Land Conservancy Easement Program, the Nature Conservancy Easement Program, and the Utah Open Lands Easement Program.[4]

Massachusetts has a conservation easement program specifically designed to benefit agriculture: “The Agricultural Preservation Restriction (APR) Program is a voluntary program that offers a non-development alternative to farmland owners for their agricultural lands who are faced with a decision regarding future use and deposition of their farms. The program offers farmers a payment up to the difference between the “fair market value” and the “fair market agricultural value” of their farmland in exchange for a permanent deed restriction, which precludes any use of the property that will have a negative impact on its agricultural viability.”[5]

Pennsylvania takes an unconventional approach by using a cigarette tax, which funds 45% of the state’s conservation easements. The remainder of the cost is funded by county and state government.[6]

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