Land use: Farmers' friend or tax break for the rich?
Behind lavish eagle-topped gates on Woodlands Road, former Value America mogul Craig Winn lives in a mansion that Albemarle County has assessed at $3.45 million. Fifty acres of rolling Albemarle countryside surround the 8,900-square-foot palace.
But because Winn's land is enrolled in a program designed to help farmers, he pays just $976 in taxes on those 50 acres about as much as the owner of a one-acre lot in Forest Lakes pays.
"Welfare for the rich," is how activist Kevin Cox describes the program. "It truly is ridiculous that the regular folks have to pay his taxes," says Cox. "It's obscene. And there's no guarantee this land is going to be preserved."
In Crozet, 141 acres with a market value of $1.54 million are part of a tract slated for a subdivision planned around a golf course. Thanks to the same tax break, the property is taxed as if it were worth just $9,300– less than one percent of its actual value.
"It makes me mad because that's money that could be available to Crozet for the sidewalks and the new library we need," says town resident Tom Loach.
In 1971, to counteract the decline in farming near urban and suburban areas, the General Assembly created a tax break that gives owners an incentive not to turn the family farm into, say, a Cory Farms subdivision. The program– dubbed Use Value Taxation (Land Use, for short)– taxes property on what it produces instead of on its market value.
Critics says the program is not working.
They claim that Land Use, adopted by the county in 1973, hasn't stopped development and that, perversely, it primarily benefits the richest residents who may spend more time with polo ponies than crops and cattle on their estates.
Indeed, some of Albemarle's wealthiest citizens– including such notables as Edgar Bronfman of Seagram's fortune, Academy Award-winning actress Sissy Spacek, and indicted former Tyco CFO Mark Swartz [see story on Swartz on page 7]– have their properties in the Land Use program.
By not reflecting true market values, Land Use cost the county $9.6 million last year, according to Loach, president of the Albemarle Neighborhood Association.
In a year that had county residents howling over an average 19 percent biannual reassessment, the 2002 tax rates in some Land Use categories actually decreased.
For example, because of the drought, an acre of class A agricultural land is valued at $100, down from $150 in 2001.
It takes just five acres devoted to agriculture or horticulture, or 20 acres for forestry, to qualify for entry into the program. The State Land Advisory Evaluation Committee SLEAC determines the rates for 30 different categories of Land Use, depending on what's grown or the type of soil.
In Ivy, where land frequently trades above $80,000 per acre, the difference in taxation can be monumental. There, a typical suburban acre might net an annual tax bill of $608, whereas if the acre were valued under Land Use, the annual tab would be just 76 cents.
(However, Albemarle assessor Bruce Woodzell points out that primo forestry rates went up from $240 an acre to $280. With two-thirds of the county's 4,900 land-use parcels in forestry, "We didn't lose anything on the tax base," he says.)
Woodzell disputes claims that Land Use is a tax break for polo ponies. Property in the program has to be a bona fide farm. "If you have horses," says Woodzell. "It can't just be for pleasure. You've got to buy and sell."
Hay is a legitimate Land Use crop, but hay farmers can't just bush hog it. It's got to be baled.
If a property owner is supposed to have cattle the biggest agricultural use in Albemarle and an assessor sees that the fences are down on the farm and no cattle are around, Woodzell writes the owner informing him to either get the cows back or risk being booted from the program.
County Supervisor Sally Thomas relates that a letter went out last year reminding people they had to demonstrate farming or forestry use. "Anecdotally, there was an upsurge in farming," she says.
Everybody's a farmer
In Orlando, Florida, Walt Disney World has cattle grazing on its property to qualify for agricultural use and thus saves millions on its property taxes.
In Albemarle County, Land Use critics see the program as a developer's friend, a way to skirt taxes before ultimately subdividing rural land.
"The purpose is to encourage the preservation of open space," says Kevin Cox, "not to stall development and reduce holding costs for speculators. That's what it frequently does."
Cox maintains that every large parcel that's been developed in the county had been in Land Use. He cites the tracts now home to Sam's Club and Forest Lakes, and he calls the penalty for developing Land Use land a "pittance."
That penalty is a five-year rollback, which means that if someone takes property out of Land Use to subdivide it, he or she must pay five years' worth of market value taxes on the property.
Even Land Use supporters acknowledge that the rollback is hardly a disincentive to a determined developer.
"Land is getting so expensive that when you sell it, you can afford to pay the rollback," says assessor Woodzell.
Tom Loach criticizes the fact that Land Use is allowed in growth areas like Crozet, and he points to the newly approved Old Trail Golf Course. The adjacent 490 acres will become Old Trail Community with hundreds of new homes.
There are other pending subdivisions whose owners currently enjoy Land Use. The 566-acre Mountain Valley Farm, owned by members of the Jessup family, is slated to be carved into 37 parcels with price tags on the houses ranging from $500,000 to $1,000,000.
And 10 years ago, The Rocks, a 613-acre farm in Ivy, was approved to become a 39-lot subdivision. Despite that roadmap to development, the land, assessed at $5.4 million by the county, is valued and taxed at just $212,000 under the Land Use program.
Ed Scharer with the Virginia Farm Bureau doesn't have a problem with developers paying lower taxes on property that's ultimately going to be developed. He calls Land Use "an orderly transition from agricultural to suburban that doesn't protect the land forever."
Nor does Scharer believe developers should be penalized under the rollback. "If it keeps the land undeveloped for 20 years, then they've more than paid their debt by holding onto the land," he says.
"We can't change the tax rate based on future plans," says Sally Thomas.
She mentions Dr. Charles Hurt, one of the county's biggest developers, who owns property near Thomas in Ivy that is currently a hayfield taxed at Land Use value. "The Constitution doesn't allow us to treat him differently because he may plan to turn it into a subdivision," says Thomas. "The fact he has 'developer' on his business card doesn't mean he isn't a legitimate farmer this year."
Dave Matthews does it. So does John Kluge. Ditto John Grisham. Many of Albemarle County's wealthiest and most famous citizens appear on the Land Use rolls.
"There is no means test," says Scharer. "It doesn't matter if you're wealthy."
The rich and famous land users and major developers The Hook contacted declined to be interviewed.
"I can't tax the dentist differently from the plumber," says Thomas. "It's what they do with their land. They're reducing the number of lots put up for subdivisions. They're fighting sprawl."
"I don't resent that at all," says A.C. Shackelford, a fourth-generation farmer. "They're keeping that land productive or keeping it occupied."
He adds, "This isn't a welfare system. It's a cheap food system. If I go out of business, your beef prices are going to go up."
Jim and Liz Hart's 230-acre farm has been in his family for 100 years. They say they couldn't afford to pay the taxes on the farm without Land Use, and they both work at jobs off the farm to make ends meet.
"If Dave Matthews wants to buy a farm and farm it, fine," says Liz Hart. "If you take Land Use away from him, you take it from everyone. Certainly it irritates the people who can't afford to buy a farm. But more power to [the wealthy] if they can work the system."
There's another consideration for those like mega-bestselling author Grisham. He put 1130 acres in a conservation easement, which is a legally binding contract that means the land can never be developed.
"The citizens should appreciate that because the land will be like that forever," says tax assessor Woodzell. "It's open land, and it's not going to grow houses."
And Woodzell points out that while the land around the mansions of the über rich may get a tax break, the mansions themselves– "improvements" in assessor parlance– are taxed at full market value. That means Craig Winn doesn't get a break on his $3-plus-million manse.
Still, Tom Loach is not convinced that allowing the rich to reap tax benefits from Land Use is a good idea. "I don't want to discriminate against them, but I don't want to subsidize them, either," he says.
Loach calculates that 19 percent of those on the county's Land Use rolls are corporations or LLCs.
And he has another gripe. In a process called "revenue sharing," implemented in 1983 to forestall annexation threats, the county turns over 10 cents per $100 of its property tax assessments to the City of Charlottesville. He says the so-called Revenue Sharing Agreement doesn't give a break for Land Use value. "We pay a surcharge," says Loach.
One of the county's anti-sprawl programs, the Acquisition of Conservation Easements (ACE), in which the county pays for development rights, does factor in the wealth of the property owner. "The first time we shelled out taxpayers' money to Westvaco would have been the end," says Thomas.
Saving the farm
With more and more subdivisions sprouting up, it may not be obvious that Albemarle, with its cattle farms and hay production, still is one of the larger agricultural counties in Virginia.
The Albemarle County Farm Bureau has 640 active farmers on its rolls, says Ed Scharer, and two-thirds of the county's land mass is in agriculture or forestry.
While Scharer thinks farmers will continue to farm, "No farmer can move to Albemarle and buy a farm," he concedes. "You can't raise crops and pay debt service on the land. A lawyer can."
Dovedale Farm is an example of a working family farm that Land Use was designed to protect. It was deeded in 1817, and a long line of Shackelfords have worked the land and been laid to rest in the family cemetery there. A.C. Shackelford, 72, is the fourth generation to farm Dovedale, but he says he may be the last.
He does most of the caring for the cattle he raises on the farm off Stony Point Road and says he makes enough to buy feed and supplies.
"There's no way I could buy this farm and produce enough to pay for it," he says.
Such is the dilemma of the ever-dwindling county farming community. And the high cost of land in turn causes a dilemma for everyone else who doesn't want to see Albemarle turn into the Fairfax of Central Virginia. Both old-timers and newcomers cherish Albemarle's open spaces but the cruel fact of living in a desirable, fast-growing area is that it's much more profitable to turn land into a subdivision than to keep it pristine pastureland.
For farmers like Scharer, Shackelford, and Hart, Land Use protects open space and gives farmers a fighting chance to farm at least this generation.
Shackelford says it's "imponderable" whether his children will take over the 367-acre farm and continue the family tradition.
Of three programs the county uses to protect remaining farmland ACE, Land Use, and designated growth areas Tom Loach says Land Use, with its $9.6 million in reduced tax revenues, offers the worst return on investment.
Supervisor Sally Thomas confirms the number. "It's always been a $9 to $10 million tax write-off the same way we write-off charitable properties or the University of Virginia. It's not unique," she says.
Currently, landowners with 21 acres can enroll in the program, even if they don't have any development rights on the parcel. That's one area both Loach and Thomas see as ripe for change.
The county is looking at a rewrite of the rural portion of its comprehensive plan, which Thomas says will include a look at the Land Use program.
Other reforms that might tighten the alleged abuses:
* a 10-year rollback period rather than the current five,
* offering the program only to people with land in an agricultural/forestry district thus eliminating the growth area loophole, and
* making the program more binding so people in the program would have to wait 10 years to subdivide.
"People who get Land Use should have a contract," says Thomas.
Loach would like to chuck the whole program and put the $9 million windfall into the ACE program, which gets only an $800,000 share of this year's budget pie.
But that's not going to happen. Albemarle County is committed to the Land Use program, says Thomas. "For genuine farmers, it's very important they not pay the subdivision rate on land," she says.
Meanwhile, farmers are an aging group, on average pushing 60, and their numbers will inevitably dwindle.
"There are very few young farmers because it's too damn expensive," says Scharer. "The only way to get a farm is to inherit one."
Or be rich.