4.4. SR 11-08-2004 - Laserfiche WebLink

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Purchase of Development Rights, CDFS-1263-98 Page 3 of5 evidence has emerged over the past decade that indicates that farmland conversion has been subsidized by government taxation and transportation policies. If this is correct, the development values of real estate at the rural urban fringe have been inflated as a result of these policies, and thus really do not reflect true "free market" values. What are the advantages and disadvantages ofPDR, as compared to other policy mechanisms to protect farmland, such as zoning, building moratoria, or tax breaks for agriculture? Restrictions on land use, including zoning have been used to protect agriculture. One of the main benefits ofPDR however, is that it is completely voluntary. Under PDR, the landowner is not deprived of any of the value of the property. This is very important because many farmers rely on their property in order to fund their retirement. Simply depriving them of the opportunity to realize the full economic value of their property bas important ethical, socioeconomic, and perhaps legal ramifications. Moreover, zoning regulations may be easily changed in the future. Other regulatory mechanisms such as building moratoria have similar disadvantages to zoning. Programs that provide tax breaks for farmers, such as current agricultural use valuation have been in place for years, and have not proven effective in keeping land, particularly at the rural-urban fringe, from being converted from agricultural to nonagricultural uses. This is because the tax breaks received by the landowner may be small compared to the price differentials between the development and agricultural land use values. PDR has several advantages over these other policies. First, since it is completely voluntary, no landowner is coerced into giving up or selling the land or the development rights. Second, it involves a permanent agreement that guarantees that the deed restriction will apply in perpetuity. Clauses for the extinguishment of the agreement typically involve requirements that the landowner demonstrate that surrounding development or economic conditions have made farming on the land impossible. Another benefit ofPDR is that it makes it much easier for one farmer to pass the farm on to an heir interested in continuing to farm. Once the development rights have been separated from the land, the value of the parcel typically declines to its agricultural value. This generally bas an enormous effect on reducing the inheritance tax liability. If taxed at the full development value, many parcels are simply taxed out of agriculture, because the heirs are not able to pay the taxes without selling the land. The primary disadvantage ofPDR is the cost involved. In all of the states with PDR programs, these purchases are funded by some sort of tax. Taxes used range from cigarette excise taxes assessed at the state level to local property, income, and sales taxes. The topic of instituting new taxes for virtually any program is always controversial. Opponents to these taxes are usually quite vocal as well. Moreover, the public bas become cynical about public programs designed to "subsidize" agriculture, and some critics have come to see PDR as another, and even more radical step in that direction. However, in the regions of the country that have instituted PDR, the program bas received generally favorable responses from the public. Surveys ofresidents in numerous parts of the country indicate that many citizens who are concerned about the loss of farmland and open space do place measurable values on publicly operated farmland protection programs. It is very likely that considerable discussion regarding the implementation and or continuation ofPDR programs will continue to be a subject for debate in the future. How to Establish and Operate a PDR Program http://ohioline.osu.edulcd-fact/1263.htrnl 11/2/2004