The concept of Land Use Taxation, where land receives preferential property tax treatment based on its use, was created by the Virginia Legislature in 1982. The concept was, and is, to provide tax benefit to those land owners who were actively pursuing agricultural enterprises. By providing this incentive, the financial pressures to develop such farm land would be reduced.
This high minded view of preferential treatment to encourage one use over another is interesting from a social engineering/market interference angle but The Free Enterprise Forum tends to think of this policy on a crass economic benefit model. [It is important to note, the primary residence and surrounding two acres of the parcel are taxed at the regular real estate tax rate.]
Albemarle County Supervisor Sally Thomas and I tend to agree on the economic benefits of land use taxation. Ms. Thomas is often quoted stating that “Cows don’t go to School”. I would add that as a rule cows, sheep, and other agricultural enterprises do not place significant demands on the county departments of police, fire, community development or social services.
The idea is that any land in land use taxation status is, by virtue of its use, not generating significant costs to local government. While this is true for direct costs (schools, fire, rescue, transportation infrastructure), it is not true for the indirect, but very real cost of the revenue sharing agreement between the City of Charlottesville and Albemarle County.
Some are suggesting significant changes to the current program. One concern noted is the land use tax credit being given to parcels that have no further actionable division rights. On the surface this argument makes sense to me but what of the many land owners who have voluntarily placed their land into a conservation easement, thus extinguishing their actionable development rights?
Another suggested reform is to require the parcels be larger than the current 20 acres in the ordinance. While I recognize the goal of this line of thinking, I am told that the fastest growing agricultural enterprise in our region is wine grape production. As one who has worked in the Virginia wine industry for many years, I know several winery owners who use several separate small holdings to produce excellent wines. As most of these vineyard holdings are less than the currently required 20 acres, I would be opposed to increasing the parcel size required for land use.
What then, if anything, should be done to improve the land use taxation program?
The Commonwealth of Virginia has recently mandated that all localities of a certain level of population increase determine and enact urban growth areas where the localities wish to see development occur. Albemarle County completed such determination in 1980. It is amazing to me that the State mandates land use tax be permitted in BOTH the growth areas and the Rural Areas. I contend that it is reasonable to go to Richmond and request the authority to remove the requirement that Land Use Taxation must be offered in both the development areas and the rural areas.
If such action is successful, I would anticipate the limited number of agricultural parcels receiving land use in the development areas will be under increased economic pressure to shift from agricultural to residential (or commercial) use. While the potential loss of development area farmland will likely be met with an uproar from the neighbors, it would be one more tool to encourage development in the development areas.
If Albemarle County is interested in increasing development in the development areas, I believe this is a proposal that can be widely supported.