Briefing Report: A Waning Williamson Act?

Thursday, April 1, 2010

The California Land Conservation Act of 1965 -- commonly referred to as the Williamson Act -- has been the state's premier agricultural land protection program since its enactment in 1965. Over half of the state's 30 million acres of farm and ranch land are currently protected under the Act.

Enacted to preserve agricultural and open space land and help slow the conversion of these lands to developed uses. It has accomplished this purpose by substituting a lower tax liability for landowners and rewarding counties with financial benefits when land is protected under Williamson Act contracts.

For the last 38 years, the state has reimbursed counties for the lost property tax revenue at a rate of $1 per acre for what is considered non-prime agricultural land and $5 an acre for prime agricultural land. This subvention allowed counties to help preserve California's valuable agricultural resources in the face of development pressure. While State subventions have been proposed for elimination over the years, they had never actually been cut - until enactment of the 2008-09 Budget Agreement.

Facing severe General Fund pressures, California's 2008-09 Budget Agreement ordered the State Controller to reduce the counties' open space subventions by 10 percent. Upon adoption of the 2009-10 State Budget, the Legislature further reduced state subventions to $27.8 million. Still left with a $1.1 billion deficit and no reserve, the Governor used his blue line-item veto pen to slash all but a $1,000 placeholder from the reimbursement pot for the 2009-10 budget year.

Given local budgetary conditions, proponents have argued that local governments will unlikely be able to continue to utilize this important planning tool without the existing financial incentive. As such, the current state of the Williamson Act raises a number of significant policy questions for lawmakers and various interest parties alike.

Basic Contract Provisions, Objectives & Participation

The Williamson Act (Government Code Section 51200 et. seq.) is one of the unique arrows in the quiver of local governments. The program offers an innovative approach to farm and ranch land protection by building an interrelated set of property tax, land use and conservation measures in a single policy package. The Williamson Act is an important component in providing a favorable business climate where farmers and ranchers can continue to keep agricultural lands in production thereby benefiting local and state economies.

The program enables local governments to enter into contracts with private landowners for the purpose of restricting specific parcels of land to agricultural or related open space use. These contracts are ten-year contracts. Unless the landowner or the County files a notice of nonrenewal, the contract is automatically renewed for an additional year on January 1, therefore remaining at a constant ten years. Under the law, farmers and ranchers who agree to keep land in agriculture and open space are permitted to pay taxes at a lower rate than the actual market or development value.

In 1998, the Williamson Act was amended to provide for the establishment of the Farmland Security Zones, commonly referred to as the Super Williamson Act. Under this program landowners receive an additional tax reduction if they choose to keep their property in the conservation program for at least 20 years.

The state then partially reimburses local government for the lost tax revenue via the Open Space Subvention Act of 1971. The contribution by the state is nominal - just a small fraction of 1 percent of the overall state budget - but the return is significant.

Lands "under the act" contribute significantly to the state's coffers and the nation's food supply, preserving California's enviable role as the nation's leader in agricultural productivity.

Program participation has been steady, hovering around the 16 million acre mark since the early 1980s. This number represents about one third of all privately held land in California, and about one half of all the state's agricultural land. As of 2005, all counties except Del Norte, Los Angeles, San Francisco, Inyo and Yuba offered Williamson Act contracts.

The Department of Conservation ( DOC), which administers the program, estimates that individual landowners save between 20 to 75 percent in reduced property taxes each year, depending upon their circumstances.

The Balancing Act

Continued pressure on agricultural landowners to develop their lands for non-agricultural and open space purposes poses a serious policy challenge for state and local governments. Both levels of government have some role to play in designing and implementing policies that preserve a certain amount of open space, while allowing for appropriate land development and continued economic growth at the state and local levels.

Both cities and counties have relied on the Williamson Act to support general plan and zoning objectives, prevent leapfrog development and promote orderly growth. While the Act has always helped protect California's agricultural production, more recently, proponents have argued that the Act also helps the State meet its greenhouse gas reduction policies and statewide environmental goals.

According to statistics from the California State Association of Counties (CSAC), one in three Williamson Act farmers and ranchers said that without the Act they would no longer own their parcel(s).

The Crunch on Counties

Subvention payments are some of the most flexible discretionary monies available to cities and counties. Unlike most funding received by local governments, subvention funds may be used for county or city general purposes (Government Code §16145). Therefore, a loss of subvention represents a decrease in flexible discretionary funding for local governments.

While the lagging economy and crash of the housing market may lessen the pressure from developers on farmers and ranchers to sell their property, the lack of state subventions does not negate the existing 10-year contracts.

Instead, California's mostly rural counties now must shoulder the property tax subsidies, tearing deeper holes in budgets already ravaged by levels of unemployment far higher than in urban counties.

In an attempt to deal with the loss of subvention funding, counties are taking a variety of approaches including moratoriums on new Williamson Act contracts. Following are some examples of the financial hit counties are facing since elimination of the Act:

Butte County - 13.3% unemployment - needs to come up with $600,000 to cover its subventions.

In Glenn County, which has an unemployment rate of 15.6%, the tab is $950,000, the Chico Enterprise Record reports.

Merced County - 17.6% unemployment - will add another $1.2 million to its budget shortfall as a result of the governor's veto. Some 474,000 acres - nearly half the county's agricultural lands are under Williamson Act contracts according to The Merced Sun Star.

In Yolo County - 14.8% unemployment - loss of funding for the Williamson Act will cost Yolo County approximately $1.1 million a year.

Closing Considerations

In light of the $20 billion budget deficit, the legislature and the governor have very difficult decisions ahead. If state officials again decline to reimburse counties for the lost property-tax revenue, it will have a dramatic effect on California's agricultural community. Without General Fund reimbursements, Fresno County has already said it might not continue with the Williamson Act program. If the number one ag-producing county in the nation decides to opt out, there could be strong pressure on other counties to follow suit.

Implications of a full elimination of the Williamson Act will prove to reach beyond the cost of lost agricultural jobs and production. Cancellation of Williamson Act contracts could lead to other issues, such as local management problems pertaining to abandoned crops and orchards and subsequent pest management challenges - all of which will place an additional cost burden on local governments.

In every crisis there is opportunity, and in every recession there is a potential for rebirth. As such, the current fiscal and political realities present a window of opportunity for lawmakers to consider California's Land Conservation Act of 1965 as they look to the future.

 

For more information on this report or other Local Government issues , contact Ryan Eisberg, Senate Republican Office of Policy at 916/651-1501.