Let’s make Current Use Useful – Support the Small Farms Study

Senate Ways and Means Hearing 3:30 today 2/27/14  Go to Status and Things to Do and contact the members.

 

Farming in this State is Diverse

Farms come in all sizes and shapes and methods of operation and practice.  Farms range from very large to very small.  Farmers sell direct to institutions or to their neighbors, sell to chain restaurants and 5 star restaurants, sell to wholesalers and retailers, and sell at the farmers market or through a CSA.

 The Current Use Property Tax Program Goal is to Preserve and Maintain Farmland – Lets make it work for Today’s Farm

Under the Current Use Program farm land is taxed based on “current use” instead of fair market value.  This reduces pressures for conversion to development.  It decreases costs, and keeps farmers farming.

Small and Large Farms Participate in the Program – Unique Eligibility Standards Make Sense for Small Farms – But they have to relate to the real world of real farmers and the mounting pressures on land availability in this state

Land in the program is classified by acreage; small farms are under 20 acres and large farms are 20 acres and over.  Enrollees must be engaged in commercial activities and are subject to examination by the County Assessor.  Small farms must meet gross income thresholds in order to establish they are actively farming.

 Assessment Practice for the Farm Residence – Need to make this Available for Small Farms

On a large farm all of the land, including land under the farm residence if integral to the farm operation, is taxed at current use.  This is because this land contributes to the farm.   But, today small farms are taxed at fair market value on a one acre lot around their farmstead, no matter how that land is used.   This lot does not really exist and cannot be sold.  The high taxes on this fictional lot are a financial burden to small farmers.  We need to find a way to make small farms eligible for the same treatment as their large counterparts.

 The Current Use Program Needs Modernization for Today’s Farms

Small farms and farms with dispersed parcels are becoming increasingly important in this state, particularly in areas where land is pressured by growth and development.  A number of issues need to be examined regarding types of operations and eligibility under the program.  Most everyone agrees we need better information before the Legislature can decide what criteria makes sense for today’s farmer.

 Evaluate the Viability of Small Farms and Other Farm Operations

The study will evaluate ways to improve the viability of small farms and other farming operations under the current use program and recommend updated eligibility requirements if appropriate.  DOR is tasked with this work.

We Support an Amendment to have the Study done jointly between DOR and the State Conservation Commission.  DOR knows taxes, the SCC knows farming.  They are the right team to do this study.

 

2 3 0 6 BINGO!

We emerged from House Finance on Tuesday armed with a legislative direction for a study on small farm viability and the one acre issue.   Then, on Thursday February 13th on the floor of the House, the study was amended onto HB 2306.  HB 2306 is another important bill about current use.  It wrestles with contemporary on-the-ground issues about the farming operation.  Both bills identify problems that need solving, fairly soon. Merging the proposals makes perfect sense.

But why a study?  This was a practical result dictated by an undercurrent haunting our legislative effort.

In short, we are still faced with that age old question “what is farming.” And a relatively new twist, which is “are small farmers real farmers.”    The legislature is making the final decisions here.  If they are worried, we need to listen.

Refresher:  The reason we came to the legislature was to address unfairness in the property tax code for agricultural lands and farmers.  The  narrow issue addressed by HB 1437 is the assessment practice for the land around the residence of a small farm.  Today a one acre administrative parcel (which is a fiction) is taken out of the farm and assessed at fair market value.  Compare this to the rest of the farm, which is taxed at current use.  (All structures are assessed at fair market value.)  Then, contrast this to the assessment treatment for large farms, which are eligible for current use on the entire farm.

The current use value is meant to capture the highest and best use of this land – in other words, farming is the highest and best use of farm land.  Taking a one acre piece out of the farm is plain goofy.  It doesn’t make sense and it drives up costs for small farmers and, honestly, drives them off their land.

The opposition and concerns relate to assuring that only  “real” farmers are eligible for the current use tax treatment.  This is all very tricky to discuss because it is grounded in our own perspectives and viewpoints.  That is why the study will be a welcome signpost along the road to enactment of current use reform.  Nothing wrong with bringing information to the table.

So, who is a farmer and how does that look on small acreage.  And how does that in turn meet the intent of the current use program.  These are the questions the study will explore, which will shed light on the one acre issue and the question of how to qualify a farming operation that is spread across a number of noncontiguous parcels.

The real question of course is how to make sure we are thinking smart about agriculture so we have food for today and tomorrow.

Please stick with us and support the passage of SHB 2306.  The next stop is the Senate, where the bill has been referred to Senate Ways and Means.  Status and things to do has more information.

Small Farm Advocates Make a Great Showing at the Legislature

Today at 1:30 the House Finance Committee heard a proposed substitute for E2SHB 1437.  You can read that document here.  The proposed substitute was sponsored by Representative Reykdal, the prime sponsor of the bill as introduced.

A description of the fiscal impact is here.

You can watch the hearing on TVW.  The hearing on HB 1437 begins at about minute 42.

Great testimony.  You will appreciate all of the good thinking from Nancy Laich (Common Ground Farm), Jim Goche (Friendly Grove Farm), Heather Hansen (Nursery and Landscape Association), Margaret Skolmen (consumer and taxpayer) Loretta Seppanen (South of the Sound Community Farmland Trust), Peggy Smith (League of Women Voters), Ron Schulz (Conservation Commission and Office of Farmland Preservation), Bruce Morgan (Thurston County Farm Bureau), Addie Candib (Tilth Producers of Washington), and Holli Johnson (State Grange).  Signing in as supporting were Evan Sheffels from the State Farm Bureau and Jeannette MacKeague with the State Realtor Association.  A range of perspectives and interests and all coming together to work on this simple fix.

Opposition as expected came from the County Assessors.  The tax shift, which is the result of the budget based property tax system, is a concern to the Assessors.  The current use program isn’t really causally linked to the loss of revenues occuring at the local level.  And the tax shift itself is a symbol of public benefit.  The average statewide increase in taxes would be around $3.  Proposal advocates believe that the existing current use system is not fair to small farms and this shift and the tax increase are necessary to modernize the current use program so that it reflects the growing importance of small farms to communities across the state.  Right now as it exists the system is not fair.  And an unfair tax system makes folks feel downright creepy.

Some thoughts as you think about this proposal:

Tax Policy – Dollar Impact Is Now on Small Farmers – Under Current Use Tax Policy it should be Spread Across the Taxing Districts

The fiscal note illustrates the need for this bill.  It shows a shift statewide and locally, and a local loss.  This is real money especially given that today it is all concentrated on our small farms.  The public policy question is should the taxpayers in the state share this burden.  Is this in line with the Open Space Act goals?  Yes.   The current use program isn’t a handout.  It is recognition that farming is the highest and best use of farmland.  Based on 2012 DOR data the average shift in the state for this proposal is around $3 for a residence assessed at $200,000.  This is not much money to make the tax code fair and remove a barrier to small farms.

The County Assessors have Everything they need to Administer this Change in Law. 

This bill is simple because the Assessors are managing this issue today.  They face the same inquiry with large farms.  The Assessors have extensive statutory authority.  Existing law and this proposal will use identical standards and criteria to determine eligibility.  Assessors can ask farmers for IRS information, for books and records, can come on the property and make an evaluation, and can sit down with the farmer and discuss the issue.   Assessors have agricultural advisory boards made up of farmers that help them think about and approach these issues.   Assessors know this program and how it works.

All Structures are assessed at Fair Market Value.  

We hear about sprawling houses, with pretend farmers watching big screen TVs and cheering on the Seahawks.  First, McMansions and shacks alike will be assessed at fair market value.  The current use program is about land, not structures.  The land preservation goal doesn’t distinguish between rich farmers and poor farmers, or modest farmers, or even care about home décor; it is about farming and farmland.  The question is whether the use of the house is integral to the farming operation.  If the person living in the big house is not a farmer they should have the land under their house assessed at fair market value.

Farm Economy – Keeping Small Farms Viable Is a Plus to the Tax Base and to Communities

Various studies have followed the dollars spent locally and the impact of small farms.  Small farms contribute to state and local economic activity and increase the vitality of communities.

Next steps are to get the bill scheduled for executive.

Please contact Chair Reuven Carlyle, Vice Chair Tharinger, Ranking minority member Terry Nealey, and Representative Reykdal requesting that the bill be exec’d.

Reuven.Carlyle@leg.wa.gov

Steve.Tharinger@leg.wa.gov

Terry.Nealey@leg.wa.gov

Chris.Reykdal@leg.wa.gov

The cut-off for this stage of the process is February 11.

Time to talk our talk. January 30, 1:30 House Finance

The House Finance Committee has scheduled the bill for a hearing on Thursday January 30, at 1:30.  The hearing is in the John L. O’Brien Building (JLOB), Hearing Room A.

If you can come to the hearing and sign in as supporting that would be good.

if you are a farmer impacted by this, it would be good to testify.  Two minutes to tell your story of how the existing tax code impacts you.  If you can’t come in person, please email or write to the House Finance committee members.  You can send one email to all of them.  Their contact information is here.  Your personal story is very important.

The Finance Committee will be interested about why this makes sense from a tax policy basis.  Will changing this law make a difference for farmers, for you?  Is there a public benefit that will result?   Think about those policy questions as you prepare your testimony.

We also need to think about the opposition to this bill, which is two fold.  It decreases the assessment of the land under a farm residence, which will result in taxes being shifted.  The amount of shift varies from county to county.  In some counties it is pennies, in others dollars.   This chart, which is based on data from a few years ago, lays it out.  Why this shift is a good thing for the public needs to be explained.  Privately held farmland amounts to a resource that is valuable to communities.   Do you think County Assessors have the tools they need to administer this program?  If you are a farmer, you can describe what detail the Assessor requires now and how this seems sufficient to administer.  Already Assessors are administering this for farms over 20 acres.  They will not have to invent the wheel, or reinvent it either.

Thanks for your interest and help.

Ready to roll, a simpler version.

After some feedback about the complexity of what was in our kick off draft, we have narrowed our focus and are back to basics.

We came to the table to talk about small farms and the one acre issue, and that is what we propose the legislature tackle.

We have a draft, that you can view here.

We have a one pager that you can view here.

The premise is the same – keep state law modern and in step with what and how farmers are operating today.  Small farms are increasingly important in our farm economy.  Lets recognize that in our tax policy.

The bill will be heard next week in House Finance.  Check back in a few days for more detail.

There are some other bills being heard this session that also address current use tax and farming.  We are glad that the conversation has started.  It is true, as my colleague Jim Goche says, we need major reform in this state and farming and farmland need to be validated for their vital role in our lives.  We can do it, yes we can.

Ready to roll.

Dear Friends of Farms -

We have a very solid bill draft for the 2014 legislature.  It is a statewide approach, and its goal is to assess all sizes of farms the same.  This bill will eliminate the practice of taking one acre out of small farms and taxing that one acre at fair market value.

We are now working to get a hearing in House Finance.

Take a look at the proposed draft to see what you think.

Here is a quick description of the issue and proposal.

It addresses a number of important issues, including the farm site issue for small farms, the inconsistent tax treatment between counties, the “aliquot problem” that has been plaguing Spokane farmers, and it recognizes the value of food production to the food bank system.  And lastly, it includes a comprehensive study of the food economy and the impact and role of the current use program.

Please take a moment to email Chair Carlyle and Ranking Minority Member Representative Nealey, and ask them to hold a hearing on E2SHB 1437.

Reuven.Carlyle@leg.wa.gov

Terry.Nealey@leg.wa.gov

For the complete list of house finance members, look here.

Can you spell BI-PARTISAN!

Today E2SHB 1437 passed out of the House of Representatives with a vote of 92-1.   The floor debate was thoughtful and compelling.  Take a look at TVW to hear Representatives Reykdal, Nealey, and Wilcox explain why this makes good sense.  (13 minutes 40 seconds into the video)

The Senate now has to decide whether to consider this proposal.

We think they should, for the reasons set out below.

Quick Recap of The Proposal

This proposal is about the current use program.

Under this property tax program participating farms are valued based on how they are used (current use), not fair market value.  This takes the high taxes off of the farmer and reduces the pressures to develop the land.  It lowers the cost of doing business and keeps the farmer competitive.

The current use program is just about land – not buildings – not houses – not barns.  Large farms get all of the land on the farm valued at current use, including land under the farm residence.  Small farms do not get the land under the farm residence taxed at current use.

This proposal treats large and small the same – with conditions.  Under existing law farms under 20 acres must meet income thresholds.  E2SHB 1437 keeps those requirements, and adds a new requirement for farms 10 acres and under.  In order for those farms to have the land under their residence taxed at current use they must prove a gross income of at least $10,000 a year.   Farms over 10 acres do not have to show any special income in order to qualify for the residence tax treatment.  All sizes of farms must establish that the farm residence is an integral part of their farm operation.

The proposal is a pilot project for Thurston County. The legislature has directed JLARC (Joint Legislative Audit and Review Committee) to do an evaluation of the Thurston County experience. This will provide useful information with which to craft a state-wide program for all small farms.

The proposal has a very modest fiscal impact.  Thurston County will lose under $7,000 (seven thousand) dollars in revenue and individual taxpayers will pay less than a dollar extra each year.  This is a small investment for such a big impact – preserving small farms.

Why Support this Pilot Program

  • Local community: Small farms have an important role in the local community and increase access to food.
  • Farmers Markets:  Small farms are the backbone of farmers markets.
  • Public interest: Tax preferences are of great public interest.  It makes sense to start with one county and see whether this program will improve the viability of small farms.
  • Readiness: Thurston County is ready for this program.  Its local government officials have testified in support of this proposal.
  • Public value:  Preserving farmland is a commonly held objective.
  • Food banks:  Small farms make significant contributions to food banks.
  • Good food:  Small farms grow good food.

Pitch in.  Go to Things to do, and do them.