Taxes, conservation easements, farms and other thoughts of spring

By John Piotti | Mar 06, 2013

Town meetings are just around the corner. This means that we are in another season where much of the local talk is about property taxes.

In my community, the town clerk just finalized that part of the town report that lists everyone who hasn’t yet paid this year’s taxes — perhaps a mark of shame for a few, but good reading for many more. (I suspect it’s the section of the report that gets read most closely.) Meanwhile, the local budget committee has been going over the numbers that will ultimately lead to next year’s tax rate — assuming that voters at town meeting don’t wander too far afield. (Going through this process reminds us how local taxes relate so directly to what we do in town — every road we plow, every dog we impound, every dollar we give to Little League.)

With town meetings come municipal elections — and most candidates for selectman offer strong and predictable views on property taxes: they don’t like them.

Nor — it seems — does anyone else.

Sure, most people recognize the need for plowing roads and educating children. But even folks who support taxes for worthy public purposes don’t want to pay any more than necessary. And we all reserve the right to complain.

When a sitting selectman talks about property taxes, it is usually to complain about “others.” The argument generally goes something like this: “We’re tight with every dollar we spend here in town; the problem is that school costs keep going up and the state keeps jerking us around.”

There’s a fair amount of truth in this. Most towns in our region do indeed run lean — though there have also been instances where funds were not well spent. And at the state level, Maine has often raised local costs, both directly and by reducing funding or shifting costs to school districts. Many local leaders are particularly worried right now, since the governor’s proposed budget shifts teacher pension costs to school districts and eliminates municipal revenue-sharing.

Yet this year I’m hearing complaints not just about state cutbacks, but also about nonprofit organizations and conserved lands.

The complaint about nonprofits is nothing new, though I’m now hearing it more frequently and fervently. The gripe is that these groups get away without paying property taxes, which pushes taxes up for the rest of us. Though it is true that some nonprofits (notably colleges and hospitals) own real estate on which they do not pay property taxes, such institutions often support the local economy in other ways that far outweigh any tax benefits they receive. In addition, many such institutions contribute “payments in lieu of taxes” to help cover the cost of services that a host community provides. (As outlined below, covering the cost of services is something that most residential development does not do. So if a nonprofit is doing that, it is already carrying more of its own weight than many residents, even before broader economic benefits are added in.)

But beyond all that, it’s important to note that many nonprofits pay property taxes exactly as an individual would. For instance, the group I now run — Maine Farmland Trust — pays full taxes on its office building in Belfast and on all the other properties it owns.

I mention Maine Farmland Trust specifically because we work with farmland owners who want to protect their land with conservation easements. And in the minds of some, conservation easements are seen as an enemy in the war on property taxes. This view is misguided and false.

Easements on farms do not drive up property taxes for other landowners. In fact, protecting farmland with easements can actually hold down a town’s overall costs, while simultaneously spurring new farming and the economic benefit that brings. Before I explain why this is so, it is necessary to explain how easements work and how important they are to farming’s future.

A conservation easement is a set of deed restrictions placed on a property to limit its use in some manner. Easements placed on farmland are intended to ensure that the land will always be available for farming, which means that the land can’t be turned into a parking lot or a housing development. Since no one knows exactly how a particular piece of land might be farmed in the future, these kinds of conservation easements — called “ag easements”—are created with a great deal of flexibility. They generally allow for fencing, farm structures, land clearing, and whatever else is appropriate to ensure that the land can support a viable farm.

Farming is a funny business. In order to buy land on which to farm, you must pay a developer’s price for land you never intend to develop. But a farm protected with an easement sells at a lower price, what we call its “farm value.” Since the high cost of farmland is the single biggest barrier that prevents new farmers from entering the field, ag easements have become a business development tool.

Easements affect property tax assessments in different ways, depending on the community. Many towns assess farms at their “current use,” which is essentially the same as farm value; this means that an easement has no impact on property taxes. Other towns assess farms at the price they could sell to a developer. In that instance, an easement would indeed lower a farm’s assessment. But the owner of that property could have received a similar benefit by enrolling in the Farmland Current Use Tax Program authorized under Maine’s constitution.

So easements are not the culprit.

Still, as taxpayers, shouldn’t we resent the fact that farmland owners can get away with paying property taxes based on current use value? The answer is no, because landowners who get these benefits still pay more than their fair share.

Several “cost of community service” studies have shown that while farms assessed at current use values may generate less tax revenue than, say, residential development, they require much less from the town. On average, farms require 37 cents in services for every dollar of taxes collected, while residences require $1.19 in services for every dollar collected.

In fact, a good strategy for a community wishing to help hold down property taxes is to maintain its farmland. If that land is developed into house lots, it will ultimately drive up taxes. (Recognizing this, a town in New Hampshire went so far as to buy a large tract of vulnerable farmland with taxpayer money, realizing that doing so would cost the town less than allowing the land to be developed.)

Now, I prefer to look at the upside of vibrant farms, not the downside of development. And that is easy to do, since farms contribute so much — rural character, scenery, wildlife habitat, land for hunting and snowmobiling, local food and local jobs. But we can add to that list: 1) farmland contributes more than its fair share to our local tax base, even when the property is protected with an easement; and 2) the use of easements to protect farms also helps protect a community against rising costs.

So why do so many people think easements on farmland hurt the community?

It would be easy to reply that such people are simply not fully informed, and no doubt that is true. But I think it is more than that. Some people just want to argue about property taxes — and always will. They want and need someone to resent, someone or something to blame. Let’s add easements to the list — the facts be damned.

And of course, it also gives selectmen something to talk about, something where the blame is not fixed to them. It’s a hard time of year for selectmen, as the snow melts and the mud rises and the roads fall apart.

I suspect this kind of talk is as inevitable as the coming of spring.

John Piotti of Unity is executive director of Maine Farmland Trust and this newspaper’s newest columnist. “Cedar and Pearl” appears every other week.

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