Front Cover
 Table of Contents
 Use value assessment
 Exclusive agricultural zoning
 Agricultural districts
 Purchase of development rights
 Transfer of development rights
 Back Cover

Title: Agricultural land preservation programs and policy implications
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Permanent Link: http://ufdc.ufl.edu/UF00084346/00001
 Material Information
Title: Agricultural land preservation programs and policy implications
Series Title: Agricultural land preservation programs and policy implications
Physical Description: Book
Creator: Clouser, R. L.
Publisher: Cooperative Extension Service, Institue of Food and Agricultural Sciences, University of Florida
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Table of Contents
    Front Cover
        Front Cover
    Table of Contents
        Page i
        Page 1
        Page 2
    Use value assessment
        Page 3
        Page 4
        Page 5
        Page 6
        Page 7
        Page 8
        Page 9
        Page 10
    Exclusive agricultural zoning
        Page 11
        Page 12
    Agricultural districts
        Page 13
        Page 14
        Page 15
    Purchase of development rights
        Page 16
        Page 17
        Page 18
    Transfer of development rights
        Page 19
        Page 20
        Page 21
        Page 22
        Page 23
        Page 24
        Page 25
    Back Cover
        Page 26
Full Text

Circular 542

Agricultural Land
Preservation Programs
and Policy Implications
Rodney Clouser and David Mulkey



- 11




USE VALUE ASSESSMENT............................................ 3

Preferential Property Tax Assessment......................... 3
Deferred Taxation............................................ 3
Restrictive Agreements....................................... 7
Circuit Breaker Tax Credits.................................. 9
Policy Implications of Use-Value Assessment................. 10

EXCLUSIVE AGRICULTURAL ZONING .................................. 11

Policy Implications......................................... 12

AGRICULTURAL DISTRICTS.......................................... 13

Policy Implications .......................................... 15

PURCHASE OF DEVELOPMENT RIGHTS................................... 16

Policy Implications......................................... 18

TRANSFER OF DEVELOPMENT RIGHTS................................. 19

Policy Implications ......................................... 21

CONCLUSIONS..................................................... 22

REFERENCES...................................................... 24


1 States with preferential agricultural tax assessment.. 4

2 Millage rates for use value and just value assessment
of agricultural lands, and tax shifts per thousand
dollars of use value assessment for Florida counties,
1979.................................................. 5

3 Southern states adopting deferred taxation programs... 8

Agricultural Land Preservation Programs
and Policy Implications

Rodney L. Clouser and David Mulkey

Land use policy is not a new phenomenon in the fields of economics,
government and agriculture. The concept and importance of land use
policy has been debated for approximately two centuries in all the
aforementioned disciplines. In the late 18th and early 19th century
agriculture accounted for a major portion of United States and world
output. Capital accumulation and technological development were limited
at this time, and early resource economists concluded that agricultural
lands were of such importance that a country's economic growth would
become retarded or decreased significantly by increasing population,
increased land cultivation and the fixity of agricultural land [6,
16]. Economic theory continued to develop and conclusions reached by
earlier economists were significantly altered as technological advances
were adopted by both agriculture and non-agriculture industries.

Land use policy has also been debated within government and at
academic institutions. Of the approximately 38,000 units of government
within the United States (counties, municipalities, and townships),
approximately 14,000 (37 percent) have some type of land use program
(zoning, ordinances, etc.) [4]. In addition, within the past 25 years,
many states have instituted land use policies such as preferential tax
assessment, tax credits, and contractual agreements. Symposia and
research studies on land use policy have been conducted at all levels of
government, with the primary emphasis at the national and state
levels. Theoretical considerations, applied research applications, and
extension education materials have been published through a variety of
academic institutions in the United States. Though many of these
articles explore the same subject areas, results vary considerably among
authors and states, and conclusive evidence for adoption of an agri-
cultural land use policy is not evident. Considerable research efforts
have also been expended on interrelated land policy issues by soil
scientists and agronomists. Topics explored include soil mapping, crop
rotation patterns, and improved crop production using limited tillage
operations to reduce soil erosion impacts.

Many factors have contributed to the lengthy debate about land use
policy and agricultural land preservation or maintenance programs. One
primary reason for the continued debate may be that land use policy is
determined by a group of decision-makers whose membership changes over
time, and whose values, goals and objectives change over time. This
change in leadership may result in the enactment of short-term measures
to alleviate long-term land policy issues. However, this trend is not
different from the decision process employed on other pertinent public
policy issues.

Rodney L. Clouser is Assistant Professor and David Mulkey Associate
Professor, Food and Resource Economics Department.

Other factors which have contributed to the public policy debate
concerning agricultural land include, but are not limited to: (1)
rapidly escalating population growth in various areas of the country,
(2) technological advances, (3) displacement of some farm operators
through increased production and efficiency, (4) changing resource
endowments, (5) fluctuations in farm income as a result of risk and
uncertainty, and (6) sporadic urban development. Although delineation
of factors contributing to agricultural land policy debates is not a
major objective of this publication, it should be recognized that many
factors contribute to agricultural land conversion, and as long as these
factors are perceived as a problem by decision-makers, the issue of land
use will maintain its importance in the public policy arena.

This publication presents information that will be useful to agri-
cultural producers who want to be informed about alternative land use
policies that may be considered by state and local government at some
future date. It also serves as a supplement for a previous series of
fact sheets published by the Food and Resource Economics Department, of
the University of Florida [1. 2, 7, 8,]. Expanded details of land
maintenance programs addressed in these fact sheets are contained in
this publication. In addition, information accumulated by the National
Agricultural Lands Study (NALS) [9, 10, 11, 12, 13, 14, 15] is condensed
and presented. More specifically, details of land preservation programs
in various states will be summarized, costs of various programs will be
identified when and where possible, and policy implications will be

Five specific agricultural preservation or maintenance programs
will be reviewed in this publication, including (1) preferential tax
treatment (often referred to as use value assessment), (2) exclusive
agricultural zoning, (3) agricultural districts, (4) purchase of
development rights, and (5) transfer of development rights.

1For individuals who are not familiar with the NALS study, it was
initiated under the Carter administration in 1979 and was charged with
determining the reasons for agricultural land conversion, evaluating the
consequences of land conversion, and recommending alternatives to
alleviate rapid land conversion, if such were deemed necessary. The
project was concluded early in 1981.
Several federal agencies, state agencies, private consultants.
academic specialists, and elected representatives participated in the
study. Results, information collected and conclusions of the study are
presented in a 12-volume report consisting of several hundred pages.
Individuals employed in state and local government may find the volume,
The Protection of Farmland: A Reference Guide Book for State and Local
Government [14] useful. NALS, as might be expected, has generated
controversy over program definitions, agricultural land definitions.
etc., from several professional occupations (e.g., economists,
planners). However, the study is the most current comprehensive review
of agricultural land use preservation programs in the United States.


Use value assessment represents the most widely used agricultural
preservation or maintenance program enacted within the United States.
As of 1980, Georgia and Kansas were the only two states not using this
approach. Use value assessment provides for preferential ad valorem
property tax assessment for agricultural lands. Four different deriva-
tives of this program are used in various states, including: (1) prefer-
ential property tax assessment, (2) deferred taxation, (3) restrictive
agreements, and (4) circuit breaker tax credits.

Initial adoption of a preferential tax assessment program occurred
in Maryland in 1956. Growth in the rate of adoption has increased
rapidly since 1960. Only two states, Maryland and Florida, enacted some
form of this legislation prior to 1960. An additional 18 states enacted
programs by 1970. and 25 states have adopted programs during the past

Preferential Property Tax Assessment

Preferential property tax assessments have been authorized by state
legislatures in 17 states (Table 1). Land eligible for agricultural
assessment is taxed according to income-earning potential in agriculture
rather than according to market (just) value. Pure preferential assess-
ment programs do not penalize landowners if the land is converted to
nonagricultural uses. The programs reduce the taxable value of agri-
cultural land and thereby reduce property taxes. This reduction results
in a tax burden shift, and other individual property owners pay a
proportion of taxes that would have been levied on agricultural land if
they had been assessed at market (just) value.

The aggregate statewide impact of preferential assessment can be
quite large and depends upon the level of revenue required to operate
the taxing district (taxing unit), the proportion of agricultural land
compared to all other property within the taxing unit, and the dif-
ference between use value and market value assessment. Property tax
reductions to agricultural producers can vary considerably, but are
usually larger than the resulting tax increases which are shifted to
other individual property owners. In 1979, it is estimated that pre-
ferential agricultural tax assessment in Florida reduced ad valorem
property tax payments on the state's classified agricultural land by
$117 million. However, this entire tax reduction did not accrue to
agricultural producers since many land parcels which qualify for pre-
ferential tax assessment are not involved in commercial agricultural
production. Estimates of the impact of preferential assessment on
classified agricultural land in Florida in 1979, by county, are
presented in Table 2.

Deferred Taxation

Deferred taxation programs are similar to preferential assessment,
but typically include a "rollback" provision which requires repayment of
preferential tax treatment received on agricultural land that has been
converted to nonagricultural uses. Normally, the rollback tax is equal

Table 1. States with preferential agricultural tax assessment

State Year Adopted State Year Adopted

New Mexico
North Dakota

South Dakota
West Virginia

1976, 1979



Source: [14]





Table 2. Millage rates for use value and just value assessment of
agricultural lands, and tax shifts per thousand dollars of use
value assessment for Florida counties, 1979.

Millage Rate
With Use Value








Indian River








Millage Rate
With Just Value








Tax Shift
Per $1000
Use Value








Table 2. Continued

Millage Rate
With Use Value












Palm Beach

St. Johns

St. Lucie
Santa Rosa



State Total

Millage Rate
With Just Value









Tax Shift
Per $1000
Use Value









to the difference between taxes actually paid and taxes that would have
been paid if preferential tax assessment had not been offered for some
specified number of years. In addition, some rollback provisions
require that an interest charge be levied on the taxes deferred for a
specific time period.

Deferred taxation represents the most widely adopted derivative of
use value assessment programs in the United States Twenty-eight states
have some form of deferred taxation program, including eight southern
states (Table 3). In general, the rollback and interest charges are
paid by the landowner. Nationwide, the interest charged on rollback
taxes ranges from five to ten percent. North Carolina imposes the
largest interest charge (nine percent) of any southern state. However,
less than half (12) of the 28 states charged any interest penalty for
the conversion of agricultural land to nonagricultural uses. The roll-
back period ranges from three to ten years in the United States, and
Tennessee has the longest rollback period (7 years) of any southern

Restrictive Agreements

Restrictive agreements typically require the landowner to enter a
contract for a specified time period, agreeing that the land will be
maintained in agricultural use. The contract is made between the land-
owner and a unit of government. NALS identified only two states,
California and New Hampshire, with restrictive agreement programs.

In California, agricultural landowners are required to enter
restrictive agreements for ten years. Each year, the contract is
extended for one additional year unless one party gives notice that they
do not want to renew the contract. After the notice of non-renewal is
received, the assessment value of the agricultural property begins to
accelerate. The program is designed such that at the end of the seventh
year after notice of non-renewal the assessed value of the agricultural
property is approximately equal to its full market value. California
estimates that contracts have been signed covering approximately 16
million acres of land, or approximately 44 percent of all privately
owned agricultural land within the state [14].

California's restrictive agreement program (also known as the
Williamson Act) allows cities and counties to establish agricultural
preserves. Establishment of a preserve represents the only method
available in the state whereby land can qualify for use value assess-
ment. Participation in the program requires establishment of a plan by
the city or county, and a local planning agency determines (for the
local governing unit) if the preserve is consistent with the overall
plan. In 1972, the program was broadened to include recreational lands
and open spaces. A preserve must consist of at least 100 acres, and
ineligible land cannot be contained within the preserve.

2A similar program in New York will be discussed under the section
on agricultural districts.

Table 3. Southern states adopting deferred taxation programs.

Rollback Interest Year
Period Charge Enacted

Alabama 3 1978
Kentucky 1976
Maryland 1956
North Carolina 3 9% 1973
South Carolina 5 1975
Tennessee 7 6% 1976
Texas 5 7% 1966
Virginia 5 6% 1971

IMaryland has a special land
Source: [14].

use charge tax.

The California restrictive agreement is considered binding and
enforceable by the state judicial system. A restrictive agreement can
be canceled by the landowner, but economic hardships are not considered
a valid reason for cancelling the contract. Objection by a minimum of
50 percent of landowners, in the preserve nullifies the cancellation. A
cancellation fee is required from the landowner but may be waived by the
state. The state has provisions to reimburse local units of government
for administrative costs and decreased tax collections. The state
estimates total program costs to be slightly in excess of $12 million
per year [4].

Future ability to attract more land into the California program is
uncertain since state passage of Proposition 13. Proposition 13 re-
quires that real property be taxed at one percent of its fair market
value in 1975 and automatic increases of two percent per year are
allowed for inflation. Agricultural landowners now have the option of
entering restrictive agreements or paying taxes according to the guide-
lines established upon passage of Proposition 13.

Circuit Breaker Tax Credits

A circuit breaker tax program allows for a tax credit on the agri-
cultural producer's state income tax, based upon the level of taxes paid
on real property. Only two states, Michigan and Wisconsin, have circuit
breaker tax credit programs for agricultural land. In some states, such
as Florida, this tax would not represent a viable alternative since no
state income tax is levied.

Michigan's program allows agricultural producers a tax credit equal
to the amount by which taxes on real property (land and farm buildings)
exceed seven percent of the household income. If the tax credit exceeds
the tax liability, a payment for the difference is due the agricultural
producer. To be eligible for the program, agricultural producers must
enter into a farmland development rights agreement restricting land use
to agriculture. The agreement is reviewed by local planning agencies
and the district soil conservation agency. The farmland development
rights agreement is then approved or rejected by a local governing
board, and final approval is required by the State Land Use Agency. The
state can dissolve the agreement if the public interest would be best
served by development of the land. Agricultural producers may also
dissolve the agreement through a process similar to that required to
initiate the farmland development rights agreement. If the state termi-
nates the agreement, no back taxes are due, but if the agricultural
producer terminates the agreement, all tax credits previously received
become due, with a six percent compound interest penalty.

The Wisconsin program offers a similar circuit breaker credit, and
encourages local government units (counties and municipalities) to adopt
agricultural zoning ordinances and preservation plans. Income tax
credits to producers depend upon adoption of these zoning and

preservation plans by local government units. The Wisconsin program is
implemented in two phases: between 1977-1982, individual producers are
eligible for circuit breaker tax credits, but after 1982, credits depend
upon the local unit of government adopting the zoning and reservations
plans previously mentioned.

Eligibility requirements for the Wisconsin program include owner-
ship of a minimum of 35 acres of land in agricultural use and gross farm
profits equal to or in excess of $6,000 the prior year (or $18,000 the
three prior years). Contractual agreements are required, and adoption
of both a zoning and preservation plan increases the tax credit avail-
able to the individual. Contractual agreements typically run between 10
and 25 years, and prohibit alterations to the property unless they are
consistent with agricultural use (the minimum contract is for 5 years in
areas designated as rural/urban transition areas).

Expiration of a contract requires payment of back credits for 10
years. Cancellation of a contract by the landowner requires an
identical payback period plus six percent interest. The tax credit is
structured such that the credit is greater for lower income levels and
higher property tax payments. The maximum credit is $4,200 and requires
a household income of less then $10,000 and property tax payments equal
to or greater than $6,000. Additional detailed requirements associated
with the Wisconsin program and a more detailed explanation are available
in The Protection of Farmland: A Reference Guidebook for State and
Local Government [14].

Policy Implications of Use-Value Assessment

Preferential agricultural tax assessment shifts a portion of the
agricultural producer's property tax burden to all other property owners
in the taxing district. Individual benefits to producers may be small,
but the aggregate statewide impact could shift taxes by several hundred
million dollars. However, the number of all other taxpayers generally
is substantially larger than the number of agricultural producers, and
property tax burdens shifted to these individuals are normally small.

In some years, due to the variability in farm income, property tax
payments represent a significant proportion of farm income. However, it
is doubtful. that property tax reductions can significantly improve the
profitability of a farming operation over a long time period. Preferen-
tial tax assessment programs can be structured so they are easy to
administer, have a low administrative cost, are basically controlled by
local government, and place minimal restrictions on agricultural pro-
ducers who participate in the program.

Since deferred taxation requires repayment of the preferential tax
treatment received by agricultural landowners if the land is converted
to nonagricultural uses, support by agricultural producers for deferred
taxation programs may be influenced by the length of the rollback period
and any interest penalty charged. It should be noted that if the land
is sold to a developer, and the rollback charges are levied on the
landowner, these charges could be capitalized into the purchase price of
the land.

Restrictive agreements often require increased regulation of the
landowner by a unit of government. Although tax benefits with restric-
tive agreements are identical to the previously mentioned programs,
contracts are also required. By restricting land market activities,
agricultural producers may forfeit long-term capital gains they would
have received in a program with less regulation.

Typically, in circuit breaker programs, property taxes paid in
excess of some specified amount are deducted from the agricultural
producer's state income tax. A major difference between circuit breaker
programs and other programs discussed is that circuit breaker programs
alter the tax mix as shifts occur from property tax to the income tax
(assuming no additional levies or new taxes). The two states currently
using circuit breaker tax credits have a major role in regulation of the


Zoning represents another alternative land maintenance program
offered by government. In most cases, land use is controlled by a local
government unit. NALS [14] identified 104 counties and 166 municipali-
ties which had adopted local zoning ordinances. Coughlin, et al., [3]
also identified 27 state legislatures enacting legislation granting
local units of government the authority to establish exclusive agricul-
tural zones. However, less than one-half of the jurisdictions have
passed ordinances prohibiting non-farm land use [3]. There are two
common forms of zoning: nonexclusive agricultural zones and exclusive
agricultural zones. Zoning, including exclusive agricultural zones, is
based upon the police power of government to provide adequate public
safety, health, and welfare for residents of their community or state.
Nonexclusive agricultural zones are the most common. Nonexclusive
zoning typically does not prevent the conversion of farmland to other
uses, as long as such conversion is approved by a local zoning board.
Guidelines usually are established in these zones to control population
density, and a minimum acreage or lot size is also required.

Exclusive agricultural zones differ from nonexclusive agricultural
zones in that a much stricter enforcement of land use is required.
Often, exclusive agricultural zones prohibit or significantly limit
nonagricultural use of farmland. A common misconception concerning
exclusive agricultural zones is that no other land use is permitted
except for agriculture. On the contrary, exclusive zones often do allow
for land use that does not compete with agriculture (e.g., landfills,
cemeteries, utility access strips) or that provides a service of value
to the agricultural zone (e.g., schools and churches).

Common elements of exclusive agricultural zoning programs identi-
fied by the NALS [14] include: (1) nonfarm construction was prohibited
within the exclusive agricultural zone, (2) a performance definition of
agricultural lands (e.g., level of farm sales) was developed as a
criteria for inclusion in the program rather than using minimum lot size
or acreage requirements, and (3) proposed construction or zoning changes
required evaluation on an individualized basis by zoning administrators
or building inspectors.

Coughlin et al. [3], conducted a survey of thirteen areas with
exclusive agricultural zoning and determined that: (1) only a limited
number of zoning changes were brought before zoning boards, (2) most of
the proposed changes were granted, and (3) only one exclusive zoning
ordinance had been challenged in court. However, the success of these
ordinances can be attributed to a low level of demand for land develop-
ment. The court challenge occurred in California and enforcement of the
exclusive agricultural zone was upheld. The court ruled that prohibit-
ing the sale of land based on parcel size represented a reasonable use
of police power by the local jurisdiction.

Oregon has one of the most comprehensive exclusive agricultural
zoning programs. A land use act was passed in 1973 requiring the estab-
lishment of urban growth boundaries around cities. Land not contained
in these boundaries is covered by exclusive agricultural zones. The
most productive land is to be retained for agricultural use, although
the program does not prohibit the construction of single-family, non-
farm units within the zone, as long as they do not interfere with farm
practices. A local governing board is required to review any land
parcel division of ten acres or less. Additionally, the 1973 act
created a Land Conservation Development Commission responsible for
development of statewide planning goals. If local authorities fail to
adopt plans, the Land Conservation Development Commission can adopt
plans and zoning ordinances for local areas.

Policy Implications

Since exclusive agricultural zoning represents a land retention or
maintenance program not widely adopted, reports on program impacts are
limited. A reasonable assumption concerning exclusive agricultural
zones is that zoning programs will be developed consistent with the
goals of the local governing unit.

Administration costs for exclusive agricultural zones may be greater
than those for nonexclusive zones. Higher costs could be associated
with the individualized review necessary for any proposed land use
change or construction within the exclusive agricultural zone. Problems
with noise, traffic congestion, litter, and vandalism to farm property
could be reduced since many of these problems are associated with urban
sprawl, and exclusive zones tend to prohibit such expansion. Generally,
potential conflicts between agricultural and nonagricultural landowners
are limited, due to the restrictive nature of the programs.
The major monetary benefit to agricultural producers is reduced
property taxes through participation in the programs, if the exclusive
zoning program is linked to tax relief. Like other land use programs
mentioned earlier, tax relief in one area results in a tax burden
shift. The major drawback to agricultural producers may be restrictions
imposed by the local governing unit. In the strictest exclusive zones,
it would be impossible for developers to purchase land or construct
housing. It is not unreasonable to assume that loss of land market
options for agricultural producers through restricted sales would result
in financial costs greater than benefits received through preferential
tax assessment.


Agricultural districts represent a voluntary farmland retention
program where a single producer or several agricultural producers form
an agreement with a unit of government (usually local) to retain farm-
land in agricultural use in exchange for tax and nontax incentives.
Such programs are intended to reduce conflicts between rural and urban
areas and reduce agricultural tax burdens in exchange for development of
a district where agriculture is the primary economic activity.

Six states have agricultural districting programs: California,
Illinois, Maryland, Minnesota, New York and Virginia. Minnesota re-
presents a special case since the agricultural districting program is
only applicable to the "Twin Cities" (Minneapolis St. Paul) area.
California adopted agricultural districting in 1965 and the remainder of
these states have enacted programs within the past 10 years. Therefore,
as might be expected, an abundance of data explaining the programs or
their success are not available. Additionally, the California program
represents only a portion of several land use policies adopted by the
state. New York is considered the leading innovator in agricultural
districting programs, and programs adopted in Illinois and Virginia are
derivatives of New York's districting program [14].

NALS [14] identified thirteen different elements of agricultural
districting in the six states:

1. Parcels enrolled in agricultural districts are eligible for
preferential tax assessment (use-value assessment);

2. Local government ordinances and regulations with negative
impacts on agriculture are restricted;

3. Public expenditures promoting non-farm development are re-

4. Before agricultural land parcels can be purchased, alternative
methods of accomplishing the desired task must be explored;

5. The ability of public agencies to impose special assessments or
special service taxes on agricultural land is restricted;

6. State agencies are mandated to modify existing administrative
regulations and guidelines with negative impacts on agricul-

7. The ability of local government to annex prime farmland is

8 Agricultural producers are encouraged to use soil and water
conservation management practices;

9. Limits are placed on the annual rate of increases in tax

10. Local government is compensated by state government for losses
incurred in tax revenues by adoption of agricultural district-

11. Developments adjacent to agricultural districts are regulated
to reduce potential rural/urban conflicts;

12. Conversion of agricultural land to nonagricultural uses is
restricted by agreements between agricultural producers and
local governments: and

13. State/local governments can purchase the development rights to
land considered for conversion to nonagricultural uses, and can
compensate landowners for loss of developing the land.

Since New York's program has been modeled by other states, the
remainder of this discussion will emphasize New York's agricultural
districting programs, and derivations in other state programs will be
mentioned when applicable. Both the New York and Illinois agricultural
districting programs specifically state that agricultural districting
was created because of a weakening farm economy partially created by
urban sprawl and scattered development. While this statement may appear
relatively unimportant to some individuals, it may be extremely
important to agricultural producers. The statement gives notice that
state/local governments recognize agriculture as a viable economic
activity of importance to state and local communities.

Generally, creation of agricultural districts is initiated by
landowners who petition the local unit of government. In Illinois and
Virginia, the final authority for establishment of a district is vested
with local government, and in New York, proposed districts are reviewed
by a state agency before being returned to the county for final
approval. Creation of a district in New York requires from six months
to one year to complete and requires that boundary maps of the district
be prepared, and petitions from landowners obtained to ascertain if the
district meets all requirements (e.g., minimum size and land use
requirements are met).

New York, Virginia, and Illinois all require that a district con-
sist of at least 500 acres. Creation of a district in New York does not
necessarily exclude non-farm housing units or isolated retail outlets,
etc. Continuous agricultural districts are encouraged but are not
required for development of a district. The same three states also
require that the majority of land contained within the district be of
sufficient quality to support farming operations. The number of years
for which districts are created varies in all three states. The longest
term is in Illinois where districts are established for 10-year periods.
New York requires eight years, and in Virginia, between four and eight
years is required. The major advantage of the variable time frame is
that several small agricultural districts can be combined into a large,
continuous district in a shorter time frame.

The New York program is constructed such that agricultural lands
receive differential tax assessment whether the lands are contained in
agricultural districts or not. However, agricultural lands in districts
do receive additional preferential tax treatment; tax levies are further
reduced on land within districts. The state also restricts or limits
grants, loans, subsidized construction programs, and expansion of sewer
and water facilities within the agricultural district. The major impact
of these limitations can best be described as an effort to influence
postponement of projects or adoption of alternative plans. Governmental
review of land purchases in excess of 10 acres (or 100 acres total
purchased) from an individual owner is required. As mentioned previous-
ly, state agencies are encouraged to review administrative regulations
to ensure compatibility with farming as long as they are consistent with
protection of public health and safety. NALS [14] notes that in no
state are there severe penalties for converting land within districts,
even when permission for withdrawal is not approved. Essentially all
states with agricultural districting require a payback of preferential
tax treatment as the penalty for converting the land.

Statistics gathered from New York's agricultural districting pro-
gram suggest that the program has been fairly successful. Since the
inception of the program in 1971, 411 agricultural districts have been
established in 79 percent of the counties in New York. Districts cover
approximately 60 percent of all the land in farms in the state [14] or
16 percent of the state's land area. The average size district includes
slightly in excess of 40 farms and 14,500 acres. According to data
analyzed for NALS [14], a higher participation rate in non-metropolitian
areas is evident in the state, but it is estimated that 53 percent of
the land in metropolitan areas is also enrolled in agricultural
districts. Surveys attempting to ascertain why individual operators
were attracted to agricultural districting programs have been conducted,
and the four reasons most often cited are: (1) to reduce or keep taxes
down (33 percent), (2) to prevent the conversion of agricultural land
(31 percent), (3) to form a community of farm neighbors (11 percent),
and (4) to prevent restrictive ordinances and regulation by units of
local government.

Policy Implications

As with the majority of other land maintenance programs discussed,
agricultural districting is most often a voluntary agreement by an
agricultural producer to retain land in agriculture in exchange for
preferential tax treatment. However, this method of land maintenance
differs from other preservation programs in that nontax incentives are
offered to the producers. Typically, the nontax incentives limit those
rules and regulations by state and local government which have negative
impacts on the agricultural sector. Common nontax incentives include
restricting development in areas adjacent to agricultural districts and
not subsidizing expansion of water and sewage facilities in agricultural

Agricultural districts are normally established for eight to ten
year periods, although Virginia has a variable districting period of
four to eight years. The main advantage identified with the Virginia

program is that larger (in total acres), more continuous blocks of
agricultural land can be combined into larger districts in a shorter
time period (four years versus eight years). However, agricultural
districting does not ensure that agricultural lands will be maintained
in agricultural uses, nor that large continuous blocks of agricultural
land will be linked together in a single district. Therefore, it is
entirely possible that "patchwork" urban sprawl will occur in a county.

Agricultural districting appears to be a "popular" method of land
retention in states enacting the program. Agricultural producers tend
to support the de-emphasis on rules and regulations of state and local
government offered by this program. Although elimination of rules and
regulations does not ensure non-conversion of agricultural land, it does
indicate to agricultural producers that government will not be a major
factor in influencing land conversion. However, it is a lofty goal for
state and local governments to review rules and regulations and elimi-
nate those having a negative impact on the agricultural sector. Accomp-
lishing this task becomes more difficult, the higher the level of
government involved. For example, it is probably more difficult for
state than for local government to review administrative rules and re-
gulations, simply because the number of agencies and rules promulgated
are greater.

This form of land retention program may also be more acceptable to
producers because, in the states enacting the program to date, the
producers' ability to withdraw the land from the district is not severe-
ly limited. Typically, the penalty for withdrawing the land is payment
of back preferential tax treatment offered the producer. It may be
possible for the producer withdrawing the land to include this back
payment of taxes in the selling price of the land. Support of this
program by urban dwellers or urban employees living in rural areas is
uncertain. Individuals residing in rural areas not engaged in farming
may support the program to help insure that the area surrounding their
homesites will not become congested or developed. However, those
individuals residing in urban areas who desire or prefer to move to a
rural homesite may not support the concept of agricultural districting,
since it would probably place restrictions on home construction. While
this issue might seem remote, it should not be overlooked, since a
smaller number of individuals are employed and live in the agricultural
sector than in urban areas. Also agricultural districting requires
political support, and groups who are capable of mounting the most
effective lobbying effort could influence the final policy outcome.

finally, agricultural districting may be attractive because of low
administrative costs. Although no specific cost figures are contained
in any of the literature, officials from those areas enacting the pro-
gram indicate they have experienced no significant cost increases.


Although all land preservation programs previously reviewed have
been adopted in the past 25 years, the concept of purchasing development
rights was not introduced as a land retention program until the mid-
1970s. Purchase of Development Rights (PDR) is built around the concept

that real estate ownership includes possession (or ownership) of a
"bundle of rights." Examples of these "bundles of rights" include the
right to access the property, to any mineral rights on the property, to
develop the property, etc. Additionally, it is possible for property
owners to separate all the various bundles and dispose of them in any
manner desired as long as it conforms to law. PDR programs envision the
property owners selling the development right, typically to a unit of
government. Private ownership of the land, all remaining "bundles of
rights," and profit from land use remain with the property owner.

PDR programs do not require that government purchase the develop-
ment rights or that the land not be developed. If a group of private
individuals can accumulate enough capital to purchase development
rights, there would be nothing limiting this alternative. Additionally,
development rights purchased could be sold or traded to other
individuals. PDRs are often referred to as "acquisitions of easements"
or "negative easements" [14] because they convey the idea that PDR
programs result in restricting what the owner is capable of doing with
his land.

The last basic component of PDR programs is the value of the
development right, typically defined as the difference between the
market value and the agricultural value of the land. Determining the
value of development rights is difficult because, in most instances, no
offer has been made on the land for development purposes. Unless an
offer has been made on the parcel, the value of the development right
would have to be negotiated between the landowner and the purchaser.

The relative newness of the PDR concept is highlighted by the fact
that development rights have been purchased on only about 10,300 acres
of land in the entire nation. Over 30 percent of the easements pur-
chased are in Suffolk County, New York, and approximately 50 percent are
equally split between programs in Maryland and Connecticut [14].
Nationwide, PDR programs have been identified in the following areas:
South County, New York: Howard County, Maryland; Southampton, New York;
Massachusetts; Connecticut: Burlington County, New Jersey; King County,
Washington; and New Hampshire [5, 14].

Suffolk County, New York, where the largest percentage of land is
concentrated in a PDR program, is located on Long Island. In 1974, the
county had the highest value of agricultural production of all New York
counties. Land in farms had decreased more than 50 percent in the years
1950 1974. and the area was under much pressure from urban sprawl
[5]. In 1975, over 380 farm owners offered to sell development rights
on approximately 17,000 acres for $117 million dollars, which translated
into a cost for development rights of approximately $6,900 per acre
[5]. No actual purchases of easements were undertaken until 1977. when
$21 million was allocated through a bond issue to purchase development
rights on approximately 4,000 acres. As of June 1980, 51 parcels of
agricultural land containing 3,214 acres were contained in the PDR
program. The cost of purchasing these easement rights was approximately
$10 million, or approximately $3,100 per acre [14].

PDR programs obviously will only be successful if landowners are
willing to sell their development rights. Landowners are supposedly
attracted to the program because they can retain ownership of the land,
sell their development rights, and use the money from the sale as they
desire. Two outside groups are involved in the PDR program in Suffolk
County. An agricultural advisory committee composed of farmers and
county officials develops criteria for land eligible for participation
in the program. Another committee consisting of county legislators,
directors of planning, extension service personnel, and individuals from
towns where easements are expected to be purchased are responsible for
designating parcels where purchase of easements is desired. The PDR
program is structured so that development rights can be sold back only
if approved by a county-wide referendum.

The effectiveness of the Suffolk County program is difficult to
evaluate. It is obvious the program has interested some agricultural
landowners, since 3,200 acres with easements have been brought under the
PDR program. Actually, much more land with easements has been offered
for purchase than was actually purchased. In total, over 640 farmland
owners have offered to sell development rights on over 21,000 acres.
Suffolk County's original goal for easement purchases was 12,000 -
15,000 acres, and the county has reached approximately 25 percent of
that level. There is also some limited evidence that the Suffolk County
PDR program has removed speculators from the land market. Prior to
enactment of the PDR program, only 858 out of approximately 3000 acres
were owned by farm operators, according to data collected during NALS.
However, after development rights had been purchased, residual rights
(agricultural production rights) obtained by agricultural producers
resulted in 1,248 out of the approximately 3,000 acres being owned by
farm operators.

Policy Implications

It appears that in areas where PDR programs have been adopted they
are capable of attracting farm participants. If the acreages purchased
are large enough, it would be feasible to develop an agricultural com-
munity or "farm block" to eliminate conflicts associated with non-farm
land use (e.g., noise, pollution, vandalism, urban sprawl). The program
may also be attractive to farm operators because it offers monetary
benefits to producers in exchange for development rights on their
land. Transfer to the producer typically is paid by government, but
money to purchase the development rights is normally raised by a bond
issue paid for by local property owners.

This transfer to the agricultural producer has both positive and
negative impacts. The positive impacts are that producers retain the
right to use their land for agricultural production, and they also
receive a payment of funds to invest or use as they deem desirable. A
negative impact of PDR programs is the cost of obtaining development
rights. On the approximately 10,000 acres purchased, the cost has been
about $18 million dollars. It is doubtful that many local governments
will be capable of supporting programs this costly. Cost is an
important consideration since the mood of the general public at present
appears to support the position of less government spending.

Additional problems can arise with PDR programs. In all the states
with PDR programs currently in effect, it is evident that individuals
offer development rights on more acres than the government can purchase,
which in turn requires the unit of government to develop some strategy
for purchases. In many instances, the chosen strategy has been to
purchase development rights on the maximum number of acres for a minimum
cost. This approach does not necessarily ensure continuous blocks of
farmland, nor does it necessarily alleviate the problem that the most
productive land is removed from agriculture. For example, some indivi-
duals postulate that the least expensive land for development purposes
is also the best farmland, since "prime" farmland is often well drained,
not sloped extensively, etc. Therefore, developers can afford to pay
more for the best farmland because total development costs are less.
The above-mentioned purchasing strategy would probably result in these
development rights not being purchased because the criteria of maximum
acres for minimum cost would not be met.

A related problem is that of determining the "correct" value of the
land's development right. This determination could be especially diffi-
cult in a state such as Florida where population is increasing
rapidly. Development rights in some areas within the state could cost
well in excess of $10,000 per acre. Historical experience from New York
indicates that the costs of development rights are somewhat dependent
upon local and national economic conditions. Therefore, for a local
unit of government to make the most reasonable purchases of development
rights, an individual or committee who could forecast economic trends
with some degree of accuracy would be required. For example, three
years ago, it was possible to borrow money at an interest rate of 10
percent or less. Even though this rate seemed high at that time, busi-
nesses and individuals continued to borrow money and expand or build
homes. During this time, development rights should have been fairly
expensive. However, in the past two years the national economy has
experienced downturns and interest rates have doubled. The demand for
credit and land purchases has most likely declined. It would be
expected that the costs for development rights would have been more
expensive if purchased just three years ago. It may also be impossible
for units of local government to react to changes in economic conditions
quickly enough to purchase development rights at lower costs, especially
if economic fluctuations were short-term.

Many unanswered questions remain concerning this land policy
option. PDR programs appear to have worked in some of the areas where
adopted. However, participation in PDR programs and data generated from
these programs are not substantial enough to make broad evaluations
concerning the programs' effectiveness.


Transfer of Development Right (TDR) programs closely parallel PDR
programs; i.e., the concept that land ownership includes a bundle of
property rights, and that these rights can be separated, sold or even
controlled by government agencies, if desired. The major difference
between TDR and PDR programs is that the transfer or sale of development

rights in the TDR program takes place between private individuals,
rather than between a unit of government and a private landowner [14].

Typically included in TDR programs are "bonus densities". A bonus
density can best be explained as allowing a developer to exceed basic
density (i.e., so many homesites per acre) controls. In other words, if
the ability to develop is removed from one parcel of land (farmland), a
more concentrated development can occur on another parcel of land
(developmental land). This strategy is based upon the assumption that
there are economies of scale on developmental land (e.g., another hous-
ing unit per acre would not require additional streets, water, sewer, or
electrical connectionss. The transfer or sale price of development
rights, theoretically, would be equal to the difference in the market
value of the land and the land's agricultural use value. Proceeds from
the sale or transfer could be used by the agricultural landowner as

TDR programs have been enacted in even fewer areas then PDR
programs; therefore, evaluation of individual programs and their effect-
iveness is difficult. According to NALS [14], TDR programs have been
enacted in Buckingham Township, Pennsylvania; Montgomery County,
Maryland; Birmingham Township, Pennsylvania; Calvert County, Maryland;
Eden, New York; Sunderland Township, Massachusetts; Upper Makefield
Township, Pennsylvania; Kennett Township, Pennsylvania; Southampton, New
York; Windsor, Connecticut; Chesterfield Township, New Jersey; and
Hillsborough Township, New Jersey.

NALS [14] also notes that TDR programs which have been enacted
encompass three important concepts. First, ordinances recognize that
landowners must have incentives to sell, accomplished by allowing the
transfer or sale of development rights. Secondly, developers must have
incentives to purchase development rights, accomplished by creating the
"bonus density" plan. Finally, efforts to eliminate problems with
surrounding landowners are necessary to ensure that increased densities
will not create new or additional problems.

TDR programs are usually voluntary, and often are associated with
some type of zoning ordinance controlling housing density. Most
development rights transferred are for residential construction. More
specifically, most programs maintain a maximum density control even
after development rights are transferred, and limit the transfer of
development rights to single-family dwellings (i.e., multi-family units
or townhouses are not allowed). As an added incentive for the
landowner, some programs allow the sale or transfer of more development
rights than the landowner has available on his property. This allowance
is also an incentive for the developer because it increases the density
of the development area.

For example, if land in a community was zoned for one residence per
acre, the TDR program could be constructed such that for each acre
transferred, the landowner could sell two development rights. In
general, such TDR programs would increase the number of transfers by 100
percent. However, density in the development area remains controlled to
eliminate potential problems (roads, sewers, water, other utilities)

that could arise if density were to increase too much. Another common
element of TDR programs is that the development district is relatively
small compared to the preservation district. For example, NALS [14]
cites two specific areas where the developmental district is less than
20 percent of the preservation district.

The cost and effectiveness of the TDR programs cannot be accurately
documented, partially because the transfer of rights occurs through the
private market system. NALS [14] notes that, in total, there have been
only five transactions (an additional transaction was in process at the
time data for the NALS was being completed); all transactions have
occurred since 1977; a total of 107 development rights were transferred,
and a total of 184 acres were "preserved".

Policy Implications

Many of the policy implications noted with PDR programs also apply
to TDR programs. However, a few notable exceptions should be
highlighted. First, TDR programs could potentially reduce the public's
direct cost of preserving or maintaining farmland. Rather than funding
the purchase of development rights through bond issues, it is financed
through private agreements with a "land developer". Agricultural pro-
ducers may support this concept since government is removed from the
process. Theoretically, a developer purchases the development rights.
In fact, individuals purchasing homesites on the developer's land will
have the cost capitalized into the lot or home costs. In this way those
who benefit (homeowners) from the program pay for the benefits they
receive. In many aspects, this part of TDR programs is similar to user
fees, a concept which should appeal to the "general public" since they
are not required to finance a project that provides them with minimal

A second major difference in policy implications between TDR and
PDR programs is the final outcome with regard to development rights.
PDR programs result in the development right being purchased by govern-
ment and the development right is typically retired (i.e., it is no
longer available for anyone else to use). However, with TDR programs,
the development right is not retired but is transferred to another area.

Other potential policy implications and problems seem inherent to
TDR programs. For example, limited data are available about individual
preferences for rural versus urban living, the demand for higher density
housing divisions, economies of scale associated with TDR programs, how
the market for development rights would function, etc. In short, the
main drawback to TDR programs and many of the other newer programs
previously mentioned is a general lack of knowledge and understanding of
how the programs operate and how effective they have been in accomplish-
ing desired objectives. This discrepancy will not improve until the
programs have been in operation for a longer period of time, more agri-
cultural producers decide to participate in the programs, and more
detailed data are collected.


Various alternatives are used by state and local governments to
retain agricultural land. Techniques vary considerably among units of
government, but the most common program for land retention is preferen-
tial tax assessment. In many instances, land retention programs are
relatively new, and data required to accurately evaluate the programs
are not available. Program costs vary considerably, ranging from inex-
pensive programs such as zoning to expensive programs such as PDRs.
Although this publication is directed toward identifying direct economic
costs of various land retention programs, it should be noted that
"political" costs associated with such programs may be of equal or
greater importance. In general, data collected show that no single
program will guarantee that agricultural land will be retained. The
major impact of the land retention programs discussed in this report may
be to reduce the rate at which lands are removed from agriculture.

More empirical data collection and applied research is needed to
accurately evaluate agricultural land retention programs. Considerable
macro data are available, but detailed farm-level (micro) data are
almost nonexistent. Several basic questions remain unanswered. Will
agricultural producers support land retention programs? What incentives
are offered producers to entice them to sell land? Have crops been
removed from productive to marginal lands? What impact has increased
educational training had on the decision of farm-reared individuals not
to return to farming? Will the general public continue to support
agricultural land retention programs as the cost of these programs
increases? Do agricultural producers realize that some land retention
programs require them to-"give up" additional property rights, etc?

In Florida, many demographic events are occurring which are
considerably different from demographic trends in states enacting some
of the newer land retention programs. Florida's population increase
between 1970 and 1980 was one of the largest in the country. Florida's
agriculture is different from that in many states which have adopted the
newer land retention programs. Florida has a limited amount of prime
agricultural land but it does not appear to be under the greatest
pressure from urban sprawl and development at present. However, much of
the state's unique farmland is under pressure from development, which
could pose potential problems for the state's "specialty crops" produc-

Several apparent reasons explain why the topic of agricultural land
retention has been controversial for a considerable period of time. In
general, except for bad production years, agricultural production has
continued to increase, technological adoption of new farming techniques
has remained relatively high, farm exports have increased, the amount of
land reported in cropland has remained relatively stable, and farm
income remains low compared to income in the nonfarm sector. Concerns

3As defined in PL97-98 (Agriculture and Food Act of 1981).

that not enough food would be available due to agricultural land conver-
sion have not been borne out in fact. This fact does not imply that
every person in the world has all the food they desire, but the United
States remains a net agricultural exporter.

Another reason why the topic of agricultural land retention has
continued to surface in policy debate is that decision-makers change
over time, bringing in individuals with different goals, objectives and
solutions. Consequently, several different land policy positions may
exist over a relatively short time period. Unusual circumstances such
as drought tend to increase the emphasis on the need for agricultural
land retention, and in some instances, short-term actions are taken that
may distort or alter the longer term solutions required to alleviate
problems. Therefore, changing land programs over time may be considered
the norm, rather than the exception. These changes require constant
evaluation of land programs as they are introduced, and education of
both the general public and agricultural producers to ensure decisions
are made with the most current knowledge available.


[1] Clayton, Kenneth C. and David Mulkey. Retaining Land for Agri-
culture-Agricultural Districts. University of Florida,
Cooperative Extension Service. FRE 30.

[2] Clayton, Kenneth C. and David Mulkey. Retaining Land for Agri-
culture Exclusive Agricultural Zoning. University of Florida,
Cooperative Extension Service. FRE 29.

[3] Coughlin, Robert E. and David Berry, Kenneth Bieri, et al.
Saving the Garden: The Preservation of Farmland and Other
Environmentally Valuable Land. Regional Science Research
Institute. Philadelphia, PA. 1977.

[4] Healy, Robert G. and John S. Rosenberg. Land Use and the
States. Johns Hopkins University Press. 1979.

[5] Krupensky, Ruth Elizabeth. The Attitudes of Rural Landowners and
Farmers Toward Retention of Farmland in Palm Beach County
Florida. Unpublished M.S. thesis University of Florida.

[6] Malthus, T.R. "A Summary of the Principles of Population," in
Three Essays on Population. Mentor Books. New York. 1960.

[7] Mulkey, David and Kenneth C. Clayton. Retaining Land for Agri-
culture-Purchase of Development Rights and Fee Simple
Purchase. University of Florida, Cooperative Extension
Service. FRE 31.

[8] Mulkey, David and Kenneth C. Clayton. Retaining Land for Agri-
culture-Use Value Assessment. University of Florida, Coopera-
tive Extension Service. FRE 28.

[9] National Agricultural Lands Study. Agricultural Land Retention
and Availability: A Bibliographic Source Book. U.S. Govern-
ment Printing Office. Washington, D.C.

[10] National Agricultural Lands Study. America's Agricultural Land
Base in 1977. U.S. Government Printing Office. Washington,

[11] National Agricultural Lands Study. Executive Summary The Protec-
tion of Farmland. U.S. Government Printing Office.
Washington, D.C.

[12] National Agricultural Lands Study. Final Report 1981. U.S.
Government Printing Office. Washington, D.C.

[13] National Agricultural Lands Study. Soil Degradation: Effects On
Agricultural Productivity. U.S. Government Printing Office.
Washington, D.C.

[14] National Agricultural Lands Study. The Protection of Farmland:
A Reference Guidebook for State and Local Governments. Robert
E. Coughlin and John C. Keene, Senior Authors and Editors.
U.S. Government Printing Office. Washington, D.C.

[15] National Agricultural Lands Study. Zoning to Protect Farming A
Citizen's Guidebook. U.S. Government Printing Office.
Washington, D.C.

[16] Ricardo, David. On the Principles of Political Economy and
Taxation. E.P. Dutton and Co. 1962.

This public document was promulgated at a cost of $740.42, or $1.48 per copy, to provide information on alternative
land use policies to agricultural producers and elected decision makers. 11-.5M-82

SCIENCES, K. R. Tefertller, director, in cooperation with the United States Department of Agriculture, publishes this Infor-
matlon to further the purpose of the May 8 and June 30, 1914 Acts of Congress; and Is authorized to provide research, educe-
tlonal Information and other services only to Individuals and Institutions that function without regard to race, color, sex or
national origin. Single copies of Extension publications (excluding 4-H and Youth publications) are available free to Florida
residents from County Extension Offices. Information on bulk rates or copies for out-of-state purchasers is available from
C. M. Hinton, Publications Distribution Center, IFAS Building 664, University of Florida, Gainesville, Florida 32611. Before publicizing this
publication, editors should contact this address to determine availability.

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