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“Current-Use Assessment of Rural
Land in New England: Equity Effects
and Reform Proposals”
Richard W. England
Professor of...
A Brief Look at Bedford, New Hampshire
Property Taxation in Bedford, NH
 Striking differences in 2013 assessments of
undeveloped land zoned for residential use:...
Use Value Assessment
Use value assessment (UVA) = assessment
of undeveloped land for tax purposes as
though permanently u...
Origins of UVA
Rapid suburbanization of U.S. cities
after WWII (interstate highways,
cheap gasoline, mortgage subsidies,
...
Rationale for UVA Programs?
Rationale for UVA offered by IAAO
(1974):
Assessments below market value
1. To preserve fami...
Design Features of UVA Programs (a)
 Simple application process: One page
application common. Little or no
supporting doc...
Design Features of UVA Programs (b)
 Small minimum acreage requirement
typical. Only 3 acres in Louisiana! At
least 5 acr...
UVA and Rural Land Protection
 Studies of impact of UVA on preservation of
rural land surveyed in Anderson & England
(201...
Thoughts About Protecting the
Small Family Farmer
 Property taxes only one reason for leaving
farming. UVA unable to save...
Ten-Acre Farms near Lexington, KY (2016)
Thoughts about Preserving
New England Forests
 30 – 40 percent of New England remained
forested in mid-1800s after two ce...
Swift River Valley (MA), 1880’s
Swift River Valley (MA), 2010
Distributional Effects of UVA (a)
Preferential assessment of rural land 
pressure on local government to raise
property ...
Distributional Effects of UVA (b)
 Early recognition by President’s Council
on Environmental Quality (1976) of “tax
expen...
Distributional Effects of UVA (c)
 Anderson and Griffing (2000) on tax
expenditures in two Nebraska counties:
1. Tax expe...
Cities, Suburbs and Current Use in NH
Pct. Acres in
CU (2014)
Average CU
Parcel Size
(Acres)
Bedford 12.6 14.9
Concord 38....
Assessed Values in NH and Selected
Counties (2014)
Assessed
Value per
Current Use
Acre (Dollars)
Assessed
Value per
Reside...
Academic Criticisms of UVA
 High tax expenditure per acre temporarily
preserved by UVA program. Superiority of
purchase-o...
Editorial Cartoon from Kentucky
Two Hypothetical UVA Parcels
in New Hampshire
Parcel Description Assessed Use Value Market Value
100 acres of
unproductive...
Some Thoughts about UVA Reform
 Current practice: Biggest tax breaks (per acre) go
to owners of undeveloped parcels with ...
Examples of Ecosystem Services
Produced by Rural Parcels
Flood control and water
storage
Filtration of air and water
pollu...
Conclusions
Need to evaluate half century of
experience with UVA and to identify
possible reforms that could improve the
...
Current-Use Assessment of Rural Land in New England: Equity Effects and Reform Proposals
Current-Use Assessment of Rural Land in New England: Equity Effects and Reform Proposals
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Current-Use Assessment of Rural Land in New England: Equity Effects and Reform Proposals

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Richard England, visiting fellow at the Lincoln Institute, argues that the preferential tax assessment of rural land isn’t as effective for encouraging small farms as its enactors had hoped, and that reform is necessary to prevent misuse of this policy tool.

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Current-Use Assessment of Rural Land in New England: Equity Effects and Reform Proposals

  1. 1. “Current-Use Assessment of Rural Land in New England: Equity Effects and Reform Proposals” Richard W. England Professor of Economics, University of New Hampshire Visiting Fellow, Lincoln Institute of Land Policy April 8, 2016
  2. 2. A Brief Look at Bedford, New Hampshire
  3. 3. Property Taxation in Bedford, NH  Striking differences in 2013 assessments of undeveloped land zoned for residential use:  Parcel 1 assessed at $10,047 per acre.  Parcel 2 assessed at $127 per acre.  Nearly 13 percent of town’s land area with average assessment of $155 per acre.  Discriminatory assessment practices? Not at all. Parcel 2 enrolled in Granite State’s current-use assessment program.
  4. 4. Use Value Assessment Use value assessment (UVA) = assessment of undeveloped land for tax purposes as though permanently undeveloped. No recognition of development potential of parcels by local assessor. Almost universal adoption of UVA by state governments during sixties and seventies.
  5. 5. Origins of UVA Rapid suburbanization of U.S. cities after WWII (interstate highways, cheap gasoline, mortgage subsidies, etc.). Developed area in U.S. grew from 25.5 to 65.5 million acres (1960 - 1997). Earliest adoption of UVA of agricultural land by Maryland in 1957.
  6. 6. Rationale for UVA Programs? Rationale for UVA offered by IAAO (1974): Assessments below market value 1. To preserve family farmers, and 2. To protect rural landscapes from urban development.
  7. 7. Design Features of UVA Programs (a)  Simple application process: One page application common. Little or no supporting documentation required.  Eligible land uses: farm or ranch typical, forested parcel less common, “open space” rare.  Modest sales or income from rural use often required. At least $500 of annual sales from farming activity in MA.
  8. 8. Design Features of UVA Programs (b)  Small minimum acreage requirement typical. Only 3 acres in Louisiana! At least 5 acres of farmland in Massachusetts. Ten acres in NH. Minimum of 25 acres in Vermont.  No development penalty in 21 states.  Rollback or conveyance tax in 28 states.
  9. 9. UVA and Rural Land Protection  Studies of impact of UVA on preservation of rural land surveyed in Anderson & England (2014).  Morris (1998) on effect of UVA on retention of farmland in nearly three thousand counties: “The policy [resulted in] … 10 percent more of the land in a county being retained in farming [after twenty years].”
  10. 10. Thoughts About Protecting the Small Family Farmer  Property taxes only one reason for leaving farming. UVA unable to save family farmer?  Farms with fewer than 600 acres common in the early 1980s. Today most cropland is on farms with at least 1,100 acres (USDA).  Today’s land-rich farmers deserving of property tax break?
  11. 11. Ten-Acre Farms near Lexington, KY (2016)
  12. 12. Thoughts about Preserving New England Forests  30 – 40 percent of New England remained forested in mid-1800s after two centuries of European settlement.  80 percent of New England covered by forest or thick woods today.  “New England is now the most heavily forested region in the United States ….” (Boston Globe, 2013)
  13. 13. Swift River Valley (MA), 1880’s
  14. 14. Swift River Valley (MA), 2010
  15. 15. Distributional Effects of UVA (a) Preferential assessment of rural land  pressure on local government to raise property tax rate and/or cut local expenditures. Shift in property tax burden from UVA beneficiaries to other property owners within taxing jurisdiction.
  16. 16. Distributional Effects of UVA (b)  Early recognition by President’s Council on Environmental Quality (1976) of “tax expenditures” associated with adoption of UVA programs.  California as unique example of state government compensating localities for revenue loss (until 2008).
  17. 17. Distributional Effects of UVA (c)  Anderson and Griffing (2000) on tax expenditures in two Nebraska counties: 1. Tax expenditure large near CBD and declines with distance in both counties. 2. Average tax expenditure = 36 percent in one county and 75 percent of revenue in other county.
  18. 18. Cities, Suburbs and Current Use in NH Pct. Acres in CU (2014) Average CU Parcel Size (Acres) Bedford 12.6 14.9 Concord 38.2 32.2 Manchester 5.8 26.7 Salem 10.1 13.6
  19. 19. Assessed Values in NH and Selected Counties (2014) Assessed Value per Current Use Acre (Dollars) Assessed Value per Residential & Commercial Acre (Dollars) New Hampshire 67.18 37,522 Coos 35.23 15,268 Hillsborough 90.15 49,031 Rockingham 93.87 60,867
  20. 20. Academic Criticisms of UVA  High tax expenditure per acre temporarily preserved by UVA program. Superiority of purchase-of-development-rights programs or outright public acquisition.  Tax relief granted to all rural land in eligible categories, not just to ecologically valuable acres threatened by development.  Flawed formulas used to estimate use values of farm and forest parcels.
  21. 21. Editorial Cartoon from Kentucky
  22. 22. Two Hypothetical UVA Parcels in New Hampshire Parcel Description Assessed Use Value Market Value 100 acres of unproductive (barren) land at interstate highway ramp one hour north of Boston. $1,000 $2 million 100 acres of white pine forest adjacent to White Mountain National Forest and not on road. $15,000 $20,000
  23. 23. Some Thoughts about UVA Reform  Current practice: Biggest tax breaks (per acre) go to owners of undeveloped parcels with biggest difference between fair market value and capitalized net income to parcel owner from continued rural use.  Reform proposal: Biggest tax breaks (per acre) go to owners of parcels with highest capitalized value of public goods generated annually by undeveloped parcel.  Relevance of “ecosystem services” research literature.
  24. 24. Examples of Ecosystem Services Produced by Rural Parcels Flood control and water storage Filtration of air and water pollutants Nitrogen fixation and nutrient cycles Carbon sequestration and climate change Wildlife habitat (including pollinators) Soil erosion prevention Option value of preserved genetic codes Soil formation via rock weathering and accumulation of organic materials Scenic vistas Etc.
  25. 25. Conclusions Need to evaluate half century of experience with UVA and to identify possible reforms that could improve the effectiveness and fairness of UVA. Need to balance social benefits of rural land preservation against social costs of higher tax bills for all homeowners and higher prices of land for new housing and other urban uses.

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