Bacon's Rebellion

Democracy Thrives in Sunlight

Voodoo Economics, Meet Cow Poo Economics

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by

James A. Bacon
in ,

There’s a reason why Albemarle County is one of the most picturesque places in Virginia. Its stately manor houses and landscapes enjoy layers of protection from the higher real estate taxes that result from providing services to a growing, urbanizing population. But people who don’t live in those manor houses are beginning to grumble.

A group calling itself Forever Albemarle and claiming more than 100 members was formed in October. The leader, Hank Martin, asserts that small property owners are getting a raw deal, according to the Daily Progress. At issue is a land-use taxation program that allows landowners to defer hefty amounts of their real-estate tax bill on agricultural and open space land for up to five years. About 60 percent of Albemarle County acreage qualified for the program, with the result that $17.8 million in taxes were deferred last year– shifting the tax burden onto homeowners. (And those numbers don’t even include the tax benefits of conservation easements.)

But Albemarle Farm Bureau President Carl Tinder argues that open space and farmland don’t require the same level of services that subdivisions do. Says Tinder: “My cows have never got on a school bus. … We’re paying more than our fair share.” Without the tax deferment program, he argues, more farmers would be forced to sell their land.

Supervisor David L. Slutzky disputes that logic. As reporter Jeremy Borden summarizes his thinking:

When a rural landowner bought the land, he paid less because the sale price reflects the longer wait for emergency services, rural roads and other “dis-amenities,” Slutzky said. “I think that the land-use program in its current form is a bad idea,” Slutzky said. “The cows-don’t-go-to-school position is bogus economics.”

Voodoo economics, meet Cow Poo economics. As this controversy reminds us, the politics of growth is all about getting what you want — and getting someone else to pay for it.

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  1. Anonymous Avatar
    Anonymous

    Both sides are right, and both sides are wrong in this case. The larger land owners pay the same tax rate as anyone else on their house and two acres. Therefore the starting pint is that they ARE on an equal footing. The larger landowners may pay more becaause they pay on an assumed two acre lot, which is larger than many homeowners.

    In ADDITION to that the large landowners pay more tax based on the open space land. It is only this land that doesn’t send cows to school, have it’s bunny rabbits aressted, etc. Looked at this way it is not a tax break on their home, but an additional levey (at a lower rate) on the vacant land.

    Remember, that for the most part they are not allowed to do much with this land, anyway – it’s agricultural. Taxed at the regular land rate for subdividable properties, the agricultural use couldn’t even pay the tax, let alone th operational costs. (And it will never make a return on the current land value, in any case.)

    AND on top of that, the large landowners get taxed at the full rate for all their outbuldings and other infrastructure.

    HOWEVER

    It is true that everyone would pay a lower rate (not a lower tax, necessarily) if all the land was taxed at full value. In some cases, even the large landowners would pay less tax under this scheme, because of their extensive outbuidings and other structures.

    Supervisor Slutzky is wrong, because the rural landowner already pays full rate for his residential services, proportional to other residences. It is only the open space that gets a lower rate.

    If you decide to tax the land at full rate, then you better plan on allowing the land the full options of other zoning areas. If you tax the land at full rate, a bunch of it will go on sale, immediately, because the owners won’t be able to hold it. This will drop the land prices – and the tax revenues.

    Unless, the new owners have reason to speculate that the rules will soon change. If you have a bunch of former agricultural areas sitting empty, then the rules will soon change. Forever Albemarle needs to re-think this, because it doesn’t sound as if rapid change is what they have in mind.

    RH

  2. Groveton Avatar
    Groveton

    A few months ago I wrote a comment that I believe explains this tension. In that comment I described a conversation I had with a number of college friends who have lived in NoVA since they graduated from UVA. I forget the exact number of people involved but it was about six. All in their late 40s and early 50s the conversation turned to retirement and where everybody hoped to live in their golden years. The vote was 5-1 for Charlottesville. I was the only dissenting voice preferring South Carolina. I should further explain that nobody in the group ever lived in Charlottesville beyond their college years at UVA.

    I believe that the Charlottesville / Albemarle County area is experiencing a three fold change:

    1. The baby boomers are retiring. They are leaving their full time jobs in the cities and looking for quieter, more peaceful and generally cheaper places to live.

    2. The baby boomers have money. They have spent their careers working during a relatively prosperous time. While the benefits of that prosperity have been unequally distributed, there are many, many baby boomers who are going to retire and retire relatively wealthy.

    3. Charlottesville / Albemarle County is (correctly) seen as a very attractive place to live.

    The shift in wealth in the US from younger people to older people is dramatic. And the wealth is moving as the wealthy retire in increasing numbers. This demographic / economic change will have two serious consequences:

    1. A decline in wealth (or at least the growth of wealth) in urban and suburban centers – especially centers where economic opportunity is high and the quality of life low.

    2. A bidding up of prices in locales where the economic opportunities may be average but the quality of life is good.

    I believe the decision to defer taxes is a bad idea. It is not supporting family farmers, it is supporting rich people from NoVA who are moving to Alberarle County as they retire. They are already rich enough – let them pay their full share of taxes now.

    I’d also argue that anyone interested in human settlement patterns, mass transit, ecology or most other civic planning issues start paying attention to the changing demographics of wealth and age. The shift will be momentus and the impact profound.

    Side note: I think Charlottesville / Albemarle County is a great place. I just like the weather in South Carolina a lot better.

  3. Larry Gross Avatar
    Larry Gross

    Well.. taxes are based on the VALUE of the property – not on the cost of the services rendered… right?

    If we took schools out of the equation – or just made everyone..regardless of where they live – pay their fair share of the school cost..

    … what would be a fair way to allocate the other costs?

    … you could set us EMS/Fire/Rescue/public safety Service Districts and the folks in those districts could pay for whatever level of service they decided they wanted.

    On my recent trip, I found out that at least some places in West Virginia have TWO tax rates.

    One is for schools and the other is for county services.

    So the School Board sets the tax rate for schools and the BOS sets the tax rate for the county.

    Here’s another thought.

    I live down the road from a large gated Community called Lake of the Woods.

    Virtually ALL services are provided by the gated community – from security to fire to water/sewer… etc…EXCEPT for schools and that annual assessment is quite substantial… and there are perennial cries that the services provided are not as good as they should be for the money collected.

    But if someone (lets say a family of 4) lives 20 miles from Charlottesville on 1000 acres that will likely remain pasture for the next 20 years…

    should they pay any more in taxes than a family of 4 who lives on one acre one mile from Charlottesville?

  4. Larry Gross Avatar
    Larry Gross

    ….”Side note: I think Charlottesville / Albemarle County is a great place. I just like the weather in South Carolina a lot better.”

    Ashville, North Carolina… you still get real seasons and not the stifling humidity…

    You can actually sit out on the porch in Ashville without sweat running down your cheeks – all 4 of them.

  5. Anonymous Avatar
    Anonymous

    Yes Larry, but the Value of the land depends on its allowed use. In this case, the only allowed use is agricultural. For most agricultural activites you will do well to make $200 an acre. If you think the pay back needs to be ten years, the land can;t be valued at mre than $2000 an acre, for that use.

    If the tax rate is $1.00 a hundred then the tax is $20 an acre or 10% of your gross earnings. You can’t stay in business that way. But, you can’t use all the acreage, so the land value value is set even less than the $2000 mentioned.

    As I explained above, everyone does pay a fair share of school and other costs because the residence and two acres is taxed at the same rate as eveyone else. in fact they pay more becuase the residential rate applies to all the outbuildings. And then,
    the agricultural rate is extra.

    As a result that family of four 20 miles out on a thousand acres will pay something like $2 for every dollar in services received.

    ——————————

    But, they still might no be much in the way of a farm, actually. 3400 farms produce %25% of all sales and 10% of farms produce 50% of all sales. It doesn’t leave much for everybody else. Whether they are rich people retiring or not, it doesn’t make much difference: you are not supporting farmers with this plan. In the first place, under this plan they pay MORE than others, so there is no “support” involved.

    You are supporting open space which we need for environmental purposes. government avoids the expense of actually owning it by making it a little easier for others to own and maintain. Not because the taxes are “lower”: they are not, the taxes paid are actually higher.

    But support open space by restricting the use, so that it cannot be developed, and having done that, you had better lower the rate.

    And let’s understand the deferral. The way it works is that the taxes are deferred for five years, and then theyare forgiven. It isn’t as if you had to pay them later.

    The only time you pay them is if the land or part of it is converted from agricultural use. In that case you must pay the taxes at the new use for the past five years, even though it was actually agricultural during that time. It is taxation for an activity in the past that never existed, and it is in additon to whatever proffers or other fees might be involved.

    This whole business makes me sick because both sides mischaracterize what is actually happening. As a result, it’s impossible to figure out what the right policy should be.

    RH

  6. Anonymous Avatar
    Anonymous

    It’s not like the land owner is getting some kind af a huge “deal” on his taxes when they are cut by a couple thousand, in exchange for the value of the land being reduced by, maybe, millions.

    The flip side is that you have to ask if the environmental benefit the community gets from this arrangement is worth the loss in revenue this artificial restriction represents.

    The restriction to “only” agricultural use is artificial, because without it those farms would not exist: most of them cannot cannot exist under the present economic and tax conditions.

    On the other hand, we might very soon reach a crossroads where they will pay, as new land goes into more intensive use to support biofuels and greater gloabel food needs.

    You would hate to see them get converted due to some stupid tax greed, and then find out you need them later.

    RH

  7. Anonymous Avatar
    Anonymous

    As public policy in Virginia evolves, I’ve moved towards Groveton’s view that South Carolina looks attractive for retirement. Virginia has quickly become the “Tax Increase State — Annually, If Possible.” That would not so bad, if the level of services was equal to the increase in taxes. But we don’t get what we pay for — at least not in Fairfax County. Also, the Virginia state religion — Developer Worship — has also got me down.

    I have several friends who swear by S.C. They don’t seem to push for tax increase after tax increase and I’ve worked enough real estate transactions there to know that development doesn’t get a free ride. I’d rather pay once for a new house than annually in higher taxes to subsidize other new comers.

    Larry — I’ll risk the sweaty cheeks!

    TMT

  8. Groveton Avatar
    Groveton

    I’ll move up to Ashville the day after you catch a redfish or a sailfish there. We stay cool in SoCa with beer. For example the Coast Brewing Company (Charleston, SC) is pouring HopArtIPA, 32/50 Kolsh and the Blackbeard Imperial Stout.

    In a pinch, Charlene’s always has plenty of ice cold PBR

    I am getting thirsty just writing this.

  9. E M Risse Avatar
    E M Risse

    Groveton:

    Many of your points are well taken and the impacts of unattractive “subruban” places are, as Larry says, spot on. But:

    Two perspectives:

    The vast majority of those moving to Cville that I know about are not moving to 2, 5, 10, 100 or 1000 acres but to one of the many “active living” places run by UVA Foundation, Churches or the private sector.

    These folks have a good education and by the time they are ready to move they know they do not want to mow grass, they want to go to concerts, to lectures, to games, …

    Sure there are some who want to raise grapes or cows but most would rather do the things you like to do (minus the sailfish) and do it in a place that is designed for those uses.

    Those who want to catch sailfish live “on the coast” and do not want to drive 20 miles past 23,000 2 acre lots to get to their boat.

    It is a matter of settlement patterns and the cumulative difference between a compact 20,000 person village and 23,000 acres of two acre lots.

    Point Two:

    If you do a sample of those who are not just 12 1/2 Percenters you will find those how have a great place to live now want to “retire” at or near that place.

    Recycling “subdivisions” is a great way to create “active living” venues.

    EMR

  10. Groveton Avatar
    Groveton

    Maybe this is true because you are 20+ years older than I am. My friends aren’t looking for “active living” they live pretty actively right now. They are looking for single family homes out in the country but with no more than a 30 minute drive to The White Spot.

  11. E M Risse Avatar
    E M Risse

    Groveton said:

    “Maybe this is true because you are 20+ years older than I am.”

    Perhaps because on a number of dwelling units basis, I beleive I am right. Would it not be interesting if the breakdown were something like 87 1/2 to 12 1/2 percent as they are within 70 miles of the Centroid of large New Urban Regions?

    “My friends aren’t looking for “active living” they live pretty actively right now. They are looking for single family homes out in the country but with no more than a 30 minute drive to The White Spot.”

    Time will tell. When the value of their current SHD goes back up to the point they will / can sell — if it ever does — they may be ready for the 55 Plus “active living” lifestyle.

    But this relates to point one, re point two the market preferences are very clear, walk to the White Spot.

    EMR

  12. Anonymous Avatar
    Anonymous

    If the breakdown were something like 87 1/2 to 12 1/2 percent as they are within 70 miles of the Centroid of large New Urban Regions, then so what?

    I don’t get it, don’t see the point. Some people do, some don’t. I don’t get too exercized about it.

    RH

  13. Anonymous Avatar
    Anonymous

    “The annals of psychoanalysis are replete with cases of otherwise capable individuals who claim that the cannot make a connection between two sets of conditions which are clearly related.”

  14. Larry Gross Avatar
    Larry Gross

    Folks who “retire” from places like NoVa to the “country” often have a difficult transition.

    Going from .. say attending a National Geo presentation or enjoying the food from that new Thai restaurant to Jimbos Burgers and Get’nGo six packs is pure culture warp for some…

  15. Lonnie Avatar
    Lonnie

    Okay, here’s a point that has apparently been missed… I think much of the frustration around land-use valuation is that basically there are non-farmers exploiting the system.

    The vast majority of land in the program is under “forestry” use, but yet not actually being actively managed for timber. Likewise, another significant portion of folks have someone come out once or twice per year to cut hay in their field so that they qualify as a “farmer”. I think many people, like myself, that feel the program is broken would be satified if there was meaningful reform that verified that people were indeed farming, not just land speculating, or rich people looking for a clever tax break.

    I speak from the perspective of a person who’s family has farmed for well over a hundred years, and still owns their farm. In addition, we do manage forests for timber, so I know that it is a very different beast from just claiming “I might cut it one day”.

    Lastly, in regards to the bogus economics, Slutsky is right. First of all the county ends up paying the city more per acre than they are getting from taxes on land use properties. Secondly, it is far better that properties be subdivided gradually than held onto for twenty years and subdivided all at once. The Biscuit Run senario creates a situation where massive infrastructure is needed overnight and at great cost. If that property had just been subdivided gradually long ago the infrastructure costs would be nowhere near as high. Thus, the “Cows don’t go to school” argument is bogus as long as the ultimate fate is subdivision and development. From that perspective, easements are a much better investment of taxpayer money.

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