Agricultural Conservation Easements and Farmland Trusts

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1 Agricultural Conservation Easements and Farmland Trusts Maxwell Norton, Program Leader Agricultural Productivity UC Agriculture and Natural Resources Ag Conservation Easements (ACE) Similar to selling mineral rights Permanently prohibits splitting or converting to a non-ag use. ACE A. Sell for cash B. Donate for income tax benefits C. Sell at a reduced price (e.g. Bargain Sale) for cash and some tax benefits

2 ACE Can still sell, inherit or encumber the land Can carve out building envelopes for future home-sites The ACE can allow, under certain circumstances, the property to be split Lenders must subordinate Baseline Report: All the pertinent property & ACE details Legal description Terms Parties Any exclusions or future building envelopes Other easements Other rights (mineral, water, access) Monitoring and enforcement ACE In the West, secure irrigation rights are critical and must be part of the easement Who granted to whom and when? Irrig easement across another parcel? How much water for how much land? Any conditions? Must be part of the baseline report and easement and then recorded Selling water rights must be prohibited

3 Farmland Trusts (FT) Must have a stable entity to hold the ACE Most gov. don t want to hold them Financial Stability is critical Operations: $100,000 + per year Need a professional staff with knowledge of RE transactions, appraisals and ag banking FT Bylaws state the philosophy of the organization and the types of people who are directors. Landowners need to be secure that the easement holder has their interests in mind. Avoid local politics and divisive policy issues ACE funders typically require County BOS s approval must have good relations with them. FT Secure monitoring and legal defense fund Usually have to monitor annually with site visit May need to defend in court against challenges several years in the future.

4 Typical Transaction >Landowner contacts FT >Preliminary feasibility review Fit priorities and mission? Have a chance to be funded? Feasible over many years? Is applicant serious? >Owner pays for a dual appraisal >Owner signs letter of intent >FT applies for grant >Sometimes need matching funds >Start RE transaction >Baseline report >Record all documents ACE easement values in NSJV are running 30%- 50% of full market value. Funders are usually funding about 75% of the easement value Some funders require a match FT may get a grant to provide matches. Funding Sources for ACE State: CA Farmland Conservancy Program Federal: Farm & Ranchland Protection Program Foundations: Packard via the Great Valley Center Mitigation fees from development Service area large enough to find ACE sellers Minimize restrictions on how used

5 Central Valley Farmland Trust (CVFT) Started by local groups in Sacramento, San Joaquin, Stanislaus and Merced Counties Emphasize working farms and prime or statewide important soils with secure water rights Avoid rangeland CA Rangeland Trust Avoid wildlife, habitat or wetlands easements or overlays CVFT Directors need to have an emphasis in ag or complimentary skills: Farm RE agent Ag lenders Rural appraisers Farmers Custom vineyard operator / wine maker Farm Advisor Former politician Corp lawyer for Gallo CVFT In the process of getting accredited. Two professional staff in small office in Elk Grove Still struggling financially for operational costs More applications than funding sources valleyfarmland.org

6 Challenges to Preserving Cultivated Land:! Fewer funding sources for cultivated land! Funders like larger heritage projects! Habitat preservation is forcing growth onto prime farmland in some areas! Can become surrounded by urban growth or ranchettes! Cities founded on best soils! Cities scattered throughout service area