The Williamson Act, more formally the California Land Conservation Act of 1965, is a property tax break for rural landowners that cost state taxpayers about $400 million in the 11 years from 1998 through 2009. The state subventions (grants) covering the costs of those tax breaks ended in 2009, and since then the financially strapped county has borne the full burden of $750,000 a year or more than $3 million total.
All tax breaks, from deferred retirement accounts to mortgage interest deductions, are forms of social engineering. The Williamson Act allows local governments, in this case San Benito County, to enter into long-term contracts with private landowners to restrict specific parcels of land to agricultural or related open space use. In exchange for accepting these restrictions, the landowners receive property tax assessments that are much lower than normal. The lower assessments are based on farming and open space uses instead of the full market value of the property.
The purpose of the act was to reduce economic development pressure on farmland. Tax assessments are based on best use; therefore, as noted by the California Supreme Court, “As the urban fringe approaches, the farmer’s land becomes valuable for residential development. His taxes are therefore increased, although his income is likely to shrink. … Often the farmer is forced to sell his land to subdivision developers, sometimes long before development is appropriate. As houses go up, so does the value of the remaining agricultural land, and the cycle begins anew.”
Obviously, if the participants in Williamson Act contracts pay less property taxes someone has to make up the difference. For decades, the costs were covered by annual subvention payments from the State of California. They paid the local government $5 per acre for prime agricultural land and $1 per acre for nonprime land under contract. In some cases, the state’s subvention payments can exceed the contract costs and the local agency ends up with a few bucks extra. However, when the state got into economic trouble, it ceased making those payments and the obligation fell to the counties who had signed the contracts.
According to a November, 2012 report from the San Benito County assessor, the county had slightly less than 580,000 acres, or 65 percent of the entire county, under the Williamson Act with approximately 2,200 Assessor’s Parcels in 525 contracts. This represented approximately 50,000 acres of prime agricultural land and 530,000 of nonprime agricultural land.
That brings up some questions about the cost and effectiveness of the local and statewide contracts. First, the nonprime acreage under contract locally is more than 10 times the prime acreage. Therefore, the tax breaks for nonprime farmland cost more than twice that for prime farmland, $530,000 versus $250,000.
The bigger question is whether much of the acreage located in the remote parts of the county is now, or will ever be, under economic development pressure to a degree that justifies a reduced tax assessment paid for out of county coffers or the state’s general fund. This does not even address the curiosity of a development-starved county paying local landowners to discourage development.
The Williamson Act is a perfect example of the complexities of social engineering. Using the tax code works – people will go to extraordinary lengths to reduce their tax bills or gain payments or tax credits. However, this often results in unintended consequences. Paying people not to develop nonprime agricultural land in remote locations that will never be developed in any case doesn’t make sense, but it’s hard to get anyone off the gravy train.
Marty Richman is a Hollister resident.
