Atlanta suburbs. Photo credit: flickr/Ryan JamesCurrent use valuation programs can encourage landowners to resist development pressures and leave forest as forest.
Development pressure on the outskirts of cities throughout the southern United States drives up land values and makes it more difficult for private landowners to keep their forestland. On average, in the South, short term returns for development can be $36,000 per acre. And for private landowners who want to keep their forest, rising property taxes can also provide a perverse incentive, because as the fair market value of the land increases, property tax bills rise. To help pay these increased taxes many landowners often resort to selling at least a portion of their lands despite their intention to keep their forests intact.
Current use valuation programs, as illustrated in a new WRI issue brief Current Use Valuation Programs: Property Tax Incentives for Preserving Local Benefits of Forests, are a tax benefit that states and counties in the South are using to encourage forestland owners to leave forest as forest and help resist development pressure. Under these programs, enrolled lands are assessed not at their fair market value (for housing development and the like) but at their value for timber production and other forest uses. This lowers the tax bill for landowners, improves the profitability of timber production, and helps reduce development pressure.
Road blocks to implementing effective Current Use Valuation Programs
Current use valuation programs exist throughout the South, but the scale of their implementation and overall effectiveness is limited for a variety of reasons. For example, some programs still provide low financial returns to landowners relative to the opportunity cost of development. Additionally, there are concerns from many local governments about the impact of reduced property taxes.
WRI’s report argues that overcoming these obstacles will require more consistent and accurate analysis of the overall fiscal impacts of current use valuation programs to determine whether protecting forests and other forms of open space result in a net drain or net surplus when the cost of providing community services is taken into account. Cost of community service studies and other forms of fiscal impact analysis demonstrate that by helping counties avoid infrastructure and community service costs (such as roads, electricity, and sewer infrastructure) of new residential developments, such programs can often save money in the long term (Figure 1).
Figure 1: Dollars Spent on Community Services per Dollar in Tax Revenue Received: Range of Values from Cost of Community Service Studies in the South, 1997-2007, (click to enlarge)The report also discusses how a variety of modifications to existing programs will increase their popularity among local governments and landowners.
How can Current Use Valuation Programs Promote the Conservation of Forests?
This report outlines four changes to current use valuation programs that could make them more effective, as applied in the South.
Designated state reimbursement fund. States can offer reimbursement funds similar to the one pioneered in Georgia to help alleviate county concerns over short-term fiscal impacts from drops in property tax revenues. Reimbursement funds can be targeted at forestlands specifically rather than open space in general to provide a more direct link between current use valuation and forest protection.
Longer covenant (contract) periods. States and counties can extend covenant terms to match the minimum rotation age for commercial forest management. Extending covenant terms to 20 years or more would ensure that lands protected under current use valuation programs would be of sufficient age to generate income streams from the sale of commercial forest products. Extending covenant terms would also help reduce speculation on lands enrolled for shorter periods.
Management for ecosystem services. States and counties could increase the flexibility of current use valuation programs to allow landowners to enroll lands that provide important ecosystem service benefits but not necessarily cash income from the sale of forest products. Building in this flexibility would make it easier for landowners to enroll and help states and counties meet important objectives related to environmental conservation and improved quality of life for residents. This flexibility would also improve the economics of maintaining land in current use valuation status relative to conversion, by saving landowners the expense of investing in timber or crops when they otherwise would not have chosen to do so.
Extending current use valuation programs to restore forest cover on marginal farmland. On agricultural lands, states and counties could encourage forest restoration on marginal and idle cropland by removing crop income requirements for enrollment. Providing tax incentives to farmers who want to let these lands naturally transition back to forest could help increase the extent of southern forests by millions of acres in the decades ahead.
Implementing these changes to current use valuation programs could help alleviate concerns about the bottom line, and bolster the long-term effectiveness of current use valuation programs throughout the region. In addition, these changes could increase the acreage of southern forest protected from development and instead managed for timber, water, wildlife habitat, recreation, scenery, erosion control, watershed protection, reduction of flooding hazards and other ecosystem services increasingly important to the well-being of southern communities.
This brief is designed to inform state, county, and municipal decisionmakers; land-use planners; and other people working to conserve and sustainably manage forests.
To learn more about southern U.S. forests, visit: www.SeeSouthernForests.org. Developed by WRI with support from Toyota, this interactive site provides a wide range of information about southern forests, including current and historic satellite images that allow users to zoom in on areas of interest, overlay maps showing selected forest features and drivers of change, historic forest photos, and case studies of innovative approaches for sustaining forests in the region. To order hard copies of this issue brief, and other briefs in the Southern Forests for the Future Incentives Series, please contact us.
John Talberth, Senior EconomistDr.
4 Comments
If you want to protect
If you want to protect forest land, then do so as a government protected park, not by shifting taxes off of land and timber extraction and on to working people. As others in this thread have mentioned, if taxes are levied on underused urban land, that increases the incentive to use them intensively and thus takes pressure off the periphery. The logic of this article was the same used to justify the enclosure act, landed particularism veiled as Naturalism.
This piece shows a complete
This piece shows a complete misunderstanding of the meaning of "current use taxation."
What is called for is taxation on the basis of assessing the highest and best use of sites. That way efficient use of the land will unfold naturally according to the site value of each parcel. Parcels in urban cores with high market value should be taxed accordingly so as to induce their owners to behave in ways that will recover their carrying costs. Logically high value and dense development will follow. In peripheral and low value locations, pressure for their development will be relieved because of its low assessment, and it will be left alone.
Improvements should not be taxed at all, as taxes on buildings discourage their development and maintenance. Every time the tax rate on land value is raised commensurate with its site worth, someone will be induced to improve it. Every time the tax rate on peripheral and remote sites is reduced, there is less likelihood that it will be improved. Reversing sprawl development and leaving peripheral localities alone is best done by a strong program of land value taxation. We've understood this for a century, ever since the writing of Henry George.
H W Batt, I own a small
H W Batt,
I own a small parcel of forestland in the suburban / rural fringe of a major southern city. My land would be very useful for a developer to use to make himself very rich while I cannot afford to develop nor do I wish to have as a neighbor a 'gated community'.
Your theory is a good one only if the person who currently owns the land can afford to develop it. Rarely is the landowner compensated fairly and never compensated fairly when the land is sold at auction for a lack of being able to pay ever increasing property tax.
I don't disagree in the high density urban development you describe as being environmentally more advantageous however, the individual landowner should not have to pay the price of public policy. If it is important to society to maintain forest land society should compensate the landowner.
While I am not familiar with
While I am not familiar with the writing of Henry George from a century ago, I am intensely familiar with the circumstances of highest and best use property tax valuation and how that does, in fact, put pressure on forest and agricultural land uses even in rural areas today. When farm or forest land 50 and 60 miles away from urban centers, "peripheral and low value locations", are valued at $4,500 per acre many owners can not afford to maintain a rural use without a current use (Forest or Agriculture) assessment. Owners of these type properties are often forced to divide and sell the property. The new owners will build a weekend get away, mini farms, etc, let's call that "rural sprawl", smaller land parcels equals greater demand on infrastructure and public services. Taxation should be based on use of services, not whatever the imperfect land market, created by imperfect public policy, deems is the value. When valuations become skewed by policy driven imperfections in the land market, government "services" tend to grow with the valuations. When the corrections occur local governments are forced to cut services, hike taxes, or both. When users of services pay for the services based on their demand and use, this tends to keep "government services sprawl" in check.
Property taxation should be based, at least in part, according to the services demanded. A 100 ac tract of forested land owned by an absentee owner certainly does not require the services that is demanded by a single-family residence on a one-half acre lot occupied by a family of four, two of which are in public schools. In the area in which I live, it is estimated the former type properties demand services equal to $2.00 - $3.00 per acre per year, and are taxed at 10 to 50 times that rate with highest and best use valuation. The latter type properties demand services in excess of ten thousand dollars annually when public education services are included and are taxed at less than one-fifth of the costs of demanded services.
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