Economic critique of U.S. prime farmland preservation policies

0743-0167190$3.00 + 0.00 Pergamon Press plc

.iourrtaf ofI?uralStudies, Vol. 6, NO. 2, pp. 119-142,199O

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Guest Editorial

Economic Critique of U.S. Prime Farmland Preservation Policies Towards State Policies that Influence Productive, Consumptive, and Speculative Value Components of the Farmland Market to Prevent Urban Sprawl and Foster Agricultural Production in the United States Arthur C. Nelson Associate Professor of City Planning,

Georgia Institute of Technology,

U.S.A.

Abstract - All states comprising the United States of America attempt to preserve prime agricultural farmland. An economic critique of the effectiveness of those policies is offered. It first creates a theoretical framework for evaluation. Farmland value has three components: productive use value which is the value of land for agricultural use, consumptive use value which is the value of the site as a singlefamily homesite to the owner whether the owner farms or not, and speculative use value which is that value over and above the first two for non-farm uses including urban development. Speculative use value and to a lesser extent consumptive use value stimulate urban sprawl. Special taxation, right-to-farm, development right acquisition, and agricultural zoning policies are critiqued using the theoretical framework. A set of policies is offered as having the greatest potential for achieving preferred results.

The Lord said to Moses . . . Command the people of Israel, that they give to the Levi&s . . . cities to dwell in; and pasture lands round about the cities . . . The pasture lands of the cities . . . shell reach from the wall of the city outward a tho~and cubits all around. Numbers 35: l-4 Eunr down your cities and leave our farms . . . and your cities will spring up again as if by magic; but destroy our farms and the grass will grow in the streets of every city in the county. William Jennings Bryan

acres (Sampson, 1981). A doubling of land used for urban purposes would not significantly affect the supply of arable land. All 50 of the United States employ some kind of policy to preserve prime agricultural land. Some argue, however, that there is no compelling need to preserve farmland since there is plenty of it. Consider that there are about 540 million acres of arable farmland, according to the United States Department of Agriculture, of which 391 million acres are now in cropland use. There exists 150 million more acres of arable land than is presently cultivated. Then consider that estimates of cropland needed for food production by the year 2000 range from 22 million acres (Batie and Healy, 1983) to 113 million

But not all arable cropland is of high productivity, There are about 384 million acres of prime farmland (Soil Capability Class I and II) in the contiguous U.S.A. About 250 million acres are cultivated (Vining ef a!., 1977). But it so happens that people live where the best farmland is, in large part because of the human species’ need to locate near where food is grown. About 48 million of those acres are within SO miles of the 100 largest urbanized areas (Furuseth and Pierce, 1982). Thus, that farmland which is most important for its productive qualities is 119

Arthur C. Nelson also that which is equally valuable for development (Solomon, 1984). One-half to one million acres of prime agricultural land is lost each year to urban or scattered suburban development [National Agricultural Lands Study (NALS), 1981; Dideriksen and Sampson, 1976; Berry and Plaut, 19781.These losses are presently compensated by addition of lower quality, marginally productive land (Platt, 1985). There are two broad reasons for preserving ‘prime’ farmland. The first is simply for human sustenance: food and commodity production. The second is for general welfare which takes the form of the production of public and quasi-public goods. Preserving prime farmland for food and commodity production

Prime farmland is important for the production of food and other organic commodities (Volkman, 1987). Prime farmland is usually most suitable for the production of truck and speciality crops near urban areas (Berry, 1978; Sinclair, 1967; Zeimetz et al., 1976). But prime farmland also produces crops not for food but for increasingly important industrial uses including corn for gasohol, sunflowers for industrial lubricants, and jujube for rubber (Volkman, 1987). Some analysts apparently argue that if prime farmland is reduced to some unacceptable level, new lands would become cultivated and production of food and commodities would continue. Marginal lands would be converted into highly productive farmland through the use of chemicals, fertilizers, and modem technology (Altshuler, 1979). The Urban Land Institute (1982), for instance, argues that new farmland can come from land presently in swamps or forest, or other land that can be intensively irrigated and heavily fertilized. Yet, conversion of swamps and forests to agriculture has come under criticism in recent years. Increased reliance on irrigation runs contrary to present concerns about wise use of water, especially in semiarid climates such as that found in the west. Moreover, chemicals and technological innovations (including sophisticated irrigation systems) that increase the productivity of marginally productive farmland have many adverse environmental impacts (Platt, 1985). The more prime farmland that is farmed the less there is need to raise productivity of marginal lands by brute force. Some economists, however, contend that by letting the market operate, truly valuable prime farmland would rise in value to a level where it would out-bid

alternative uses (Muth, 1961; Fischel, 1982). Fischel, for example, makes three arguments. First, using a partial equilibrium capital utilization model to evaluate the choice between building a home on a level site where farming occurs or on an adjacent hilly site, and provided that construction costs on both sites are equal, the choice made will be to develop on the hilly site. This maximizes profit since the hilly site is converted from non-use to a residential use while farming production continues. This is too simplistic and not realistic. Construction costs on level land are almost always less than on hilly land. The costs of roads, foundations, wells, and septic system fields are typically less on flat than on hilly land. Fischel thus shows that construction on the level site would be more socially desirable if these differences in costs are accounted. Yet, he ignores the potentially high, non-optimal transaction costs in moving the farmer; the reduction of continuous farmland production whose long-term, discounted returns may exceed short-term gains of development; and the shifting of farming from low cost, high productivity soils to higher cost, low productivity soils - with associated environmental costs discussed above (see Solomon, 1984; Marchand and Russell, n.d.). Moreover, Fischel’s model assumes that land converted to urban uses can be converted back again to agricultural production when food prices dictate. It is uncertain, however, whether agricultural activities are as fungible as implied. Second, Fischel uses a resources exhaustion model to show that the socially optimal path of resource exploitation, such as conversion of rural land to urban uses, requires the growth rate in prices to equal the market rate of interest. The land conversion process, if unfettered by both agricultural and housing subsidies, will allocate land to its most productive use. It may also lead to suburbanites using their backyard vegetable gardens as a hedge against high food prices. But resource exhaustion models assume that resources are non-renewable and they avoid issues of location. Fischel himself notes these limitations. Moreover, the conversion of rural land to urban uses can result in spillovers such as erosion, pollution, and nuisance restrictions on agricultural land uses. Besides, it is unlikely that backyard vegetable gardens will significantly satisfy the worldwide demand for food. Third, Fischel (after Muth, 1961) devises an urban land rent model that allocates land uses across space through a process of competing bid-rent curves between urban and rural land uses. Urban spatial growth is attributable to urban uses out-bidding rural uses. Conversely, when supply reductions in

Guest Editorial farmland results in higher food prices, farmland will out-bid urban uses at some point away from the city center. Although he discusses the role of agriculture and housing subsidies in influencing the nature of the market equilibrium, he offers no magnitudes. Moreover, the approach ignores the fact that because of imperfect information, ‘market’ value is incapable of reflecting the social benefits of farmland and therefore there is market failure (Baumol and Oates, 1975). It is not possible for the market to accurately reflect the value of farmland society at large may be willing to pay in the future. Finally, his approach ignores one of the fundamental purposes of U.S. agricultural policy, namely the production of food at affordable prices to prevent a situation in which only the affluent can afford food. Naturally, if prime farmlands were vastly reduced and production of marginal lands expensive, food prices would rise and lower income families would be forced out of the food market (unless new taxes were generated to subsidize lower income households’ purchase of food). This is not acceptable in civilized society, but it is the plausible outcome of an economic model that presumes that farmland may one day push back urban development by out-bidding urban uses. There is some consensus that preservation of prime farmland for food and commodity production at least guards against future uncertainties since it requires fewer inputs relative to marginal farmland (U.S. Department of Agriculture, 1975). Prime farmland thus has ‘merit’ good features worthy of preservation (Lee, 1979). The general welfare functions of prime farmland The second purpose has varied parts. The general welfare purpose of prime farmland preservation does not consider, at least directly, the production of food or other commodities. Rather, it is chiefly concerned with the production of other kinds of public and quasi-public goods. Public good uses include flood absorption and air cleansing, providing urban areas with scenic backdrops, offering urban residents a splendid view of the country on their excursions from congested and polluted urban areas, and so forth (Rose, 1984; Correll et al., 1978). Quasi-public goods include offering privacy and scenic vistas exclusively enjoyed by private properties near open spaces such as prime farmland (Correll et al., 1978). Economic purposes of farmland preservation policies At the center of concern for farmland preservation is the argument that without public intervention in the

121

use and sale of such land, the free land market will not be capable of internalizing its true value to society. The free land market, it is believed, disregards the need by future generations of the food, fibre, and other products of farmlands. If one knew the value that future generations would place on that land, one might very well find that the value discounted to the present would be higher than the apparent value observed in the market (Peterson and Yampolsky, 1975). Furthermore, farmland as open space is not as highly valued by farmers as it is by urban residents (Correll et al., 1978). The free land market thus fails to take full account of its value to society. Society intervenes in the market to preserve its interest in prime farmland and other open spaces. For those reasons, every state in the U.S.A. has adopted some form of farmland preservation policy. The purpose of this paper is to review the effectiveness of those policies. The evaluation does not report original research, only pertinent research that is available in the literature. Unfortunately, there is scant research on the effectiveness of many techniques so there is necessary reasoning to deduce the effectiveness of some techniques. Growth, urbanization, and decentralization of the population accelerate the conversion of rural land for urban uses (Goldberg and Chinloy, 1984; Schmid, 1968; Clawson, 1%2). Urban growth is stimulated by rising population and improving technology. With improved technology, farming requires fewer operators and so displaced workers seek work in cities. Cities generate jobs to serve an economy that is growing in complexity, diversity, and income. As cities grow they expand outward. Land use activities needing central locations out-bid competing land uses (Burgess, 1925; Ely and Wehrwein, 1940; Radcliff, 1949; Alonso, 1960; Muth, 1961; Mills, 1969; Mills and Hamilton, 1988). In general, central locations have become occupied by high-rise towers serving finance, legal, government, and related business services. Thousands of workers can occupy just one acre of land. Outermost locations are occupied by tract residential subdivisions where each home may occupy more than a quarter-acre. As population grows, residential tract subdivisions are pushed farther out and those closer in either survive conversion to higher intensity uses only because of planning decisions or high income levels of residents, or they are redeveloped into more intensive uses that are pushed out of central city locations (Catanese and Nelson, 1988). The dynamic process of urban devel.opment results in the conversion of considerable volumes of rural land for low intensity urban use at the urban-rural fringe (Clawson, 1971).

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But even urban areas that are not growing in population or employment tend to grow outward. The population continues to deconcentrate and spread at very low densities into the par&urban or ‘exurban’ countryside which extends 50 or more miles from the city centers (Spector-sky, 1955; Berry and Dahmann, 1980; Hart, 1980; Blumenfeld, 1983; Herbers, 1986; Nelson, 1986a; Nelson and Dueker, 1989). Growth and deconcentration of development challenges the role of farmland in regional development planning. The relationship between urban and rural land is fairly well understood. Rural land is more-or-less viewed as the urbanizable frontier for urban regions. But if farmland is to be preserved in order to provide food and other benefits, then public policy needs to intervene in the land market. No matter what ostensible purposes underlie farmland preservation policies, all such policies aim to influence the market for prime farmland in four ways. First, they attempt to increase the productive value of farmland. Second, they intend to stabilize, reduce, or eliminate the consumptive value of farmland. Third, they intend to eliminate the speculative value of farmland for alternative, non-farmland uses. Fourth, they attempt to eliminate the impermanence syndrome, which is done by achieving the first three objectives. Figure 1 shows how these values comprise the market value of farmland. In the absence of farmland preservation policies the value of farmland with respect to distance from the edge of urban develop ment is R,. At this value’, farmland is not traded for its use as farmland the closer it is to urban development. Indeed, it is traded as potential urban land. Farmland preservation policies thus aim to reduce the market value of farmland to the point where it is traded only for its value as productive farmland. The line R, shows the raw value of farmland with respect to distance from urban development in the absence of any investment in farmland inputs (irrigation, tiles, poles, etc.). The line is upward sloping to a point with respect to distance to account for the spillover effects that urban development has on farming. Urban development and sprawl into rural areas, whether in the form of continuous low density development emanating from urban areas, radial development, or scattered pockets of develop ment in a low density, leap frog fashion (Harvey and Clark, 1%5), causes ‘spillover effects’. Spillover effects can make farming activities less profitable and can cause farmers to disinvest. Productive value falls. Five common spillover effects are:

/Distance from urban devekpmant underproductivity attributabta to urban

1

I

Region whem impermanence ryndranm operates

Figure 1. Components of market value in the absence of any farmland preservation tax policy. R, is the observed market value. R rawis the value of farmland without inputs. It rises with distance from urban development before descending, reflecting the production-inhibiting effects of urban residents who use nuisance complaints to restrict operations, or who are otherwise nuisances themselves to farm production. Rhv reflects the marginal productivity of agricultural inputs such as irrigation, tiles, poles, etc. It is also upward sloping with respect to distance from urban development before descending beyond a point. It represents the outward extent of the impermanence syndrome. Rfa, is the total value of land for farming. Rhe is Rf,, plus the increment value to a single home. The difference between Rhome and R,,, is speculative value. Farmland preservation tax policies aim to reduce or eliminate speculation, raise the Rtvalue, and reduce the region of the impermanence syndrome.

1. Regulation of farming activites deemed to be nuisances by non-farm residents in rural areas. These include restrictions on fertilizers, manure disposal, smells, slow-moving farm vehicles on commuter roads, limitations on the use of pesticides and herbicides, restrictions on farm noises and hours restrictions on dust and glare, of operation, limitations on irrigation, and restrictions on other activities that may upset the lifestyle of suburban residents (Berry, 1978). While right-to-farm laws aim to prevent such nuisance restrictions, they have severe limitations in practice as will soon be discussed.

2. Increased property taxation to pay for new schools, roads, services and facilities intended to serve new residents. Farmers pay for those new facilities and services on the basis of the amount of land they own and not necessarily on how much they use them (Keene et al., 1975). Typical responses

Guest Editorial include preferential and preferred property taxation. But these efforts can actually stimulate speculation and push urban sprawl further into the rural countryside as will be shown below. 3. Air pollution damage to crops caused by automobiles, industrial activity, and even residential space heating (Prestbo, 1975). 4. Destruction of crops or equipment or harassment of farm animals by residents of developments in rural areas. Theft of tree crops, berries, and vegetables is common (Berry et al., 1976). 5. Use of eminent domain to acquire at relatively low cost farmland for public uses serving primarily new residential development (Berry and Plaut, 1978). Eminent domain for roads and reservoirs are common. Voluntary associations of farmers creating agricultural districts in New York state are aimed in part at preventing this use of eminent domain (Conklin and Bryant, 1974; Bryant and Conklin, 1975; Bills, 1975; Bills and Boisvert, 1988). The result of these spillover effects is that productive use of value of farmland falls the closer it is to urban and other non-farm development (Sinclair, 1967; Boal, 1970; Rosser, 1978; Nelson, 1986a; Meier, 1988). The line Ring represents the level of investment in farmland inputs such as irrigation, tiles, poles, and so forth. The higher the investment, the more productive farmland is, and the more valuable it becomes for farming. The line is upward sloping with respect to distance from urban development because of spillover effects. The sum of R, and Ri, is Rrarm, or the value of farmland solely for agricultural production considering distance from urban development and level of investment into production inputs. This is its ‘productive’ value (see also Pope, 1985). The purpose of farmland preservation policies is to maintain if not increase productive value. As the raw value of farmland is fixed with respect to distance from urban development, productive value can only increase with investment. Farmland preservation policies are effective if they cause an increase in farmland investment. Consumptive value of farmland is sometimes confused with speculative value. Consumptive value is the value of farmland if it were ‘consumed’ for nonfarm purposes (Pope, 1985). No distinction is made between the single homesite and subdivision potential values. That means that virtually any farmland tract on which a single home sits has consumptive value; yet not every farmland tract has potential for subdivision. Consumptive

value is considered

here to be the

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incremental value of a farmland tract as a single homesite, assuming no further partitioning of the tract can occur. This is shown as line Rho,,,=. It is the incremental value that farmland generates for a single homesite in terms of space, privacy, and the rural lifestyle so many people allegedly pursue. The difference between R, and Rho,,,=is speculative value, or the perceived value of farmland for alternative or non-farm uses. Speculation is a unique form of demand for land that is independent of the productivity of its use for agriculture or urban (commercial, residential, industrial, institutional) purposes. It arises from distortions created by tax policies which reduce the holding cost of farmland relative to other land uses and from inflation (Boehm and McKenzie, 1981). The effect of tax policies and inflation is to increase investment rate of return in vacant land relative to alternative use. Farmland preservation policies should aim to eliminate speculative value but actually stimulate it, as will soon be seen. If speculative use value is eliminated, farmland would remain in productive farm use until efficient conversion to urban uses is warranted in an undistorted land market (Mills and Hamilton, 1988). An approach to evaluating whether policies are effective at eliminating speculative use value has been reported by Nelson (1984, 1986a). While one of the immediate purposes of farmland preservation policies may be the preservation of rural land for open space (Keene et al., 1975; Currier, 1978), the ultimate purpose is to remove concern by farmers of the ‘impermanence syndrome’ (Berry ef al., 1976; NALS, 1981). The impermanence syndrome is characterized by farmers believing that agriculture in their area has limited or no future, and that urbanization will absorb the farm in the not too distant future. It is manifested through disinvestment in farming inputs, sale of tracts of land for hobby farm or acreage development, shifting of crop selection from those that are labor or capital intensive (such as berries and orchards) to those that require little labor or investment (such as pasture or annual crops such as certain vegetables), and ultimately farmers becoming themselves speculators on land conversion. A less pronounced effect of the impermanence syndrome is a feeling of uncertainty over the future viability of agriculture in the area. Uncertainty can delay important investments and can accelerate movement toward the impermanence syndrome. In either case, farmland production tends to fall and farming income falls. The commercial agricultural economy dwindles and eventually collapses leaving no or few farming support services (Berry, 1976; Daniels and Nelson, 1986; Daniels, 1986; Lapping and FitzSimmons, 1982). The result is

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vast areas of underutilized and idled land near and between urban areas (Gottmann, 1961; Berry, 1976; Vining et al., 1977). There is some evidence to suggest that for every acre of prime farmland that is urbanized, another half-acre to one acre becomes idled due to the impermanence syndrome (Plaut, 1976). The effectiveness

of farmland preservation policies will be evaluated in terms of their ability to eliminate speculative use value, reduce or eliminate consumptive use value, and maintain if not increase investment in agricultural inputs. The overall purpose is to eliminate the impermanence syndrome among prime farmland owners in areas targeted for preservation. Also entertained will be distributional issues; that is, who really benefits from farmland preservation policies? Farmland preservation techniques and their effectiveness Adapting the arrangement of farmland preservation techniques cited by the National Agricultural Lands Study (NALS) (1981), this article evaluates the following techniques: (A) Tax Zncenfives and Disincentives 1. Property tax programs (a) Differential tax assessment programs (I) Preferential assessment (i) Pure preferential assessment (ii) Preferential assessment with conveyance or use change penalty (iii) Deferred taxation with rollback penalty (II) Restrictive agreement with cancellation penalty (b) Income tax credits against property taxes (circuit breaker) 2. Capital gains penalties (B) Right-to-Farm (C) Acquisition of Development Rights 1. Transfer of development rights 2. Purchase of development rights (D) Agricultural Zoning 1. Non-exclusive zoning 2. Voluntary agricultural districts 3. Exclusive zoning. Table 1 shows the distribution of techniques used by the states at the time of this writing. This information was pieced together by the National Association of State Development Agencies (January 1989) and Rose (1984).

Many states use several techniques. Most taxing techniques are available statewide. Some taxing programs are mandatory: Vermont and Oregon for identified tracts, for example. Most taxing programs require application by farmland owners, however. Right-to-farm laws are usually applied statewide although they are not necessarily applicable in all areas of any given state. Most other farmland preservation programs are local option and not used statewide. Some states create an integrated system of farmland preservation techniques: special taxation with rightto-farm and agricultural districting, for example. A system that integrates techniques may be no moreor-less effective than one particular technique, however. This article evaluates these principle techniques and suggests their effectiveness when used in combination. Voluntary agricultural districting policy is addressed within the context of agricultural zoning, although it receives special treatment in a section of this article. Land use regulations in these districts are typically less onerous on farmland owners than exclusive farm use zoning, but perhaps more onerous than non-exclusive zoning (Geier, 1980; Bills and Boisvert, 1988). While all states use some form of special use value taxation for farmland, as well as various forms of right-to-farm legislation, the more innovative approaches to farmland preservation are usually restricted to the northeast and the west coast. The reasons should be obvious. The northeast is the nation’s most densely populated region; efforts to preserve prime farmland are viewed as necessary to sustain viable agriculture in the face of growth and deconcentration of population into the countryside. In the west, arable land is in short supply and it is often located in areas of greatest growth pressures. Examples include western Washington, the Willamette Valley in Oregon, southern California, and to a lesser extent California’s central valley. The article may sound more promising than it intends to be. Evaluations of many techniques have simply not been done with any rigor. The article suggests research approaches in those cases. It does, however, consider the likelihood of effectiveness given evaluations of other techniques and theory. It concludes with the proposition that one set of policies promises to be most effective. Tax incentives and disincentives Real property taxes often consume as much as 1520% of a farmer’s net farm income (Keene et al.,

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Guest Editorial Table 1. Distribution of farmland preservation policies by states of the U.S.A.

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1975). In urban fringe areas, real property tax liabilities can equal or exceed net farm income (Leutwiler, 1986). This occurs when farmland is assessed not for its farm use of productive value but for its potential value as urban development.

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Farmers owning land close to urban development incur a property t& burden considerably in excess of the benefits received (Gloudemans, 1974). All 50 states use some form of tax incentive or disincentive to slow, if not prevent, the conversion of farmland to

Arthur C. Nelson urban uses. In theory, if the tax burden can be reduced farmers will ‘sell-out’ later rather than sooner. The taxing techniques are not, however, designed to encourage maintenance or enhancement of agricultural production. The major taxing techniques are reviewed below. Their effectiveness is viewed in terms of preserving farmland and affecting production.

Differential tax assessment programs - Forty-eight states employ some form of differential assessment of farmland for property taxation purposes. Differential assessment policies aim to reduce the property tax burden of farmers relative to owners of urban land. It may involve lowering the tax rate that is applied to the assessed value of farmland so that taxes are assessed only for certain services; reducing the assessed value of farmland to a percentage relative to urban land; or reducing the assessed value of farmland to its ‘use value’ as farmland and not its potential or speculative value for non-farmland uses. The principal objectives of differential assessment are: (1) to reduce the property tax burden on farmers, especially those near urban development; (2) to delay the inevitable sale and development of farmland for urban uses; and (3) to recognize that farmland typically places far less demand on local government for the facilities and services which are financed from property taxes (Keene et al., 1975; Currier, 1978; Plaut, 1977). There are two major forms of differential assessment: preferential assessment and restrictive agreement or contract assessment. Those programs provide considerable incentive for enrollment as the property tax burden is reduced considerably. The purpose of those programs is to reduce the tax burden of farmers. The assumption is that when rural areas become developed, new residents demand new facilities and services that are supported principally through property taxes. If the market places higher value on farmland for urban uses, then farmers pay urban scale property taxes. They are thus induced into selling to developers earlier than would happen if they were not so strapped by the burden. Moreover, there is a certain equity involved in having farmers pay through higher property taxes for new facilities and services principally benefiting new non-farm residents (Keene et al., 1975; Berry et al., 1976). Since there is a danger that farmers could sell to speculators or become speculators themselves and use enrollment in special tax programs to keep holding costs low, each program has its own kind of penalty that acts as a disincentive to conversion. The particulars of those now are effectiveness programs and their discussed.

Preferential assessment - Under all variations of preferential assessment, farmland is assessed a property tax on only its productive value. Productive value is typically established by state agricultural experts. It is determined by the income approach, that is, gross income less operating and other expenses (including property taxes) equals annual rent which, when capitalized at an appropriate rate, equals the value of land for agricultural uses. There are three variants of preferential assessment: pure preferential assessment, preferential assessment with conveyance or use penalty, and deferred assessment with rollback penalty (Currier, 1978; Plaut, 1977; NALS, 1981; Rose, 1984). Pure preferential assessment - Seventeen states use pure preferential assessment. In its purest form, pure preferential assessment involves applying the property tax on only the productive value of farmland. There is no penalty for converting farmland to non-farm uses. There is also no direct penalty for idling land once it has been designated for preferential treatment. In Indiana, for example, all farmland owners receive pure preferential assessment, whether used or idled. In other states, the local assessor may, but often does not, evoke pure preferential assessment for land that becomes idled and waiting for conversion. As there is no direct penalty assessed for changing land use, enrollment is popular among both farmers and speculators. Preferential assessment, however, does not slow the conversion of farmland to urban uses. It may even facilitate conversion (Forkenbrock and Fisher, 1983). Preferential taxation results in increasing the speculative value of farmland as property tax savings are capitalized (Bahl, 1968). Near urban development, productive value actually falls as capitalized tax savings stimulate speculative behavior. Farmers realize a windfall when they sell to speculators. Speculators, including farmers acting like speculators, maintain minimum agricultural use (including idling on the argument that land is ‘fallow’) to continue qualifying for preferential taxation. Idling stimulated by tax policy pushes the impermanence syndrome farther into the countryside (Berry, 1978; Berry et al., 1976). In short, pure preferential assessment increases speculative value, does not increase (actually decreases) productive value near urban areas, and may actually contribute to a reduction in productive value at farther distances from urban development than might have been observed in the absence of the program. These effects are illustrated in Fig. 2. These effects are natural consequences to a tax subsidizing system that stimulates speculation and urban sprawl (Bahl, 1968; Shoup, 1970).

Guest Editorial

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In a sense, then, those farmers who need preferential assessment least because their productive value approaches or equals market value, are most likely to enroll in preferential assessment programs. Put another way, those farmers for whom the program is targeted, since they are in the path of urban development, are the least likely to enroll. Distance from urban development underproductivity attributable ta urban externalities

Region Mare impermawnco syndmina aporatea

Figure 2. The fundamental effect of any tax deferral or

preferential tax program is to increase market value, especially if there are not other restrictions on land use. Market value is increased as the holding cost of land is decreased. The increase in market value is chiefly attributed to speculation. Those programs thus extend the frontier of the impermanence syndrome and do not really preserve prime farmland near urban areas. Rather, such land is held in speculation by investors or farmers acting like investors. Society-at-large thus subsidizes speculative behavior in farmland ownership near urban areas.

This kind of policy has the effect of reducing productive value in the path of development. It may have the perverse effect of extending the area within which the impermanence syndrome is felt as farmers attempt to second-guess when they should stop enrollment in the program. When engaging in such farmers enter the ‘uncertainty’ second-guessing, phase that precedes the impermanence syndrome. The choice to dis-enroll signals nearby farmers of the possibility of urbanization. An alternative and equally perverse effect of this policy is to enable speculators to strategically reduce holding costs if the capitalized tax savings actually exceed the tax penalty. Speculators invest in farmland some distance from urban development and maintain modest production. When development appears imminent within a few years, it is disenrolled. Investors pay any penalty but it is likely to be less than the penalty due if dis-enrollment occurred simultaneously with conversion (at higher urban value). This has the effect of pushing the impermanence syndrome and its associated uncertainty considerable distances into the countryside.

Preferential assessment with conveyance or use change penalty - To counteract the potentially perverse effects of pure preferential assessment, seven states penalize conversion with conveyance or use change taxes. The penalty is triggered when preferential status is revoked. The penalty may be assessed if the use changes simultaneously with sale of the property, as when an option on a property is exercised by a developer who then proceeds with development. More typically, it is assessed when the owner voluntarily withdraws from preferential assessment status, usually in anticipation of use change. Least typically, it is assessed when the local tax assessor determines the property has not been used as farmland in recent years. In two states, the tax is a percentage (lO-30%) of the difference between agricultural use value and market value.

Deferred taxation and rollback penalties - Thirty states employ a combination of preferential assessment with a penalty upon conversion based on tax savings. Under this arrangement, farmland is assessed for property tax purposes at its productive value. However, the assessment rolls also show the market value of that land and, implicitly, the taxes not assessed on both consumptive and speculative uses (comprising the balance of market value). Participating landowners who develop their property in ways inconsistent with purposes of the program are required to pay back some amount of the taxes they saved. ‘Rollback’ taxes are usually equal to the difference between what the tax on the market value would have been and what the actual tax was for a given number of years.

The incidence of enrollment in preferential assessment in those states with conversion taxes rises with distance from urban development. The penalty has the effect of forcing landowners, whether farmers or speculators, into withdrawing from preferential assessment enrollment long before conversion is expected, so that the penalty is minimized.

In theory, if the rollback penalty were equal to 100% of the present value of taxes saved, there would be no net tax benefit to the speculator upon conversion, aside from simply deferring holding costs until those costs could be paid from development proceeds (Forkenbrock and Fisher, 1983). In practice, however, all states with this policy assess considerably

Arthur C. Nelson less than 100%. For example, many states assess only the last two years’ deferred taxes at no interest. The speculator thus enjoys considerable benefits during the period in which property taxes are deferred. All owners of land that can meet the minimum requirements of productivity are likely to take advantage of what amounts to subsidized investment. In fact, participation is higher the closer land is to urban development. This is because through participation, speculators and farmers acting like speculators enjoy subsidized holding costs. Speculative value rises as farmers capitalize the tax savings. Urban sprawl is consequently induced by deferred taxation policy as it is practiced. Not only is economic conversion of property delayed beyond the ‘optimal’ point by such tax subsidy policy (Bahl, 1968; Shoup, 1970), but the speculative value component of farmland farther away from urban development is higher than it should be. Farmers farther away are thus induced into expecting conversion earlier than might be expected in the absence of the policy. The impermanence syndrome extends farther into the countryside, as does development. Land closer-in is withheld from development as the holding cost subsidy offered by the policy does not encourage development earlier than would have been observed in the absence of the program. Many of those parcels will not develop until completely surrounded by development. Society thus induces inefficient urban sprawl by subsidizing speculative behavior among both speculators and farmers. It is doubtful whether farmland is preserved except when it is withheld from the market for higher-intensity development. Productive value falls over a broader area than would have been observed in the absence of the policy. The program benefits those who need the program least (Esseks, 1978). Restrictive agreements with cancellation penalty -

California and New Hampshire have restrictive agreement programs that require farmers to enter into long-term contracts with the local county in which they agree not to develop, in exchange for receiving preferential assessment. In California, the ‘Williamson Act’ requires local governments to establish agricultural preserves. When the preserves are effected, cities or counties may enter into agreements with farmland owners. Farmland valuation is determined by capitalizing net farm income considering property taxes (Rose, 1984). Contracts exclude non-agricultural uses, are binding

cn succeeding owners, and have an initial contract period of 10 years. Contracts are automatically renewed for one-year periods unless non-renewal notice is given by either the local government or the landowner. A contract will be cancelled by the local government if development occurs. The owner is assessed a cancellation fee equal to 12.5% of the then full market value of the land. Hanson and Schwartz (1975) report that landowners in the path of urban development are less likely to enter into those contracts than landowners considerably beyond the path of urban development. No contracts were entered into when landowners expected development of their property within 10 years, whether or not that perception was realistic. As enrollment in the program is voluntary, incidence of enrollment increases with distance from urban areas. An argument could be made that California’s Williamson Act benefits the wrong people. Property tax subsidies passed from the general population to farmers may be considered a windfall to those farmers as they receive additional income (tax savings) in exchange for essentially nothing. This occurs when farmers located a considerable distance from urban development evaluate whether to participate. The contracted assessed value is determined by state officials. If the contracted assessed value is considered by the farmer to be less than the market value even if the only market is other farmers, then they will participate. If the contracted assessed value would be higher than the market value in the estimation of the farmer, then they will not participate. The Williamson Act is not effective in enhancing farmland productivity (Hanson and Schwartz, 1975). It may accelerate idling and conversion of farmland by pushing the impermanence syndrome outward. It does so by stimulating scattered low-density development as it skips over or out-flanks land that may be enrolled closer-in (and waiting for contracts to expire). Classic leap-frog development occurs. As in the tax programs, the Williamson Act generally results in more urban sprawl and not less (Hanson and Schwartz, 1975). The program generally results in extending the effects of the impermanence syndrome farther into the countryside than would be expected without it. Income tax credits against property taxes (circuit breaker) - Michigan and Wisconsin have a ‘circuit

breaker’ program in which farmland property tax relief takes the form of a state income tax rebate. Those statesdo not use preferential assessment. In Michigan, .an income tax rebate is triggered when the local property taxes assessed on a farmer exceeds seven per cent of his/her net farm income. The state

Guest Editorial refunds income taxes equal to the property taxes paid in excess of that threshold. The program applies only to those landowners who contract with the state for a minimum lo-year period. Participating landowners in Michigan who do not renew their contracts must repay the state the last seven years’ rebates, without interest. Landowners allowed to withdraw from the program before contract expiration must repay the state all property taxes rebated plus six per cent interest. Those programs have little effect on preserving farmland and actually encourage slightly less productivity in order to reduce net farm income to a level that would qualify for property tax rebates. Participants in those programs are typically retired, other low income non-farm households, farmers earning less than $9ooO annually, and farmers who lost money (Barrows and Bonderud, 1988). Furthermore, speculators can purchase existing farms and maintain them at minimal levels until conversion - all the while enjoying subsidized holding costs in the form of rebates by placing title for tax purposes in low earning corporate entities. The penalty at conversion is usually minimal compared to the costs of development. The policy thus reduces farmland productivity but increases speculative value. Not surprisingly, less than five per cent of Michigan’s land base is enrolled in this program (Barrows and Bonderud, 1988). Capital gains penalties Two states, Connecticut and Vermont, attempt to discourage speculation of all land by assessing a special capital gains tax on it. Vermont’s land sales tax applies a sliding scale to all land sold or exchanged within six years of purchase. For land sold within one year of purchase, the tax ranges from 30% on any gain of less than double the purchase price, up to 60% on gains more than triple the purchase price. The tax falls to 5% and 10% respectively, for land held after the first but before the sixth year. Daniels et al. (1986) report that the land sales tax has not led to a reduction in subdivision activity and (by implication) has not effectively reduced speculative value. For one thing, land less than lo-25 acres (depending on location) is exempt. Second, the practical effect of the tax is to withhold land from the market until the tax is too small to matter (or simply held more than six years). This has the perverse effect of driving land values up by restricting urban land supply everywhere. It thus rewards speculative behavior.

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Does the policy preserve farmland? This is doubtful. Although it does initially slow the pace of conversion, once a full six-year cycle has run its course farmland may actually be traded at a faster rate for higher prices to accommodate pent-up demand. The program could have the effect of rendering farmland under-productive with farmers anticipating the legal possibility of ‘cashing-in’ to speculators without the penalty after six years, whether that expectation is realistic or not. Summary: effectiveness of tax programs Are property tax programs effective in preserving prime farmland? Are the recipients of preferential assessment policy the intended recipients? The general answer to those questions is ‘no’. The primary justification for providing property tax relief to farmers is the notion that rising land value assessments increase tax burdens which then force farmers to sell their land prematurely (Forkenbrock and Fisher, 1983). At first, by reducing the property tax burden, those tax programs are effective in retaining farmland at least in the near-term. The circuit breaker program especially helps marginal farmers whose property tax payments are high relative to income. But all policies have the potential for inducing farmers into selling prematurely to speculators since preferential programs reduce holding and operating costs. Any program that does not ultimately assess a penalty equivalent to 100% of the present value of the stream of tax savings will induce farmers into selling to speculators, or becoming speculators themselves. In practice, however, the penalty is usually so small as to have a minimal effect on withdrawal. Speculators will thus maintain the minimal production needed to continue preferential assessment, withdrawing only at a time that minimizes potential tax liability relative to gains from sale or conversion. By encouraging rather than discouraging speculation in farmland, those programs have the tendency to induce urban sprawl. It is also conceivable that, as a class, farmers who enroll in those programs actually produce less than farmers who do not for two reasons. Farmers who enroll realize a reduction in the cost of operations and while this raises net revenues, it does not pressure farmers into making their land more productive. One argument for a high property tax is that it forces owners to maximize the marginal productivity of their land, or else lose it to the next highest use. A high property tax encourages farmers to raise production. A low property tax does not (Bahl, 1968; Goldberg and Chinloy, 1984; Mills and Hamilton, 1988).

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The second reason is that if such programs actually induce urban sprawl, the volume of farmland affected by the presence of sprawl is increased. Farmland would become under-productive and some would be idled owing to two dynamics. On the one hand, the impermanence syndrome could cause farmers rather distant from urban development, but close to leap-frogged development, to disinvest prematurely. On the other hand, land near urban development is also affected by urban externalities. Nelson (1986b) estimated in one study that urban externalities extend up to three miles from urban development. The following scenario is conceivable. In the absence of differential assessment, farmland is underproductive or idled up to three miles from urban development. Urban development progresses outward in a more-or-less continuous fashion, thereby pushing the region of under-productivity outward over time. Onto this landscape a differential assessment program is applied that includes a penalty for withdrawal. Farmland remains under-productive within three miles of urban development. Some urban development leap-frogs over this region into areas where the penalty will be less (as property taxes deferred do not reflect the present value of all potential taxes deferred). Farmland within three miles of scattered subdivision or sprawl development is therefore impacted by the presence of leapfrogged urban development. The volume of land made under-productive therefore increases due in part to a differential assessment program with penalties. These relationships are illustrated in Fig. 3. Then there are the distributional effects. Differential assessment programs as they are currently applied benefit the wrong people in the wrong place and at the wrong time. The people who benefit mostly are those who are so far away from the path of development that there is virtually no fear of urbanization, or speculators (or farmers acting like speculators) near urban development who use those programs to subsidize holding costs. In fact, there is some evidence to suggest that banks and investment partnerships own much of the farmland near urban areas and many can afford near-term deficit financing, if needed, to hold land until development (Esseks, 1978). Reduced property taxes merely cushion the holding costs and have the effect of delaying development beyond the optimal time in the absence of such subsidy (Bahl, 1968), hence inducing leap-frog urban development (Harvey and Clark, 1965) that accelerates the impermanence syndrome (Berry et al., 1976). Taxpayers essentially pay for something that effects the wrong outcomes: subsidized speculation of farm-

Figure 3. Differential property tax programs may affect expansion of the impermanence syndrome farther into the countryside if they: (a) encourage holding land from conversion near urban areas through subsidized holdings costs; and (b) encourage leap-frog development away from urban areas as land is developed before its rightful time. As urban development imposes production-inhibiting externalities on farmland perhaps up to three miles away, the effect of leap-frog development at six miles is to extend the impermanence syndrome nine miles into the countryside from the boundary of urban development.

land near urban areas, urban sprawl as land closer-in is held out of development longer than it would have been otherwise, under-productivity of farmland over broader regions as urban sprawl is attenuated, and subsidized operations of farmers so distant from urban areas as to be virtually beyond the reach of future urban development. What should policy-makers do if they wish to eliminate the premature sale of farmland? An ideal scheme would be a mandatory preferential assessment program applied to all prime agricultural land, if not all rural land in excess of a certain acreage, with a penalty equivalent to the full present value of the stream of property taxes deferred. This would have the effect of eliminating the capitalization of tax savings thereby eliminating the incentive to sell at a high value, and prevent subsidizing speculation. It would also eliminate the property tax burden on farmers. It will not, however, eliminate the ability of a speculator to leverage investment in farmland near urban areas since holding costs would be deferred- until actual development takes place. Even if full tax deferral is paid, the principle advantage is of keeping holding costs down until sale or conversion. All such policies are thus prone to

Guest Editorial perverse outcomes by distorting the market (Esseks, 1978; Stoler, 1979; International Association of Assessing Officers, 1975; Barron and Thompson, 1973; Kolesar and Scholl, 1972; Gloudemans, 1974; Currier, 1978; Plaut, 1977; Coughlin et al., 1978; Boehm and McKenzie, 1981; Goldberg and Chinloy, 1984; Mills and Hamilton, 1988). Right-to-farm All states have versions of right-to-farm laws. Such laws attempt to shield farmers from nuisance complaints filed by urban residents who move into or near traditional farming areas (Hand, 1984). Suits and the threat of suits can result in disinvestment or termination of viable commercial farming (Hagman and Juergensmeyer, 1987); they can also effect the impermanence syndrome. As urban residents cause the idling of nearby farmland, they can hardly argue against its development. Right-to-farm laws aim to prevent this by keeping urban residents from filing nuisance complaints against traditional farmers (Rosser, 1978; NALS, 1981; Lapping et al., 1983; Leutwiler, 1986; Lapping and Leutwiler, 1987; Penfold, 1988). At the heart of right-to-farm laws is the desire to protect innocent farmers from land use actions or restrictions that evolve around them, over which they have little or no control (Leutwiler, 1986). The central feature of such laws is to make it difficult for nearby non-farm residents to restrict operations through nuisance suits. In particular, such laws aim to modify the test for proving a private nuisance. Private nuisances are those which unreasonably interfere with the use and enjoyment of another person’s property (Hagman and Juergensmeyer , 1987). Without right-to-farm, neighbors are free to allege nuisance due to chemical spray drift, smells, noises, hours of operation, and so forth. Right-tofarm laws attempt to tip the balance in favor of farmers through statutory declarations that standard farming practices are reasonable land uses, despite their possible adverse impacts on neighboring property. Such laws go further through language that establishes that the social utility of farming outweighs to some degree incidental harm to nearby properties. Moreover, such laws put new residents on notice that they may be ‘coming to the nuisance’ if they choose to live near a farm. There are many shortcomings to those statutes, however. First, right-to-farm laws do not prevent farmers from converting their land to an urban use, or inhibit its sale to speculators. Second, right-tofarm laws may not apply to the operations of a succeeding owner. That is, the practices of one

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owner may become ineligible for right-to-farm protection if they are continued by a new owner. Third, right-to-farm laws do not protect nuisance suits brought against operators who change agricultural practices, no matter how insignificant the change may appear (Lapping and Leutwiler, 1987). Fourth, farmland that is fallow during the year in which new development occurs nearby may not be protected from conversion to more intensive use in the future. Fifth, local governments often retain statutory power to regulate (and ban) the use of fertilizers, pesticides, and herbicides as an expression of their police power rights to protect the health, safety, and general welfare of residents (Rose, 1984). There is an even more insidious problem with rightto-farm laws that states may find difficult to protect farmers against. Right-to-farm laws address nuisance and not trespass. Traditionally, courts have required plaintiffs to demonstrate that physical invasion of their property occurred in order to show trespass. The trespass test has evolved in recent years, however, to the point where a plaintiff need only demonstrate that the actions of another deprived the plaintiff of exclusive possession of their property. Under this broadened test, odors and airborne particulate matter would constitute a trespass. Farmers may become vulnerable to this attack (Bradbury, 1986). Various proposals to remedy those problems require considerable administrative expense and invite litigation if implemented. For example, Thompson (1982) suggests a certification process for agricultural practices that would entail the registering and monitoring of farm operations and changes in operations. So long as the farmer maintains certified activities, nuisances could not be filed. No state uses this approach. The central problem is that farmers and urban residents do not co-exist. This has been described theoretically (Sinclair, 1967; Boal, 1970; Rosser, 1978) anecdotally (Berry, 1978), and empirically (Nelson, 1984, 1985, 1986a; Meier, 1988). Right-tofarm laws are not likely to be effective in preserving farmland in the long-term (Leutwiler, 1986). Acquisition of development rights Recognizing that tax and zoning programs are limited, if not perverse, in their ability to preserve prime agricultural farmland and maintain if not enhance agricultural productivity, many local governments throughout the United States of America have sought to acquire the development rights of farmland near urban areas. The hope is that

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by placing development rights in the hands of local government, speculative value can be reduced and productive value increased. Farmland would be preserved and, as farmers would not expect their property ever to be developed, the effects of the impermanence syndrome should be removed. Investments into agricultural inputs would rise, as would productivity. There are two major approaches to the acquisition of development rights on farmland: transfer of development rights to the local government in exchange for higher density development in urban areas, and outright purchase of development rights usually through sale of local general obligation bonds and negotiation with farmers. Transfer of development rights - The transfer of development rights (TDR) on farmland involves designating farmland districts eligible for development rights transfer, but ineligible for conversion to non-farm uses. Landowners within those districts can sell development rights to developers in urban areas. Once transferred, farmland owners possess no residual right to develop their property as their rights are held like an easement by local government (Rose, 1984; NALS, 1981; Berry and Plaut, 1978). An example of how TDR works is found in Montgomery County, Maryland. The county is located northwest of Washington, D.C. In 1980, the county down-zoned about 88,000 acres in the northern and western area from one home per 5 acres to one home per 25 acres. Development rights were assigned on the basis of one dwelling unit for every five acres. They are called ‘sending’ areas. Seven urban areas are designated for receipt of additional development due to exercise of TDRs. They are called ‘receiving’ areas. Development in those areas initially exceeded density standards established by other planning ordinances. Development rights purchased by developers range about $5000 per unit. TDR in Maryland is authorized by state statute. That statute allows consideration of re-purchase of development rights if, after 25 years, there is a demonstration by the petitioner for re-purchase that farming is not feasible, and further provided that repurchase is authorized by the local governing body as well as by various state officials (Rose, 1984). There are two major problems with TDR programs of the sort used in Montgomery County. First, only owners of those farmland parcels that are least likely to develop in the future are willing to sell their development rights. In a sense, they realize a windfall when the market otherwise would not value as highly such distant land. Owners of land nearest

urban development do not sell their rights; they would rather wait for re-zoning to urban uses, even if that is some years into the future. From their point of view, developers would rather buy TDRs at the least possible amount of money. Owners of land farthest from urban development are likely to be willing to sell for the least amount. Over time, however, as cheaper rights are transferred from the farthest properties, developers may pay higher prices for rights on properties closer-in. At some point in time equilibrium is achieved when the purchase price of the next TDR exceeds its marginal value to developers. Urban expansion may then require spatial expansion. Hold-out landowners nearest urban development merely wait for their land to be rezoned for urban development. The second problem is that urban neighborhoods in receiving areas may oppose the sudden rise in development density attributable to TDRs. While developments using TDRs remain subject to planning and engineering review, there is no question that the use of TDRs in areas otherwise designated for lower-density development change the complexion of those areas. Receiving neighborhoods actually sued the county in state court and won the argument that, unless land use plans were changed, increases in density exceeding planning standards would not be allowed. The county has since revised its ordinances to allow for greater density in those areas. The more serious problem with this and all other TDR programs, however, is that they do not assure maintenance of agricultural operations. Viable, commercial-scale agriculture in prime farmland regions requires very large areas of farmland of the order of thousands of acres (Lapping and FitzSimmons, 1982). Random sales of TDRs will not prevent the scattered subdivision of farmland tracts to the acreage density allowed by zoning in all situations where TDR is used. Since subdivision and sale of farmland tracts into acreage rural residential sites is not prevented, it is possible that a regional farming economy can be so disrupted by such scattered development that it will no longer be able to support a commercial farming infrastructure (Furuseth, 1980, 1981; Furuseth and Pierce, 1982; Gustafson et al., 1982; Nelson, 1983a, 1983b; Daniels and Nelson, 1986; Daniels, 1986). Purchase of development rights - Some suggest that perhaps the best way to preserve farmland for the public interest is for local or state government to purchase its development rights outright. The approach at first glance has favorable benefit distribution implications. It is also appropriate in

Guest Editorial situations where implementation of agricultural zoning is not politically possible. Purchase of development rights does not result in purchase of title fee simple. Rather, the rights to all future development are acquired. To date, PDR programs are restricted to prime agricultural regions just outside some of the largest metropolitan areas in the eastern U.S.A. extending from Maryland to Massachusetts. King County (Seattle), Washington, is the only example of PDR used outside of megalopolis. The King County example is illustrative of how the program works. Between 1984 and 1987, King County purchased the development rights to about 13,OtXl acres of the county’s 30,000 acre prime agricultural land (Spellman, 1984). The rights were purchased from farmers who voluntarily negotiated the sale with the county. The county intends to apply non-exclusive agricultural zoning to the remaining 17,000 acres. Purchase of the development rights to those acres is not envisioned in the near future. The cost, over $50 million for the development right to 13,000 acres, may seem excessive. In fact, it will cost the 1.3 million King County residents an average of $9 per person for 11 years to retire the bonds floated to purchase those rights. This will have the effect of assuring permanent open space for urban residents in exchange for tax burden shifting (from farmland to urban land owners); without such purchase there is no guarantee that open space land would not be developed at some point in the future. King County residents thus face up to the value of open space by internalizing its value through a tax arrangement. In effect, the program shelters future generations of taxpayers from subsidizing farmers in return for owning development rights. In Suffolk County, on Long Island, New York, a similar program has worked to purchase a much smaller amount of farmland for much more money. Over 3000 acres of farmland have been purchased for more than $200 million since the 1970s (NALS, 1981; Rose, 1984). Bonds financing the purchases are retired by an increment on the property tax. There are several problems with PDR approaches. First, since they are really voluntary programs, they suffer from the same limitations of the TDR program, namely, they do not assure preservation of prime farmland in quantities and in locations suitable to sustain a viable agricultural economy. Second, those who choose not to participate in these programs remain free to farm or subdivide their land. In both King County and Suffolk County, subdivisions may be limited to large acreage tracts,

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but the tracts may be attractive to affluent urban residents seeking to realize the uniquely American dream of a country home within commuting range of work (Nelson and Dueker, 1989). Gradual subdivision of this kind can undermine a locally viable commercial agricultural economy (Lapping and FitzSimmons, 1982; Daniels, 1986). Third, much of the value of the PDRs are really a function of value created in the first place by investment in roads, water and sewer systems, and other facilities and services that make development possible. The public is really paying twice - first for the infrastructure that creates development value, and then for the purchase of development value that the taxpayers created in the first place. There are anecdotes in Suffolk County of local speculators buying tracts of farmland and making their gains on the sale of PDRs (Rose, 1984). Such programs are, at best, successful open space preservation efforts. Even if farms are bought by urban residents, the clearly rational thing for them to do is to enter into long-term leases with other farmers, and those leases may include provisions for maintaining necessary agricultural investments. Thus, productivity may be maintained if not enhanced over time, but only if the balance of farmland in the region is involved in viable agricultural operations. If not, then it is unlikely to expect affluent urban households owning such land to engage in truly productive farming operations. More likely, productive value will not rise but consumptive (single home) value will. At their worst, PDR programs are expensive (and can stimulate speculation in a kind of PDR market), do not necessarily preserve the local farming economy, and can turn farmland regions into exclusive enclaves of affluent estate-holders.

Agricultural zoning Agricultural zoning is the most common non-tax method of farmland preservation used by local governments (NALS, 1981). Such zoning restricts land uses to farming and livestock, other kinds of open space activity, and limited home building. It is sometimes used in tandem with regional urban containment planning (Nelson, 1985b). Hawaii and Oregon require the use of agricultural zoning by all local governments that have prime agricultural farmland. The most important element of an agricultural zoning ordinance is the extent to which it restricts the intrusion of new, non-farm uses into established agricultural areas. There are two funda-

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mental types of agricultural zoning: non-exclusive and exclusive. In either case, agricultural districts are identified by local and state agencies, and either exclusive or non-exclusive agricultural zoning is applied to those districts. Such zoning is mostly involuntary in that all owners within agricultural districts become subjected to agricultural zoning. There is the separate case of voluntary agricultural districts, which are essentially regulatory arrangements entered into voluntarily by farmland owners. Those regulations can be either non-exclusive or exclusive in nature. Effectiveness of voluntary agricultural districts may be viewed independent of nonexclusive and exclusive agricultural zoning in involuntary agricultural districts. The effect of each type on farmland preservation, productivity, and distribution of benefits are reviewed.

Non-exclusive zoning - Non-exclusive agricultural zoning usually includes large minimum lot sizes, ranging from about 10 to 640 acres (and more); entitlement to single family home construction on any pre-existing and newly created but conforming lot; no requirement to demonstrate the effects on farm production of land partitioning at the minimum lot size; and usually a wide range of uses allowed by conditional use permit including commercial recreation, smaller than minimum lot size developments, patently non-farm dwelling units, agriculturally related industrial activities, and planned developments sometimes at higher densities. There is evidence that such zoning can have perverse outcomes (Archer, 1977; Daniels and Nelson, 1986; Nelson, 1983a, b). Families wishing to own a small acreage tract near urban areas are forced into buying larger farms instead. They cannot manage the entire farm and instead manage the two to five acres they really wanted. Those new families may rent spare land to other farmers, but rental agreements are short-term and typically do not involve maintenance or installation of long-term oriented investments (Daniels, 1986). Viable commercial farming operations fall in number and the local agricultural support economy suffers (Daniels and Nelson, 1986). Over time, large acreage rural residential sprawl invades and succeeds in the district, prime agriculutural land becomes under-productive or idle and more, not fewer, acres are taken out of production than would have occurred without such zoning (Archer, 1977). As the agricultural economy is vastly reduced, buyers of the large farm tracts should be expected over time to lobby for relaxing zoning restrictions to allow for smaller acreage development and perhaps low-density urban development. Productive value falls, but consumptive and speculative values rise.

These perverse outcomes are often stimulated in some states. As farmers are themselves actors in the process that leads to non-exclusive agricultural zoning, many tend to argue for smaller minimum lot sizes than can support a commercially viable farm. This is their hedge against losing all speculative value. While this may be a hedge, it actually causes more perverse outcomes. For example, large farmland tract owners in Florida’s Brevard, Charlotte, and Lee Counties convinced local officials to designate more than one-half million acres of rural land mostly engaged in farming for one acre development (Florida Department of Community Affairs, 1989). This encourages scattered, patently low urban density residential development everywhere. It is possible that considering the adverse interactions between farmers and non-farm residents evaluated above and below (see Figs 1 and 4), the commercial viability of an entire agricultural region can be vastly reduced by low urban density subdivisions scattered randomly across the landscape. Under non-exclusive agricultural zoning used in these and other Florida counties, households seeking space and privacy within commuting range of urban employment will purchase acreage tracts for relatively high sums. Acreage tract subdivisions sprawl in a scattered fashion throughout the agricultural countryside resulting in large farms being broken into hobby farms or ranchettes, all meeting the minimum lot size requirement whether they be one acre or twenty acre density (Daniels, 1986; Daniels and Nelson, 1986; Gustafson et al., 1982; Buttel, 1982; Lapping and FitzSimmons, 1982). The effect of such zoning, whether it be at one acre or twenty, is to remove farmland from production and allow non-farm development adjacent to viable farming operations everywhere. Ultimately, such low urban density development will demand (and sometimes by state law require) urban services in the low-density countryside such as regional water systems, roads, and sanitary sewers. Available evidence suggests that where non-exclusive agricultural zoning is employed there is a tendency toward greater subdivision activity, reduction in acres cultivated by commercial farming operations, reduction in farm-related income, and extension of the impermanence syndrome over a broader area than would have been expected without such zoning (Fuller and Mage, 1975; Archer, 1977; Berry et al., 1976; Nelson, 1983a, b, 1986a). Voluntary agricultural districting - Perhaps the best known example of voluntary agricultural districting is that of New York state. In general, farmers may petition to collectively form a district. That district is approved by local and state agencies after a public participation process. The district is administered at

Guest Editorial the county level. Petitioners must own 500 acres or 10% of the land in the proposed district, whichever is greater. The state commissioner of agriculture may also create districts of 2000 or more acres to protect ‘unique and irreplaceable agricultural lands’. No districts have been created by the commissioner, however. By 1986, about eight million acres of farmland (25% of the entire state land area) were in about 400 districts. The number of districts actually fluctuates between about 390 and 410, however, as district status can be changed by action of the county governing body (Bills and Boisvert, 1988). Within agricultural districts, farmers are protected to some extent from state and local land use and building regulations on farming activities that do not threaten the public health, safety, and welfare; from special assessments for water, sewers, lighting, and other forms of utility districts; and from the use of eminent domain to acquire farmland for public uses (Berry and Plaut, 1978; Geier, 1980; Rose, 1984; Bills and Boisvert, 1988). The most tangible advantage of the districts is the opportunity to receive differential property tax assessment with deferred taxation (also available to some farmland owners outside districts as well). Deferred taxes accumulate only to five years. Many farmland owners eschew participation in this special tax program, although there is some evidence to suggest that participation increases in proximity to growing urban areas (Bills and Boisvert. 1988). While some may allege that voluntary agricultural districting is successful in preserving farmland (Bills and Boisvert, 1988), such districting suffers from many shortcomings. For one thing, the principle advantage of districting is to extend differential property tax assessments to farmers. Participating in such special assessment is made by annual application. Farmers in the path of urbanization tend to participate and those away from the path of urbanization tend not to. This is predictable behavior as discussed above. Deferred taxation, as it is used in New York, can result in turning farmers into speculators by extending special tax treatment to farmland owners, thus distorting the land market. Interestingly, Bills and Boisvert (1988) could not determine whether there was greater participation in tax deferral among farmers with highest quality soils, nor did they address the question of whether participation resulted in increased or sustained productivity near growing urban areas. Bills and Boisvert (1988) also observe that participation in the tax deferral program rises when local property tax rates rise in response to new demands for facilities and services placed on county governments occasioned by increasing non-farm population. It

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would thus appear that while the burden of paying for new facilities and services may seem to shift appropriately from the farmer to the non-farm household, it is the non-farm household that subsidizes the speculative inclinations of the farmer. Farmland owners within districts are free to use their land for non-farm activities. This includes the ability to subdivide farmland into acreage tracts at minimum sizes established by each county. Those tracts are sold to non-farm households. The policy thus does not protect against the intrusion of nonfarm, albeit large acreage, homesite development in the middle of agricultural districts. Voluntary agricultural districts suffer from the same problems identified for special taxation programs and non-exclusive agricultural zoning. Because of tax policy, speculative use value rises. Because of non-exclusive farm use zoning, consumptive value rises. Voluntary agricultural districting can push the impermanence syndrome ‘shed’ farther into the countryside than may be observed in the absence of such policy. Exclusive zoning - Exclusive farm use zoning intends to prevent non-farm activities in farming districts. Many exclusive farm use zones have very large minimum lot sizes that are calibrated to approximate the minimum size necessary to sustain a viable farming operation considering the production characteristics of the region. For example, Madeira County, California, has minimum lot sizes of 640 acres and Tulare County has an 80 acre minimum. Commercially viable agriculture in these areas requires large tracts of land. In Oregon, however, there is no explicit minimum lot size; land partitionings are approved only when there is evidence showing that partitioning will improve farming activities; dwellings are allowed only if demonstrably needed to support farming operations, although non-farm dwellings are allowed by conditional use in certain low production soils; and commercial recreation and industrial activities are restricted to the least productive soils or sub-areas most impacted by nearby urban development. Urban growth boundaries are used in Oregon as a means in which to direct development into cities and preserve the countryside for agriculture and other open space uses. There is descriptive evidence that exclusive farm use zoning preserves prime farmland (Furuseth, 1980, 1981; Gustafson et al., 1982; Daniels and Nelson, 1986). There is Zmore statistically compelling evidence that exclusive farm use zoning of the kind employed in Oregon and Hawaii eliminates speculation of prime farmland near growing urban areas

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(Nelson, 1984, 1985a, 1986a). In particular, Nelson found that the presence of exclusive farm use zoning resulted in the regional land market trading farmland outside an urban growth boundary for its productivity value, as illustrated in Fig. 1. The combination of urban growth boundaries and exclusive farm use zoning may explain Nelson’s findings. Nelson also found that the interaction between land zoned for non-exclusive farm use (large acreage zoning on marginally productive land) and exclusive farm use in the same region was such that there were no spillover effects detected in the land market (Nelson, 1987, 1988a). This is illustrated in Fig. 4. He surmises that exurban or par&urban households consider themselves akin to farmers and therefore do not mind farming activities. It is possible that the purpose of right-to-farm laws, namely to protect farmers against adjacent and nearby urban residents, can be accomplished by using acreage residential development to buffer urban activities and farming operations. Together, these findings suggest that non-exclusive farm use zoning can be used to shelter exclusive farm use districts from urban spillovers. Exclusive farm use zoning may be effective in eliminating speculative use value and limiting consumptive use value without explicit use of urban

Rent gradient wlthout

growth boundaries. This only happens, however, when farmland owners perceive that policy will not allow any development of land in exclusive farm use districts. This is made explicit in Oregon (Leonard, 1983; DeGrove, 1983). Exclusive farm use designation in Oregon carried with it a statutory requirement that all land zoned such is assessed for its farm use value. However, as a result of exclusive farm use zoning, the land market trades agricultural land for its productive use value; where such land already has a home, it is traded for its agricultural use and consumptive use value as one homesite. Comment on combinations of policies Many states allow local governments to employ a variety of farmland preservation techniques. It is hoped by some that while one policy or another may not be as effective as wished, the combination of policies will be such that desired effects are realized. This is mostly wishful thinking as well. Typical combinations of preservation policies include non-exclusive farm use zoning, agricultural

L

0

Rent gradient in exurbon development n containment

f 9 ? s

RI Rent gradient within green with axurban containment policy

R

u2

u3

Distance from city center and axurban boundary

4.Interaction between greenhelt and exurban land markets regulated by regional urban containment policy. R is the continuous land value gradient

Figure

extending from the city center, uo, into the countryside beyond u3 in the absence of a regional urban containment policy. Such a policy would create an urban growth boundary at ul, a greenbelt district between u1 and ~2, and an exurban development district extending beyond us. Two things should happen. First, the demand for exurban land should shift from greenbelt land into exurban districts, creating a new land value gradient, RI,that extends across the greenbelt and exurban districts. The shift in demand would increase the value of exurban land but reduce the value of greenbelt land, creating a gap in the land value gradient at u2. Second, when exurban development extends to the boundary with the greenbelt, us, the value of exurban land should rise as it gets closer to the boundary, resulting in the land value gradient Rs. That occurs because exurban land close to greenbelt land exclusively can enjoy the views, scenic backdrop to the homesite, and other advantages proximity to farmland has. Unlike the interaction between urban and greenbelt land, we should not see an additional reduction in value of greenbelt land as it approaches the exurban development boundary us.

Guest Editorial districting (whether voluntary or involuntary), and deferred property taxation. These policies combine to exacerbate perversities, not compensate for them. Non-exclusive farm use zoning allows farmland owners to subdivide prime farmland into acreage tracts for sale to non-farm oriented households. This interjects non-farm activities into farming areas and creates conflicts between farmers and non-farmers. Tax deferral allows farmers to behave but worse it allows non-farm like speculators, households owning acreage tracts to also behave like speculators. Most tax deferral programs require modest demonstration of farm productivity for entitlement to tax deferral. These requirements are easily met in most states; sometimes the test for entitlement includes crops and animals raised for sole use by the tract owners. Non-farm households thus take full advantage of tax deferral to sustain a subsidized lifestyle (with unsuspecting low and moderate income urban households picking up the shifted tax bill). By the time these new landed gentry retire, urban development may have reached their acreage tracts. These non-farm household speculators cash in. The combination of these policies disrupts viable farming operations. Since property taxes are greatly reduced for the land, tax deferrral effectively stimulates the production of acreage tracts. As acreage tracts are allowed by non-exclusive farm use zoning, their production is increased to meet the market demand for essentially non-farm, acreage tract development. As the landscape is developed into acreage tracts for non-farm oriented households, the commercial agricultural infrastructure disintegrates. Over time, viable agriculture becomes impossible and the impermanence syndrome is pushed farther into the countryside. In states where TDRs are combined with nonexclusive farm use zoning and tax deferral, there is little incentive to sell development rights near the path of urban development. Tax deferral rewards speculative behavior near urban development and effectively undermines sale of TDRs where they would be most effective in preserving prime farmland. Farmers unwilling to wait for urban development simply subdivide their property into the minimum lots allowed, selling those lots without having sold development rights. Purchasers of those tracts can subsidize their investment through use of tax deferral. Purchasers become speculators. Prime farmland is thus not preserved near urban development; rather more farmland is perhaps removed because of non-exclusive farm use zoning and tax deferral than is preserved through sale of development rights (but only at considerable distance from urban development).

Purchase of development rights on some land by government coupled with non-exclusive farm use zoning and tax deferral on other farmland will face a similar fate. Although farmland is preserved through purchase of development rights, other land is ultimately traded and used for non-farm activities. Some is eventually developed for urban uses. As a result, purchase of development rights on some property is not likely to assure continued agricultural productivity in the region. Non-farm subdivisions and eventual urban development will impose spillover effects that reduce farmland production. More insidiously, land on which development rights have been sold may merely become large tract estates traded by the very affluent not for its farmland value but for its consumptive use value as exclusive open space amongst urban development. The estates of the Vanderbilts, Camegies, Mellons and Fisks come to mind. If the remedy to this outcome of PDR programs is to apply exclusive farm use zoning to land on which PDRs cannot be purchased, then there may be an interesting equal protection challenge under the U.S. Constitution. That legal theory is not elaborated here, but suffice it to say that if government buys development rights from some property for the purpose of preventing its eventual development, then restricts development on all other land by exclusive farm use zoning to accomplish the same result, then there is unequal treatment of similarly situated owners since they all face the same use restrictions, since some were paid and some were not. I shall soon, however, pose a combination of policies that may indeed prove effective in preserving prime farmland near urban areas. But I shall first recapitulate the shortcomings and perversities of existing policies. Recapitulation poliiies

of

prime

farmland

preservation

None of the tax incentive or disincentive policies affect the long-term preservation of farmland. None has been shown to increase productive value. All create or raise speculative and consumptive use value principally by distorting the market through reductions property tax burdens. All are prone to extending the impermanence syndrome farther into the landscape chiefly by subsidizing holdings costs of speculators or turning farmers into speculators. All are prone to generating benefits either to those farmers who need it least or to speculators, including farmers acting like speculators. Right-to-farm legislation is structurally incapable of preventing nuisance complaints in the long-term. At

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best, right-to-farm laws give short-term protection to farmers along the urban-rural fringe. Yet, a farmer could win all the legal battles in court only to lose the proverbial war to attrition, expense and wariness. Moreover, the law of trespass has so evolved as to potentially undermine the purposes of right-to-farm legislation. A better planning and legal solution would be to use hobby farms or ranchettes to buffer farmland districts from urban development. Non-exclusive agricultural zoning, as it is currently practiced, does little to prevent the conversion of farmland in the long-term. It also does little to increase productive value, but instead can increase cons~ptive and speculative value by stimulating scattered, low-density urban sprawl into the countryside. With tax deferral opportunities compounding these effects, such policy can have the effect of pushing the impermanence syndrome farther into the landscape by forcing urban residents to purchase larger tracts than they want or can manage. Voluntary agricultural districting suffers from similar effects. Transfer of development rights benefits those farmers who are least impacted by urban development and does little to encourage farmers close to urban development to participate. They also have the effect of increasing urban neighborhood densities beyond that which may be acceptable. TDRs do little to overcome the impermanence syndrome, except by placing the development rights of the most far-flung farmland into local govemment’s hands. Purchase of development rights is lauded as the most equitable way in which to distribute benefits to those intended to receive benefits, It preserves in perpetuity farmland near urban areas and may increase productive value over the long-term. While it may raise consumptive value (and in the process create enclaves of acreage estates amongst urban development), it does eliminate speculative value. PDR programs may have the effect of pushing the impermanence syndrome farther into the landscape, however, by forcing urban residents who desire land in PDR districts to purchase larger tracts than they want or can manage. PDRs also have a perverse redistribution of benefits. Development rights are in large part related to ~~astNcture making develop ment possible. Taxpayers pay for the infrastructure. PDR programs thus have the effect of forcing taxpayers to pay twice: once for the infrastructure that creates development value, and then for the development value created by infrastructure. Shrewd speculators buy farmland in the path of urban development and then sell development rights at a later time. Moreover, since farmland from

which development rights have been purchased may suffer the spillover effects of nearby urban development, those effects will need to be offset by nonexclusive farm use zoning which shelters such land from urban development. But if exclusive farm use zoning is applied to both land from which rights have been purchased and other land in order to create a farming region of such size to support viable commercial agriculture, a challenge could be made on equal protection grounds. There are thus serious theoretical, practical, equity and legal problems associated with PDR programs. Exclusive agricultural zoning, as practiced in Hawaii and Oregon, promises to preserve farmland, although it does little to directly encourage greater investment by owners. Speculative value is eliminated if the program conveys the appropriate signal to farmland owners of their inability to develop or use the land for anything but farming. Productive value may or may not rise. The policy is costeffective in that purchase of rights is avoided but since beneficial use remains, there is no claim for taking (Rose, 1984). But the policy will only be effective in the long-term if public officials have the courage to reject future requests for conversion, as they seem to in both Oregon and Hawaii (DeGrove, 1983). Consumptive value may rise if some urban households should out-bid farmers for large tracts of land isolated from urban development. By itself, exclusive farm use zoning could thus have the effect of pushing the impermanence syndrome farther into the landscape by forcing urban residents to purchase larger tracts than they want or can manage. There is a potential legal problem associated with restricting land to exclusive farm use next to urban development. Recall that urban spillovers reduce productivity of farmland in the manner illustrated in Fig. 1. Such spillover could be reasoned a trespass (Bradbury, 1986) or a private nuisance (Leutwiler, 1986). If a court holds in either case, remedy may be owed to the suffering farmland owner (Fischel, 1983). Nelson (1988b) shows this possibility. There is thus this potential legal challenge that so far has not been addressed in courts. Towards an effective prime farmland preservation strategy

Given these limitations to all prime farmland preservation programs, what is the appropriate policy or set of policies in which to engage? Recall that the purpose of prime farmland preservation policies theorized above is to eliminate speculative use

Guest Editorial restrict consumptive use value, and maintain if not enhance productive use value. value,

Speculative use value appears to be eliminated in situations where urban development is contained behind an urban growth boundary and where prime farmland is designated for exclusive farm use. This set *of policies requires policy-makers to be clearly understood by the land market for their resolve to limit spatial expansion of urban development and prohibit all but commercial farming from prime farmland. The demand for acreage tracts cannot be ignored. Lacking substitutes, households wishing acreage tracts will purchase existing farms in exclusive farm use zones. As they wish only to occupy and not necessarily use the land, disinvestment in agricultural inputs will commence. Consumptive value rises and productive value falls. It is possible that if such a pattern pervades across the exclusive farm use necessary to region, the economic infrastructure support viable commercial farming would be removed. Over time, there could be pressure to change the status of exclusive farm use areas. Speculative use value will rise. To accommodate the demand for acreage tracts, marginally productive land may be set aside for nonexclusive farm use activities. At large tract sizes, perhaps of the order of lo-20 acre minimum lot sizes, the interaction between non-exclusive and exclusive farm use zones is such that there are little or no spillover effects. In fact, Nelson (1989) demonstrates positive effects on non-exclusive use farmland and no adverse effects on exclusive farm use land at 20 acre exurban residential density, at least as reflected in the land market.

139

Another element must be considered, that of eliminating special tax treatment of all land in such a region in order to eliminate the sprawl-inducing distortions of such policy. By limiting prime farmland to exclusive farm use, it will be traded in the market for its productive use value anyway (plus an increment for consumptive use if a home is already on it). The purpose of special farm use tax policy is therefore not needed. On all other land, there should be no use of special use taxation. Since nonexclusive farm use land would be traded for its value as large acreage homesteads, it should not be afforded special tax subsidies. Tax distortions are eliminated. The land will be traded in the market more for its consumptive use value than its productive or speculative use values. Indeed, by eliminating property tax subsidies, speculative use value should be eliminated or at least greatly reduced. The generalized scheme of land use planning implementing these policies is illustrated in Fig. 5. Under this scheme, right-to-farm laws may be kept on the books but would not need to be relied upon to protect farming from urban spillovers and nuisance complaints. Nelson (1989) argues that where nonexclusive farm use tracts are in the range of 20 acres at the boundary with exclusive farm use districts, the market for prime farmland does not internalize spillovers. This suggests that owners of non-exclusive farm use tracts behave as quasifarmers - that is, they may fancy themselves as being like farmers and may sympathize more with farming practices than urban residents. Transfer of development right and purchase of development right schemes would not be needed. While there may be re-zoning of land to exclusive farm use status, and while affected farmland owners

Productive value of exclusive farm use land can rise in two ways. First, by buffering prime farmland from urban development through intervening non-exclusive farm use zoning (in the 10-20 acre range), it is possible that urban spillover effects on exclusive farm use land can be absorbed on intervening land zoned for non-exclusive farm use. While some prime farmland would be lost to non-exclusive farm use along the urban boundary, farmland adjacent to non-exclusive farm use land would have higher productive value. Second, as the urban population grows but continues to be spatially contained, and as prime farmland owners see over time the resolve of policy-makers to prevent non-farm uses in the exclusive farm use district, productive value should rise as farmers have confidence in returns on their investment.

Figure 5. Hypothetical schematic of region using mix of planning policies to preserve prime farmland.

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may allege a taking of value accordingly, various courts have ruled that value reductions are merely loss of speculative use value and not of productive or consumptive use value. In other words, there is no taking claim when the land may continue to be beneficially used (Rose, 1984; Hagman and Juergensmeyer, 1987).

Policies other than those outlined here only subsidize speculative behavior, extend the impermanence syndrome across a greater area, and generate benefits to the wrong people in the wrong place and usually at the wrong time. An argument could be posed that anything but the set of policies promoted here is actually worse than having no policy at all. References Alonso, W. (1960) A theory of the urban land market. Papers and Proceedings of the Regional Science Association 6, 149-157. Altshuler, A. (1979) The Urban Transportation System: Policies and Policy Innovation. Joint Center for Urban Studies, Cambridge, Massachusetts. Archer, R.W. (1977) Policy and research issues in subdivisions for rural residences. Hobby farms, and rural 48th ANZAAS Congress, Melbourne, retreats. Australia. Bahl, R.W. (1968) A land speculation model: the role of the property tax as a constraint to urban sprawl. Journal of Regional Science 8(2). Barron, J.C. and Thompson, J.W. (1973) Impacts of open space taxation in Washington. Washington Agricultural Experimental Station Bulletin 772, Washington State University, Pullman, Washington. Barrows, R. and Bonderud, K. (1988) The distribution of tax relief under farm circuit breakers. Land Economics 64, 15-27. Batie, S. and Healy, R.G. (1983) The future of American agriculture. Scientific American 248, 45-53. Baumol, W.J. and Oates, W.E. (1975) The Theory of Environmental Policy. Prentice-Hall, Englewood Cliffs, New Jersey. Berry, D. (1976) Idling of farmland in the Philadelphia region, 1930-1970. Regional Science Research Institute Discussion Paper Series No. 88, University of Massachusetts, Amherst. Berry, D. (1978) Effects of urbanization on agricultural activities. Growth and Change 9, 2-8. Berry, B.J.L. and Dahmann, D.C. (1980) Population redistribution in the United States. In Population Redistribution and Public Policy, Berry, B.J.L. and Silverman, L.P. (eds). National Academy of Sciences, Washington. Berry, D., Leonardo, E. and Bieri, K. (1976) The farmer’s response to urbanization. Regional Science Research Institute Discussion Paper Series No. 92, University of Massachusetts, Amherst. Berry, D. and Plaut, T. (1978) Retaining agricultural activities under urban pressures: a review of land use conflicts and policies. Policy Sciences 9, 153-178. Bills, N.L. (1975) Extent of local efforts to form agricultural districts in New York State. Journal of the Northeastern Agricultural Economics Council 4.

Bills, N.L. and Boisvert, R.N. (1988) Information for evaluating land retention programs: the agriculture district approach. Paper presented to the Resolving Rural Conflicts Symposium, Mt Allison University, New Brunswick, Canada. Blumenfeld, H. (1983) Metropolis extended. Journal of the American Planning Association 52, 346-348. Boal, F. W. (1970) Urban growth and land value patterns. Professional Geographer 22, 79-82. Boehm, T. and McKenzie, J. (1981) The Investment Demand for Housing. Office of Policy and Economic Research, Washington. Bradbury, D.A. (1986) Suburban sprawl and the right to farm. Washburn University Law Review 22, 448-468. Bryant, W. and Conklin, H. (1975) New farmland preservation programs in New York. Journal of the American Institute of Planners 41. Burgess, E. W. (1925) The growth of the city. In The City. Park, R.E., Burgess, E. W. and McKenzie, R.D. (eds). University of Chicago Press, Chicago, Illinois. Buttel, F.H. (1982) The political-economy of part-time farming. GeoJournal6, 293-300. Catanese, A.J. and Nelson, A.C. (1988) The buying of America’s neighborhoods: the planning policy implications of neighborhood buyouts. Center for Urban Planning and Development, Georgia Institute of Technology, Atlanta, Georgia. Clawson, M. (1962) Urban sprawl and speculation in suburban land. Land Economics 99-111. Clawson, M. (1971) Suburban Land Conversion in the United States. The Johns Hopkins Press, Baltimore, Maryland. Conklin, H. and Bryant, W. (1974) Agricultural districts: a compromise approach to agricultural preservation. American Journal of Agricultural Economics 56, 607613. Correll, M.R., Lillydahl, J.H. and Singell, L.D. (1978) The effects of greenbelts on residential property values. Land Economics 54,207-217. Coughlin, R.C., Berry, D. and Plaut, T. (1978) Differential assessment of real property as an incentive to open space preservation and farmland retention. National Tax Journal June, 165-179. Currier, B.A. (1978) An analysis of differential taxation as a method of maintaining agricultural and open space land uses. University of Florida L.aw Review 30. 821-842. Daniels, T.L. (1986) Hobby farming in America: rural development or threat to commercial agriculture? Journal of Rural Studies 2, 31-40. Daniels, T.L., Daniels, R.H. and Lapping, M.B. (1986) The Vermont land gains tax. American Journal of Economics and Sociology 45, 441-456. Daniels. T.L. and Nelson, A.C. (1986) Is Oregon’s farmland preservation program working? Journal of the American Planning Association 52, 22-32. DeGrove, J.M. (1983) Land Growth and Politics. American Planning Association, Chicago. Dideriksen, R. and Sampson, R.N. (1976) Important farmlands - a national viewpoint. Journal of Soil and Water Conservation 31. Ely, R.T. and Wehrwein, G.S. (1940) Land Economics. Macmillan, New York. Esseks, J.D. (1978) The politics of farmland preservation. Policy Studies Journal 6, 514-519. Fischel, W. 71982) The urbanization of agricultural land. Land Economics S&236-259. Fischel, W. (1983) The Economics of Zoning. The Johns Hopkins Press, Baltimore.

Guest Editorial Forkenbrock, D.J. and Fisher, P.S. (1983) Tax incentives to slow farmland conversion. Policy Studies Journal 11, 25-37. Fuller, A.M. and Mage, J.A. (eds) (1975) Part-time farming. Proceedings of the First Rural Geography Symposium, University of Guelph, Guelph, Ontario. Furuseth, O.J. (1980) The Oregon agricultural protection program: a review and assessment. Na~raI Resources Journal 20,603~614. Furuseth, O.J. (1981) Update on Oregon’s agricultural protection program: a land use perspective. Natural Resource Journal 21, 57-70. Furuseth, O.J. and Pierce, J.T. (1982) Agrictdturaf Land in Urban Society. Association of American Geographers, Chicago. Geier, K.E. (1980) Agricultural districts and zoning: a state-local approach to a national problem. Ecology Law Quarterly 8, 655-696. Gloudemans, R.J. (1974) Use-value Farmland Assessments. International Association of Assessing Officers, Chicago. Goldberg, M. and Chinloy, P. (1984) Urban Land Economics. John Wiley and Sons, New York. Gottmann, J. (1961) Megalopolis. Twentieth Century Fund, New York. Gustafson, G.C., Daniels, T.L. and Shirack, R.P. (1982) The Oregon land use act. Journal of the American Pining Associa~n 48, 365-373. Hagman, D.C. and Juergensmeyer, J-C. (1987) Urban Pianning and Land Development Control Law. West Publishing, St Paul, Minnesota. Hand, J.P. (1984) Right-to-farm laws: breaking new ground in the preservation of farmland. University of Pittsburgh Law Review 45,297 et seq. Hanson, D.E. and Schwartz, S.I. (1975) Landowner behavior at the rural-urban fringe in response to preferential property taxation. Land Economics 51, 341-354. Hart, J.F. (1980) Land use and change in a Piedmont County. Annals of the Association of American Geographers 70,492-527. Harvey, R-0, and Clark, W.A.V. (1965) The nature and economics of urban sprawl. Land Economics 41(l). Herbers, J. (1986) The New Heartland. Times Books, New York. International Association of Assessing Officers (1975) Propew Tar Incentives for Preservation: Use-value Assessment and the Preservation of Farmland, Open Space, and Historic Sites. Intemational Association of Assessing Officers, Chicago. Keene, J.C. et al. (1975) Untaxing Open Space. Council on Environmental Quality, Washington. Kolesar, J. and Scholl, J. (1972) Misplaced Hopes, Misspent Millions. The Center for Analysis of Public Issues, Princeton, New Jersey. Lapping, M.B. and FitzSimmons, J.F. (1982) Beyond the land issue: farm viability strategies. GeoJournul 6, 519-524. Lapping, M.B. and Leutwiler, N.R. (1987) Agriculture in conflict: right-to-farm laws and the pari-urban milieu for farming. In Sustaining Agriculture in Cities, Lockeretz, W. (ed.). Soil and Water Conservation Society of America, Ankeny, Iowa. Lapping, M.B., Penfold, G.E. and MacPherson, S. (1983) Right-to-farm laws. Journal of Soil and Water Conservation 38, 465-467. Lee, D.B. (1979) Market failure. In The Land Use Policy Debate in the United States. Praeger, New York.

Leonard, H.J. (1983) ~~g~g Oregon’s Growth. Conservation Foundation, Washington. Leutwiler, N.R. (1986) Farmland preservation laws: what do they do? Can they be justified. Unpublished Masters thesis, Department of Urban Planning, University of Colorado at Denver. Marchand, J.M. and Russell, K.P. n.d. Externalities, liability, separability and resource allocation. American Economic Review 63,611-620. Meier, B.W. (1988) An urban induced ring of disinvestment by farm operators. Paper presented to the 1988 Conference of the Association of American Geog raphers, Portland, Oregon. Miami University, Miami, Ohio. Mills, ES. (1969) The value of urban land. In The Q~Zi~ of the Urban Environment, Perloff, H. (ed.). Resources for the Future, Johns Hopkins University Press, Baltimore. Mills, E.S. and Hamilton, B.W. (1988) Urban Economics (4th Edition). Scott Foresman, Homewood, Illinois. Muth, R.F. (1961) Economic change and rural-urban land conversions. Econometrica 29, l-23. National Agricultural Lands Study (NALS) (1981) National Agricultural Lands Study. U.S. Department of Agriculture, Washington. National Association of State Development Agencies (1989) Farmland Notes. National Association of State Development Agencies Research Foundation Farmland Project, Washington, Nelson, AC. (1983a) Comment on the Oregon Land Use Act. Journal of the American Planning Association 49, 85-87. Nelson, A.C. (198313) Comment. Natural Resources Journal 23,1-5. Nelson, AC. (1984) Eva~~ting Urban Contain~nt Programs. Center for Urban Studies, Portland State University, Portland, Oregon. Nelson, A.C. (1985a) Demand, segmentation, and timing effects of an urban containment program on urban fringe land values. Urban Studies 22, 439-443. Nelson, A.C. (1985b) A unifying view of greenbelt influences on regional land values and implications for regional policy. Growth and Change 1643-48. Nelson, A.C. (1986a) Using land markets to evaluate urban containment programs. Journal of the American Planning Association 52, 156-171, Nelson, A.C. (1986b) Towards a theory of the American rural residential land market. JournaZ of Rural Studies 2, 309-319. Nelson, A.C. (1987) How regional planning infhrences rural land values. In Sustaining Agriculture Near Cities. Soil and Water Conservation Society, Ankeny, Iowa. Nelson, A.C. (1988s) An empirical note on how regional urban containment policy influences an interaction between greenbelt and exurban land markets. Journal of the American Pawning Association 52, 178-184. Nelson, AC. (1988b) Additional and reduced demand, amenity and d&amenity increment recapture considerations of urban containment policies. Real Estate Issues. Nelson, A.C. (1989) Appropriate boundary effects of regional urban containment planning. City Planning Program, Georgia Institute of Technology, Atlanta, Georgia, U.S.A. Nelson, A.C. and Dueker, K.J. (1989) The exurbanixation of America. Journal of Planning Education and Research (forthcomihg). Penfold, G. (1988) Right-to-farm as a method of conflict resolution. Paper presented at the Conference on

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Resolving Rural Development Conflicts, Mt Allison University, New Brunswick. Peterson, G.E. and Yampolsky, H. (1975) Urban Development of Metropolitan Farmland. The Urban Institute, Washington. Platt, R.H. (1985) The farmland conversion debate. Professional Geographer

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Plaut, T. (1976) The effects of urbanization on the loss of farmland at the rural-urban fringe: a national and regional perspective. Regional Science Research Institute Discussion Paper Series No. 94. University of Massachusetts, Amherst, Massachusetts. Plaut, T. (1977) The real property tax, differential assessment, and the loss of farmland on the rural-urban fringe. Regional Science Research Institute Discussion Paper Series No. 97. University of Massachusetts, Amherst, Massachusetts. Pope, C. (1985) Agricultural productive and consumptive use components of rural land values in Texas. American Journal of Agricultural Economics 66, 81-86.

Prestbo, J. (ed.) (1975) This Abundant Land. Dow Jones Books, Princeton, New Jersey. Radcliff, R. (1949) Urban Economics. Rose, J.B. (1984) Farmland preservation policy and programs. Natural Resources Journal 24, 591-640. Rosser, J.B. (1978) The theory and policy implications of spatial discontinuities in land values. Land Economics 54,430-441.

Sampson, N.R. (1981) Farmland or Wasteland. Rodale Press, Philadelphia, Pennsylvania. Schmid, A.A. (1968) Converting Rural Land to Urban Uses. Johns Hopkins Press, Baltimore, Maryland. Shoup, D.C. (1970) The optimal timing of urban land development. Papers and Proceedings of the Regional Science Association 25, 33-44.

C. Nelson Sinclair,

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Solomon, B. (1984) Farmland protection: a case of quality not quantity. Land Use Policy 357-366. Spectorsky, A.C. (1955) The &urbanites. Lippincott, Philadelphia. Spellman, J. (1984) King County’s purchase of development rights program. In Protecting Farmlands, Steiner, F.R. and Theilacker, J.E. (eds). AVI Publishing, Westport, Connecticut. Stoler, F.D. (1979) Farm-use Assessment Revisited. Lincoln Institute of Land Policy, Boston. Thompson, E. Jr (1982) Defining and protecting the right to farm (Part 2). Zoning and Planning Law Digest $67 et seq.

United States Department of Agriculture (1975) Perspectives on prime lands. Background papers for a seminar on the retention of prime lands, 16-17 July 1975. Vining, D.R., Bieri, K. and Strauss, A. (1977) Urbanization of prime agricultural land in the United States: a statistical analysis. Regional Science Research Institute Discussion Paper Series No. 99. University of Massachusetts, Amherst, Massachusetts. Vining, D.R., Plaut, T. and Bieri, K. (1977) Urban encroachment on prime agricultural land in the United States. International Regional Science Review 2, 2. Volkman, N.J. (1987) Vanishing lands in the USA. Lund Use Policy 4, 14-30.

Zeimetz, K.A., Dillon, E., Hardy, E.E. and Otte, R.C. (1976) Dynamics of land use in fast growth areas. Agricultural Economics Report No. 325. Economic Research Services, United States Department of Agriculture, Washington.