Tax break for ranchers, farmers on chopping block

Santa Clara County crop values growing

For ranchers and farmers in California, the property tax break
using the Williamson Act is what they’ve built their dreams on, but
Gov. Jerry Brown’s budget proposal is creating a disconcerting
nightmare scenario. Brown unveiled his plan to find $25 billion
missing from Sacramento through cutting $12.5 billion in programs
and services, and $12.5 billion by extending tax increases for five
more years. Brown has proposed to eliminate the $10 million general
fund appropriation for the Act this fiscal year and all funding in
2011-12.
For ranchers and farmers in California, the property tax break using the Williamson Act is what they’ve built their dreams on, but Gov. Jerry Brown’s budget proposal is creating a disconcerting nightmare scenario.

Brown unveiled his plan to balance the $25 billion deficit in the state budget through cutting $12.5 billion in programs and services. By June, Brown is hedging that Californians will extend current tax increases for another five years to eliminate half of the $25 billion deficit.

Brown has proposed to eliminate the $10 million general fund appropriation for the Act this fiscal year and all funding in 2011-12.

Landowners who use Williamson see a 20 to 75 percent break on their property tax bill, which some say have kept them in business since paying taxes on the highest market rate for their parcels – even in the current economy – would be enough to destroy their livelihood.

Also known as the California Land Conservation Act, Williamson is a state law passed in 1965 to preserve farmland and open spaces in California. Sixteen million acres – or about half of the state’s farmland – is under the Williamson contract, including more than 328,000 acres in Santa Clara County, about 40 percent of the county’s total land area. The state’s general fund pays cities and counties about $38 million a year to make up for the lost property tax from those protected by Williamson.

In May, then-Gov. Arnold Schwarzenegger proposed in his budget that Williamson Act funding would be reduced to just $1,000 to place hold the budget, but in October he signed a bill to help restore the Act and the $10 million subvention fund.

“If it goes away, our taxes would go up … for some the profit margin is very slim and some ranches could fail. It’s concerning,” said Kyle Wolfe, whose family has owned Kickham Ranch in Gilroy since 1866.

Wolfe, along with more than a dozen other farmers and ranchers, spoke Dec. 7 at the Santa Clara County Board of Supervisors meeting when the Williamson Act was given to each county for review of possibly reducing benefits by 10 percent. The ploy – called a money grab by the state by Supervisor Liz Kniss – was defeated unanimously by the county supervisors.

Recently elected District 1 Supervisor Mike Wasserman of Los Gatos made the motion to leave the Williamson Act alone and spoke to the importance of the program in maintaining open space and agriculture.

“At a time when our agricultural community is working to stay viable, the state has hung us out to dry. We should not do the same to our ranchers and farmers,” Wasserman said. His motion was met with applause by the audience of dozens of ranchers and farmers.

“We think it’s a really valuable program. It’s a bang for you buck program. The state spends $10 million to protect 16 million acres. You almost can’t afford not to do it,” said Jennifer Williams, the executive director of the Santa Clara County Farm Bureau.

Wednesday at the League of California Cities Conference in Sacramento, Brown spoke mostly about his plan to eliminate redevelopment agencies across the state to supplement $1.7 billion to the deficit.

“Wherever I look, it’s not pretty,” he said.

Brown asked the 200 city leaders to help the state crawl its way out of the $25 billion hole, saying that redevelopment is less vital than funding fire services or schools.

“None of it looks good, but tell me how else to draw the lines,” Brown said.

Lobbying efforts by Santa Clara County are in full swing until then, with the hope that since the county’s budget is signed and sealed until July 2011 the state will not eliminate the estimated $38 million it spends each year to reimburse landowners across the state.

Business without Williamson

The implication of saying farewell to the Williamson Act altogether would reach beyond lost agricultural jobs and production, according to the California State Senate Briefing Report from this year. Canceling contracts could lead to management issues of abandoned crops and orchards, pest control challenges and most excruciating – the burden on local governments that rely on its local businesses and crops.

The great benefit to landowners, is the relief provided through the assessment of the land that is based on the income-producing value rather than their market value.

In Morgan Hill, the effect of extinguishing the Act would be detrimental, locals say.

“The idea is whether it’s the Garlic Festival, the Mushroom Festival, the Morgan Hill soccer fields, or the PGA (tournament), the idea is to get people close to your wineries, to your mushroom farms and sell direct to them. That’s the only way to stay viable,” said Dhruv Khanna, who owns Kirigin Cellars in Gilroy. Khanna spoke at the Dec. 7 supervisors’ meeting pleading for the Williamson Act to stay intact. He said his property taxes would increase by 18 percent if not.

The Williamson Act involves voluntary contracts between landowners and a city or county in which they agree to retain their lands in agriculture or other open space uses for a minimum of 10 years, the Act is used for commercial farmers and ranchers and is not meant to be used by recreational gardeners, for example.

That very issue came to head in 2002 when an audit by the California Department of Conservation found that Santa Clara County had not administered the law properly, allowing rural homeowners to pocket tax breaks for cultivating a vegetable garden or a few rows of wine grapes. The county addressed the problem in 2003 and adopted new guidelines to enforce the rules of Williamson. It clarified who can and cannot receive the Act’s protection.

Since then, all parcels that don’t meet the Act’s minimum size requirement of 10 acres of prime land suitable for most row crops and orchards, or 40 acres for non-prime land typical for ranching, aren’t allowed to take advantage of the Act’s benefits.

As it historically has, the county will continue to back the Williamson Act and the county’s stewards of the land, Wasserman said.

“Because of their own $25 billion current deficit, (the state) is looking at ways to balance their budget with tax increases and cuts to the cities and counties,” he said Wednesday. And while “nothing is done yet” Wasserman said in terms of California lawmakers passing Brown’s budget, he is frustrated and even angry that the buck is being passed to California’s county governments.

“The message is simple: At some point people have to hold the state accountable because the cities and counties are doing the best they can with what they got … We can’t turn to somebody else for help,” Wasserman said.

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