GILROY
– The future of a government property-tax relief program that
affects more than 40 percent of the county’s land area – from San
Martin to the Mount Hamilton range – is uncertain in light of the
state’s budget woes and increased scrutiny over how the county
administers it.
GILROY – The future of a government property-tax relief program that affects more than 40 percent of the county’s land area – from San Martin to the Mount Hamilton range – is uncertain in light of the state’s budget woes and increased scrutiny over how the county administers it.
South County agricultural advocates and county officials once again are biting their nails about the future of the Williamson Act, a provision they say is crucial to help preserve the viability of the county’s remaining farms and scenic hillsides.
The Act offers property owners tax breaks in exchange for a commitment to use their land for farming or certain specific uses and is administered by the state through counties. It’s already being retooled in Santa Clara County, where state auditors uncovered problems such as ranchettes and subdivisions that were engaged in contracts under the state program but seemingly in conflict with its intent.
But in the short term, there are more pressing concerns. Just months after it was spared the ax during the state’s last budget cycle, funding for the entire statewide program has been placed back on the chopping block in Gov. Gray Davis’ budget bail-out plan.
“We obviously remain hopeful (the state) does not cut it,” said Rachael Gibson, land-use aide to District 1 County Supervisor Don Gage. “We think it provides an absolutely crucial benefit to folks in the agricultural industry.
“The elimination of the Williamson Act could be a crushing blow to agriculture statewide.”
Officially known as the California Land Conservation Act of 1965, the Williamson Act works through special multi-year contracts between property owners and counties.
Landowners who sign the decade-long contracts pledge to use their property for agricultural production, open space or other uses deemed compatible with the provisions of the Act.
In exchange, their property is taxed at its assessed value for farming or open space rather than its full market potential for development. The resulting tax breaks can range between 20 and up to 70 percent in some cases.
Sixteen million acres – or about half of the state’s farmland – is under the Williamson contract, including more than 300,000 acres in Santa Clara County. That’s about 40 percent of the county’s total land area.
Farmers benefit from tax break
As they face increasing pressures from foreign competition and rising water, electricity and supply costs, local farmers say losing the program’s benefits as well could push some in the already low-margin business over the edge.
A study commissioned by the state Department of Conservation, which oversees the Act statewide, indicated one in three farmers and ranchers interviewed wouldn’t be doing so if they didn’t receive Williamson Act benefits.
And the Act benefits more than just farmers, advocates say – it helps preserve the hillsides and farmlands that many other South County residents enjoy seeing on a daily basis – land that otherwise could be subjected to subdivisions and development.
“It’s vital to agriculture and open space to preserve (the Act),” said Jenny Midtgaard Derry, executive director of the Santa Clara County Farm Bureau.
But in his budget, Gov. Gray Davis has proposed slashing roughly $39 million in funding statewide that’s distributed to counties to make up their share of tax revenue lost through the program. Santa Clara County receives up to $400,000 a year in the so-called “subvention payments.”
Without the state funding, the county would be left with two choices: discontinue the program and its benefits altogether or scrape up the cash to continue within its own troubled budget. County officials have projected a shortfall of as much as $120 million in next year’s financial plan – a shortfall that retiring County Executive Richard Wittenberg has called “historically unprecedented.”
It’s too early to tell what the county will be able to do if supervisors are forced to make that decision, Gibson said. The county values agriculture and wants to retain and encourage it, she said – but scores of interests and departments also will be approaching supervisors to plead for budgetary mercy.
“(Retaining the Act) would require an expenditure of county funds – which we already don’t have enough of,” she said.
State Department of Conservation spokesman Don Drysdale said it’s tough to know how the situation will play out at the state level. Cuts have been proposed in the past – including last year – but weren’t followed through, he noted.
“I think we were all surprised by the reaction to the possibility of losing funding last time, and the agricultural community spoke with a loud voice,” he said. “But at the same time, everyone from every walk of life, and every interest in California will be affected by the budget reality.”
Misuse of the Williamson Act
But as farmers lobby their legislators to protect it, county officials are in the midst of a major examination and revamp on how the program is run here in the wake of issues raised by a state audit and an internal county review.
According to the audit, completed this spring by the state Department of Finance, the county allowed large tracts of land under the Williamson contract to be subdivided into smaller lots that were marketed or developed as home sites – in apparent contrast to the purpose of the Act.
“These smaller parcels are creating rural subdivision-type ranchettes, which, in our opinion, violate the intent of the Williamson Act,” said Samuel Hull, an auditor with the state’s Department of Finance in a May letter to the county.
For example, land under one Williamson contract in the east Gilroy hills has been split into 28 parcels that appear to be a series of ranchettes – without livestock or farming, Hull said.
Another contract near Morgan Hill covers 47 parcels that resemble a subdivision of rural ranchettes and feature several buildings, private gates and a 20,000-square-foot home, Hull wrote.
“We were unable to identify any livestock or commercial farming on the ranchettes,” he wrote.
County officials said both subdivisions were approved in the 1970s.
The state audit letter outlines other problems to be ironed out, such as discrepancies in the data the county uses to seek reimbursement from the state for taxes lost under the Act. A handful of properties claimed for the so-called “subvention payments” also were within the jurisdiction of cities – not the county, state officials noted.
County agrees review is needed
So far, officials say there are few solid answers on how the county will deal with the properties cited in the letter, how they will enact other changes in how the county’s 1,000-plus Williamson contracts are administered – or how widespread the effects will be.
Even before the state audit, the county realized its administration of the program – which was split among several departments – had not been analyzed in an overall sense for more than two decades, county Planning Director Ann Draper said.
“Like anything, things had drifted in several directions,” Draper said. “We were all having problems with its administration.”
Under a resulting county workplan, officials are examining criteria for new contracts, how to monitor existing contracts to ensure landowners comply with the Act and what to do with those that don’t appear to be in compliance.
“There are many layers to this,” Draper said.
There are also some tough decisions ahead.
For example, one big question is how – and where – the county will set up boundaries of so-called “agricultural preserves” that are used to administer the Act.
To continue taking advantage of Williamson benefits, Draper said a property will have to fall within the boundaries of such preserves, which are the result of policy decisions by county supervisors over where land should be saved for agricultural uses.
Under state law, properties that aren’t in a preserve could have to go into “nonrenewal,” where their Williamson benefits would expire at the end of nine years, she said.
The big question: Where the boundaries of the preserves be located?
Current county thinking would include areas zoned for hillsides, ranchlands and ag hillside and ranchlands in the preserve areas, Draper said, which she said could account for almost 1,360 of the county’s contracts.
“The vast majority of the properties in contract right now are ones we are looking at to be in the contract,” Draper said. “There are a small number that are not in those three big zoning (areas).”
It’s unclear at this point what would happen to the remaining 40 contracts, she said.
“Some are commercial ag uses,” Draper said. “Some you go and look at them and it’s a house, so it’s not in an ag use. It may be in an ag area, but it’s not an ag use.”
What qualifies under the Act?
Once in a preserve, the next question is what kind of uses exist or are planned for a property. Under the state law, there are specific criteria about what constitutes an ag use, Draper said.
“It’s about viable, commercial” agricultural uses,” she said. “That’s different from, let’s say, ag-related uses like pet horses or a giant garden or pet pigs.
“Those aren’t commercial ag uses. They may be personal ag uses, but they’re not viable commercial (uses) … “You could sell something once every 10 years, but it’s not a viable ag use.”
Keeping land fallow potentially can be seen as a compatible use – as long as agricultural uses are planned in the future, Draper said. The agricultural use would have to be developed before a house, for example, could be built.
But what happens to those who have developed a house or other use under Williamson contract – but have no apparent agriculture that jives with the state provisions – is still murky, officials said.
“There are some people who have houses and absolutely no ag use on the property,” Draper said. “The state has said ‘You have do something with those.’
“It might be they establish a viable agriculture use, or it might be to ‘get out,’ but we haven’t come to that part. That’s what we have to take a look at.”
The act’s benefits aren’t just restricted to ag uses – to further comply with the state law, the county has recently added provisions for open space and recreational uses as well.
But those provisions can be very specific. For example, land may need to be near a scenic byway or contain certain wildlife habitat to qualify as open space under the act.
“It’s not just any place you don’t want to build,” Draper said.
How to undertake enforcement will be another tough question, Gibson said. The county doesn’t necessarily have the resources to dedicate staff time – and money – to comb through all contracts and ensure they are complying with the act, she said.
“It’s all well and good if we let people in our program, but once they get in how do we make sure they live up to the spirit and letter of the law?” she asked. “They’re deriving very valuable tax benefits from this program, and we need to make darn sure they’re holding up their end of the bargain.”
County officials are tentatively expected to approach a supervisors’ committee with data and some rough options on the preserves as early as February.
