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As the housing market has declined, fewer developers are purchasing raw farmland. That’s driving more and more landowners to turn to preservation programs as a way to raise cash and preserve their assets.
There are several options available to those who want to preserve the family farm.
In the best of both worlds, some farmers are not only preserving farmland for future generations, but also getting an influx of cash to maintain farming operations, plan for retirement and pass their legacy to their children.
A recent forum, sponsored by The Nature Conservancy, highlighted options and programs for Delaware landowners who are contemplating the sale of property.
The forum, at the Carvel Research and Education Center near Georgetown, was the second in the state.
R.C. Willin of Seaford, president of Willin Farms in western Sussex County and a member of the Sussex County Land Trust, said many organizations, as well as the county, are taking a proactive approach to land preservation.
“As a whole the general desire of a lot of people in the ag community is to see the equity in their land respected,” Willin said.
He said traditionally, farmers put every dollar back into real estate without putting away much money for retirement. “And the business always has a low return on investment,” he added.
Selling development rights offers farmers a chance to settle their estates and plan for retirement, he said.
Willin said he would like to see as much attention paid to the farming industry as is being paid to the land.
“We need to look beyond just land preservation. We really need to look to preserve farming. But that often falls on deaf ears,” he said.
Getting started
“To get started, people need to define their goals,” said Kate Hackett, director of land preservation for The Nature Conservancy and moderator of the forum. “Then they need to find an organization that meets their goals. There are people out there to provide help.”
Those goals could be to preserve a farm, set up retirement income and distribute an estate equitably among children or to make a sizeable contribution to a conservation organization – or a combination of such plans.
The forum was designed to help landowners make an informed decision about selling their land and to help people provide the legacy they intended.
Options are varied and can be combined according to a person’s individual wishes, Hackett said.
Mike Parkowski, an attorney and board member of The Nature Conservancy, said there are ways to pass on land to future generations and still get benefits from it through several public and private organizations.
“You can get benefits by conserving your property,” he told the large crowd.
One of the state’s hidden success stories, he said, is the Agricultural Land Preservation program – now in its 13th year. So far, 85,000 acres of farmland have been protected and another 145,000 acres are in the program’s 10-year nondevelopment program.
With a budget of $10 million a year, the Delaware Agricultural Preservation Foundation purchases development rights from farmers taking part in the program.
“The emphasis is to maintain a mass of farmland,” he said. “People have saved the family farm by taking money from the program.”
Once a farmer sells development rights to his land, he or she is locked in to several requirements including keeping the land in farming or agricultural-related uses.
He said the program has become flexible over the years to accommodate the changing farming landscape to even allow agritourism.
“You can rent a room out and let them kiss your cow,” he said.
Parkowski said there is never enough money to purchase all of the development rights so a bidding process has been established. Those offering the highest discounts off the appraised value as a donation to the foundation get first chance to sell development rights.
Parkowski said the discounts now average above 50 percent.
Sussex County and the Sussex County Land Trust also participate in the program with matching money. He said what people walk away with is a percentage of value in development rights and a percentage of value as a donation. They get to pocket the money and still keep the farm.
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Several conservation options available to landowners
There are several options available to property owners who want to preserve their land. Experts agree that the place to start is a local conservation organization with a follow-up consultation to personal legal and financial advisors.
The following options are available to property owners who want to transfer ownership and management of land to a conservation organization; transfer ownership of land but retain management for life; or retain ownership of the land and manage it according to regulations spelled out in a conservation easement.
• Donation of land or conservation easement. For an outright donation, a qualified appraiser determines the land’s value for tax-deduction purposes.
• Bargain sale. The sale of land or a conservation easement at less than fair-market value to gain the benefit of a tax-reducing donation.
• Charitable gift annuity. In exchange for land or easement, a property owner receives lifetime income with no capital gains tax at transfer and an income-tax deduction for the donated portion of land.
• Sale at full market value. Although full or partial donations can be advantageous to seller and buyer, occasionally conservation organizations purchase high-priority properties at top price.
• Installment sale. This allows the purchaser to buy the property or conservation easement over time, spreading out the seller’s tax liability.
The following options are available to landowners who want to sell property with a conservation easement:
• Conservation buyer. A conservation organization markets the easement-restricted land for sale to a conservation-minded buyer.
• Charitable remainder trust. This option allows the sale of land with a conservation easement through a trust with no capital gains tax.
For landowners who prefer to retain ownership and management for life and to transfer land or a conservation easement at time of death, the following option is available:
• Bequest through estate. This option must be specified in a will or living trust that land or a conservation easement is to be donated to a conservation organization.
Each of the options has different advantages and disadvantages in regard to federal and state taxes, capital gains taxes and property taxes.
Land protection organizations include the following:
• Sussex County Land Trust, 227-0287, www.sclandtrust.org.
• Nanticoke River Watershed Conservancy, 337-8847.
• The Nature Conservancy, 684-5348, www.nature.org/delaware.
• The Conservation Fund, 302-656-1103, www.conservationfund.org.
• Delaware Nature Society, 302-239-2334, www.delawarenaturesociety.org.
• Delaware Agricultural Lands Preservation Foundation, 302-698-4500.
• Delaware Forestland Preservation Program, 302-698-4550.
• Delaware Division of Fish & Wildlife (several programs), 302-739-9914, www.fw.delaware.gov.
• Landowner Incentive Program, 302-735-3600.
• Delaware Division of Parks and Recreation (several programs), 302-739-9235.
• U.S. Department of Agriculture, 302-678-4160, www.de.nrcs.usda.gov.
“And most people walk away without paying any settlement costs,” he said.
Contact Ron MacArthur at ronm@capegazette.com
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