Farmland Holds Value
Originally Appeared On:"delmarvanow.com"
By Brian Shane
Apr. 10, 2012
Everyone knows that residential and property taxes are plummeting,
sending state and local budgets into a revenue tailspin. But what about
farmland?One local farmer said the property tax bills for his
115-acre home farm are up by about $1,000, or 12 percent, in the last
round of triennial assessments.
"Farmland, trees, anything to do
with ag land basically went up. I saw an increase in my own, and I heard
other people say the same exact thing," said Virgil Shockley, a chicken
farmer and Worcester County commissioner.
Shockley also said if there are irrigation systems on the farm, farmers face $50-$75 per acre more in land rent.
One
main reason for the increased appreciation of agricultural land is
there's less of it in Worcester County, and there won't be any new
farmland created anytime soon.
"The biggest threat to the poultry
industry is not EPA or MDE (the Maryland Department of the Environment)
-- it's building houses where acres of corn used to grow," Shockley
added.
Pete Richardson, a property auctioneer, said market values
for farmland, in his experience, have not seen a steep decline in value
like residential properties have, if any.
"Say it's 95 percent
tillable land and 5 percent woodland -- that has not gone down in value
at all," said Richardson, who is also a former soybean and corn farmer
in Willards.
The value of unfarmed woodland has also dropped dramatically, Richardson added.
"We
know this much: the demand is a lot weaker," he said. "Most woodland
owners are not in a forced sale position. The demand for large woodland
tracts is less than it was during the boom years. It's primarily
recreational land. It doesn't produce a significant amount of income.
The recreation dollars aren't here anymore, so you have less buyers."
Both
Shockley and Richarsdon said creating new farmland involves clearing
trees from major acreage; that's a challenge based on modern state and
federal regulations, and the sheer cost of starting things up.
And
even if a person did start that farm, Richardson said, "it takes two
or three generations. There are guys that have successfully started out,
and got operations going, but it takes 30 or 40 years to get there. But
it's tough. You gotta have a lot of capital."
Stephen Hales,
Worcester County's clerk of the circuit court, who deals with land
records, said real farmland rarely turns over to new ownership and will
generally stay in a family.
Hales also said when it comes to establishing value for a property, there are a lot of moving parts.
"Is
it well-drained? Is it prime farmland? Is there timber on the property?
There (are) so many factors to the equation," he said.
The U.S.
Agriculture Department's 2007 census of agriculture showed 384 farms in
Worcester County, with the average farm size at 289 acres. Corn and
soybeans were the top crop items.
Agricultural property values
have swung up and down for Worcester County in the last few years,
according to Maryland's Department of Assessments and Taxation.
Worcester's
real property taxable assessable base for agricultural land was about
$305.5 million as of July 2011. That figure for 2009 was $338.2 million,
and $324.5 million for 2010. For 2008, it was $305 million.
Land
prices seem to have held steady in Sussex County because the value of
their product is on the rise, said Daniel Magee, a Williamsville farmer.
"I
guess it depends whether you're buying or selling," Magee said. "The
reason farmland values have held partly is because of the price of the
product that we sell, which has gone up pretty good. Corn, soybeans and
wheat have gone up pretty good. Therefore, the product we sell has
increased in value, whereas houses have decreased in value. That's
pretty much where it lands."
Another factor involves how
residential home values -- and their equity -- have collapsed, while
agricultural lands have held strong, said Vance Phillips, a Laurel
farmer.
"It's there and the value when banks consider loaning
money, what's really held steady if not improved, is the agricultural
component of (zoning), and that's because grain prices have gone up and
because the vegetable industry is very healthy in Sussex County,"
Phillips said. "Many farms were sold for (up to) $20,000 an acre during
the boom; there's nowhere that those values are realized today."
Phillips also noted that the vast majority of the open land being sold is for development, not farming.
What ultimately anchors the value of farmland continues to be the poultry industry, Phillips said.
"It
is the glue that holds everything together here," he said. "So with
high grain prices, it makes it pretty difficult on most folks, and we've
seen that. That is a double-edge sword. It's great to have high grain
prices, but we need to have someone to sell that grain to."