Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: FRIDAY, April 2, 1993 TAG: 9304020449
SECTION: EDITORIAL PAGE: A-10 EDITION: METRO
SOURCE:
DATELINE: LENGTH: Medium
THE FARMERS OF ROANOKE CITY
FEDERAL subsidies and entitlement programs are under the budget spotlight these days. Less scrutinized is local government's version of them.In Virginia, for example, localities can opt to give real-estate tax breaks under some conditions to elderly homeowners and to farmers. Many jurisdictions have so opted, including Roanoke city.
But the city's tax break for agricultural land may be in peril. Mayor David Bowers is zeroing in on it, anyway. While the mayor has yet to make a wholly convincing case, he has raised questions - both explicit and implicit - that deserve Roanokers' thought.
The first thing to recognize is that such tax breaks are subsidies, even though you won't see them as line-item expenditures in official budgets. Real estate is taxed on the basis of fair market value; when some property is taxed at less than fair market value, it is a revenue loss that other property-owners must make up.
This is not to say that such "tax expenditures" are necessarily bad policy. But they should be evaluated by the same criteria that would apply to any item of government spending. Is it affordable? Is the cost worth the benefit? Has the program outlived its usefulness? Can the same benefit be obtained at less cost?
The tax break for elderly homeowners seems to arouse little controversy. Under it, elderly homeowners with incomes and assets below a certain level can apply to have their real-estate taxes frozen. This is not a huge break, and at first only a negligible one.
But over time, the difference can be enough to keep some lower-income elderly people from being forced to sell their homes because they can't handle the taxes. Roanokers apparently agree that this is a sufficiently strong public benefit to be worth the cost.
The tax break for farms works in similar but not identical fashion. Among its purposes is to prevent high taxes from forcing farmers off their land in places where development pressures and speculation are driving up real-estate values. Under the program, qualifying land is taxed at its market value as a farm rather than as, say, a prospective housing subdivision or shopping center.
The break can be tremendous. The annual real-estate tax bill for one 50-acre farm inside the city limits is $462 instead of $7,000. Taxes on two other highly developable parcels near Interstate 581 and Hershberger Road are $1,065 annually instead of $61,000.
That's not so unfair as it might seem at first glance. The exemption, after all, is working as intended: The land is being held for farming. The owners haven't received the financial benefits of developing it or selling it for development. (If they do, they must pay full-market-value taxes for the previous five years.) Moreover, the overall effect on municipal finances isn't huge, because only 670 acres in the city qualify for the exemption.
Still, the size of the gap between those acres' fair market value and their value as farmland suggests that maybe farming isn't exactly an ideal use for property in Roanoke city; maybe farming is something you do in rural areas, not urban centers.
That suggestion is related to the strongest point in Bowers' case for ending the exemption: It's outdated. The city is filling up; state law prevents it from expanding by annexation; local tax policy should encourage, not discourage, the development of what vacant land remains. In other words, the public benefit from the exemption is no longer worth the cost; indeed, what once was a benefit may have become a detriment.
But while preservation of the remnants of an agricultural industry may seem pointless (if not laughable) in a center city like Roanoke, another issue does not - preservation of what open land and green space is left within an otherwise developed urban core.
The last time we looked, the city wasn't buying acreage to set aside for public parks. The farm exemption has operated as a rough-and-ready mechanism for at least keeping the option open.
The issue - whether to keep the exemption and discourage development of what remains of large tracts of open land within the city, or end the exemption and encourage development - would be easier to gauge if it did not also involve city-county competition for population and tax revenues. But a valleywide approach to long-term land-use planning remains one more victim of local-government balkanization.