Land Use & Agriculture Law Alert: Governor Schwarzenegger Eliminates Funding for Williamson Act Contracts

Land Use & Agriculture Law Alert: Governor Schwarzenegger Eliminates Funding for Williamson Act Contracts
8/10/2009

On July 28, California Governor Arnold Schwarzenegger used his line item veto authority to eliminate $27 Million in state funding to local governments for Williamson Act contracts. Under the Williamson Act (officially titled "The California Land Conservation Act of 1965" and found in California Government Code Section 51200 et. seq.) counties and cities contract with owners of agricultural land to restrict the land to agricultural use in exchange for reduced property taxes. The state funds are used to replace the county taxes that would have been collected absent the Williamson contracts. The contracts are mostly for 10 year terms and renew automatically every year for the full ten years. Many California counties and cities were already drowning in red ink, and the sudden loss of state funds for their Williamson Act contractual obligations has caught them unprepared and at a very tough time. It also raises significant questions about the immediate future of Williamson Act restrictions on agricultural land in California.

Currently, nearly 16.9 million acres of prime and non-prime agriculture land is under contract in the Williamson Act. The contracts reduce farmers' property tax liability by anywhere from 20 to 75%. For many farmers, the Williamson Act is a key factor in the economic viability of continuing to farm their land.

The possible implications of the loss of funding for the Williamson Act vary broadly and depend on how the individual counties respond to the lack of funding. Financially pressed local governments may choose to cancel automatic contract renewals which would phase in property tax increases over the ensuing nine year period. Farmers might fight such action. Other farmers may view the situation differently and see this as an opportunity. The program might also regain funding this Fall or in 2010 which could, in turn, create a category of land that fell out of the Williamson Act during the loss of funding period. Local governments or farmers may or may not want to get the land back into the program and issues could arise as to the treatment of property tax liability during that period of time. In short, depending on what actions counties and farmers take, the ensuing period could be one of litigation and challenges to the continuation of the program, and could ultimately undermine the underlying policy of promoting the preservation of prime agricultural land.

The implications reach beyond agriculture, since farm land is often converted to residential, commercial, and energy and other industrial uses. Land intensive solar thermal and solar photo-voltaic projects may find opportunity in the demise of Williamson Act funding as both landowners and possibly local governments look at revenue replacement options favorably. Contracts for use of agricultural land for compatible uses such as wind energy may need to be renegotiated, and future contracts may increase in price as farmers seek compensation for higher property tax bills. Many landowners could not afford to dedicate their land to windpower absent the Williamson Act tax savings.

If you have questions about these or other related issues, please contact:

Sacramento, California
John McKinsey at (916) 319-4746 or jamckinsey@stoel.com
Lee Smith at (916) 319-4651 or lnsmith@stoel.com
Barbara Brenner at (916) 319-4676 or babrenner@stoel.com
Tim Taylor at (916) 319-4754 or tmtaylor@stoel.com