Wednesday, January 22, 2014

Small Farms Try Again For Tax Program Changes

Above: A close-up of the 1956 tile mural by Jean Beal in the lobby of the General Administration building on the Capitol Campus.

Farms Look To Update Property Tax Program with New Bill

By Janine Unsoeld

Editor’s Note: As with any legislative story, proposed legislation and information can change fast. A loose coalition of farm advocates is working to create a statewide farmland current use bill that can pass in this 60 day session. Draft legislation wording has changed dramatically this week and today. It is current as of this writing.
While sitting at the Olympia Food Co-op on the eastside early this morning, Leslie Cushman, a volunteer small farm advocate, transferred the latest version of a proposed piece of farmland preservation legislation to me via her Smartphone. Talk about hot off the press.
It was an appropriate place to meet, and several Co-op volunteers were being trained at a nearby cash register.
By correcting inequalities in the open space and agriculture laws, farmers hope to ensure the future between local food availability and farm sustainability. 
Enjoying bi-partisan, statewide support, tax relief comes to the Washington State Legislature as House Bill 1437, a bill which would amend the home site exemption in the Open Space law. 
The proposed legislation is sponsored by Representatives Chris Reykdal (D-22), Brian Blake (D-19), Kathy Haigh (D-35), Ed Orcutt (R-20), Kristine Lytton (D-40), Kevin Van De Wege (D-24), and Hans Zeiger (R-25). On the first day of this session, the bill was taken out of Rules and referred to the House Finance Committee.
The Senate companion bill is SB 5327, sponsored by Senators Karen Fraser (D-22), Steve Hobbs, (D-44), and Randi Becker (R-2). It was reintroduced and retained in its present status.

It’s a bill that has seen a lot of history.
In a new proposed substitute bill, supporters are emphasizing that farmland preservation is an important tax policy.

Currently, for farms less than 20 acres, the one acre under a farm house is assessed at the 'highest and best use'. This subjects smaller farms to a higher tax rate and works against efforts to preserve working lands. 
Farmers say that taxing one acre of a small farm at fair market value hurts small farms, and ask that all farms in the current use program be assessed the same.

The bill would abolish the "farm house acre" practice employed by assessors. Farm land that is enrolled in the Open Space program is currently assessed based on current use rather than fair market value. This reduces pressure to convert farmland to other uses.
Supporters are now calling on House Finance Chair Carlyle Reuven (D-36) and Ranking Minority Member Representative Terry Nealey (R-16), to hold a hearing on the new bill, which ended last session as E2SHB 1437.

The Open Space Act

The details of the Open Space Act, under RCW 84.34.010,  is technical. At the time of its enactment in 1970, it was probably revolutionary, but over time, it appears that it has not stayed in step with the diversity and changing nature of today’s farms.
Three categories under the Open Space Taxation Act allow for current use valuation, and are based on the size of the agricultural parcel.

Parcels 20 acres and larger must be devoted primarily to agricultural production. Parcels between five and 20 acres must generate gross income from the sale of farm products of $200 or more per acre in three of each five-year period. 
Parcels that are five acres and under must generate gross income from the sale of farm products of at least $1,500 per year in three of each five-year period.

For parcels of 20 acres and larger, the principal residence of the farm operator or owner is considered an integral part of the farm, and the land under the house is valued at its current use value.
For parcels less than 20 acres, the land that the house is situated is valued at fair market value while the remainder of the parcel is valued at current use value.

Bill Died in Senate Last Year 
Last April, E2SHB 1437 passed out of the House of Representatives with a vote of 92-1. 

The Senate entertained a hearing last year on the companion to the bill, but it did not get out of the Senate Agriculture and Rural Economic Development committee by cutoff.
Prime sponsor Senator Karen Fraser (D-22) spoke to her bill last year, SB 5814, saying, “It’s a tricky matter to draft a bill for small agriculture. I want to protect the tax base and don’t want to draft a bill that is a wide open loophole for hobby farms….  

“I want to help our farmers to stay in that sell to farmer’s markets or sell food on a subscription basis….these are highly appreciated land uses in our state. These farmers provide fresh food into our local communities.”
Representatives of the Washington State Grange supported the bill, saying “This is a great step forward to keep farmers farming.”

Lone opposition last year was voiced by the Association of County Officials due to a tax shift of an undetermined amount. The assessors association estimated a nearly $700,000 loss in revenue per year, although it was unclear where this number came from since a local governmental fiscal note was not produced. Bill supporters dispute this figure.

Supporters say the bill, which would have been a pilot project for Thurston County as proposed last year, would have had a very modest fiscal impact. Why Thurston County? 
“The Thurston County Commissioners supported the legislation and testified in front of the legislative committees. The county assessor was willing to work on resolving differences.  For a program with local impacts, the support of local government officials made a big difference.  And the residents of Thurston County are involved in a local food movement, emphasizing sustainability and community,” said Cushman.

After some discussion and generally positive remarks expressed by fellow committee members, Committee chair Brian Hatfield (D-19) said he was torn on the bill, expressing concern about a possible loss of tax revenue to local governments. 
“I grew up in county government and tend to bounce things off local government. Let’s balance this thing out…maybe there’s a compromise, maybe not. I’m glad we’re starting this conversation,” said Hatfield last year.

Small Farms Speak Up
Common Ground Farm in west Olympia works in community sustainable agriculture (CSA). Some of its CSA customers who receive a weekly box of fresh vegetables and herbs from mid-May to mid-November, have been buying Common Ground’s produce for over 20 years.
A farmer for 31 years, Nancy Laich of Common Ground testified last year to the Senate committee. Laich served on the Thurston County Agricultural advisory committee, and helped Senator Fraser craft last year’s legislation. She has long worked for farmland preservation, and served on the board of the South of the Sound Community Farmland Trust.
To explain the reason for the bill, Laich explained that the land under her house on her 15 acre farm receives continual increases in the assessed value because she is close to an urbanized area.
“It’s compared with nonconforming one acre lots hooked up to city services. I cannot subdivide one acre or sell one acre or hook up to city services on my street, but I am taxed at an assessed value that's the same as these one acre lots,” said Laich in a telephone interview today.

Laich, like many farmers, uses her house as an integral part of her farm.

“Essentially, farms are small, medium and large, and we're going for the equal treatment of farms of all sizes,” she said. 
Julie Puhich, also of Common Ground Farm, has been farming for 33 years.
“Our farm provide jobs, educational opportunities, research, and acts as a business incubator. If we had not been enrolled with the Open Space Agricultural Program from the beginning, we would have long been paved over,” said Putich.
Above: Otis Bell, left, chats with Senator Karen Fraser about her small farm last year. Bell, a local farmer for eight years, leased a one acre piece of land in Northeast Olympia to grow vegetables, medicinal herbs, bees, and chickens. Testifying to the committee in support of the bill last year, Bell said some farmers cannot afford large pieces of land but make a viable living on small plots. 

New Statewide Small Farm Study
A new farm survey, “Profile of Small Farms in Washington State Agriculture,” by Washington State University (WSU) Extension, says that based on U.S. Department of Agriculture criteria, 90 percent or 35,269 of Washington’s farms are considered small.

The U.S. Department of Agriculture National Commission on Small Farms defines small farms as “farms with less than $250,000 gross receipts annually on which day-to-day labor and management are provided by the farmer and/or the farm family that owns the production or owns, or leases, the productive assets.”
The WSU study states that, “Classifying farms by acreage can be misleading in a state like Washington, where productivity per acre can differ vastly depending on water availability, type of crop, and the farming strategies employed.”

Indeed, many farms now include many value-added products, such as artesian cheese, bees, and mushrooms to the list of products it produces and sells.
The study goes on to say that, “If current trends hold, we will see continued erosion of commercially viable small and moderate sized farms and their associated farmland.”
Strange Bedfellows Collaborate
Small farmers enjoy a wide range of bi-partisan legislative support, and have also brought together groups that might not ordinarily work together.

Those who testified last year in support of the bill include Common Ground Farm, Thurston County Commissioner Sandra Romero, the State Grange, the Thurston County Farm Bureau, the South of the Sound Farmland Trust, the Thurston County Agricultural Advisory Board, shellfish growers, farming professors, and others. 

Signing in as supporting past legislation were the League of Women Voters, the State Conservation Commission, Calliope Farms, Lisa Smith of Enterprise for Equity, and the Washington State Realtors. 
A group of interested parties met during the legislative interim to craft a new bill to introduce this session.

Good ideas floated in previous bill versions as recently as yesterday addressed the inconsistent tax treatment between counties, and recognized the value of food production to the food bank and other charitable feeding programs. Part of the draft proposed bill would have allowed all farms to count food bank donations as commercial activities and income. For Eastern Washington farmers, it addressed imperfections of an old survey system.
Other ideas directed the State Conservation Commission and the Office of Farmland Preservation to study the trends in farming, the economic contribution of farms, and the fiscal impact of the current use program on property taxes and taxpayers. This would have included a comprehensive study of the food economy and the impact and role of the current use program.

There’s a lot that can be thrown into a bill, but when that happens, things get complicated. In many cases, simple is best. And for a short session in particular, there just isn’t time to properly educate legislators on the issues.
One of the interested parties that has helped craft the new legislation regarding current use is the Thurston County Farm Bureau. The Bureau has found itself on the other side of a few conversations with the current county commissioners.

Jim Goche is a managing partner of Friendly Grove Farm in Olympia and a board member of the Thurston County Farm Bureau. For about four years, Goche and his family has allowed Kiwanis volunteers to till a portion of their land, plant crops, harvest what comes up, and take it down to the Thurston County food bank.
Representing himself, Goche has communicated with the state Department of Revenue regarding the Open Space Act to clarify the agency's role, and the county assessors’ house site designation practices. He helped draft the current legislation.

“I believe that the Department of Revenue should check its assumptions, look more closely at the county assessors’ actions, and ask itself whether the current administration of the Open Space Act is meeting its stated goals….The Open Space Act is 44 years old this year…Some of its provisions don’t support farmland preservation and food production and several are being administered by Washington’s counties in a manner which works against the intent of the law…One area of the Act which needs immediate attention involves the distinction made between large and small farms.”
Goche says the world has changed and agriculture has evolved. “Farms are smaller and now so numerous that they represent well over half of the farms in Washington State. While these small farms may be highly productive in growing the fresh produce that farmer’s markets, food banks, and school nutrition programs rely on, the farm income for many is marginal….”

“Considering the importance of Washington agriculture and the enormous contribution that small farms make to it, the ‘house site’ issue and all of the problems that go with it should be addressed by the 2014 Legislature....I support attempts to fix for 'house site' part of the law, but believe that a better solution is to repeal the 'house site' language entirely....This will benefit farms both large and small and help keep working lands working. It will also help preserve farmland and maintain the open spaces and habitat that farms provide for the public.
“We’re losing farms at an alarming rate. Every time the state adds a regulation on one’s property, it diminishes the value and shifts the burden to the taxpayer,” said Goche.

Thurston County Farmlands at Risk
The Washington Conservation Commission’s Office of Farm Preservation published a report last year, Thurston County Farmlands at Risk.

A Thurston County farmland inventory, completed in 2009 by South of the Sound Community Farmland Trust, concludes several startling facts:
-Thurston County has lost over 90,000 acres of farmland since the 1950s;
-Seventy-five percent of the farmland is within three miles of an urban growth boundary;
-Only about 51 percent of the farmland is in the Open Space Tax program;
-The majority of farmland is not within Long Term Agriculture zoning;
-The average age of principal farm operators is 57 years old;
-The majority of the total land in farms is on rented land.
For more information about the bill and the history of Washington State legislation, go to:
For more information on the Profile of Small Farms in Washington State Agriculture, go to:
For more information about the farmland inventory, go to:

Also: The League of Women Voters of Thurston County will be holding an Agriculture Preservation forum on Thursday, January 23, 7:00 pm, United Churches of Olympia, 110 11th Ave. SE.
The forum will feature a panel with various perspectives on agriculture economics and ways to preserve local farms.
Speakers and topics include: Erik Hagen, WSU Extension, an overview of farmland in Thurston County; Steven Drew, County Assessor, economic aspects of farming in Thurston County; Chris Wilcox, owner of Wilcox Farms, a large farmer’s perspective; Lisa Smith, executive director of Enterprise for Equity, efforts to increase the number of small farms; Loretta Seppanen, citizen board member, South of the Sound Community Farmland Trust, efforts to purchase and preserve farmland.

For more information, go to:  or call (360) 754-4305.

Above: LadyBerry Farms' Brussels sprouts are great sautéed with butter and a little bit of salt. I hated them too when I was kid, but now? Ymmm, they're good. And good for you!