Farmers, ranchers, environmentalists and planners have long hailed the Williamson Act Contract for its protection of agricultural land and assistance to agriculture’s sustainability.  However, yesterday, Gov. Arnold Schwarzenegger eliminated state support for this program.  The impact on agriculture could be significant, depending on how and if local governments honor their contracts with land owners.

The Williamson Act Contract

A Williamson Act contract is an agreement between a property owner and a city or county (depending on where the property sits), where the owner agrees not to develop the property for anything other than agricultural purposes, like wineries, barns, etc., in exchange for reduced property tax rates.  It’s purpose is to preserve agricultural land.

A county assesses property under such a contract at a lower tax rate and then sends the bill to the property owner for payment.  The State then reimburses the county for the ‘deficiency’: the amount of tax revenue necessary to make the county whole, as if there were no reduction in tax revenue to them.  In 2008, Monterey County received over $1 million dollars to fund this program from the State.

Options for Farmers, Ranchers and Local Governments

So, what happens if the county lacks the ability to fund its own contracts and refuses to honor them?  This is the real danger. Whether it’s immediate, by breaching current contracts or failing to approve new contracts, or incremental, by serving a “notice of nonrenewal” eliminating contracts over a period of years, taxes will increase.

In the case of the rancher, who’s margin and work on cattle creates a great way of life, but a tough living, alternatives will be explored to sustain the operation.  Pressure will mount to subdivide and sell portions of the property to pay for capital improvements (fencing, troughs, pumps, water lines, trucks, horses, etc., etc.) and operational expenses.

In the case of the farmer, the rise in taxes is dramatic, which could result in a number of problems.  What’s left of the family farm in the Salinas Valley could be further eroded and consolidated into the larger operations.  The price of the produce sold may increase to cover the increase in taxes.  And, again, the option for development and a change in land use is a possibility.

Bad News for All

From the cattle rancher struggling through another dry year, to the public, who cherish the history of agriculture and its place in the environment, this is bad news.

Local governments across California will now be forced to balance the needs of agriculture and the public with the need to maintain fiscal and operational stability within their own entities.  It will be interesting to see what services are deemed ‘essential’ as budgets are further modified.