From its inception in 1980 to July 1988, the county farmland preservation program had kept only 7,770 acres from development -- less thanone-third its goal.
Increased pressure from developers, limited county funds and failed attempts to change rural zoning had brought the program to a virtual standstill. In all of 1988, for example, therewas only one application and one settlement. Preserving even 10,000 acres seemed unrealistic, to say nothing of the 30,000 acres plannershad hoped for a decade earlier.
The county had to either admit defeat or do something radically different.
It chose radical difference. And in so doing, it came up with an idea so ingenious that the County Council is beginning to wonder if it's not too successful.
The centerpiece is an innovative financing scheme that not only pays top dollar to landowners willing to refrain forever from developing their land, but has the added incentive of providing participants millions of dollars in tax-free income.
Since the revamping of the program in October 1988, 3,045 acreshave been added to the program and another 2,412 acres are pending. Not included in that total is the choice 900-acre Central Maryland Farm Research and Education Center in the heart of the county that the University of Maryland said last week it wants to bring into the program.
Also excluded are 253 subdivided acres in the northwestern part of the county near Cabin Run Road and Patuxent River State Park. According to county farmland preservation administrator John W. Musselman, plans to develop the 57-lot Cabin Branch subdivision are "dead in the water" and the owners are looking for buyers.
Among those interested in the property, Musselman said, is a group of about five toseven farmers who might form a confederation to buy the property andbring it into the preservation program. Another prospective buyer would like to turn the property into a golf course, Musselman said.
Developer Donald R. Reuwer, Jr., president of American Properties Inc., a Columbia-based real estate firm, is among those who want the Cabin Branch property preserved.
Reuwer, who with his wife bought lots surrounding their home on Folly Quarter Road and put them together in an 88-acre parcel that was accepted into the preservation program,says inclusion of the Cabin Branch property is "in the long-term interests of Howard County by a long shot. It is a great piece of property."
This is how the program works:
At $6,500 an acre, for example, the contract price for the Cabin Branch acres would be $1.64 million. Rather than pay the full amount up front, the county would pay the owners interest on that amount tax-free for 30 years. It also would make small payments on the capital with a balloon payment at the end.
The tax-free interest alone (in this example, slightly more than 7.5 percent when the balloon payments and capital installments arefigured in) amounts to $125,439 a year, or $3.76 million tax-exempt dollars altogether. Add in the $1.64 million capital payment, and theowner would be paid $5.4 million over the 30-year period.
By leveraging money this way, the county not only becomes competitive with developers bidding for the same properties, but does it for about one-sixth the cost. Tax incentives and falling prices due to the recession make the county's deal even sweeter.
So sweet in fact, that the County Council is beginning to worry about spending money on properties not worthy of preservation.
"Recently questions have been raised by both County Council members and the public about the cost and effectiveness of our agricultural land easement program," Paul R. Farragut, D-4th, wrote Musselman in a letter dated Jan. 17.
"I have a very serious concern that we may run out of money before we can preserve those farms which are most commercially viable. This is especiallytrue given the 'soft nature' of the real estate market at present."
Farragut said he is also concerned about small tracts of less than50 acres coming into the program. "These tracts are typically expensive and adjacent to large pieces of farmland," he told Musselman. "Towhat extent are they threatened, and do they create conflicts if developed?"
Musselman and the farmland preservation advisory board will meet with the council next month to explain the program. Musselmanbelieves the program is not only financially sound but is doing exactly what the council directed it to do and has put the goal of preserving 30,000 acres within the county's grasp.
The small parcels areimportant, too, he said. They are often the "mortar for the bricks" -- essential parcels that tie together larger blocks of preserved farmland. Generally, owners of small parcels are paid less per acre thanowners of large parcels.
As for preserving the "most commerciallyviable land," the farmland preservation advisory board has an elaborate set of criteria by which each parcel seeking to enter the programis scored and weighted.
It begins with a land evaluation site assessment, called LESA for short, and ends with ranking the properties based on the LESA scores. If a property is next to a subdivision it is less valuable than land adjacent to a park or other preserved property.
The soil is tested for the potential yield of crops and the portion of the land that is not suitable for development. Extra pointsare awarded if the land produces food and fiber crops, is actively farmed, has little erosion, is adjacent to a park or watershed, or is of a goodly size.
After the land is ranked by LESA scores, the board weighs the property in terms of its relation to other blocks in the program and judges its merits based on the board's individual and collective knowledge of the property.
The program is financed by county transfer taxes that raise about $3.3 million annually. The moneyis used to pay off the tax-free interest on each parcel and to buy azero coupon from the federal government to cover the purchase price. Using the Cabin Branch example above, the county would spend $148,000 now for a bond that would pay $1.64 million in 30 years.