Promoting Urban Agriculture With Tax Incentives

One of the key issues for many urban farmers is paying property taxes. According to the Michigan General Property Tax Act, only nonprofit organizations that own their property are eligible to be exempt from property taxes. This is an obvious problem for many because land acquisition has been one of the largest obstacles for many urban farmers. It also leaves for-profit farms to pay a higher tax rate based on the property’s market value as opposed its agricultural use.

This obstacle is not unique to Detroit, and a growing number of states and cities are addressing it with innovative legislation that gives tax incentives to urban farms. Profiled in this post will be a law enacted by the state of California, as well as laws currently being considered in Washington D.C. and Baltimore.

Earlier this year, California enacted the Urban Agriculture Incentive Zones Act. The state law permits local units of government to create urban agriculture incentive zones. After establishing an urban agriculture incentive zone, the local unit of government may then enter agreements with private landowners within the zone to restrict the use of the land to urban agriculture. There are certain conditions for the landowner. The term of the agreement must be at least 5 years and the entire property must be dedicated to agricultural use. However, in return the landowner’s property is taxed at a rate based on the average per-acre value of irrigated cropland in California as opposed to it being taxed based on its market value. So far, San Francisco is the only city to have created an urban agriculture incentive zone but other California cities, such as Los Angeles, are looking to create urban agriculture incentive zones as well.

Washington D.C. is also considering a similar bill that would encourage urban agriculture through tax incentives. The bill, titled the D.C. Urban Farming and Food Security Act, seeks to change the city’s tax regulations to encourage urban farming on both publicly and privately owned vacant lots.

To encourage urban farming on publicly owned land, the bill calls on the Mayor to identify 25 vacant lots owned by Washington D.C. that could potentially be used for successful urban farming ventures. The bill also requires the Mayor to set up a leasing initiative where applicants will be selected to develop urban farms on the identified vacant lots. In order to be eligible, an applicant must be a resident of Washington D.C. for at least 1 year and have at least 1 year experience in farming. All land leased under this program, which is known as the Urban Farming Land Initiative, would be exempt from property taxes and must be leased for at least 3 years.

The Urban Farming and Food Security Act proposes to incentivize urban farming on more than city-owned land. The Real Property Tax Abatement Initiative would apply to privately owned land, and would reduce real property taxes by 50% for an owner of unimproved real property if they leased that property to an unrelated third party for urban farming purposes. The property owner is required to provide the urban farmer with at least a 3-year lease to be eligible.

Lastly, the Baltimore City Council is currently considering a bill that would provide tax breaks to urban farmers. This bill is being considered in the wake of the Maryland legislature passing a law that enables counties and cities to provide tax credits to urban farmers. The bill, proposed by Councilman Welch and supported by Baltimore Mayor Stephanie Rawlings-Blake, proposes to provide a 90% break on property taxes to farmers who grow and sell at least $5,000 worth of fruits and vegetables in a year. According to the bill, the credits are initially good for 5 years, but may be renewed for up to a total of 10 years.

While the above policies are all attempts to innovatively promote urban agriculture, they are not without their critiques. In Baltimore, a bill similar to the one described above died in committee because many argued that it would set a bad precedent for a city that was already in financial trouble. The Washington D.C. Urban Farming and Food Security Act also has its shortcomings. The Urban Farming Land Initiative, which is meant to set aside 25 city-owned plots for urban farming, could contain stronger language that would mandate the city government to set aside and utilize 25 plots for urban agriculture. The Real Property Tax Abatement Initiative, which applies to privately owned land, only requires the private landowner to lease their land for urban agriculture use for a minimum of 3 years to be eligible for the tax incentive. Typically, a 3-year agreement doesn’t provide enough security to many urban farmers.

Looking to all of the above policies, the bill being considered in Baltimore is the strongest for urban farmers. It is the only bill that doesn’t rely on short-term leases. It is also seemingly the only bill that envisions urban farms not only becoming a permanent land use, but also provides incentives so that individual farms can become fixtures in the community. Despite the debates above, the fact that these cities and states are attempting to create innovative urban agriculture policies is encouraging, and the state of Michigan and the city of Detroit would be wise to follow.

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