Blue Ribbon Panel on Smart Growth and Rural Development

22 Feb

 A STUDY BY W. FITZHUGH TURNER, TIDEWATER PROPERTIES, QUEENSTOWN, MD:

W. Fitzhugh Turner is a Maryland Certified General Appraiser. He is also a partner with Tidewater Properties, Queenstown, Maryland, a real estate firm founded in 1954, and has been appraising all types of properties on the Eastern Shore of Maryland as well as in Delaware since 1984. He is clearly qualified to speak on the valuation of farmland. Here is his story…

“In the Fall of 2008 the Queen Anne’s County Commissioners presented a proposed bill that would limit subdivision of the agricultural lands to minor subdivision. The bill would limit the maximum density of existing farmland to, minor subdivision,  5 parcels per farm. The bill does not make any other change to zoning and transfer or use of the development rights of the farm, or other rights do not change.
 
Claims were made that this ordinance would have a severe impact on Farming. Bankers Stated that farmland prices would drop 40% to 60%. Claims were made that farmers would not be able to refinance their farms. Farmers would be forced out of farming due to the drop in farmland prices.
 

No One presented evidence that property values would drop. Farmers said their gut tells them values will drop. Farmers said they have always planned to subdivide their farms when they retire. They Said: Reducing the subdivision of the farm will take away their ability to retire.
 

Studies were presented that indicate little impact on market value for down zoning. A Critic Spoke, telling the Commissioners and the Zoning Board that the studies were wrong.  He provided no studies.  The Critic stated that the studies were based upon bad information. The Critic offered no data to demonstrate that there was an adverse impact on market value with down zoning. The Critic said in his heart, or in his gut, he knows the values will drop as a result of down zoning. But there was no evidence presented.
 

A conservation organization sought me out, as an unbiased real estate appraiser who appraises farmland for developments as well as conservation easements. Queen Anne Conservation Association hired me to determine if the zoning ordinance would lower property values. I concluded that the ordinance will not lower property values.
 

I was asked what impact zoning has on farmland property values. If farmland is down zoned will the property values plummet as stated by the Bankers? Will farmland property values drop 40% to 60%. Should Banks worry about their existing loans? Should Farmers expect to loose their farm?
To study property value changes I chose a constant and a variable. The Variable was Queen Anne’s County. Queen Anne’s County has had development pressures for decades. Queen Anne’s County permits one unit per 8 acres and allows transfer of development rights. Houses and small developments are popping up in every corner of the County. The Queen Anne’s County environment health department cut off perk test applications at 1000 tests each year in both 2004 and 2005 because they did not have enough personnel to study more tests.  Kent County is the Constant. Kent County zoning limits farmland to one unit per 30 acres. They had practically no new development in Kent County over the past ten years. Few new subdivisions. Kent County had applications for only about five major developments during the last ten years with only about 35 lots.
What Did I Compare? :
 

•The Larger Working Farms, the ones that are the back bone of the County.
•Farmland, 100 acres or more
•Included Multiple Tracts of farmland in a transaction.
•Included Tillable, Woodland, Pasture, Non-tidal wetland.
•Excluded Waterfront Farms
•Excluded Annexed Land and Land Next to Towns
•Excluded Family Transfers
•Excluded Sales of Small Lot Subdivisions
•Excluded Easement Restricted Properties
Such as MALPF or Conservation Easements.
To find the data, I  pulled up the Sales Using Maryland Department of Assessment Transactions, cross referenced with MLS Sales Data, cross referenced each Deed to include the total acres in the sale and the sales price, cross referenced multiple settlements to combine parcels to a single contract, checked back the deeds to 1977 – time of the first Conservation Easements and reviewed Plats and Tax Records.
Findings:
 

•An Average of 10 sales per County per year.
•About 80 sales per County.
•Sales from 1997 through 2008
•Kent County and Queen Anne’s County State Forester reports that 25% of each County is woodland.
 

We observed that in spite of the development pressure, Queen Anne’s County and Kent County followed much the same path of property values. Queen Anne’s County sales were not 40% to 60% higher than Kent County. Kent County and Queen Anne’s County followed much the same trend line with property value increases.
CONCLUSION:
 Queen Anne’s County farmland prices did not increase 40% to 60% more than Kent County Prices. The study demonstrates that from 1998 through the present the typical price per acre is very close despite the differences in both Counties.  Farmers will continue to keep their farms, borrow against their farms, and expand their operations in Kent and Queen Anne’s Counties. As a result of this study it is my conclusion that development pressure was not the cause for the property value increases in Queen Anne’s County.
The conclusion was that the driving force behind the rapid rise in farmland prices in Queen Anne’s County was not residential development. If residential development was the driving force then the price per acre in Queen Anne’s County would have risen far higher than the Kent County sales from 2002 through 2006, but they rose at about the same rate.
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One Response to “Blue Ribbon Panel on Smart Growth and Rural Development”

  1. erichschmitt February 23, 2011 at 3:11 pm #

    I am not an appraisal expert but I do know the following. Agricultural land with no development potential has sold at an average of $7,000 per acre in Harford County over the past 5 years. A 100 acre farm can be developed into 10 lots with 2 acre lot sizes worth about $160,000 in todays market. Value is 10 lots @ $160,000 for the lots + 80 ac remainder @ $7k per acre equals $2,160,000. Under the new regs 4 lots @ $160,000 + 92ac remainder @ $7k equals $1,284,000. A 59% loss is what the rural landowner is facing. The bills title says it all – Agricultural Land Preservation Act of 2011.

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