Farmland preservation has been a priority in Lebanon County for the past three decades.
It is a priority issue for the three current County Commissioners and the Democrat candidate running in the municipal election on Nov. 7, and LebTown receives many comments in support of preserving the county’s rural way of life.
Lebanon County’s farmland preservation program, in cooperation with the state government, is the vehicle by which farmland is conserved here and across the state.
In 2022, Lebanon County celebrated the 30th anniversary of the creation of its farmland preservation program and the achievement of over 20,000 acres preserved.
With one farm to be added this year, there will be 185 agricultural easements preserved and 20,526 acres across Lebanon County participating in the farmland preservation program, according to Craig Zemitis, agricultural preservation specialist for the Lebanon County Conservation District.
At the end of 2022, Lebanon County was ranked 11th in the state for the most farms preserved. Lebanon ranked 8th in total acres saved.
Pennsylvania leads the nation in the number of farms preserved and the number of acres enrolled in the program, according to the Department of Agriculture’s website. To date, the commonwealth has 6,180 farms and 622,238 acres conserved in perpetuity.
Zemitis explained how farmers/landowners enroll their properties in the farmland preservation program, which begins by joining an agricultural security area.
“An ag security area, or an ASA, is a township-level, voluntary designation by a landowner and a program as voted on by a municipality,” said Zemitis. “It’s just a declaration that the land will be used for agricultural practices.”
One of the benefits of being in an ASA is the buffer it provides landowners from nuisance complaints.
“If they are spreading manure and someone complains about the smell, and they are spreading what they’re allowed to legally, it’s, ‘No, this is agricultural land’ and it will be better defended against things like that,” said Zemitis.
There are other requirements for a farm to be considered for the preservation program and designated as an Agricultural Conservation Easement.
A property must contain at least 50 percent of soils that are available for agricultural production and are of capability classes I-IV; contain 50 percent harvested cropland, pasture lands, or grazing lands; and be at least 50 contiguous acres in size unless a minimum of 10 acres is of a unique crop or adjoining an attached perpetual ACE.
Zemitis said no one generally understands the soil designation ranking, adding soil maps must be consulted and tests taken to determine what are the “good” soils, which are ranked as I through IV, and not as desirable soils designated as V through VIII.
“All of the soils are ranked by their agricultural productivity, so 50 percent has to be what is designated as ‘good’ farmland,” said Zemitis. “So I take the soils and I map them and color code them based off of what soil type they are, and you’ll get more points towards that. But at least 50 percent has to be good soil, which is designated by the state, to meet our standard.”
Limestone soil, which is generally found south of Route 422, is rated as good because it tends to be deeper, meaning it holds moisture better than shallower soil, which typically is shale-based. Additionally, land that tends to flood and stay wet receives the worst ratings because those soils are less productive.
“If we have 100 acres of pasture, but is right next to river land, so it is wet and flooded, it might not meet our standards,” noted Zemitis. “From what I know, when you can’t get as deep, the soil doesn’t hold the water and limestone is what’s good for the soil because it’s deeper and keeps the pH.”
Zemitis added that in the nearly five years he’s been on this job, no farm has been denied participation in the preservation program based on its soil composition. The soil type does impact where a farm ranks on the waiting list since the goal is to preserve the most productive lands first.
“The land that is south closer to Lancaster County is the best while land to the north, not so much, but we still have farmland preserved to the north,” said Zemitis.
Where farms rank on the scoring sheet determines when they will be preserved, with Zemitis noting farms are preserved “from the top down and that there’s no picking and choosing which ones get preserved first.”
Scores are based on four different categories with the soil type ranking receiving 40 percent of the overall rating.
“The most points are by soil, so that divides the county a little bit with the southern parts scoring higher than the northern parts,” said Zemitis.
Clustering potential, which is the proximity to other ACEs and neighboring farms enrolled in an ASA, garners 25 percent of the overall score.
“If someone wants to go into farmland preservation and they want to increase their points, they can convince their neighbors to be in an ag security area because that benefits us and increases our outreach,” said Zemitis.
The category titled farmland potential also receives 25 percent of the ranking and takes into consideration total acreage, whether any portion of the farm is being withheld out of the program, and the percentage of total land composition. In other words, what percentage of the property consists of cropland, pastures and forested acreage determines total land composition.
Zemitis said developmental potential is 10 percent of the score and considers proximity to public water, road frontage, and the percent of non-ag land located in proximity to the property.
“That (non-ag) is beneficial to developers and is what they are looking for, so if you have a higher chance to be developed, you are scored a little higher so we can prevent that from happening,” said Zemitis. “If you have good farmland and you are looking at being developed, it will score you high.”
Once a farmer has applied for free to the farmland preservation program, the farm is scored by Zemitis, and the property is put on a waiting list to be considered at the November meeting of the Lebanon County Farmland Preservation board, where it is scored and ranked by them.
Three months later, the county learns how much the state funding match will be when it is announced by the state’s farmland preservation board. (Traditionally, the state match is around $1.30 per acre for every $1 invested by Lebanon County and is determined by what Zemitis says is a complicated formula.)
After local funding is announced by the state, a letter is sent to inform the farmers at the top of the list that their property has been accepted and that they need to get an appraisal to determine their land value.
“An offer letter is sent to them informing them how much we will pay,” said Zemitis, who added the amount in Lebanon County is $2,500 per acre. “All of the farms I’ve done have been (appraised) over $2,500 per acre.”
The pool of funding provided by the state, county and local municipalities and revenue the county’s farmland preservation program receives from rollbacks through the Clean and Green program ultimately pail in comparison to what a developer can pay a landowner per acre for their property.
(Farms in the Clean and Green program receive annual tax breaks as long as the farm remains in agricultural or forested use, according to Ted Conley, assistant chief county assessor at the Lebanon County Tax Assessment office. If sold and developed, the rollback is the difference between the land’s market value and the Clean and Green tax rate, plus 6 percent interest. A rollback can be up to a maximum of seven years, and the money assessed from the 6 percent interest is placed into the county’s farmland preservation program coffers to help fund it. The rest of the rollback tax dollars goes to the county, local municipality and school district.)
“We could increase our per acre cap to $15,000 per acre and we’d still get outbid by a developer. There’s no way we can compete with developers,” said Zemitis. “If they want to develop, they’re going to have it.”
Lebanon County officials changed in the late 2000s the amount paid from $1,500 an acre to $2,500 because program interest was waning, added Zemitis.
“We weren’t getting as much interest in the program, so they increased the cap to generate more interest and now we have a waiting list that stays around 30 and people keep joining every year,” he said. “So, there’s enough interest that we continue to do it for the people who want to preserve their farmland. But if a developer comes in and wants the land, we’re not going to be able to outbid them.”
Landowners are asked to get an appraisal so they can potentially deduct on their federal taxes the difference between what they are paid per acre and the appraised amount.
For example, if an appraisal is at $3,000 an acre and a farmer is paid $2,500 per acre, they should be able to claim the $500 difference per acre on IRS Tax Form 8283 (charitable contributions).
This is the only tax benefit program available to farmers who preserve their land, according to Jay Losiewicz, deputy communications director for the Pennsylvania Department of Agriculture.
The other way to receive tax relief is via Clean and Green but that program is also open to farms that are not preserved but qualify for it.
One difference, however, between conserved and non-conserved farms is that at the state level, preserved farm owners, as it relates to property taxes, must still apply to Clean and Green to receive the lowest overall assessment.
Zemitis emphasized that he is not a tax expert and added that he informs landowners that they should consult their accountant to determine whether their charitable contribution is tax deductible.
“You could potentially get up to $500 per acre, but I can’t guarantee that because I can’t give tax advice, a farmer needs to talk to their accountant,” he said. “But they might be able to get potential tax credit benefits for that (difference). I’ve never had someone not get it who applied for it and I don’t know what may prevent someone from doing that, but there are potential tax credit benefits for preserving.”
Concerning capital gains taxes, landowners do have to claim the amount of money they receive as part of their preservation payment on their federal tax form.
Given the complexity of the tax code and differences in people’s tax records, a local tax accountant, who asked not to be identified, said capital gains should be discussed with an accountant so that landowners receive the advice that’s right for them.
To help ease their capital gains taxes from the money a farmer receives for preserving their property, landowners do have the option to choose different payment methods.
“You can get it as a lump sum payment. We have some people split it between two years for tax purposes or you can get it in long-term installments, five years, 10 years, and you do get some interest on that,” said Zemitis. “Or you can do a like-kind exchange into another property and you can avoid the capital gains tax on that.”
Losiewicz wrote in an email to LebTown that like-kind exchanges occur at the time of an easement, and allow the farmer to use the proceeds from the easement sale to immediately purchase a separate farm property with those funds, thus mitigating some of the taxes associated with the sale.
“In this instance, the farmer does not take ownership of the proceeds from the easement, but those funds are immediately handed over to a third-party qualified intermediary who makes that purchase on behalf of the farmer. Again, this occurs during the easement settlement, so the farmer never takes ownership of the funds,” wrote Losiewicz.
He noted that “PDA helps set up those exchanges, but is not involved in any way, shape or form with the like-kind use of those funds.”
Zemitis pointed out what he said is good news for farmers who have preserved their land: property values of preserved farms versus non-preserved farms generally tend to be equivilent.
“I don’t have specific numbers about this, but in talking to other counties and the state, there seems to be no loss in property value when a preserved farm is sold,” said Zemitis. “The value of a preserved farm does not drop and sells at the value of a ‘normal’ farm. It’s good to hear that they are not losing their value just because they were preserved.”
Zemitis added that’s because selling a property to another farmer has no impact on the land value since it will remain in agricultural production.
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