Study: Ranchers likely to sell out without tax help
Updated: Thursday, November 29, 2012 11:30 AM
More than a third of ranchers would sell some or all land
By TIM HEARDEN
DAVIS, Calif. -- The loss of a key property tax break could force many California rangeland owners to sell off part or all of their land, a university study asserts.
State budget cuts have drastically reduced funding for the Williamson Act, which provides tax relief for landowners who agree to keep their land in agriculture for an extended period.
If Williamson Act contracts go away, ranch owners plan to sell 20 percent of their total acres, according to a survey conducted by University of California-Davis researchers.
More than one-third of ranchers predicted they would sell some or all of their rangeland without the tax break, said William Wetzel, a UC-Davis doctoral candidate who worked on the study.
"What was surprising was how low profit ranching can be in California, and what a difference a program like the Williamson Act can make to keeping ranches afloat," Wetzel said. "That was the most surprising thing."
If ranches start selling out, "they aren't going to go evenly from across the spectrum," he said. "You'll see lower income ranges go first. Californians will have to ask themselves if we want those ranchers to be out of business and only have the very large, profitable ones left."
The findings by Wetzel and other graduate students appear in the October-December issue of California Agriculture, UC's peer-reviewed research journal.
Through the 1965 Williamson Act, the state has paid counties to compensate for much of the property tax revenue lost when they enter into contracts with landowners to keep their properties in agriculture in exchange for lower tax assessments.
The state had been spending nearly $38 million a year to protect about 16 million acres, but it eliminated most of that funding starting in 2009.
Rangeland accounts for more than 10 million acres under Williamson contracts, the UC notes. Of the 700 ranchers surveyed, 72 percent considered the tax relief to be "extremely important" to their operations and 23 percent said they were likely to end their entire ranching enterprise if they lost the tax break.
Of the ranchers who said they would sell their land, 76 percent predicted buyers would use the land for nonagricultural purposes. Whether land is likely to be developed depends on its location.
California's market for land appears to be stabilizing, with only five of the 20 largest counties showing declines in assessed valuations this fiscal year, according to a Fitch Ratings report. However, while property in coastal counties lost only 2 percent in value from 2009 to 2012, assessed values in California's inland counties fell by 10 percent.
The UC researchers' findings were no surprise to Margo Parks, the California Cattlemen's Association's associate director of government affairs.
"It goes to prove if your sole job is ranching and you don't have an outside occupation, you will be in trouble," Parks said. "Current finances often force people to get other jobs. It's too bad people who are working as ranchers will be less able to do it if their contract is not renewed."
Ranchers were chosen for the survey from among the CCA's list of members, Wetzel said.
California Agriculture report: http://californiaagriculture.ucanr.edu