Myths and Misconceptions of Current Use

Current Use Tax Coalition |2010

The Use Value Appraisal Program (UVA), or more commonly called Current Use, was implemented in 1980 by the Legislature and enables farm and forest landowners who practice long-term management to have land appraised for its “use value” rather than at fair market value. Current Use is the single most important tool to preserve Vermont’s working landscape. However, there are many misperceptions about how Current Use actually works.

Today, there are approximately 12,000 property owners enrolled in Current Use: about 8,000 forest landowners and 4,000 agricultural landowners.  Vermont is 5.4 million acres in size; 4.5 million acres are in forest and woodlands and 794,000 acres are agricultural. 2.0 million acres of our working landscape are enrolled in Current Use (about one-half million agricultural acres and 1.5 million forestland acres).  Private landowners own 85 percent of the forested landscape, while local municipalities, the State of Vermont, and the federal government own 14 percent. Industrial landowners hold the remaining 1 percent.

Myth: The Current Use program costs the state of Vermont money.

Fact: The “cost” of Current Use is the reimbursement from the State’s General Fund to local government for enrolled acreage. In FY 2010, the reimbursement was $10.7 million. This is the only expenditure by the State on an annual basis. If the State were to do away with the Current Use Program in its entirety, then an owner of a $100,000 non-residential property would save about $60 in property tax. The tax difference would be slightly higher for a homestead property of the same value; however, if the owner pays based on income there may be no difference.

The return to all Vermonters, however, is very great, as evidenced in the chart below. Current Use helps create billions of dollars in revenue every year. The nominal cost of the program is far outweighed by the financial return to the State.

Myth: The more land in a town that is enrolled, the heavier the tax burden on other local taxpayers.

Fact: Use value taxation is structured so that towns are held harmless for the cost of the program.  The tax burden is spread across all taxpayers (not just property taxpayers but income, sales, etc.) in the state of Vermont, not town by town.  Cost of community services studies have always shown that open land, even in Current Use, pays more in taxes than it requires in services.  Since developed property is actually taxed at its “use value” – that is, development value – and residential property is taxed at its “use value” – that is, residential value – why should towns tax farms and forestlands at Fair Market Value (FMV) instead of “use value?”

Use Value properties do not create costs for towns but, in fact, keep costs down. Property in Current Use, and all undeveloped land, actually subsidizes owners of developed land since undeveloped land requires very few services.

Myth: Current Use was designed to prevent development.

Fact: Current Use is instrumental in alleviating tax pressures that would lead to subdivision and/or development. Furthermore, the Current Use statute [32V.S.A. 3751] had other purposes, as stated in the following objectives:

• encourage and assist in the maintenance of productive agricultural and forest land;
• encourage and assist in conservation and preservation for future productive use and for protection of natural ecological systems;
• prevent the accelerated conversion of these lands to more intensive use by the pressure of property taxation at values incompatible with the productive capacity of the land;
• achieve more equitable taxation for undeveloped lands; to encourage and assist in the preservation and enhancement of Vermont’s scenic natural resources;
• enable the citizens of Vermont to plan its orderly growth in the face of increasing development pressures.

Myth: Landowners agree not to develop their land.

Fact: The purpose of the Use Value Appraisal program is to maintain and conserve Vermont’s productive agricultural and forestland to prevent the conversion of these lands to more intensive use by the pressure of property taxation.  Enrolled landowners agree to primarily manage their lands for agricultural and forest products. If landowners don’t follow their approved management plan they may be ejected from the program.  Land enrolled in the program may be developed if the landowner pays a land use change tax.

Myth: Out of state landowners benefit the most from the program.

Fact: Taxes are applied equally to all enrollees. While some believe that out-of-state landowners can afford to pay more in taxes, there is no means testing for Current Use. If the goal of the program is to maintain, conserve, and preserve agricultural and forestland, it is a goal that cannot be achieved if taxes are levied based on owner characteristics rather than land use. Out-of-state landowners enrolled in the Current Use program must satisfy the same program requirements as all enrollees. Non-residents own only 24 percent of enrolled land and 26 percent of total eligible land (2006). That means that Vermont residents own and manage 76 percent of all enrolled land. The benefits of Current Use accrue to all Vermonters, regardless of who owns the land.

Myth: The Current Use program benefits only those that are enrolled in the Program.

Fact: According to the 2009 Final Report from the Council on the Future of Vermont, when Vermonters talk about the working landscape, they refer both to land use actively in agriculture and forestry and to the way of life associated with these professions.  The Report found that “overwhelmingly, Vermonters are united in support of the state’s working landscape.” So, what does that really mean?

Current Use allows farm and forest landowners to maintain our working landscape for production. Farmers grow food for people and livestock, supporting our ‘buy local” economy. Imagine summer without your local Farmers’ Market and its access to a wide assortment of fresh, locally grown products.

The working landscape provides clean air and water, flood mitigation, timber for forest products or firewood, wildlife habitat, carbon sequestration, many outdoor recreation opportunities, and unspoiled panoramic views that draw tourists. By managing forests, landowners ensure that all these benefits, and more, will be available to all for the long-term. Every tree on our working landscape is owned and cared for by someone.

Do you ever wonder when you drive around Vermont why you see a working landscape with beautiful green mountains and forests and farms instead of subdivisions and industrial smoke stacks?  Have you ever considered why Vermont has one of the best environments to live in? Our farmers and forest landowners deliver these benefits to every Vermonter! Imagine our landscape dotted with condominiums rather than cornfields, malls rather than sugar maples, high-rise buildings rather than hemlocks.

You can thank Current Use landowners and the Vermont State Legislature who, more than thirty years ago, had the vision to create the Use Value Appraisal Program. The program has helped to minimize fragmentation of the forests and farmlands, to prevent sprawl, to preserve Vermont’s pristine environment and working landscape; and to contribute financially to many sectors of Vermont’s economy. The Current Use Program in Vermont is responsible for the some of the best-managed natural resources in New England and perhaps even in the country.

Myth: Current Use is a tax dodge for developers “parking & flipping” land.

Fact: Fears of “land banking” in the Current Use program are without substance and not borne out by the numbers. According to the State’s Department of Taxes, only about 15,000 acres were withdrawn from 2005 to 2008, or about .002 percent. Many of these removals are for lifestyle reasons: sold to children, children going to college, retirement, medical needs, etc. At this rate of withdrawal, it would take 7 years before even one percent is withdrawn from the program, and that would not take into account new enrollees in Current Use.

Landowners pay a land use change tax when they develop their land. This tax acts as a disincentive to temporarily park and flip land in certain circumstances. According to an analysis of the situation by Deb Brighton, “the land use change tax is an effective disincentive for temporary enrollment of land when a landowner intends to develop the entire parcel,” but it “is not an effective disincentive for temporary enrollment of land when a landowner intends to develop a portion of the parcel.” This means the land use change tax is only partially effective in curtailing short term enrollment or parking in the program.

Myth: Landowners who sell or donate their development rights and then enroll in the program are “double dipping.”

Fact: Long-term maintenance, conservation, and preservation of productive land require attention to capital costs, annual carrying costs, and profitability. Deed restrictions, especially conservation easements, reduce the capital costs and make it possible for people to purchase and/or hold land. In combination, Current Use and conservation easements help to foster the goals of ensuring that agriculture and forestland remain in production for the long term. A conservation easement on a parcel just prevents the land from ever being developed. In theory, a deed restriction should lower the assessed value of a property; however very few towns reduce assessed values for conserved lands and in all towns the assessed value is significantly higher than the use value.

In short, removal of development rights restricts subdivision and other development but it usually requires Use Value Appraisal to lower taxes to an affordable level.

Myth: Current Use is a tax dodge for developers “parking & flipping” land.

Fact: According to the State’s Department of Taxes, only about 15,000 acres were withdrawn from 2005 to 2008, or about .002 percent. At this rate of withdrawal, it would take 7 years before even one percent is withdrawn from the program, and that would not take into account new enrollees in Current Use.