More ‘farm’ income needed for lower taxes

Too many property owners getting easy ride with farm status

More agricultural land in the Lower Mainland might be farmed if cities crack down on property owners who abuse the current rules to avoid paying higher property taxes.

That’s the advice to Metro Vancouver from consultant Scott Bowden of Colliers International, who studied options to intensify agricultural and industrial land use on behalf of the regional district. Only half of the agricultural land in Metro is actively farmed.

Bowden said too much land is underused because it’s too easy to qualify for farm tax status, which reduces the property tax owners pay by as much as 99 per cent.

“We have seen evidence of this being abused,” he told a recent Metro Vancouver regional planning committee meeting.

A Chilliwack man saved more than $100,000 by arranging to have a few llamas put on industrial land he owned, Bowden said, while similar cases crop up, where land owners have a few cows or other livestock to achieve the “incredible benefit” of farm rates.

Bowden said one option would be to substantially raise the current threshold for farm status – it only takes $2,500 in annual agricultural revenue for properties that are four hectares or smaller, to qualify the owner to pay much lower property tax.

Planner Diana Hall is the District of Maple Ridge’s staff liaison for the agricultural committee. She said this hasn’t been a frequent issue locally, but added that an inflationary increase would appear to be in order.

“It has been $2,500 for as long as I can remember,” said Hall, who has been with the district 15 years. “It hasn’t gone up, but everything else has.”

In a 2009 report, the province’s Farm Assessment Review Panel recommended raising the threshold to a minimum of $3,500.

Richmond Coun. Harold Steves, who is also a cattle farmer, said the threshold should definitely be raised, adding he’s turned down requests to put a few of his cows on properties, to help the owners dodge paying residential tax rates.

He suspects many owners of giant houses on farmland avoid paying much higher tax bills by leasing out part of their yards to blueberry growers or livestock farmers. Steves said tax relief should be reserved for “bona fide farmers.”

Langley Township Mayor Jack Froese said people with secluded country mansions who have no intention of farming shouldn’t be able to get the farm tax break.

“I believe they should be taxed at residential rates,” he said. “There are a lot of land owners who take advantage of the agricultural taxation.”

But Pitt Meadows Mayor Deb Walters believes the present system is working. The BC Assessment Authority allows farm classification based on three thresholds, not one, she points out.

The first threshold is $2,500 income, if the farm operation is between 0.8 and four hectares (between two and 10 acres). In Pitt Meadows, 182 of the 461 farms are in this category.

There is another threshold formula, based on size, for farms larger than four hectares. There are 272 farms of that category in Pitt.

The third category has a $10,000 income threshold if the total area of the farm operation is less than 0.8 ha.  There are just seven such farms in Pitt Meadows.

Walters said the $10,000 threshold already discourages people from abusing the system.

“Farm operations less than 1.976 acres have a higher threshold of revenue,$10,000, that must be met to be classified farm property, despite the fact their properties are much smaller than most in the ALR and, as such, less likely to be lucrative farming operations,” she said.

She noted there are only seven of the two-acre farms in Pitt Meadows.

“Therefore, the city is comfortable with the tax revenue collected from properties in the ALR and does not feel we’re missing out on tax revenue because of this system.”

Walters does not see raising the thresholds as a way to encourage more agricultural activity.

“Less land would be farmed if the threshold was raised,” she predicts. “Presumably, the higher the threshold of revenue that a farm must generate to be classified as farm status, the more difficult it would be for farmers or hobbyists, to meet the higher thresholds. As a result, this would create a disincentive to farm or would cause the farms that don’t meet the threshold to be less financially lucrative because they are paying higher taxes than otherwise would be the case.”

Bowden also recommended cities apply much higher residential tax rates in the Agricultural Land Reserve to increase the cost to wealthy residents who don’t even attempt to seek farm status. Different residential tax rates can be applied in different geographic areas, he said, and the ALR could be defined as such.

“We could make it so onerous to be located in the ALR that they would be more inclined to lease their property to a farmer in order to achieve the farm class status.”

Just half of the 60,893 hectares of Agricultural Land Reserve land in Metro Vancouver is actively farmed, according to a regional district report. Another 25 per cent isn’t farmed but has potential to be, while another quarter is categorized as unavailable for farming because of incompatible uses like parks, golf courses or housing.

Delta has the highest proportion – 79 per cent – of its 9,400 hectares of ALR land actually farmed. It’s followed by Pitt Meadows at 60 per cent, Richmond at 59 per cent and Surrey at 58 per cent.

Langley Township’s 23,406 hectares of ALR land – the largest amount of any municipality in the region – is only 45 per cent actively farmed. Maple Ridge is worse yet with only 31 per cent of its 3,787 hectares in the ALR actively producing.

Metro planners intend to discuss Bowden’s findings with local cities and provincial officials before recommending any changes.