Urban Encroachment: An Overview

 

Background

The United States is primarily an urban population living in a rural nation, according to the U.S. Department of Agriculture (USDA) Economic Research Service (ERS). Individuals in many areas of the country are concerned by the local loss of farmland, and as a result, farmland preservation programs have been widely adopted. The motivation for these programs comes from public concern for food security, preservation of a rural lifestyle, environmental protection, and the prevention of urban sprawl. Despite the efforts to preserve farmland, the continued encroachment of new urban areas into agricultural regions creates a tension between the new inhabitants and the agricultural production operations that struggle to survive in the same location. However, not all effects of urbanization negatively affect agriculture. Urbanization may cause land values to drastically increase, raising the value of farm assets and providing potential retirement income to farmers. In addition, marketing opportunities and access to labor may provide economic benefits to agricultural producers. This overview focuses on farmland preservation programs and the potential legal issues that may arise as agricultural lands become urbanized.


Right-to-Farm Laws

Every state has enacted its own right-to-farm laws, which vary widely from one state to another. These statutes seek to protect qualifying farmers and ranchers from nuisance lawsuits filed by people who move into a rural area where normal farming operations exist and who later use nuisance actions to attempt to stop those operations.

A landowner in a nuisance suit argues that a neighboring landowner has substantially and unreasonably interfered with the use and enjoyment of his property. A nuisance may be either private or public. In a private nuisance action, only a small number of property owners are damaged in a discrete manner. In a public nuisance action, the community’s rights as a whole are damaged in a more general manner. Courts often use a cost-benefit analysis in order to determine whether the alleged interference with property rights is unreasonable. The outcome of these types of cases is often uncertain, and if plaintiffs prevail, farmers may be forced to pay damages or even cease operations.

Many of the right-to-farm laws codify the “coming to the nuisance doctrine.” This doctrine is a historical common law defense to a nuisance action that in modern times is often merely a factor in the overall nuisance cost-benefit analysis rather than a defense.

Under the typical right-to-farm statute, if a farming operation has been in existence for more than one year prior to the land use change that allegedly creates the nuisance situation, the farmer will be protected from the nuisance claim. However, the farmer’s operations must comply with all regulations, permitting, and licensing requirements, and the operation could not have been a nuisance from the beginning. Often farmers are required to use best management practices or at least generally accepted management practices for similar operations in order to maintain the protections of the statute.

Another version of the right-to-farm law creates agricultural districts. Agriculture operations located within these districts are protected from nuisance suits and local regulations that limit normal agricultural practices. The farming operations protected under these types of statutes are still required to comply with all regulations, permitting, and licensing requirements. Some districts require landowner participation through voluntary enrollment for specified lengths of time. In addition to nuisance suit protection, some districts may include tax incentives for landowners.

Some right-to-farm laws protect agricultural operations from local zoning restrictions. The exempted agricultural uses are usually broadly defined under this type of statute, and case law interpreting agricultural uses that qualify varies widely from one jurisdiction to another.


Zoning

Some states use zoning as a means of protecting farmland. Preservation of farmland through zoning is similar in nature to the use of Urban Growth Boundaries (discussed below) and the creation of agricultural districts. The zoning regulations dictate minimum parcel size, limit permissible uses, and deter sale for other uses. Permissible uses are generally associated with the overall agricultural purpose and include farm labor housing, processing facilities, and marketing facilities. The zoning may create exclusive agricultural areas, or it may create mixed areas that remain substantially rural in character but include noncommercial farms and large-lot residential areas.

In some instances zoning may be detrimental to agricultural operations. Zoning regulations that prohibit certain agricultural activities in an agricultural area may force producers to move their operations. Unless carefully structured, these types of regulations may result in a regulatory taking under the Fifth Amendment or a violation of due process under the Fourteenth Amendment to the United States Constitution. However, if this type of zoning does survive legal challenge, it will have the effect of forcing the urbanization of agricultural lands.


Agricultural Easements

Agricultural conservation easements are used by governments and nonprofit organizations to preserve farmland. Development restrictions are recorded on deeds and run with the land either permanently or for an agreed length of time. Landowners voluntarily restrict their land in order to receive benefits either in terms of direct cash payments or tax incentives. A few states have adopted the Uniform Conservation Easement Act or parts of the Uniform Act  to facilitate conservation efforts. Several types of programs exist to assist the preservation of farmland through the creation of agriculture conservation easements.

Purchase of development rights programs (PDR), also called purchase of agricultural conservation easements programs (PACE), function to restrict development of agricultural lands by paying landowners for giving up the right to develop their lands. These purchase programs are operated by both governments and nonprofit groups. Landowners are compensated for the value of the rights they give up. Government agencies often purchase the easement directly, and nonprofit organizations take advantage of federal and state tax provisions giving landowners tax benefits when they donate the easements to nonprofit organizations.

Transfer of development rights programs (TDR) operate by creating a market for the development rights. Areas are designated as growth areas or conservation areas. Growth areas may be developed at higher rates than allowed by zoning laws if developers acquire additional development rights. These rights can be purchased from agricultural landowners in conservation areas. The sale of the rights takes place in private negotiations between the parties.

The federal government has enacted specific legislation to aid in the procurement of agricultural conservation easements. The Federal Agricultural Improvement and Reform Act of 1996 established the Farmland Protection Program (FPP). FPP was an agricultural easement purchasing program administered by the USDA National Resources Conservation Service (NRCS). The Farm Security and Rural Investment Act of 2002, Pub. L. No. 107-171, § 2503, 116 Stat. 134, 267-269 (to be codified at 7 U.S.C. §§ 3838h-3838i), repealed that program and replaced it with a new program. However, the new program retained the same title, the Farmland Protection Program, as the repealed program, although the new program obviously differed substantively from the program it repealed. To avoid the confusion this created, to distinguish it from the repealed program, and to better illustrate the new program’s overall purpose, the implementing regulations renamed the new program the Farm and Ranch Lands Protection Program (FRPP). The FRPP was administered by the NRCS with funds from the Commodity Credit Corporation.

The FRPP provided matching funds to state and local governments and nonprofit organizations with existing farmland preservation programs for the purchase of conservation easements to limit the nonagricultural use of prime, unique, or locally important soils. NRCS partners with the local entity to purchase the easement, but NRCS funds cannot exceed 50% of the fair market value of the easement. The other half of the purchase price of the easement must come from the local entity with at least 25% in cash and no more than 25% being a charitable donation by the landowner. If applications for the program exceed the allotted funding, the NRCS will rank applications based on the Land Evaluation and Site Assessment System and other criteria listed in the regulations to maximize the effects of the program. After the easement is executed, the landowner must adopt a conservation plan acceptable to the NRCS to preserve environmental resources on the land subject to the easement. By 2005, more than 306,000 acres in 42 states had, or were expected to receive, easements constracts (according to NRCS FY 2005 budget request document). Additionally , a 2013 study found that the FRPP was successful in promoting agricultural viability and on-farm conservation while helping farmers gain access to land. On face, 84% of farmers who sold easements surveyed in that study reported that they used the proceeds to reinvest in their farms  through equipment upgrades, land purchases, construction, improved conservation practices, etc. The 2014 Farm Bill consolidated the FRPP, along with the Wetlands Reserve Program and the Grassland Reserve Program, into the Agricultural Conservation Easement Program (ACEP). The three former programs were repealed, but all existing easements remain valid.

In addition to this program, the federal government is subject to the Farmland Protection Policy Act (FPPA), 7 U.S.C. §§ 4201-4209. This statute requires federal agencies to consider the impact of federally funded programs that convert farmland to nonagricultural uses and to consider other actions that would decrease the adverse effects of such conversion. Other minor federal programs that involve farmland preservation include a program that provides guarantees and interest rate reduction to state trust funds that purchase conservation easements in an effort to assist them in borrowing money. Also, certain government borrowers that convey conservation easements to the federal government may receive debt principal reductions for the value of the easement.


Special Tax Treatment

Every state has enacted laws that provide agricultural land with differential tax status. Some statutes require local tax authorities to assess agricultural land based on values for its present use rather than values for highest and best use. This benefit is greatest for agricultural land near cities that is under development pressure. The development pressure could increase taxes to such a degree that agriculture uses for land would not be economically feasible.

Other statutes provide agricultural producers with lower assessments if they agree not to develop their land for a specified period of time, thereby providing a tax incentive to preserve farmland. Some states provide income tax benefits to producers or agricultural landowners in the form of deductions or credits to add economic incentive for the agricultural use of land.


Urban Growth Boundaries

Urban Growth Boundaries (UGBs) are planning boundaries used to focus urban expansion and growth inward. UGBs set the limits for a city’s projected growth. The urban development cannot extend past the UGB and as a result, more compact and efficient development occurs in already urban neighborhoods within the boundary. UGBs help reduce the cost of public services and preserve natural resources including, agricultural areas.