Will a farmland trust save class 1 land?

OTTAWA — A western Ontario farmer was offered $10 million for his farm near Brantford, an area being gobbled up by developers pushing out the boundaries of Metropolitan Toronto. He declined what others might think a delicious offer and is now one of the first Ontario farmers planning to turn his farmland into a farmland trust.
A farmland what? That’s what farmers asked Melissa Watkins, at the Ontario Land Trust Alliance booth at the Ottawa Valley Farm Show last month. People often think they’re connected to government, or worse, in leagues with a conservation authority, she said.
A farmland trust is a rather simple idea to protect farmland from future development. The landowner places a permanent agreement – an easement — on the property that legally binds the land to agriculture, restricting housing development or any other use. In exchange for that commitment the farmland trust gives the farmer a charitable donation receipt equivalent to the difference in what the land has been appraised at (based on the price of area farmland sold to developers) and what the land would fetch if its value were based on farming only. The beauty of this idea is that the farmer keeps his land.
There’s only one glitch. Come tax time, the Canada Revenue Agency treats your donation as if you sold property and charges capital gains tax. “It’s a strange quirk of the income tax act,” said farmland trust chair Stewart Hilts, who is also chairman of the land resource science department at the University of Guelph, noting that the tax practically wipes out the gain made from the donation. “Until we get that resolved we won’t get many easements.”
Hilts hopes that the federal government will resolve the issue within months, by creating an farm-gift program. As it stands, wetland easements are treated as donations and are called eco-gifts. “It’s unfair that someone can get an easement on a swamp and gets better tax treatment than someone who gets an easement on productive farm field,” Hilts said.
If a farm-gift program is created, here’s how it works.You farm close to the city and you don’t want to move. At the same time, your neighbours are making a fortune selling class 1 land and you are the one preserving the land for future generations. So, you create an easement restricting development and donate the easement to a trust. You will then be rewarded for it, earning possibly 25 cents or more on the dollar for your land and you get to keep the land. For instance, farmland at the south end of urban Ottawa has fetched $15,000 an acre as developers swoop in making repeated offers to area farms. A farmer with an easement owns the property. The trust owns the easement. That would devalue the land to, say, $5,000 an acre. The trust would issue a charitable donation slip of $10,000 for every acre with an easement. By putting 100 acres in a farmland trust, the farmer forgoes $1.5 million (minus capital gains tax) that he may have been offered from a developer and receives a donation receipt for $1 million. The donation receipt works out to a value of about $250,000 to almost $500,000, depending on a farmer’s income.
Doesn’t sound like a good investment to a farmer with no kids who want to farm and who doesn’t give a hoot about preserving farmland. The farmland trust does work well in two cases: financially sound farmers with no kids and a passion for agriculture and farmers who want to keep farming the same land.
“We’re not forcing people to do anything with their land,” said Watkins, acting director of the land trust alliance. “We’re giving them an option. By agreeing to protect land they give up value of the property. But they don’t have to sell it to get the tax receipt.”
Agricultural easements “don’t work very well for the average farmer,” Watkins said, adding that their work is an uphill battle. “We don’t feel we’ll ever be protecting enough farmland through easements and ownership of land,” she said. “Land trusts are just one piece of the puzzle. We’ll never be able to do enough as a charity.”
Governments also need to develop good farmland policies, especially around urban areas, where good farm land is now being lost, she said.
One challenge is that the non-profit farmland trust, the only land trust focusing on farmland in Ontario, is new and, therefore, lacking funds. Incorporated in 2004, it receives funds from three foundations and this year, for the first time, is working with four Ontario farms, all in western Ontario, to establish agricultural easements.
If the trust ever purchased farms, it would be to designate them as agriculture-only or re-sell them to help fund easements, and keep the farmland in farming.
Richmond area dairy farmer Ed Schouten owns land close to Ottawa urban development and strongly favours the idea of a farmland trust.
“There is little Class 1 farmland left and the little we’ve got we’ve screwed up,” he said. “They (developers) know they can get their way with this land. When it comes to good farmland, no one says boo. There’s no movement, no lobby to stop development (of class 1 land). If we don’t oppose this and do something about this, they’ll (developers) keep on doing it. I think the trust is a good idea. It’s a good start. Put conservation rights on the land. But the farmer has to be compensated for it. To get everyone on side you have to compensate people. This is a far better deal than any greenbelt.”
Ontario Federation of Agriculture president Geri Kamenz said a farmland trust could work for some farmers and noted the upcoming annual meeting of the Ottawa federation at 7:30 p.m. on April 8 at St. Philip’s Church hall in Richmond is where farmers can go to discuss “how to make it a better fit.”
The one drawback of farmland trusts, he noted, is that “Like everything else it takes money to make everything work.”