Coming in the Future

MARBIDCO will work with commercial lenders to help qualified beginning or young farmers purchase farmland for sustainable agricultural uses. Initially, the program expects to employ a financing tool called an “easement purchase option” to help farmers obtain mortgage financing. Using this tool, MARBIDCO would help a prospective farmer meet the equity requirements of a financial lender by buying the development rights of the land that farmer is purchasing at the time of settlement. Such a transaction would enable that farmer to purchase land that he/she would not otherwise be able to afford.

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Governor O’Malley Signs Key Rural Land Preservation Funding Bill (SB 662)

On May 22, 2008, Governor Martin O’Malley signed an important piece of rural land preservation legislation into law, with the bill’s primary sponsor, Senator Thomas “Mac” Middleton, and a number of leaders from the agricultural community witnessing the event in Annapolis. Senate Bill 662, Agricultural Land Transfer Tax - Rates and Distribution of Revenue, which was passed on the final night of the legislative session, had garnered broad bi-partisan support from legislators across Maryland following a concerted effort by individuals representing several agricultural and young farmers’ organizations, land preservation groups, as well as the Maryland Department of Agriculture.

Beginning July 1, 2008, Senate Bill 662 imposes a 25% surcharge on the existing agricultural land transfer tax with all of the new revenues collected going to support State-side rural land preservation efforts. The ag transfer tax is only paid when farmland is taken out of agricultural use, and is typically paid by the buyer/developer. Child lots of 2 acres or less will be exempt. Senate Bill 662 is expected to generate an additional $2-3 million for State agricultural land preservation programs during FY 2009, and in a robust economy the net effect of SB 662 could generate has much as $6 million annually in new rural land preservation funding.

Amendments adopted to SB 662 have the effect the tying the new revenues generated as a result of the surcharge authorized in SB 662 to funding the Next Generation Farmland Acquisition Program to be offered by MARBIDCO beginning this coming fall. The Next Generation Program is a strategically important program for the long-term viability of agriculture in Maryland, and it was authorized – but not funded – in the landmark Agricultural Stewardship Act of 2006.

Maryland agriculture is nearing a potentially critical juncture. With an aging farmer population and skyrocketing real estate prices due to population increases and development pressure, it appears that much remaining farmland might be in danger of disappearing forever. The Young Farmers Advisory Board and other agricultural industry groups report that a major impediment to the future success of the next generation of farmers is their ability to purchase farmland at affordable prices. A partial solution to this problem is a reasonably well-financed and rapid response-type farmland easement purchase option program to help facilitate the transfer of farmland to a new generation of farmers. This new generation of agriculturalists would, in turn, help support the economies of rural communities, retain the rural working landscape, and sustain a critical mass for the agricultural industry activity in this State. An additional advantage of the Next Generation Program is that it would help permanently preserve considerable agricultural land from future development, thus providing significant open space and water/air quality benefits. As noted above, SB 662 provides important initial funding for the Next Generation Program.

Senate Bill 662 also dedicates $4 million to the MARBIDCO/MALPF Installment Purchase Agreements (IPA) Program with the flexibility for MALPF to be able to use these funds on a “leveraged” basis so that more easement purchases can be made sooner, and at a relatively lower cost. MARBIDCO will act as MALPF’s agent in facilitating the agricultural easement sale transactions through the purchase of U.S Treasury securities. However, there is no requirement that MALPF use these IPA funds in a leveraged fashion. In fact, because the IPA program is relatively new, it is anticipated that during the first couple of years a significant portion of the funds will be used on a “self-funded” basis, in effect acting as a supplement to the existing MARBIDCO/MALPF “self-funded” IPA program.

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