Bringing Urban Agriculture into the City: Implementing 551

On September, 28, 2013, Governor Brown signed AB 551 (Ting)1 to give new powers to cities and counties to promote agriculture in urban areas. This primer seeks to clarify for community activists what the 551 program can do, and what needs to be done to take advantage of its provisions. PROGRAM BACKGROUND Counties collect property tax revenue in a manner authorized by the state. The California Constitution allows the legislature to create programs by which land can be forcibly restricted to recreation, enjoyment of scenic beauty, use or conservation of natural resources, or production of food or fiber.2 When land is so restricted, its tax rate can be determined in light of those limitations.3 Because the land will be prohibited from commercial, residential, or industrial development, it is likely that the land will be worth less, and the owner will have a lower tax rate. By far, the largest program to embrace this scheme has been the Williamson Act. Looking at the history and operation of this law will give us some insight into the potential operation of AB 551 contracts. Williamson Act This law authorizes cities and counties to enter into agricultural land preservation contracts with landowners who agree to restrict the use of their land for a minimum of 10 years in exchange for lower assessed valuations for property tax purposes.

Williamson Contracts in brief:

Minimum Size: 100 acres Contract Period: 10 years Cancellation: Cannot be based on opportunity for greater profit

The resulting agricultural preserve must consist of no less than 100 acres. However, in order to meet this requirement two or more parcels may be combined if they are contiguous or under common ownership. Smaller agricultural preserves may be established if a local board or council determines that the unique characteristic of the agricultural enterprise in the area calls for smaller agricultural units, and if the establishment of the preserve is consistent with long-range planning priorities. A landowner may petition to cancel a Williamson Act contract. To approve a cancellation, a county or city must make specific findings that are supported by substantial
1

Full text of Assembly Bill 551 (Ting) available at http://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201320140AB551 2 Cal. Const. Art. XIII, 8. available here http://www.leginfo.ca.gov/cgibin/waisgate?waisdocid=12874622089+1+0+0&waisaction=retrieve 3 Id.

evidence. The existence of an opportunity for another use of the property is not sufficient reason for cancellation. In addition, the uneconomic character of an existing agricultural use shall not, by itself, be a sufficient reason to cancel a contract. Because they lower property tax rates, Williamson Act contracts cause counties to lose revenue. Initially, the state created a fund to offset these county revenue losses. However, since 2009, statewide budget cuts have reduced that fund to a total payout of $1,000. Without state support, many counties now have standing ordinances to let any existing Williamson contracts expire without renewal. The size restrictions, contract length, and typical zoning requirements4 under the Williamson program make it unsuitable to develop urban agriculture. Recognizing this, Assemblymember Phil Ting introduced Assembly Bill 551 to authorize a new program that promotes coordination between local governments to recognize increased agricultural production in Californias urban areas. URBAN AGRICULTURE INCENTIVE ZONES (UAIZS): A NEW TOOL FOR LOCAL GOVERNMENTS Procedures For adoption: Since it is ultimately the county that loses revenue from decreased property tax assessments, AB 551 requires a county board of supervisors to either approve or, with a city, establish by ordinance the UAIZs that will determine what land is eligible for propertytax-lowering contracts.5 The statute seems to provide a great deal of flexibility for cities and counties to work together to develop a suitable program. A city may choose to write an ordinance first and ask for county approval, or the county and the city could coordinate efforts and author complementary ordinances. Finally, a county could authorize urban agriculture incentive zones generally, and cities within could define the zone for themselves.6 For cancellation: Contracts need to describe the value of the tax benefit to the landowner received during the duration of the contract.7 Cancellation of a contract triggers a fee equal to the value of that

See, e.g., Sacramento County requires that land be zoned agriculturally to be eligible for Williamson Act Contracts. http://www.assessor.saccounty.net/TopicsAtoZ/Pages/WilliamsonLandConservationActFAQs.aspx#Nonrenewal 5 CAL. GOV. CODE 51042 (a)(1)(AB). 6 See Appendices A and B (reflecting this approach). 7 The assessment basis of land under contract will be based on the average per acre value of irrigated cropland in California as reported by the US Department of Agricultures National Agricultural Statistics Service. In 2012, this was $12,000 per acre. CAL. REV. & TAX. CODE 422.7(c).

tax benefit unless the local government contract party determines the cancellation was caused by extenuating circumstances despite the good faith effort by the landowner.8 For breach: In the event of breach of a UAIZ contract, either by establishment of an incompatible use, failure of successors in interest to sign a similar contract, or unapproved division of the land under contract, all the affected property under contract shall be reassessed at full cash value pursuant to Revenue and Taxation Code Section 110.1. Which areas are eligible for contracts? The statute is particularly aimed at the revitalization and repurposing of vacant, unimproved, or blighted parcels of land9 in urban areas.10 To achieve these goals, the statute contains both planning restrictions that limit the ability of counties and cities to establish UAIZs, as well as UAIZs in brief: Size: .1 acre to 3 acres contract restrictions that place requirements on Contract Period: no less than 5 years contracts for parcels in UAIZs. Cancellation: Subject to fee (see Planning Restrictions
Cancellation Procedures)

AB 551 contains planning restrictions that mean that UAIZs may not be established in or covertwo types of areas. First, UAIZs may not cover areas that are currently, or have within the last three years, been held under a Williamson Act contract.11 The California Department of Conservation has maps for each county that detail Williamson Act parcels in 200912 but this would most effectively be determined by individual owners by looking at parcel records. A contracting local agency may include provisions for cancellation if it is found that the parcel violates any of these restrictions. Next, UAIZs may not cover areas within the sphere of influence (SOI) of a city unless the city consents to the establishment of the UAIZ.13 This would act only against counties seeking to establish UAIZs adjacent to existing cities. Prohibitions like this illustrate a need for collaboration between counties and cities as they develop their UAIZs. In Sacramento, only three

8 9

CAL. GOV. CODE 51042 (a)(2)(B). CAL. GOV. CODE 51042 (a)(1)(B). 10 U.S. CENSUS BUREAU , 2010 Census Urban Area Reference Maps, available at http://www.census.gov/geo/mapsdata/maps/2010ua.html. An example map of the Sacramento urban area is attached at XXXXXXXXX 11 CAL. GOV. CODE 51042 (h). Spheres of influence are a legal term that describe areas outside of a city that are part of the citys long-range growth plans. Sacramentos 12 See, e.g., Sacramento County Williamson Act Lands 2009, CAL. DEPT. OF CONSERVATION, available at ftp://ftp.consrv.ca.gov/pub/dlrp/wa/. 13 CAL. GOV. CODE 51042 (g).

areas trigger the SOI restriction: Natomas Joint Vision,14 Camino Norte,15 and Aspen 1.16 While not active SOI efforts, Arden/Arcade, Fruitridge-Florin, and Rosemont are currently study areas that may become part of the SOI in the future. Contractual Requirements Apart from the planning restrictions above, the statute contains restrictions on which parcels may enter into contracts. 17 Contracts are not available in the following circumstances: for periods of less than five years for parcels smaller than 0.1 acres or larger than 3 acres for parcels containing dwellings o however, buildings that support a parcels agricultural purpose are OK18 for parcels not entirely dedicated to some agricultural use

These requirements operate differently than the planning restrictions above. UAIZs may cover parcels that would not be eligible to enter into contract. In this way, the location of a parcel in a UAIZ is a necessary but not sufficient condition for the tax break. Because of this, the only real geographic limitations for jurisdictions adopting an UAIZ are the planning restrictions. Of course, a city or county may choose to develop its UAIZ zones based on considerations like foreclosure rate, the presence of blight, status as a food desert, or soil quality. While worthwhile considerations, this sort of policy-based tailoring seems best implemented as a local requirement for contracting as opposed to the UAIZ boundary setting stage.

14

Map of Natomas Joint Vision, SACRAMENTO GENERAL PLAN 2030, available at http://www.sacgp.org/documents/SSA4NatomasJointVisionStudyArea.pdf 15 City of Sacramento, Community Development, Sphere of Influence, http://portal.cityofsacramento.org/Community-Development/Planning/Long-Range/New%20Growth/Sphere-ofInfluence.aspx 16 Id. 17 CAL. GOV. CODE 51042 (a)(2)(B). 18 CAL. GOV. CODE 51042 (c) specifically allows toolsheds, greenhouses, produce stands, and instructional space.

APPENDIX A: Proposed Sacramento Ordinance: Title 17 PLANNING AND DEVELOPMENT CODE Division III OVERLAY ZONES Chapter 17.348 URBAN AGRICULTURE INCENTIVE ZONE ORDINANCE NO. XXXXX Adopted by the Sacramento City Council Date Adopted XXXX AN ORDINANCE ADDING CHAPTER 17.348 RELATING TO OVERLAY ZONES BE IT ENACTED BY THE COUNCIL OF THE CITY OF SACRAMENTO: SECTION 1 Chapter 17.348 of Title 17 of the Sacramento City Code (the Zoning Code) is repealed and reenacted to read as follows: Chapter 17.348 Urban Agriculture Incentive Zones 17.348.010 Purpose. A. The purpose of this chapter is to provide a tax incentive for owners of properties that are dedicated to developing Urban Agriculture (defined in Chapter XX.XXX of the City Code) so that they may provide space for public entities, nonprofit organizations, business entities, or individuals to grow food for the community, themselves, or for sale. B. The City of Sacramento recognizes that Urban Agriculture is vital to addressing issues of food access, economic resilience, and neighborhood blight in the City and County of Sacramento. C. The City of Sacramento recognizes that increasing opportunity to participate in small-scale, entrepreneurial agriculture can supplement incomes and stimulate our local economy. D. The City of Sacramento recognizes that lawns are the largest irrigated crop in the United States and that our City should allow its residents to use their landscaping to grow food for themselves and their communities. In urban areas in the United States, anywhere from 30 to 75 percent of residential water is used for watering lawns. These resources could be allocated to more productive activities, including growing food, thus increasing access to healthy options for all Sacramento residents. 17. 348.020 General provisions. A. The City of Sacramento does hereby: (1) Establish by ordinance an Urban Agriculture Incentive Zone comprising its boundaries for the purpose of entering into enforceable contracts with landowners, on a voluntary basis, for the use of vacant, unimproved, or blighted lands for small-scale agricultural use. (2) Impose a fee upon contracting landowners for the reasonable costs of implementing and administering contracts entered into pursuant to this Chapter.

(3) Consent to the establishment of Urban Agriculture Incentive Zones by Sacramento County in areas within the Citys sphere of influence. B. A contract entered into pursuant to this Chapter shall: (1) Not be for less than five years. (2) Not be available to a property that is less than 0.10 acres, and not more than three acres. (3) Not be available to a property that is not entirely dedicated toward commercial or noncommercial agricultural use. (4) Not be available to a property that contains any dwellings on the property while under contract. (5) Include a notification that if a landowner cancels a contract, a city, county, or city and county is required to assess a cancellation fee equal to the value of the property tax benefit available to be received during the remainder of the contract period. (6) Not prohibit the use of structures that support agricultural activity, including but not limited to toolsheds, greenhouses, produce stands, and instructional space. (7) Not be available to a property that uses: (a) pesticides except for those pesticides or fertilizers allowed by the United States Department of Agricultures National Organic Program. (b) synthetic or inorganic fertilizers. (8) Not be entered or renewed pursuant to this chapter after January 1, 2019. Any contract entered into pursuant to this chapter on or before January 1, 2019, shall be valid and enforceable for the duration of the contract. (f) Assess property subject to the contract pursuant to Section 422.7 of the Revenue and Taxation Code during the term of the contract.

APPENDIX B Sample Contract for the City of Sacramento URBAN AGRICULTURE INCENTIVE ZONE CONTRACT FOR SACRAMENTO COUNTY THIS CONTRACT made and entered into this _____________ day of _______________[date], by and between the CITY OF SACRAMENTO, a political subdivision of the State of California, hereinafter called "City" and ______________________, hereinafter called "Owner." WHEREAS, Owner possesses certain real property located within the City of Sacramento, State of California, which is presently devoted to the production of food and is described in Exhibit A attached hereto and made a part hereof; and WHEREAS, both parties wish that the property be subject to a contract between Owner and City intended to limit the use of the property to agricultural production and compatible uses under the provisions of the Urban Agriculture Incentive Zones Act of 2013, as amended, at Chapter 6.3 (commencing with Section 51040), Part 1, Division 1, Title 5 of the Government Code; and WHEREAS, the County of Sacramento has authorized the City of Sacramento to establish a Urban Agriculture Incentive Zone (Urban Agriculture Incentive Zone No. ____, Resolution No. ___) in accordance with the requirements of Government Code Section 51042 which contains, within its boundaries, the property of owner; and WHEREAS, the property of owner, is currently in compliance with the applicable zoning laws of the City related to urban agriculture. WHEREAS, the property meets one or all of the criteria specified in Government Code Section 51042 for Urban Agriculture Incentive Zone benefit-eligible property; NOW, THEREFORE, County and Owner agree as follows: RESTRICTION ON USE OF PROPERTY During the term of this contract, and any and all renewals thereof, the property described in Exhibit A shall not be used by Owner, or Owner's successors in interest, for any purpose other than the production of food purposes and uses compatible to or in support of food production. A list of all such compatible uses is set forth in Exhibit B, attached hereto and by this reference incorporated herein. TERM OF CONTRACT This contract shall become effective on the _________ day of _______ [date], and shall remain in full force and effect for an initial term of five years. The initial term of five years shall be measured commencing as of the first day of January next succeeding the date of execution.

Each succeeding first day of January shall be deemed to be the annual renewal date of this contract. This contract shall be automatically renewed on each succeeding January 1 and one additional year shall be added automatically to the initial term unless notice of nonrenewal is given as provided in paragraph 4. NOTICE OF NONRENEWAL (a) If either party desires in any year not to renew this contract, that party shall serve written notice of nonrenewal upon the other party in advance of the annual renewal date of this contract. Unless such written notice of nonrenewal is served by Owner at least 90 days prior to the renewal date, or by County at least 60 days prior to the renewal date, this contract shall be considered renewed as provided in paragraph 3 above. (b) If either party serves written notice of nonrenewal in any year within the time limits of (a), above, this contract shall remain in effect for the balance of the period remaining since the original execution or the last renewal of this contract, as the case may be. NO COMPENSATION Owner shall not receive any payment from the City or County of Sacramento in consideration of the obligations imposed under this contract, it being recognized and agreed that the consideration for the execution of this contract is the benefit(s) that may accrue to Owner as a result of the property at subject to this contract being valued for assessment purposes in accordance with the provisions of Revenue and Tax Code Section 402.1. SUCCESSORS IN INTEREST This contract and the restrictions imposed hereunder shall run with the property described in Exhibit A and shall be binding upon the heirs, executors, administrators, trustees, successors, and assign of Owner. Notwithstanding the foregoing, each new Owner who succeeds to ownership of the aforesaid property shall be obliged to execute a new contract identical to or more restrictive than this contract. This contract shall be transferred from County to any succeeding city or county acquiring jurisdiction over the property described in Exhibit A. On the completion of annexation proceedings by a city, that city shall succeed to all rights, duties and powers of the County under this contract for that portion of the property described in Exhibit A which may be annexed to the city. DIVISION OF LAND The property described in Exhibit A shall not be divided without the written approval of the City first had and obtained. This contract is divisible in the event the property described in Exhibit A is divided. Owner agrees to submit any proposed division to City for its approval and County, if it approves the division, shall, as a condition of its approval of the division, require the execution by Owner of a contract identical to this contract on each parcel created by the division.

Owner agrees to execute such contract. The division of land under contract in an urban agriculture incentive zone will not be approved unless it is found there will be no loss in the production of food as a consequence of the division and that the size of each parcel remaining following the division is found to be economically viable for continued agricultural production. During the term of this contract no additional, separate legal parcels currently making up the property described in Exhibit A, which may be based on previous patent or deed conveyances, subdivisions, or surveys, may be recognized by a Certificate of Compliance under Government Code Section 66499.35. Owner agrees not to apply during the term of the contract for, or otherwise seek recognition of, additional legal parcels within the property based on a Certificate of Compliance. CONDEMNATION When any action in eminent domain for the condemnation of the fee title of any land described in Exhibit A is filed or when such land is acquired in lieu of eminent domain for a public improvement by a public agency or person, or whenever there is any such action or acquisition by the federal government, or any person, instrumentality or agency acting under authority or power of the federal government, excluding those circumstances in which under the provisions of Government Code Section 51296 eminent domain is not permitted, the remainder of the benefit of this contract to the owner of the land actually being condemned or so acquired shall be paid to the landowner as consideration for such action. Money so given shall be used to relocate the displaced urban agriculture operation or otherwise mitigate the impact of its loss. CANCELLATION This contract may only be cancelled under the provisions of Government Code Section 51297 relating to cancellation of a farmland security zone contract. NOTICES All notices required or permitted by this contract shall be given in writing and may be mailed or delivered in person. If mailed, the address of Owner shall be the last known address on the assessment record of County, and City's address shall be In Care of City Council, Courthouse _________________, California _________, and deposit in the mail, postage prepaid, shall be deemed receipt thereof. ENFORCEMENT In the event of breach of this contract, including but not limited to (1) incompatible use, or (2) failure of successors in interest to sign a contract similar to this one, or (3) failure to obtain the approval of the Board of Supervisors for a division of the land under contract, all the affected property under contract shall be reassessed at full cash value pursuant to Revenue and Taxation Code Section 110.1. However, such reassessment for the period encompassed by the breach shall

not terminate the contract. Reassessment shall be in addition to the other remedies available to the County including, but not limited to, an action to enforce the contract by specific enforcement or injunction under Government Code Section 51251. If incompatible uses during the period of breach have diminished the ability of the property to contribute to the production of food on the lien date, the property shall be reassessed at full cash value. The period of breach is the period commencing upon breach as set forth above, and ending upon cure of the breach. If the lien or assessment date falls within the period of the breach, all the property under this contract will be reassessed at full cash value pursuant to Revenue and Taxation Code Section 110. IN WITNESS WHEREOF the parties have caused this contract to be executed Owner on the date affixed next to the signature of each, and by County on the date affixed next to the signature of the chairperson of the Board of Supervisors. Dated:________________ CITY OF ______________________ By: _______________________________ City Council ACKNOWLEDGMENT Dated: ______________ ___________________________________ Owners Dated: ______________ ___________________________________ Owners STATE OF CALIFORNIA City of Sacramento On _________________ (date), before me, ____________________, Notary Public, personally appeared ___________________________, personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subject to the within instrument and acknowledged to me that he/she/they executed the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official seal.

___________________________ Notary Public