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The relation of taxation to services as a technique to prevent the premature conversion of farm land Hartley, James Ernest 1963

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THE RELATION OF TAXATION TO SERVICES AS A TECHNIQUE TO PREVENT THE PREMATURE CONVERSION OF FARM LAND by JAMES ERNEST HARTLEY B.S.A. The U n i v e r s i t y o f Saskatchewan, 1 9 5 8  A THESIS SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTER OF SCIENCE i n the Department of COMMUNITY AND REGIONAL PLANNING  We accept t h i s t h e s i s as conforming r e q u i r e d standard  t o the  THE UNIVERSITY OF BRITISH COLUMBIA April,  I963  In presenting  t h i s t h e s i s i n p a r t i a l f u l f i l m e n t of  the requirements f o r an advanced degree at the U n i v e r s i t y of B r i t i s h Columbia, I agree that the L i b r a r y s h a l l make i t f r e e l y a v a i l a b l e f o r r e f e r e n c e and"study. m i s s i o n f o r extensive  I f u r t h e r agree that per-  copying o f t h i s t h e s i s f o r s c h o l a r l y  purposes may be granted by the Head o f my Department or by his representatives.  I t i s understood that copying, or p u b l i -  c a t i o n o f t h i s t h e s i s f o r f i n a n c i a l g a i n s h a l l not be allowed without my w r i t t e n p e r m i s s i o n .  Department o f Community and Regional P l a n n i n g The U n i v e r s i t y of B r i t i s h Columbia,. Vancouver 8, Canada. Date  May 6, 1963  ABSTRACT The  purpose of t h i s t h e s i s i s two f o l d :  f i r s t , to  focus a t t e n t i o n on the problems o f urban expansion and the t r e n d towards suburban l i v i n g and secondly, t o i n v e s t i g a t e a technique which c o u l d be used by s e m i - r u r a l m u n i c i p a l i t i e s t o c o n t r o l one of the problems of s u b u r b a n i z a t i o n , premature c o n v e r s i o n  t h a t of  o f farm land t o non-farm uses.  Many  techniques a r e p r e s e n t l y used t o c o n t r o l land use and urban development i n m u n i c i p a l i t i e s i n t r a n s i t i o n from a r u r a l t o an urban c h a r a c t e r , but g e n e r a l l y , these techniques have f a i l e d t o p r o t e c t farm l a n d from premature c o n v e r s i o n farm uses.  t o non-  The technique examined i n t h i s t h e s i s i s t h a t o f  f i n a n c i a l c o n t r o l as e x e r c i s e d through p r o p e r t y  taxation.  A f t e r s u b s t a n t i a t i n g the i n c r e a s i n g demand f o r l a n d f o r urban uses, a b r i e f examination of the f o r c e s which r e g u l a t e the supply  and demand o f land i s presented t o a i d  the understanding of the p r i n c i p l e of h i g h e s t and b e s t use as a p p l i e d t o competing land uses. f o r the premature c o n v e r s i o n  T h i s i l l u s t r a t e s the cause  o f farm land t o non-farm uses.  An examination i s made o f the c o n v e r s i o n  of farm land t o non-  farm uses w i t h emphasis on premature c o n v e r s i o n economic and s o c i a l c o s t s which a r i s e from t h i s  ii  and the conversion.  In view o f the i n c r e a s i n g r a t e o f c o n v e r s i o n  o f farm  land t o non-farm uses and the c o s t s which can be a t t r i b u t e d t o premature c o n v e r s i o n  o f farm l a n d , i t becomes e v i d e n t  that  a technique which w i l l p r o t e c t farm land from premature conversion By  should  be implemented.  studying  the ways and means c u r r e n t l y a v a i l a b l e  f o r the c o n t r o l o f l a n d use and l a n d development by a p u b l i c agency, i t i s found that the r e g u l a t i o n s do not p r o t e c t farm land from premature c o n v e r s i o n  t o non-farm uses.  Since  f i n a n c i a l c o n t r o l of land use e x e r c i s e d through t a x a t i o n i s not used t o any a p p r e c i a b l e  degree by m u n i c i p a l  the r e l a t i o n s h i p of l a n d use and p r o p e r t y  governments,  tax i s studied.  In  t h i s e v a l u a t i o n , p a r t i c u l a r a t t e n t i o n i s p l a c e d on the e f f e c t of p r o p e r t y  taxes on farm l a n d .  that high property use.  T h i s leads t o the c o n c l u s i o n  taxes can f o r c e land i n t o a more i n t e n s i v e  As a r e s u l t o f t h i s c o n c l u s i o n , i t i s proposed t h a t a  r e d u c t i o n i n farm p r o p e r t y premature c o n v e r s i o n  taxes would p r o t e c t farm l a n d from  t o non-farm uses.  Rather than use an a r b i t r a r y tax r a t e t o lower farm t a x e s , the t a x r a t e i s r e l a t e d t o the c o s t of s e r v i c e s provided The  f o r farm p r o p e r t y .  Corporation  Using 1 9 6 1 d a t a c o l l e c t e d from  o f The Township o f Richmond, a  m u n i c i p a l i t y adjacent  t o the C i t y of Vancouver i n B r i t i s h  Columbia, i t i s shown by a p p o r t i o n i n g and  'rural-urban'  the m u n i c i p a l  expenditures t o farm and non-farm p r o p e r t y  r a t e r e l a t e d t o the c o s t o f s e r v i c e s p r o v i d e d ill  revenues  that a tax f o r farm land  would  reduce the farm t a x e s .  The r e d u c t i o n i n taxes i s then  r e l a t e d t o the farm l a n d income, which i s measured by farm land r e n t a l v a l u e s ,  t o determine the e f f e c t i t would have i n  p r o t e c t i n g farm l a n d from premature  conversion  t o non-farm  uses. An a n a l y s i s of the farm l a n d income shows t h a t the net r e t u r n t o farm land i s comprised o f t a n g i b l e and i n t a n g i b l e elements.  The t a n g i b l e or monetary r e t u r n t o the  farm land i s low when compared w i t h the r e t u r n a v a i l a b l e from other  low r i s k investments.  intangible returns  Thus, i t appears t h a t the  such as the value as a homesite, the  p o s s i b i l i t y of a c a p i t a l g a i n and the p r e s t i g e of l a n d ownership a r e g r e a t e r  than the economic  returns.  From t h i s i t  i s concluded t h a t a r e d u c t i o n i n farm taxes a r i s i n g  from  r e l a t i n g the tax r a t e t o the c o s t o f s e r v i c e s p r o v i d e d f o r farm p r o p e r t y  may, depending upon the t a x a t i o n system,  encourage  farm land owners t o keep t h e i r land i n farm use, but would n o t p r o t e c t farm l a n d from premature  APPROVED  iv  conversion  t o non-farm  uses.  ACKNOWLEDGEMENTS The persons who  author wishes to express generously  provided valuable assistance during  preparation of t h i s t h e s i s . extended t o Dr. H.P.  g r a t i t u d e to the manythe  In p a r t i c u l a r , thanks are  Oberlander,  Head, Community and  Regional  P l a n n i n g Department, U n i v e r s i t y of B r i t i s h Columbia, f o r h i s encouragement and  guidance i n i n i t i a t i n g the study, and  Dr. K.J. C r o s s , of the same Department, f o r h i s day guidance and  constructive c r i t i c i s m .  Miss M. Dwyer and  to  to day  Thanks are a l s o due  to  s t a f f of the F i n e A r t s s e c t i o n , U n i v e r s i t y  L i b r a r y , f o r t h e i r p a t i e n c e , and a s s i s t a n c e i n l o c a t i n g  the  bibliographic material. Great  indebtedness  C o r p o r a t i o n of The e s p e c i a l l y t o Mr.  i s due  to the O f f i c i a l s of  The  Township of Richmond, B r i t i s h Columbia, Trigg, Municipal Assessor, f o r providing  access t o the m u n i c i p a l r e c o r d s and  f o r devoting  valuable  time to an e x p l a n a t i o n of the m u n i c i p a l assessment  and  t a x a t i o n system. A p p r e c i a t i o n and  s i n c e r e thanks are extended t o my  wife  f o r her u n f a i l i n g encouragement and endless hours of t y p i n g which made the completion  of t h i s t h e s i s p o s s i b l e .  g r a t i t u d e i s extended t o The  C e n t r a l Mortgage and Housing  C o r p o r a t i o n f o r the p l a n n i n g f e l l o w s h i p granted a s s i s t e d the completion  Finally,  of the requirements v  t h i s year which  of t h i s  course.  TABLE OF CONTENTS Page ABSTRACT  i i V  ACKNOWLEDGEMENTS LIST OF TABLES  viii  LIST OF ILLUSTRATIONS  ix  INTRODUCTION  -  1  Chapter I.  The Demand f o r Urban Land  9  The Economics o f Land Use  12  Urban Expansion and A g r i c u l t u r a l Land  II.  9  PREMATURE CONVERSION OF FARM LAND  . . .  17  The Premature C o n v e r s i o n of Farm Land to Non-Farm Uses . Costs o f Premature C o n v e r s i o n  18 22  Summary  3°  LAND USE CONTROL AND THE TAXATION OF FARM LAND  37  Land Use C o n t r o l s  37  T a x a t i o n of Farm Land  51  Summary and Restatement o f Hypothesis  vi  . . .  58  Chapter III.  IV.  V.  Page FARM PROPERTY TAXATION:  COSTS AND BENEFITS. .  63  Functions of M u n i c i p a l Governments  67  Assessment and Taxation L e g i s l a t i o n i n B r i t i s h Columbia  71  Apportionment of M u n i c i p a l Revenue and Expenditure  75  E v a l u a t i o n of the Revenue and Expenditure Distribution  83  THE EFFECT ON FARM LAND RENTALS OF A TAX RATE RELATED TO SERVICES PROVIDED TO FARM LAND .  87  C a l c u l a t i o n of a Tax Rate Related to the Services Provided  88  S e l e c t i o n of a Random Sample for D e t a i l e d Analysis  89  Rental Values as a Measure of Farm Land Returns . . .  91  The E f f e c t of the Proposed Tax Rate on Farm Land Returns  94  TAXATION AS A TECHNIQUE TO PROTECT FARM LAND FROM PREMATURE CONVERSION TO NON-FARM USES .  103  Summary  103  Assumptions and L i m i t a t i o n s of the Study . . Conclusions  Ill 113  BIBLIOGRAPHY  121  vii  LIST OF TABLES Table  Page  1.  Forecast of Urban Growth i n Canada  2.  General Revenue for B r i t i s h Columbia Municipalities, 1961 Apportionment of M u n i c i p a l Tax Revenues, Richmond, 1 9 6 1  79  Apportionment of M u n i c i p a l Expenditures, Richmond, 1 9 6 1  82  Summary of M u n i c i p a l Revenue and Expenditure Apportioned to Farm and Non-farm P r o p e r t y , Richmond, I 9 6 I  82  Proposed Tax Rate Related to Services f o r Farm and Non-Farm P r o p e r t y , Richmond, 1 9 6 1 . . .  89  3. 4. 5.  6.  11 69  Provided  7.  S i z e and D i s t r i b u t i o n of Farm Land P a r c e l s , Richmond, 1 9 6 1  91  8.  Median Annual Rent Value According to Type of Farm Use for Ladner Clay Loam S o i l s , Richmond . . . . . .  92  Median Annual Rent Value According to Farm S i z e for Ladner Clay Loam S o i l s , Richmond . . . .  93  10.  Median Net Return Per Acre Using 1 9 6 1 and Proposed Tax Rates, Richmond  97  11.  Levied Tax and Net Return Per Acre Using 1 9 6 1 and Proposed Tax Rates, Richmond . . . . . .  98  12.  Percent Net Return on Farm Land Investment, Richmond, 1 9 6 1  99  13.  Median Rent and Net Return Per A c r e , and Percent Return on Farm Land Investment, Richmond, 1 9 6 1  9.  viii  116  LIST OF  ILLUSTRATIONS  Figure  Page  1.  Generalized P r o f i l e  of Land Uses  2.  Richmond, B r i t i s h Columbia, I n the M e t r o p o l i t a n Complex  3. 4.  16  .  64  Types of S o i l and U r b a n i z e d A r e a , Richmond, B r i t i s h Columbia . .  65  Richmond, B r i t i s h Columbia, Revenue and Expenditure For The Year Ending December 31? 70  1961  5.  1 9 6 l Median Farm Land Values f o r a l l S o i l s , Richmond, B r i t i s h Columbia  95  Photograph 1.  Farm Land I s o l a t e d by Premature S u b d i v i s i o n s  2.  T h i s was  3.  S t r e e t s and S e r v i c e s - but no Houses  35  4.  Houses - but no I n h a b i t a n t s  35  5.  Farm Land Converted P r i o r t o the Demand f o r R e s i d e n t i a l Land  36  'Good  1  Farm Land  ix  .  34 34  INTRODUCTION A b r i e f review of the l i t e r a t u r e concerned w i t h p o p u l a t i o n growth and urban expansion i n d i c a t e s t h a t the world p o p u l a t i o n can be expected to expand a t an e v e r rate.  With t h i s i n c r e a s i n g p o p u l a t i o n growth and  subsequent life,  increasing the  i n c r e a s e i n the m a t e r i a l requirements of modern  the a r e a l needs of almost every type of l a n d use are  bound t o i n c r e a s e .  The problem of meeting  these a d d i t i o n a l  l a n d requirements would be g r e a t l y s i m p l i f i e d  i f each use  c o u l d expand without impinging upon lands needed f o r other purposes.  U n f o r t u n a t e l y , the f i x e d nature of the world's  l a n d - r e s o u r c e base makes t h i s an i m p o s s i b i l i t y . each new  Accordingly,  upward surge i n the demand f o r l a n d may  be expected t o  c o n t r i b u t e f u r t h e r t o the c o m p e t i t i o n and p o s s i b l e between v a r i o u s l a n d u s e s .  This competition w i l l  conflicts encourage  more e f f i c i e n t l a n d use p r a c t i c e s ; and i t w i l l a l s o l e a d t o s i g n i f i c a n t changes i n l a n d use and to the s u b j u g a t i o n and nonf u l f i l l m e n t of many l a n d  requirements.  V a r i o u s c l a s s i f i c a t i o n schemes can be used t o d e s c r i b e the p r i n c i p a l types of l a n d use found throughout the w o r l d . However, schemes f o r c l e a r - c u t c l a s s i f i c a t i o n s of l a n d use are o f t e n c o m p l i c a t e d by the presence of o v e r l a p p i n g and use p a t t e r n s .  multiple-  Most lands are used s i m u l t a n e o u s l y f o r more than 1  2  one purpose; f o r example, some lands a r e used f o r forestrypurposes but a t the same time have v a l u e f o r g r a z i n g , r e c r e a t i o n and watershed uses.  S i m i l a r l y , the l a n d o c c u p i e d  by a h o t e l may be used p r i m a r i l y f o r r e s i d e n t i a l purposes b u t a t the same time i t may p r o v i d e commercial o r r e c r e a t i o n a l facilities. The c l e a r - c u t d e l i n e a t i o n o f the v a r i o u s l a n d use areas i s a l s o reduced by t h e complementary nature o f most l a n d use p a t t e r n s .  Many areas enjoy n a t u r a l and man-made  advantages t h a t f a v o r t h e i r use f o r p a r t i c u l a r purposes. However, man's needs f o r v a r i o u s types o f l a n d uses o f t e n causes combinations o f uses t o develop i n c l o s e p r o x i m i t y t o each o t h e r ; even i n those areas where comparative f a v o r s one type of use above a l l o t h e r s .  advantage  Farmers i n  s p e c i a l i z e d crop p r o d u c t i o n areas o f t e n use s u b s t a n t i a l acreages f o r other c r o p s , p a s t u r e s , woodlots, and f o r farmsteads and farm r o a d s .  S i m i l a r l y , most c i t i e s have l a r g e  areas t h a t a r e used f o r gardens, r e c r e a t i o n a l , t r a n s p o r t a t i o n , and s e r v i c e purposes as w e l l as f o r r e s i d e n t i a l ,  commercial,  and i n d u s t r i a l purposes. F o r the purposes of t h i s t h e s i s , l a n d uses have been c l a s s i f i e d i n t o two broad c a t e g o r i e s , •agricultural  1  'urban* l a n d use and  l a n d use. The term 'urban' l a n d use r e f e r s t o  the s p a t i a l p r o v i s i o n s f o r c i t y f u n c t i o n s ; the r e s i d e n t i a l communities  or l i v i n g a r e a s , the i n d u s t r i a l , commercial and  r e t a i l b u s i n e s s d i s t r i c t s o r major work a r e a s , and the  3 i n s t i t u t i o n a l and l e i s u r e a r e a s .  ' A g r i c u l t u r a l ' land use  r e f e r s t o the s p a t i a l p r o v i s i o n s f o r r u r a l f u n c t i o n s j the c r o p land a r e a s , areas.  the pasture and g r a z i n g a r e a s ,  Cropland and pasture o r g r a z i n g  and the f o r e s t l a n d  l a n d i s r e f e r r e d t o as  farm l a n d and i n c l u d e s a l l of the c u l t i v a t e d areas used f o r the p r o d u c t i o n  o f food, f e e d , f i b e r s , and other crops as w e l l  as land used f o r pasture which i s c o n s i d e r e d  plowable and which  might e a s i l y be s h i f t e d i n t o use f o r the p r o d u c t i o n f e e d , f i b r e s , and other  o f food,  crops.  Urban l a n d uses are seldom s t a t i c , but change as the urban organism changes.  Land which i s devoted t o r e s i d e n t i a l  use may e a s i l y become used f o r i n d u s t r i a l , commercial, or even r e c r e a t i o n a l purposes.  These changes occur f r e q u e n t l y i n the  urban complex, and g e n e r a l l y r e q u i r e l i t t l e  or no adjustment i n  the c o n f i g u r a t i o n o f the l a n d , but the timing o f a change from from one urban use t o another, o r the type o f use which i s changed may c o n f l i c t w i t h the i n t e r e s t s o f i n d i v i d u a l s or society. Land uses i n the a g r i c u l t u r a l context  may a l s o change  f r e q u e n t l y ; f o r example, pasture land may be converted t o cropland.  However, as long as the l a n d use remains such t h a t i t  can be c l a s s i f i e d as a g r i c u l t u r a l , these changes are somewhat s i m i l a r i n a c t i o n t o the urban l a n d use changes i n t h a t they are i n t e r c h a n g e a b l e .  The change i n l a n d use which i s important  i s the change from a g r i c u l t u r a l use t o urban use.  To f a c i l i t a t e  such a change, p h y s i c a l a l t e r a t i o n s t o the l a n d are u s u a l l y  4  r e q u i r e d , such as t h e c r e a t i o n o f r o a d s , the i n s t a l l a t i o n o f sewer or water l i n e s , or one o f many other adjustments. Whatever the a l t e r a t i o n may be, i t u s u a l l y renders the l a n d both p h y s i c a l l y and e c o n o m i c a l l y u n s u i t a b l e f o r a g r i c u l t u r a l purposes.  Thus, once a g r i c u l t u r a l l a n d i s converted t o urban  uses and i s covered with s t r e e t s and houses  or f a c t o r i e s , i t i s  not l i k e l y t o be r e c o n v e r t e d t o i t s p r e v i o u s u s e . Many arguments have been p r e s e n t e d f o r p r e s e r v i n g a g r i c u l t u r a l l a n d , e s p e c i a l l y i n areas where s p e c i a l t y crops .are grown, such as i n the Niagara P e n i n s u l a i n O n t a r i o and the o r c h a r d growing areas of C a l i f o r n i a .  Other w r i t e r s have p o i n t e d  out the v a s t t r a c t s of a g r i c u l t u r a l l a n d i n North America and have emphasized  t h a t there should be no concern over the l o s s  of a s m a l l percentage of a g r i c u l t u r a l l a n d .  The purpose o f  t h i s t h e s i s i s n o t t o i n v e s t i g a t e the d e s i r a b i l i t y of t h e c o n v e r s i o n o f farm land t o non-farm  uses, but t o q u e s t i o n the  t i m i n g of t h i s c o n v e r s i o n and t o examine a technique which may be used t o p r o t e c t farm l a n d from premature  c o n v e r s i o n t o non-  farm uses. When l a n d uses a r e ranked a c c o r d i n g t o i n t e n s i t y o f use, farm use i s o f low i n t e n s i t y compared w i t h r e s i d e n t i a l , commercial, o r i n d u s t r i a l uses.  G e n e r a l l y , as the demand f o r  l a n d f o r a h i g h i n t e n s i t y use i n c r e a s e s t h e r e i s a tendency f o r t h i s use t o d i s p l a c e a lower i n t e n s i t y use.  Thus, as the demand  f o r r e s i d e n t i a l and other urban l a n d i n c r e a s e s , farm l a n d which i s s u i t a b l e f o r these uses i s c o n v e r t e d t o non-farm  uses.  This  5  conversion  from farm use t o non-farm uses may occur p r e m a t u r e l y .  An example o f t h i s premature c o n v e r s i o n  i s the s u b d i v i s i o n o f  'good' farm land f o r r e s i d e n t i a l development w h i l e a r e a s o f non-farm land remain v a c a n t , or the removal o f l a n d from farm use because i t i s i s o l a t e d by r e s i d e n t i a l developments. premature c o n v e r s i o n various  The  o f farm l a n d t o non-farm uses r e s u l t s i n  economic and s o c i a l c o s t s .  These c o s t s become the  r e s p o n s i b i l i t y o f both the i n d i v i d u a l and s o c i e t y , and a r e i n the form o f more c o s t l y s e r v i c e s , l o s s o f farm income, h i g h e r a g r i c u l t u r a l p r i c e s , and the l a c k o f a m e n i t i e s i n the r e s i d e n t i a l areas developed i n the suburban m u n i c i p a l i t i e s . The premature c o n v e r s i o n  of farm l a n d t o non-farm uses  has r e s u l t e d p a r t i a l l y because o f inadequate c o n t r o l over land development.  Zoning and s u b d i v i s i o n r e g u l a t i o n s are commonly  used t o c o n t r o l a l l phases o f l a n d use and land  development.  These r e g u l a t i o n s were f i r s t employed i n an attempt t o c o n t r o l the l a n d use i n urban c e n t r e s .  However, when suburban  m u n i c i p a l i t i e s r e a l i z e d t h a t the form of development  taking  p l a c e i n t h e i r j u r i s d i c t i o n s was c o s t l y and c r e a t i n g a d d i t i o n a l problems, zoning and s u b d i v i s i o n r e g u l a t i o n s were r e s o r t e d t o as a means o f c o n t r o l l i n g the new development.  Municipalities  have a l s o employed other types o f development c o n t r o l such as f i n a n c i a l c o n t r o l , l a n d purchasing and the l o c a t i o n o f p u b l i c u t i l i t i e s , but t o a l e s s e r degree. D e s p i t e these c o n t r o l s , farm l a n d i s c o n t i n u o u s l y prematurely converted t o non-farm uses.  being  Since i t i s g e n e r a l l y  6  accepted t h a t p r o p e r t y taxes can p l a y a major r o l e i n encouraging  l a n d t o be converted t o a more i n t e n s i v e u s e , h i g h  farm p r o p e r t y taxes c o u l d be r e s p o n s i b l e f o r causing u n d e s i r a b l e type o f c o n v e r s i o n .  this  P r e v i o u s s t u d i e s conducted i n  suburban m u n i c i p a l i t i e s i n Canada have shown t h a t farm p r o p e r t y taxes exceed the v a l u e o f m u n i c i p a l s e r v i c e s p r o v i d e d f o r farm property.  T h e r e f o r e , assuming t h a t farm p r o p e r t y taxes  should  be r e l a t e d t o the c o s t of s e r v i c e s p r o v i d e d f o r such p r o p e r t y , it  i s proposed: THAT A TAX RATE RELATED TO THE COST OF SERVICES  PROVIDED FOR FARM PROPERTY WOULD REDUCE FARM TAXES AND THEREBY PROTECT FARM LAND FROM PREMATURE CONVERSION TO NON-FARM USES. To t e s t t h i s h y p o t h e s i s , the r e s u l t s o f a case  study  u s i n g 1 9 6 1 s t a t i s t i c s c o l l e c t e d from the C o r p o r a t i o n o f the Township o f Richmond w i l l be examined. m u n i c i p a l i t y adjacent  Richmond, a suburban  to the C i t y o f Vancouver, B r i t i s h  Columbia, was s e l e c t e d because i t r e p r e s e n t s a t y p i c a l m u n i c i p a l i t y i n t r a n s i t i o n from a r u r a l t o an urban c h a r a c t e r and  i s h i g h l y s u b j e c t t o the premature c o n v e r s i o n o f farm l a n d  to non-farm The  uses. expansion  o f the urban p o p u l a t i o n i n the  m e t r o p o l i t a n areas and the i n c r e a s i n g demand f o r urban l a n d i s i n d i c a t e d i n Chapter I .  The economics of l a n d use a r e examined  i n an attempt t o e x p l a i n the reason farm l a n d i s converted t o non-farm uses.  Emphasis i s p l a c e d on the premature  conversion  o f farm l a n d t o non-farm uses and the v a r i o u s c o s t s r e s u l t i n g  7  from t h i s premature c o n v e r s i o n are o u t l i n e d . I n Chapter I I , the main l a n d use c o n t r o l techniques are examined to determine t h e i r e f f e c t i v e n e s s i n p r e v e n t i n g the premature c o n v e r s i o n of farm land t o non-farm uses. f i n a n c i a l c o n t r o l as e x e r c i s e d through  t a x a t i o n has not been  used i n t h i s context to any a p p r e c i a b l e degree, an of the r e l a t i o n s h i p between taxes and presented  examination  land resources i s  to e s t a b l i s h whether taxes f o r c e land to be  to a more i n t e n s i v e use.  Since  converted  T h i s leads t o the h y p o t h e s i s f o r  which i t i s assumed that farm p r o p e r t y taxes should be to the s e r v i c e s p r o v i d e d f o r such  related  property.  I t i s e s t a b l i s h e d i n Chapter I I I t h a t m u n i c i p a l governments must perform  c e r t a i n f u n c t i o n s and t h a t a major  source of revenue f o r these f u n c t i o n s i s d e r i v e d from p r o p e r t y taxation.  The assessment and t a x a t i o n l e g i s l a t i o n i n the  P r o v i n c e of B r i t i s h Columbia i s reviewed understanding  to provide a c l e a r  of the t a x a t i o n system employed i n Richmond.  The m u n i c i p a l revenue from p r o p e r t y t a x a t i o n f o r the ending December 3 1 ,  year  I96I, i s apportioned to farm and non-farm  p r o p e r t y and an e q u i v a l e n t amount of expenditure  i s also  a p p o r t i o n e d to the r e s p e c t i v e p r o p e r t i e s to a s c e r t a i n whether the revenue obtained from farm p r o p e r t y exceeds the expenditures which can be a p p o r t i o n e d t o the farm  property.  To complete the case study, a d e t a i l e d a n a l y s i s i s presented  i n Chapter IV.  F i r s t , a tax r a t e r e l a t e d to the  s e r v i c e s p r o v i d e d f o r farm p r o p e r t y i s c a l c u l a t e d .  T h i s tax r a t e  8  i s then used t o determine the amount by which the p r o p e r t y on i n d i v i d u a l farm p a r c e l s i s reduced.  tax  Farm l a n d r e n t a l v a l u e s  are then used as a measure o f the income from farm land and an attempt i s made to determine the e f f e c t the use o f a t a x r a t e r e l a t e d to services provided farm  would have on the income from  land. The r e s u l t s of the study are summarized i n Chapter V  and a r e c o r r e l a t e d t o determine i f a tax r a t e r e l a t e d t o the c o s t of s e r v i c e s p r o v i d e d land from premature  f o r farm p r o p e r t y  conversion  t o non-farm  would p r o t e c t uses.  farm  CHAPTER I PREMATURE CONVERSION OF FARMLAND The The  Demand f o r Urban Land  combined a c t i o n o f two f o r c e s appears t o be  c o n t r i b u t i n g t o the exodus from the c e n t r a l c i t y t o i t s p e r i p h e r a l areass  one, the h i g h r a t e o f urban p o p u l a t i o n  i n c r e a s e and the second, the s e a r c h f o r l e s s congested business  and d w e l l i n g s i t e s .  The p o p u l a r i t y o f the.suburbs  f o r r e s i d e n t i a l uses has been a r e s u l t o f an attempt t o elude the c o n g e s t i o n  and h i g h land c o s t s o f the c e n t r a l c i t y and a  response t o the demand f o r e x t r a space f o r a d d i t i o n a l urban population.  The advent o f the automobile has made a  p o p u l a t i o n movement t o the suburbs both p r a c t i c a l and p o s s i b l e . Coupled with t h i s i n c r e a s e d m o b i l i t y o f the p o p u l a t i o n i s a trend towards s i n g l e - f l o o r homes and a d e s i r e f o r l a r g e l o t s , more outdoor l i v i n g space, and sometimes country  living.  T h i s has ended the p o p u l a r i t y o f the narrow twenty-five t o f o r t y f o o t l o t s found i n the centre o f many c i t i e s . average f a m i l y seeking has a wider f r o n t a g e  The  a new homesite now looks f o r a l o t t h a t  and a g r e a t e r t o t a l area than the l o t s  c r e a t e d two decades ago.  T h i s t r e n d may be i l l u s t r a t e d by an  examination o f the l a n d requirements f o r a s p e c i f i c i n c r e a s e i n  9  1G  population?  a century ago a p o p u l a t i o n i n c r e a s e of 1000  r e q u i r e d t e n a c r e s ; t h i r t y years ago the requirements  people  were  t h i r t y a c r e s ; today an area of one to two hundred a c r e s i s needed.^  I n t h i s same time i n t e r v a l the f r o n t a g e of the average  b u i l d i n g l o t has  s t e a d i l y i n c r e a s e d from about t h i r t y f e e t i n  the early, p a r t of the t w e n t i e t h century t o s i x t y f e e t or even l a r g e r today.  As a r e s u l t of both i n c r e a s i n g u r b a n i z a t i o n and  the t r e n d towards l a r g e r l o t s and b u i l d i n g s i t e s , the growing demand f o r r e s i d e n t i a l l a n d w i l l undoubtedly r e q u i r e a l a r g e r a d d i t i o n to the a r e a now  used f o r t h i s purpose.  , The u r b a n i z a t i o n movement a l s o c a l l s f o r more l a n d a r e a f o r commercial and  i n d u s t r i a l uses, f o r s t r e e t s and  a r e a s , f o r parks and playgrounds, many other expanding or new  parking  f o r s e r v i c e a r e a s , and f o r the  urban uses.  P a r t of these l a n d  needs w i l l be met  w i t h i n the c i t i e s ; but as the land needs  i n c r e a s e , the new  urban lands w i l l of n e c e s s i t y be l o c a t e d i n  the p e r i p h e r a l a r e a s . The t r e n d towards i n c r e a s e d u r b a n i z a t i o n i n Canada has been e s t a b l i s h e d by the Royal Commission on Canada's Economic P r o s p e c t s , the Gordon Commission. u t i l i z e d , those compiled  2  Two  s e t s of f i g u r e s were  by the Dominion Bureau of S t a t i s t i c s  and those from the Bank of Nova S c o t i a , which were based the census d a t a .  The major d i f f e r e n c e was  on  i n the a l l o c a t i o n of  areas to m e t r o p o l i t a n r e g i o n s , f o r example, the 1951  census  l i s t e d f i f t e e n a r e a s , a l l but two  of which had p o p u l a t i o n s of  more than 100,000 ( S t . John's was  excluded).  The Bank of Nova  11  S c o t i a study excluded  Newfoundland and i n c l u d e d f o u r t e e n  m e t r o p o l i t a n areas p l u s twenty other major urban a r e a s , each having  a p o p u l a t i o n over 4 0 , 0 0 0 .  t h i r t y e i g h t percent  The d a t a shows t h a t i n 1 9 2 1 ,  of Canada's p o p u l a t i o n l i v e d i n t h i r t y -  f i v e m e t r o p o l i t a n areas; by 1941 the f i g u r e had grown t o f o r t y f o u r percent; and by 1 9 5 1 the t o t a l was f o r t y - s e v e n The Commission a n t i c i p a t e d t h a t by  percent.^  I98O the t o t a l p o p u l a t i o n of  Canada, e x c l u s i v e o f the Yukon and Northwest T e r r i t o r i e s , would reach 2 6 , 6 5 0 , 0 0 0 , an i n c r e a s e o f 1 2 , 6 6 6 , 0 0 0 over 1 9 5 1 . TABLE 1 FORECAST OF URBAN GROWTH IN CANADA  1951  1956  1970  1978  1980  8,623  14,269  16,292  18,506  21,010  (000)  2,534  2,866  2,993  3,134  3,294  (000)  2,827  2,385  2,355  2,350  2,346  13,984  19,520  21,640  23,990  26,650  Urban p o p u l a t i o n (000)  R u r a l non-farm p o p u l a t i o n R u r a l farm p o p u l a t i o n  Total population ( e x c l u d i n g Yukon and Northwest T e r r i t o r i e s ) (000)  Urban p o p u l a t i o n as % o f total Source:  62$  73$  75%  To  Housing and S o c i a l C a p i t a l . January, 1 9 5 7 , P« 3 3  The t r e n d towards an urban p o p u l a t i o n i s n o t c h a r a c t e r i s t i c of Canada alone b u t a l s o o f other c o u n t r i e s .  The  U n i t e d S t a t e s , f o r example, has s w i f t l y become an urban n a t i o n .  12  As l a t e as the F i r s t World War, was  approximately  the p o p u l a t i o n of t h a t  one-half urban and  two-thirds urban.  I t i s estimated  country  one-half r u r a l , now  i t is  t h a t by the year 2000,  e i g h t y percent or more of the t o t a l p o p u l a t i o n of the U n i t e d S t a t e s w i l l l i v e i n urban communities.^ T h i s expansion  of the urban c e n t r e s has a t t r a c t e d much  a t t e n t i o n from p r o f e s s i o n a l s , j o u r n a l i s t s and e s p e c i a l l y i n the U n i t e d S t a t e s .  The  the p u b l i c ,  overwhelming m a j o r i t y of  the comments have been very c r i t i c a l .  One  s c h o o l of thought  takes the view t h a t , s i n c e the p u b l i c e i t h e r approves or a t l e a s t t o l e r a t e s what has happened, the r e s u l t i s e i t h e r good or at l e a s t acceptable.  A second s c h o o l of thought suggests  the k i n d o f suburban development t h a t has been  experienced  d u r i n g the past two decades i s h i g h l y u n d e s i r a b l e but beyond c o n t r o l . concern  that  largely  A good d e a l of the d i s c u s s i o n i l l u s t r a t e s  over what has happened or i s happening, but there have  been very few  s p e c i f i c suggestions  a v o i d or l e s s e n the t r o u b l e s men i n e v i t a b l e i n another  few  as t o what might be done t o  f o r e s e e as probable  or  decades.  The Economics of Land  Use  I t i s a t t h i s p o i n t t h a t a b r i e f examination  of the  f o r c e s which r e g u l a t e the supply and demand of l a n d i s appropriate.  T h i s w i l l a i d the understanding  of the r e a l - e s t a t e market and  of the  inter-play  the a p p l i c a t i o n of the h i g h e s t  b e s t use p r i n c i p l e t o competing l a n d  uses.  and  13  Some land economists view each p a r c e l of l a n d occupying a unique p h y s i c a l r e l a t i o n s h i p w i t h every p a r c e l of l a n d .  other  I f i n each community there e x i s t s a v a r i e t y of  land uses, each p a r c e l of l a n d i s a focus  of a complex but  s i n g u l a r set of space r e l a t i o n s h i p s w i t h the s o c i a l economic a c t i v i t i e s that are centered The  as  market a t t a c h e s  on a l l other  and parcels.  to each s e t of space r e l a t i o n s h i p s a  s p e c i a l e v a l u a t i o n which l a r g e l y determines the amount of money that w i l l be b i d f o r a p a r t i c u l a r s i t e . ^ s i t e s w i l l be more h i g h l y valued,  Thus, c e r t a i n  f o r example r e s i d e n t i a l  s i t e s because of c e r t a i n space r e l a t i o n s h i p s such as convenience t o shops, t r a n s p o r t a t i o n , schools  and  To the economist, land w i l l be pressed existence  of a v a l u e , and  the use  the land  of the market  the d e c i s i o n as t o what a l t e r n a t i v e  w i l l y i e l d the h i g h e s t r e t u r n . continuous c o m p e t i t i o n  i n t o use by  of a p a r t i c u l a r p l o t of  w i l l be f i n a l l y determined i n the o p e r a t i o n f o r c e s by the p r i c e p a i d and  so f o r t h .  This action r e s u l t s i n  between the v a r i o u s  uses f o r c e r t a i n  p a r c e l s of l a n d , as most land areas are s u i t e d f o r a v a r i e t y of uses.  As a g e n e r a l  resource  r u l e , land owners tend to use  f o r those purposes which promise them the  their  highest  returns.  In t h i s r e s p e c t , they tend to a l l o c a t e t h e i r  resources  i n accordance w i t h t h i s concept of h i g h e s t  Land resources  land  land  and  best  use.  are a t t h e i r h i g h e s t and b e s t use when  they are used i n such a manner as t o provide to the owners or to s o c i e t y .  an optimum r e t u r n  Depending upon the c r i t e r i a  used,  14  t h i s r e t u r n may be measured i n s t r i c t l y monetary terms, i n i n t a n g i b l e and s o c i a l v a l u e s , or i n some combination o f these values.  Land i s o r d i n a r i l y c o n s i d e r e d a t i t s h i g h e s t and b e s t  use when i t i s used f o r t h a t purpose or t h a t combination of purposes f o r which i t has the h i g h e s t comparative  advantage or  l e a s t comparative disadvantage r e l a t i v e t o other uses.  This  concept n e c e s s a r i l y c a l l s f o r c o n s i d e r a t i o n o f both the usec a p a c i t y ? o f the l a n d and the r e l a t i v e demand f o r the v a r i o u s uses to which i t might be p u t . suited for high-priority  Large areas a r e sometimes  uses such as i n d u s t r i a l o r r e s i d e n t i a l  s i t e s j but the l i m i t e d need f o r these s i t e s o f t e n causes many t r a c t s t o f i n d t h e i r h i g h e s t and b e s t use i n lower p r i o r i t y uses. The h i g h e s t and b e s t use f o r any p a r t i c u l a r  site i s  s u b j e c t t o change; i t can s h i f t w i t h changes i n the q u a l i t y o f the l a n d r e s o u r c e , w i t h changes i n technology, and w i t h changes i n the demand p i c t u r e .  Under most c i r c u m s t a n c e s , a change i n  the h i g h e s t and b e s t use f o r a p a r t i c u l a r  s i t e can be expected  to take p l a c e i n response t o the b i d d i n g and c o u n t e r - b i d d i n g t h a t goes on between v a r i o u s l a n d owners. Land r e s o u r c e s can u s u a l l y earn a h i g h e r r e t u r n when used f o r commercial  or i n d u s t r i a l purposes than when used f o r  any other type of u s e . As a r e s u l t , these uses a r e o f t e n a b l e to take precedence  over other uses f o r almost any s i t e .  R e s i d e n t i a l uses o r d i n a r i l y have next p r i o r i t y , f o l l o w e d by other types o f uses i n c l u d i n g a g r i c u l t u r a l  uses.  15  T h i s o r d e r i n g o f l a n d uses o f t e n suggests  a definite  p r o f i l e such as t h a t shown i n F i g u r e 1, page 16, i n which t h e h i g h e s t v a l u e d lands a t the centre of the c i t i e s are used f o r commercial purposes while the areas w i t h s u c c e s s i v e l y lower v a l u e s a r e used f o r i n d u s t r i a l , r e s i d e n t i a l , farm and f o r e s t r y purposes r e s p e c t i v e l y . P r o f i l e s of t h i s type n a t u r a l l y r e p r e s e n t a g e n e r a l i z e d average;  and they a r e never as f i x e d or s t a t i c as they may f i r s t  appear.  Each use c l a s s c o n t a i n s wide g r a d a t i o n s and there i s  always a tendency f o r the v a r i o u s use c l a s s e s t o o v e r l a p . A l s o , many exceptions can be found;  some i n d u s t r i a l and  commercial uses a r e d e l i b e r a t e l y l o c a t e d on low-cost  sites;  and some r e s i d e n t i a l uses, such as apartment b l o c k s , o c c a s i o n a l l y d i s p l a c e commercial and i n d u s t r i a l uses on h i g h cost  sites. Wide v a r i a t i o n s e x i s t i n the p r i o r i t i e s a s s o c i a t e d w i t h  special-use areas.  Mining  s i t e s o f t e n have a top p r i o r i t y ,  p a r t i c u l a r l y when the p r o s p e c t s are good f o r t h e i r use.  profitable  R e c r e a t i o n lands vary from l o w - p r i o r i t y w i l d e r n e s s and  r e s i d e n t i a l areas t o urban park areas which may be r e c l a i m e d or redeveloped  a t great expense.  Lands used f o r t r a n s p o r t a t i o n  purposes may be low i n value i n some i n s t a n c e s , but i n v o l v e c o n s i d e r a b l e c o s t as i n the case of s t r e e t - w i d e n i n g p r o j e c t s , new p a r k i n g l o t developments, or new m e t r o p o l i t a n a i r p o r t facilities.  GENERALIZED  Source^  PROFILE  OF  LAND  Raleigh Barlowe, Land Resource Economics{ Englewood Cliffs, Prentice Hall, Inc., 1958) p. 14.  USES  17  Though the h i g h e s t and best use of a g i v e n u n i t of l a n d r e s o u r c e s a t any one  time can u s u a l l y be computed i n monetary  terms, d i f f e r e n c e s of o p i n i o n f r e q u e n t l y a r i s e when a value i s g i v e n to w e l f a r e c o n s i d e r a t i o n s as non-monetary s a t i s f a c t i o n s , , T h i s shows t h a t the concept  of h i g h e s t and best use i s a t most  a r e l a t i v e concept, however, i t p r o v i d e s a worthy o b j e c t i v e i n land use  planning. Urban Expansion  and A g r i c u l t u r a l Land  As p r e v i o u s l y i l l u s t r a t e d , i t i s the economic f o r c e of human demands as expressed by what people are w i l l i n g t o pay for  goods or s e r v i c e s t h a t i s the key to the establishment  land values. determined  Land i s l i k e any  of  other commodity whose use i s  by i t s value i n the market p l a c e .  The  l o c a t i o n of  the l a n d i s the main f a c t o r c o n t r i b u t i n g to t h i s v a l u e .  Each  t r a c t of l a n d has a v a r i a b l e value f o r each k i n d of farming w e l l as f o r r e s i d e n t i a l , commercial, i n d u s t r i a l and  other  as  uses.  In the case of a g r i c u l t u r e , land p r o d u c t i v i t y i s a r e l a t i v e t h i n g and does not depend upon l o c a t i o n as much as on other f a c t o r s such as c l i m a t e and s o i l  fertility.  T r a c t s of  farm  l a n d which a r e w e l l l o c a t e d f o r other uses command a h i g h e r p r i c e because they are worth more to the buyers than  the  c a p i t a l i z e d value of the p o t e n t i a l farm products and  related  other v a l u e s are t o a g r i c u l t u r e . farm l a n d was  However, i f the supply of  d e f i n i t e l y l i m i t e d r e l a t i v e t o the demand f o r i t s  p r o d u c t s , t h i s l a n d would probably be b i d up to a l e v e l a t which  18  i t would not  s h i f t to other uses.  In other words, the farm  l a n d would y i e l d a h i g h e r r e t u r n and other uses.  thereby compete w i t h  An example of farm uses competing f o r l a n d w e l l  l o c a t e d f o r other uses i s i n areas such as the o a s i s communities of the Sahara Desert, where the supply extremely l i m i t e d  and  of a r a b l e l a n d i s  the r e s i d e n t i a l q u a r t e r s are  l o c a t e d on the edge of the d e s e r t .  often  This enables a l l of  a r a b l e land t o be used f o r food p r o d u c t i o n purposes. situation  i s not s i g n i f i c a n t  farm land a d j a c e n t be converted  i n North America and  the  This  until i t i s ,  to expanding urban c e n t r e s w i l l continue  to  to urban uses. The  Premature C o n v e r s i o n of Farm Land to Non-Farm Uses  Numerous arguments have been presented  for preserving  farm l a n d which i s l o c a t e d near our urban complexes. s u b s t a n t i a t e these arguments the students  of t h i s s c h o o l  thought have p o i n t e d out the need f o r food producing open spaces near our c i t i e s .  To  Other students  of  land  and  and authors have  shown t h a t when c o n s i d e r i n g land development c o s t s by using c o s t - b e n e f i t a n a l y s i s , i t may t o convert  be more economical f o r s o c i e t y  farm land near the urban c e n t r e s t o urban uses  r e l y upon other a g r i c u l t u r a l areas f o r food s u p p l i e s .  and  I f the  l a t t e r argument i s accepted, that i s , t h a t there should be absolute  p r e s e r v a t i o n of farm l a n d adjacent  from farm use t o non-farm  use.  no  to expanding urban  c e n t r e s , c o n s i d e r a t i o n must s t i l l be g i v e n t o the t i m i n g of conversion  a  the  19  Farm land i s f r e q u e n t l y taken out of p r o d u c t i o n before  the c o n v e r s i o n  i s a c t u a l l y n e c e s s a r y , and  development tends to take p l a c e on not a c t i v e l y used f o r farming l a n d developers and  tend  suburban  'good' farm l a n d while  purposes stands i d l e .  land  Since  to f o l l o w the l i n e s of l e a s t r e s i s t a n c e  a l s o p r e f e r areas f o r development which are  a c c e s s i b l e and  long  are p r o v i d e d  easily  w i t h s e r v i c e f a c i l i t i e s , farm l a n d  i s f r e q u e n t l y s u b j e c t to premature c o n v e r s i o n  t o non-farm uses.  I t i s very d i f f i c u l t t o d i s c u s s the premature conversion  of farm l a n d t o non-farm uses as a  separate  occurrence s i n c e vacant l a n d i s a l s o s u b j e c t to premature conversion.  F a c t o r s such as l a n d s p e c u l a t i o n , which r e s u l t i n  the premature c o n v e r s i o n premature c o n v e r s i o n  of farm l a n d a l s o l e a d to the  of vacant l a n d .  Thus, the f o l l o w i n g  d i s c u s s i o n , although emphasizing premature c o n v e r s i o n  of farm  l a n d , w i l l of n e c e s s i t y r e f e r to premature c o n v e r s i o n  of a l l  land. The  premature c o n v e r s i o n  of farm land to non-farm uses  i s a r e s u l t of v a r i o u s economic and i n d i f f e r e n t ways. premature c o n v e r s i o n  of farm l a n d i s the c r e a t i o n of urban  non-farm l a n d not being are o f t e n concentrated  there are s u b s t a n t i a l areas of  e f f i c i e n t l y used.  Suburban developments  i n the b e t t e r farm areas around  They do so because the  well drained  occurs  The most e a s i l y i l l u s t r a t e d example of  developments on farm l a n d while  cities.  s o c i a l a c t i o n s and  l o c a t i o n and  suburbanite  our  f r e q u e n t l y wants a  an area with good s o i l s f o r gardens,  20  lawns and flowerbeds; but most of a l l , the suburbanite wants a c c e s s i b i l i t y t o the c e n t r a l c i t y as w e l l as t o s c h o o l s , water supply, e l e c t r i c a l power and other f a c i l i t i e s .  The  a c t i v e l y farmed areas are chosen as a l o c a t i o n f o r t h i s  new  development as t h i s i s where the d e s i r e d f a c i l i t i e s are n o r m a l l y present i n the g r e a t e s t abundance.  G e n e r a l l y , people  p r e f e r h i g h u n d u l a t i n g s i t e s t o l e v e l bottom s i t e s f o r r e s i d e n t i a l development, but they w i l l not l o c a t e on the h i g h e r s i t e s i f access t o major roads and other f a c i l i t i e s does not exist.  Past experience i l l u s t r a t e s t h a t suburban l o c a t i o n s are  a t t r a c t i v e f o r r e s i d e n t i a l development, e s p e c i a l l y a r e a s s u i t e d for  s p e c i a l t y c r o p s , as the c l i m a t e i n these areas i s a l s o  f a v o r a b l e f o r r e s i d e n t i a l development.  E i g h t y - f i v e percent o f  O n t a r i o ' s r e c e n t i n d u s t r i a l and urban growth has taken p l a c e on what i s c l a s s i f i e d as ' e x c e l l e n t ' or 'very good o land.  1  agricultural  T h i s t r e n d i s a l s o e v i d e n t i n the Lower Mainland Region  of B r i t i s h Columbia where r e c e n t r e s i d e n t i a l developments have been l o c a t e d on 'good' a g r i c u l t u r a l land i n the m u n i c i p a l i t i e s of Richmond the  and Delta.9  H i l l y areas o f non-farm l a n d such as  uplands i n the Lower Mainland Region of B r i t i s h Columbia are  o f t e n a v o i d e d and urban development takes p l a c e on low l y i n g •good' s o i l because of the developer's d e s i r e f o r good s o i l a c c e s s i b i l i t y t o major r o a d s .  A l s o , the economics o f  development i n h i l l y areas i s more p r o h i b i t i v e than i n l e v e l areas because of the a d d i t i o n a l c o s t i n v o l v e d i n i n s t a l l i n g sewer and water mains and c o n s t r u c t i n g r o a d s .  and  21  Another f a c t o r which leads t o the premature of farm land and other speculation.  conversion  l a n d not used f o r urban purposes i s  The demand f o r l a n d f o r urban uses reaches a  p o i n t a t which l a n d l y i n g o u t s i d e  the immediate demand area i s  purchased i n a n t i c i p a t i o n o f an i n c r e a s e i n demand.  An i n c r e a s e  i n demand f o r urban l a n d then enables the purchaser t o subdivide  the s i t e and t o r e c e i v e a s u b s t a n t i a l p r o f i t by the  s a l e of r e s i d e n t i a l l o t s . . While the s p e c u l a t o r s h o l d the l a n d i t sometimes ceases t o be used f o r farming purposes and l i e s idle.  Normally the farm l a n d would be l e a s e d or r e n t e d f o r  farming purposes, however, L i c h f i e l d  1 0  p o i n t s out t h a t the  owners of such l a n d h e s i t a t e t o commit t h e i r l a n d f o r the p e r i o d r e q u i r e d f o r farming purposes as i f they do, when the opportune moment f o r s u b d i v i d i n g occurs the l a n d may be t i e d up by a l e a s e agreement.  Even i f the land i s l e a s e d f o r farming  purposes i t i s s u b j e c t t o a short-term therefore not e f f i c i e n t l y The  b a s i s and the l a n d i s  utilized.  s p e c u l a t i v e a c t i o n o f the land market, as i t  operates i n North America, o f t e n r e s u l t s i n the supply of b u i l d i n g l o t s exceeding the demand f o r them. been a frequent  phenomenon i n North American h i s t o r y ; and they  have o f t e n l e f t a h a r v e s t  of excessive  s u b d i v i s i o n s i n t h e i r wake. i n the U n i t e d  Land booms have  States  residential lots.  serviced  As e a r l y as the 1920's some areas  s u f f e r e d from an e x c e s s i v e  T h i r t y percent  vacant i n 1928 w h i l e  and p o o r l y  number of  o f the l o t s i n Chicago were  s i x t y - n i n e percent  o f those i n Cook County  22  o u t s i d e Chicago were s t i l l  unused.  I n the m u n i c i p a l i t y o f  D e l t a , B r i t i s h Columbia, a r e s i d e n t i a l s u b d i v i s i o n boom developed i n 1958 when c o n s t r u c t i o n was s t a r t e d on a highway which would reduce the t r a v e l l i n g time from t h e C i t y o f Vancouver t o the M u n i c i p a l i t y .  I n one p a r t i c u l a r s u b d i v i s i o n  three hundred and s i x t y l o t s were c r e a t e d on farm l a n d i n 1958, and by August, 1962 only f i f t e e n houses were c o n s t r u c t e d  while  IP the r e s t o f the l o t s remained The has  vacant.  l e a p - f r o g g i n g p a t t e r n o f urban development which  taken p l a c e i n many suburbs i s another f a c t o r causing the  premature c o n v e r s i o n o f farm l a n d .  The p a t t e r n of urban  growth has n o t e x h i b i t e d a uniform,  systematic  expansion o f  urban f a c i l i t i e s outwards from the c e n t r a l c i t y ; i n f a c t , i n many i n s t a n c e s , the opposite has happened.  A s m a l l t r a c t of  l a n d i s o f t e n bypassed f o r v a r i o u s reasons such as r e f u s a l t o s e l l , t o o h i g h a l a n d p r i c e , or poor a c c e s s i b i l i t y .  This land,  i n many cases farm l a n d , becomes i s o l a t e d i n a sea o f sprawling houses and r e s i d e n t i a l - s i z e d l o t s and i s sometimes u s e l e s s f o r farming  rendered  purposes.  Costs o f Premature  Conversion  Under Canadian l a n d market c o n d i t i o n s , the c o n t r o l o f l a n d resources normally  goes t o the h i g h e s t b i d d e r .  This  b i d d e r i s then f r e e to put h i s l a n d t o the use which o f f e r s t h e highest return.  I n most c a s e s , these uses a r e c o i n c i d e n t w i t h ,  or a t l e a s t a r e n o t c o n t r a r y t o the w e l f a r e o f s o c i e t y . However, l a n d owners q u i t e o f t e n f i n d i t p r o f i t a b l e e i t h e r t o  23  e x p l o i t t h e i r land r e s o u r c e s o r t o c o n v e r t them t o uses n o t compatible w i t h the l o n g - r u n i n t e r e s t s o f s o c i e t y . case w i t h the premature uses.  Such i s the  c o n v e r s i o n of farm l a n d t o non-farm  A l t h o u g h the expanding  urban c e n t r e s c r e a t e a demand f o r  land which g e n e r a l l y n e c e s s i t a t e s the c o n v e r s i o n o f farm l a n d t o non-farm  uses, there appears t o be no d e f i n i t e reason f o r t h i s  l a n d having i t s use changed u n t i l the need f o r urban l a n d reaches a c r i t i c a l p o i n t . l a n d t o non-farm  The premature  c o n v e r s i o n of farm  uses may y i e l d a monetary p r o f i t t o v a r i o u s  i n d i v i d u a l s but u s u a l l y proves t o be c o s t l y f o r s o c i e t y as a whole and thus i s n o t t h e most d e s i r a b l e occurrence i n the economic l a n d market. of  The v a r i o u s c o s t s o f premature c o n v e r s i o n  farm l a n d a r e not n e c e s s a r i l y measured i n monetary  terms  s i n c e both economic and s o c i a l c o s t s r e s u l t . Accompanying the premature s c a t t e r e d s u b d i v i s i o n s and houses. are  c o n v e r s i o n o f farm l a n d are When a few hundred  houses  s c a t t e r e d over an area of s e v e r a l m i l e s as has o c c u r r e d  around many o f the major urban c e n t r e s , the people l i v i n g i n these houses  cannot have the advantages :  o f convenient s c h o o l s ,  corner s t o r e s , p a r k s , and playgrounds without undue If f a c i l i t i e s to  expense.  such as these a r e t o be convenient and economical  everyone who uses them, the people they serve must be grouped  c l o s e l y around them.  Thus, there a r e both economic and s o c i a l  c o s t s r e s u l t i n g from the a c t i o n of premature l a n d and o t h e r l a n d to urban u s e s .  c o n v e r s i o n o f farm  24  Economic Costs The  economic c o s t s of premature s u b d i v i s i o n are those  c o s t s which can be d e f i n i t e l y measured i n monetary terms. These c o s t s range from the l o s s of income f o r the farmer the h i g h c o s t of s e r v i c e s f o r the suburbanite, expensive food and h i g h e r The  property  and  to more  taxes f o r s o c i e t y .  major c o s t i n v o l v e d i n premature s u b d i v i s i o n of  land i s the h i g h c o s t of the s e r v i c e s and a m e n i t i e s d e s i r e d the r e s i d e n t s or f u t u r e r e s i d e n t s of the area Services  such as water and  paving and p a i d f o r by  by  subdivided.  sewer mains, s t r e e t c o n s t r u c t i o n ,  maintenance, s t r e e t l i g h t i n g , and the l i n e a l f o o t .  Therefore,  so on are  a fully  generally  s e r v i c e d sub-  d i v i s i o n which i s only p a r t i a l l y u t i l i z e d by d w e l l i n g s encountered a l l the s e r v i c e c o s t s and  the s e r v i c e s  f u n c t i o n i n g at only a p o r t i o n of t h e i r c a p a c i t y .  has  are The  excessive  c o s t s of these s e r v i c e s do not f a l l p r i m a r i l y on the owner o f the prematurely converted l a n d : d i s t r i b u t i o n , and  of paving and  but the c o s t s of water road maintenance, f o r example,  are d i s t r i b u t e d throughout a wider a r e a  such as a water d i s t r i c t  or a m u n i c i p a l i t y over which the s e r v i c e s are d i s t r i b u t e d . Studies  i n the Lower Mainland of B r i t i s h C o l u m b i a ^ n d a  Louth  Township i n O n t a r i o ^ have shown t h a t a g r e a t e r p r o p o r t i o n these c o s t s are c a r r i e d by the farm  of  areas.  In many cases, a s u b d i v i s i o n p o o r l y r e l a t e d to  other  s u b d i v i s i o n s would r e q u i r e an e x c e s s i v e  l e n g t h of water mains,  sewer mains or other  t o provide  u t i l i t i e s In order  the  25  r e s i d e n t i a l l o t s w i t h the s e r v i c e s which the people demand. Costs o f education conversion  of land.  a r e a l s o i n c r e a s e d by premature  The sparce p o p u l a t i o n which i n e v i t a b l y  accompanies premature s u b d i v i s i o n s makes i t d i f f i c u l t and c o s t l y f o r s c h o o l boards t o provide  adequate  schooling  f a c i l i t i e s f o r the c h i l d r e n l i v i n g i n these s u b d i v i s i o n s .  One  r e s u l t o f an incomplete r e s i d e n t i a l development i s the h i g h cost of transporting c h i l d r e n to schools,  or the e x c e s s i v e  c o s t of c o n s t r u c t i n g s m a l l s c h o o l s which i n t u r n a r e l e s s economical,and e f f i c i e n t than l a r g e r  schools.  Another way i n which the premature c o n v e r s i o n  o f farm  land t o non-farm uses i s c o s t l y i s the premature d e s t r u c t i o n of farm l a n d .  T h i s r e s u l t s i n the unnecessary l o s s o f food  products as w e l l as a l o s s o f income t o the f a r m e r s . I n the waves o f . s u b d i v i s i o n s p e c u l a t i o n which r e s u l t i n urban sprawl, many more b u i l d i n g l o t s and small h o l d i n g s a r e created  than can p o s s i b l y be absorbed by the market w i t h i n a  reasonable p e r i o d .  As a r e s u l t , "many small h o l d i n g s  never  become f u l l y developed, as the owners d i s c o v e r t h a t sparetime farming i s something more than a r e l a x i n g hobby f o r jaded workers."' '^ 1  city  T h i s i n e v i t a b l y means that some farm land i s  removed from the acreages r e q u i r e d f o r economic f a r m i n g . from the q u e s t i o n  of whether urban development of a r a b l e  Apart land  i s d e s i r a b l e a t a l l , premature s u b d i v i s i o n of farm land i s a destructive, wasteful  mode o f development from the p o i n t o f  view o f economic income.  26  As p r e v i o u s l y p o i n t e d out, the l e a p - f r o g p a t t e r n of development sometimes by-passes areas which were once productive  farm l a n d .  be economically  These i s o l a t e d areas o f farm l a n d cannot  farmed and many l i e i d l e , a w a i t i n g  Farm land near an expanding urban centre  the b u l l d o z e r .  generally  begins t o s u f f e r from suburban development long before a c t u a l l y taken out o f p r o d u c t i o n .  i t is  T h i s i s due t o the l a c k of  reinvestment i n the l a n d and the equipment n e c e s s a r y t o farm the l a n d e f f e c t i v e l y and p r o d u c t i v e l y .  I n the case of orchard  farms near San Jose, C a l i f o r n i a , L e s s i n g e r ^  showed t h a t due t o  e x p e c t a t i o n o f urban development, the orchards were allowed t o run down and r e p l a n t i n g was n o t done f o r many years urban development took over the farm. farmers about how much longer  before  The u n c e r t a i n t y o f the  they w i l l be farming  before  land i s r i p e f o r s u b d i v i s i o n prevents them from f u l l y  their  developing  the l a n d f o r a g r i c u l t u r e . To i l l u s t r a t e t h i s p o i n t f u r t h e r , much o f the farm l a n d i n the Lower Mainland o f B r i t i s h Columbia c o u l d be u t i l i z e d i n a more p r o d u c t i v e  manner i f i r r i g a t i o n and drainage improvements  were i n s t a l l e d .  These improvements r e q u i r e a s i z e a b l e c a p i t a l  o u t l a y and t h e r e f o r e cannot be i n s t a l l e d e c o n o m i c a l l y short-term  b a s i s ; and under the present  on a  conditions of  u n c e r t a i n t y , i t i s l i k e l y n o t t o be done a t a l l . ' 1  7  Thus, there  i s a r e d u c t i o n o f income f o r the farmers, combined w i t h l e s s e r production  o f food, which c o u l d p o s s i b l y r e s u l t i n h i g h e r  p r i c e s f o r the consumer.  food  27  T h i s p a r t i c u l a r aspect may  be taken one  stage f u r t h e r  to an examination of the food product i n d u s t r i e s .  I t i s only  n a t u r a l to assume t h a t an u n c e r t a i n t y i n the source of m a t e r i a l s f o r an i n d u s t r y w i l l u n c e r t a i n t y i n t o the i n d u s t r y . for  farm l a n d , and  raw  i n j e c t a s i z a b l e amount of With an u n p r e d i c t a b l e  consequently farm p r o d u c t s ,  expect the farm produce p r o c e s s i n g  one  future  cannot  i n d u s t r i e s t o expand  commit themselves to c a p i t a l e x p e n d i t u r e s .  The  and  Lower Mainland  18 Regional  P l a n n i n g Board  s t a t e s t h a t twenty percent  of  jobs i n the Lower Mainland are dependent d i r e c t l y or upon a g r i c u l t u r e .  indirectly  Thus, depending upon the economy of a r e g i o n ,  t h i s u n c e r t a i n t y may i n the  the  a f f e c t a l a r g e p o r t i o n of the  population  region. The  premature s u b d i v i s i o n of farm land r e s u l t s i n an  i n c r e a s e i n the values  of neighboring  lands.  In areas where  farm l a n d assessment values are r e l a t e d to the market value  of  the l a n d t h i s a c t i o n w i l l i n c r e a s e farm land taxes p o s s i b l y to a p o i n t where the land can no l o n g e r be economically farm purposes.  used f o r  In other areas where farm l a n d assessment  values are not d i r e c t l y r e l a t e d to the market v a l u e , but t o a value f o r a g r i c u l t u r a l purposes, an i n c r e a s e i n the l a n d w i l l have no d i r e c t e f f e c t upon the farm l a n d t a x e s .  value  However,  an i n c r e a s e i n the l a n d v a l u e , although not d i r e c t l y a f f e c t i n g production  i f the l a n d owner remains the same, may  discourage  the purchase of the land by someone i n t e r e s t e d i n farming value  of the land may  as  have exceeded the p o i n t where the l e s s  the  28  i n t e n s i v e use o f farming  w i l l not y i e l d a s u f f i c i e n t r e t u r n .  T h i s i n t u r n may r e s u l t i n the l a n d l y i n g i d l e u n t i l i t i s used f o r r e s i d e n t i a l or other urban uses. S o c i a l Costs Apart  from the economic c o s t s o f premature  conversion  are c o s t s which cannot be measured e a s i l y i n monetary terms. These c o s t s are c o n s i d e r e d  as s o c i a l c o s t s , and although they  are d i r e c t l y r e l a t e d t o the economic c o s t s they may be i l l u s t r a t e d i n a s l i g h t l y d i f f e r e n t way. The  haphazard, s c a t t e r e d s u b d i v i s i o n s which are u s u a l l y  a r e s u l t o f premature s u b d i v i s i o n s , e s p e c i a l l y on farm l a n d , i n c r e a s e the c o s t o f many s e r v i c e s .  I n some i n s t a n c e s , the  i n c r e a s e d c o s t may become e x o r b i t a n t and make i t v i r t u a l l y impossible  t o supply  the s e r v i c e s .  T h i s makes i t more d i f f i c u l t  f o r the s u b d i v i d e r t o s e l l h i s p r o p e r t y but he u s u a l l y succeeds to a c e r t a i n degree and the people l i v i n g i n these areas a r e f a c e d w i t h i n s u f f i c i e n t or f a u l t y s e r v i c e s . The  premature urban development o f land r e s u l t s i n a  development which w i l l n o t 'mature  1  f o r many y e a r s , by which  time i t s s c a t t e r e d b u i l d i n g s may be o l d and run-down, and the e n t i r e a r e a may have become low i n d e s i r a b i l i t y and v a l u e . Because o f t h i s , the area i s not l i k e l y t o command f u l l b u i l d i n g l o a n s , and t h i s i n t u r n prevents the s u b d i v i s i o n from becoming fully  developed.  29  During the time t h a t r e s i d e n t i a l s u b d i v i s i o n s a r e only p a r t i a l l y b u i l t up, i t i s very d i f f i c u l t t o p r o v i d e convenient s c h o o l s , shopping c e n t r e s , p a r k s , and playgrounds f o r the people r e s i d i n g i n the a r e a .  A l s o , the haphazard  development  poses tremendous problems f o r f u t u r e development.  Because o f  the s c a t t e r e d development, and p r o v i d e an e f f i c i e n t  i t becomes v e r y d i f f i c u l t  t o organize  system o f roads and s e r v i c e s which  alone would probably open up the a r e a p r o p e r l y .  These  d i f f i c u l t i e s o f t e n cause f r u s t r a t i n g d e l a y s i n development and sometimes l e a d t o a complete impasse. of r e s i d e n t i a l development parks and playgrounds. difficult  The h i t - a n d - m i s s p a t t e r n  a l s o b r i n g s f o r t h problems concerning  The m u n i c i p a l a u t h o r i t i e s have a  time j u s t i f y i n g the purchase and maintenance  of a  park f o r a p o t e n t i a l neighborhood which w i l l only be p a r t i a l l y used.  Tremendous c o n f l i c t s o f t e n a r i s e concerning the f u t u r e  uses of open spaces.  Most a u t h o r i t i e s argue t h a t  substantial  areas of open spaces are needed around b u i l t - u p s e c t i o n s f o r p a r k s , playgrounds and other s i m i l a r uses.  Yet there i s always  a temptation t o use these open spaces f o r v a r i o u s b u i l d i n g projects.  P u b l i c funds f r e q u e n t l y a r e not a v a i l a b l e to ensure  the r e s e r v a t i o n o f needed  open areas a t the time when they might  be secured a t the l e a s t c o s t .  As a r e s u l t , i t i s o f t e n  necessary t o make the d e c i s i o n of e i t h e r spending c o n s i d e r a b l e sums a t l a t e r dates f o r the purchase o f b u i l t - u p areas f o r parks or l e a v i n g the area d e f i c i e n t of adequate park space.  30  Summary The areas has  trend towards u r b a n i z a t i o n and  the exodus t o suburban  become i n c r e a s i n g l y e v i d e n t during  decades and  t h i s t r e n d promises to continue  the past  two  i n the f u t u r e .  The  a r e a l requirements f o r urban l a n d uses are expanding at an ever increasing rate. use  Since a g r i c u l t u r a l l a n d use  i s a low i n t e n s i t y  compared w i t h most urban l a n d uses, the urban uses e a s i l y  r e p l a c e the a g r i c u l t u r a l uses i n areas adjacent metropolitan  centres.  Due  t o expanding  to the p a t t e r n of r e s i d e n t i a l  development i n suburban areas and  the s p e c u l a t i v e a c t i o n of  land market, l a n d i s c o n t i n u o u s l y  removed from farm use p r i o r  i t s a c t u a l need f o r urban uses.  T h i s premature c o n v e r s i o n  the to  of  farm land to non-farm uses i s i l l u s t r a t e d by urban development on  'good' farm l a n d while  there i s a s u b s t a n t i a l area of  farm land a v a i l a b l e f o r development, and  by the  leap-frog  p a t t e r n of development which i s o l a t e s farm l a n d and u s e l e s s f o r farming  purposes.  f o r t h i s premature c o n v e r s i o n  One  non-  renders i t  of the main c a u s a t i v e f a c t o r s  i s the s p e c u l a t i v e a c t i v i t y i n the  r e a l e s t a t e market. As a r e s u l t of t h i s premature c o n v e r s i o n economic and  s o c i a l costs a r i s e .  causing higher p r o p e r t y production  or p r o d u c t i o n  S e r v i c e s become more c o s t l y  t a x e s , farm land i s taken out  of  i s r e s t r i c t e d r e s u l t i n g i n a l o s s of  income to the farmer and higher s o c i e t y , and  various  a g r i c u l t u r a l produce c o s t s f o r  the u n c e r t a i n t y i n the farm i n d u s t r y  injects  u n c e r t a i n t y i n t o the a g r i c u l t u r a l product i n d u s t r i e s .  31  In r e l a t i o n t o s o c i a l c o s t s , t h e p o o r l y c o - o r d i n a t e d developments a r e c o s t l y t o s e r v i c e and because areas a r e without r e s i d e n t i a l s e r v i c e s .  of t h i s many  Residential  sub-  d i v i s i o n s may not be f u l l y developed, and these areas may become low i n d e s i r a b i l i t y and v a l u e and may l a c k many of the a m e n i t i e s which t h e p o t e n t i a l purchasers o f the l o t s d e s i r e . In view o f these s o c i a l and economic c o s t s , i t i s evident  that some technique should be employed t o p r o t e c t  l a n d from i t s premature c o n v e r s i o n to non-farm uses.  farm  In  Chapter I I , the main techniques used t o c o n t r o l land use and land development a r e examined.  The r e l a t i o n s h i p o f taxes t o  land r e s o u r c e use i s a l s o o u t l i n e d i n an attempt the e f f e c t a readjustment farm land  uses.  to ascertain  i n the t a x a t i o n system would have on  REFERENCES •^American I n s t i t u t e of Park E x e c u t i v e s , The C r i s i s i n Open Land (Aglebay Park, West V i r g i n i a : American I n s t i t u t e of Park E x e c u t i v e s , 1 9 5 9 ) , P. 1 2 . ^Yves Dube, J . E . Howes, and D.L, McQueen, Housing and S o c i a l C a p i t a l . R o y a l Commission on Canada's Economic P r o s p e c t s (Ottawa: Queen's P r i n t e r , 1 9 5 7 ) , P. 2 6 . 3  lbid.  4  Ibid.  ^Marion Clawson, "Suburban Development D i s t r i c t s , " J o u r n a l of The American I n s t i t u t e of P l a n n e r s , XXVI, No. 2 (May,  I960),  69.  ^ R i c h a r d U. R a t c l i f f , Urban Land Economics (New York: H i l l Book Company, I n c . , 1949), pp. 2 8 3 - 2 8 4 .  McGraw-  ?Use c a p a c i t y r e f e r s t o the a b i l i t y o f any g i v e n u n i t of land r e s o u r c e t o produce a net r e t u r n above the p r o d u c t i o n c o s t s a s s o c i a t e d w i t h i t s use. R a l e i g h Barlowe, Land Resource Economics (Englewood C l i f f s : PrenticeH a l l , I n c . , 1 9 5 8 ) , p. 1 2 8  ^Edward G. H a l l , " F a c t s , F a c t o r i e s and Farms," A g r i c u l t u r a l I n s t i t u t e Review. X I I , No. 4 (July-August, 1 9 5 7 ) , 1 8 . ^Lower Mainland R e g i o n a l P l a n n i n g Board of B r i t i s h Columbia, Land F o r Farming (New Westminster; Lower Mainland R e g i o n a l P l a n n i n g Board of B r i t i s h Columbia, 1 9 6 2 ) , PP.  37-43.  10 N a t h a n i a l L i c h f i e l d , Economics of Planned Development (London: The E s t a t e s G a z e t t e , L t d . , 1 9 5 6 ) , p. 1;L  279.  Barlowe, 5 1 1 .  12  A s s o c i a t e d E n g i n e e r i n g S e r v i c e s L i m i t e d , Vancouver, 1 9 6 2 . Private F i l e s . 32  33  •^Lower Mainland R e g i o n a l P l a n n i n g Board of B r i t i s h Columbia, Economic A s p e c t s o f Urban Sprawl (New Westminster: Lower Mainland R e g i o n a l P l a n n i n g Board of B r i t i s h  Columbia, 1956), 45 pp.  1 4  T l a l p h Krueger, "The Rural-Urban F r i n g e T a x a t i o n Problem: A Case Study of Louth Township," Land Economics, XXXIII, No. 3 (August, 1 9 5 7 ) , 2 6 4 - 2 6 9 .  11 -'Lower Mainland R e g i o n a l P l a n n i n g Board of B r i t i s h Economic A s p e c t s of Urban Sprawl, p. 1 3 .  Columbia,  16 X D  H a r o l d Mayer, " C i t i e s , T r a n s p o r t a t i o n , and Technology," Land, The Yearbook of A g r i c u l t u r e , 1958 (Washington: The U n i t e d S t a t e s Department of A g r i c u l t u r e , 1958), p. 4 9 6 , quoting J . L e s s i n g e r , The D e t e r m i n a t i o n o f Land Use i n R u r a l Urban T r a n s i t i o n A r e a s , B e r k l e y ,  195oT^  ^ L o w e r Mainland R e g i o n a l P l a n n i n g Board o f B r i t i s h Land F o r Farming, p. 2 2 . l 8  I b i d . , p. 1.  Columbia,  34  Photograph 2.  This was "Good" Farm Land  CHAPTER I I LAND USE  CONTROL AND  THE  Land Use The  Controls  impact of urban pressures  to urban centres wishing to s e l l  i s often devastating.  purchasing the l a n d , and from farm use.  on farm land  Farm land owners  farmers who  may  S p e c i a l assessments f o r s c h o o l s ,  farm taxes i n c r e a s e .  long before  Speculators  the land i s subdivided  These a c t i o n s j o i n t l y c o n t r i b u t e  sewers, water  the non-farm l a n d purchase l a n d  from farmers f o r r e s i d e n t i a l s u b d i v i s i o n s and farm use  be i n t e r e s t e d i n  t h i s f o r c e s the land to be removed  or other improvements are voted by  owner, and  adjacent  t h e i r land demand a p r i c e which i s o f t e n  beyond the r e a c h of o p e r a t i n g  supply,  TAXATION OF FARM LAND  remove i t from  and  built  upon.  t o the premature c o n v e r s i o n  of  farm land to non-farm uses. The  techniques r e l i e d upon to cope w i t h these  problems are mainly r e g u l a t o r y c o n t r o l s , w i t h s u b d i v i s i o n c o n t r o l s and  zoning  A l t h o u g h these two  by-laws b e i n g  the most commonly used.  techniques were o r i g i n a l l y conceived  s p e c i f i c purposes, they are now  used as a means of c o n t r o l l i n g  the many r a m i f i c a t i o n s of land use. zoning  and  s u b d i v i s i o n r e g u l a t i o n was 37  for  The  f i r s t a p p l i c a t i o n of  an attempt to b r i n g under  38  c o n t r o l the development problems i n the urban c e n t r e s . L a t e r , when the development problems i n the became prominent, s u b d i v i s i o n c o n t r o l s and u t i l i z e d without undergoing m o d i f i c a t i o n s .  'urban f r i n g e zoning  1  were  Jurisdictions  which have been i n t e r e s t e d i n c o n t r o l l i n g the l o c a t i o n of  new  s u b d i v i s i o n s i n t h e i r areas have g e n e r a l l y r e s o r t e d to these two  techniques a l t h o u g h other methods of land use  control  such as land a c q u i s i t i o n , economic i n c e n t i v e s , and p o s i t i v e d e s i g n p o l i c i e s have, to a l e s s e r extent, been employed. r e s u l t , s u b d i v i s i o n c o n t r o l s and a p p l i e d to r e g u l a t e  the  zoning  l a y o u t and  use  As  a  by-laws have been of i n d i v i d u a l l o t s  as  w e l l as to c o n t r o l the g e n e r a l p a t t e r n of land development. Generally,  these techniques have been i n e f f e c t i v e i n  c o n t r o l l i n g the l a n d use very  little  i n the suburban areas and have  influence i n preventing  farm land t o non-farm uses. the inadequacy of the present  had  the premature c o n v e r s i o n  B e f o r e examining the reasons f o r l a n d use  controls, i t i s  n e c e s s a r y t o review the development of these concepts and  to  examine t h e i r s i g n i f i c a n c e as techniques used to c o n t r o l land use and  land development i n Canada.  Since  zoning  and  s u b d i v i s i o n c o n t r o l are the most commonly used techniques they w i l l be examined i n d e t a i l . eminent domain and and w i l l only be  The  other  c o n t r o l s , such as  f i n a n c i a l c o n t r o l are of l e s s e r importance  examined b r i e f l y .  of  39  Zoning P u b l i c r e s t r i c t i o n s on the use o f p r i v a t e l a n d  first  began i n Canada p r i o r t o World War I . A t t h a t time the r e s t r i c t i o n s were n o t as they e x i s t today, b u t were i n the form of the laws t o prevent n u i s a n c e , and i n some cases were r e s t r i c t i v e covenants and b u i l d i n g schemes i n conveyances. J.B.  1  M i l n e r p o i n t s out t h a t many landowners sought t o p r o t e c t  t h e i r own- land f a r beyond the law of n u i s a n c e , s i n c e when they s o l d p a r t o f t h e i r land they r e s t r i c t e d the purchaser's use  t o something they regarded as compatible w i t h t h e i r  enjoyment of the p a r t they r e t a i n e d . The  law of nuisance was c r e a t e d  of l a n d from being  t o prevent a p a r c e l  used i n such a manner as t o cause  e f f e c t s t o the n e i g h b o r i n g the  2  land.  detrimental  The prime example o f t h i s i s  slaughterhouse which was c l a s s e d as a nuisance and  p r o h i b i t e d by law from c e r t a i n a r e a s .  T h i s i l l u s t r a t e s the  reason f o r the p u b l i c a u t h o r i t y wanting t o r e s t r i c t the use o f land. Since as one sees f i t , derogation  i t i s a common law r i g h t t o be a b l e t o use land r e s t r i c t i o n s l i m i t i n g such a r i g h t a r e i n  of common law r i g h t s .  are imposed by m u n i c i p a l exist.  by-law, c l e a r s t a t u t o r y a u t h o r i t y must  I n Canada, the m u n i c i p a l i t y ' s power t o p l a c e  r e s t r i c t i o n s on land by zoning enabling  Thus, when such r e s t r i c t i o n s  a c t which grants  i s d e r i v e d from a p r o v i n c i a l  the m u n i c i p a l i t i e s c e r t a i n powers.  40  The B r i t i s h North America A c t , 1867,3 c r e a t e d a system o f government and  i n S e c t i o n 92, paragraph 8, gave t o  the P r o v i n c i a l L e g i s l a t u r e a u t h o r i t y over institutions. has  powers to them.  governments and  of the community, and  of p r i v a t e p r o p e r t y  The  of p r i v a t e p r o p e r t y  by-law.'  d i s t r i c t s , areas,  p r o h i b i t e d ; and  for residences,  the permitted  circumstances.  a g r i c u l t u r a l zones as a minimum and be t h r e e or more k i n d s  f o r business,  Within  the h e i g h t ,  population.  uses  uses i n 4  and  f o r i n d u s t r y as w e l l as f o r  each of these zones v a r i o u s  s i z e and  use  i n many  of zones each  r e s t r i c t i o n s are g e n e r a l l y a p p l i e d concerning  land:  and  by the by-law, a l l other  i t regulates  m u n i c i p a l i t i e s there may  and  by-law u s u a l l y does  by-laws e s t a b l i s h i n d u s t r i a l , commercial,  r e s i d e n t i a l , and  agriculture.  regulations  segregates i n t o p a r t i c u l a r  v a r y i n g degrees, depending upon attendant Most zoning  f o r the p u b l i c  or zones the v a r i o u s uses of land  b u i l d i n g s t h a t are permitted  the  control.  A zoning  i t c l a s s i f i e s and  and  It is this  m u n i c i p a l i t i e s c r e a t e the r e s t r i c t i v e  by adopting a 'zoning things:  to control  to p r o t e c t these ends.  good t h a t i s the l e g a l b a s i s of zoning  being  specific  t o p r o t e c t h e a l t h , s a f e t y , convenience, morals,  r i g h t t o c o n t r o l the use  two  delegated  province  Among other powers, the m u n i c i p a l i t i e s are  the g e n e r a l w e l l - b e i n g use  municipal  On the b a s i s of t h i s a u t h o r i t y , each  created municipal  authorized  two-tier  of b u i l d i n g s ; and  regulations the use  of  the d e n s i t y  of  41  The  purposes of zoning, as d e s i g n a t e d i n many  Canadian m u n i c i p a l by-laws ares  the p r e s e r v a t i o n of p r o p e r t y  v a l u e s , the c o n t r o l of the a r c h i t e c t u r a l d e s i g n of b u i l d i n g s , the p r o t e c t i o n of '-amehty,  1  the l i m i t a t i o n of the d e n s i t y of  p o p u l a t i o n , the promotion of h e a l t h and w e l f a r e , the r e d u c t i o n of t r a f f i c c o n g e s t i o n , and  so on.-*  p u b l i c r e g u l a t o r y power and may  I n any  be used o n l y t o safeguard  promote p u b l i c h e a l t h , s a f e t y , morals,  or  or the g e n e r a l w e l f a r e .  I t i s a means of implementing a land-use f o r p l a n n i n g ; and  event, zoning i s a  p l a n , not a s u b s t i t u t e  i t s value and g e n e r a l e f f e c t i v e n e s s always  depend on the c h a r a c t e r of the p l a n n i n g upon which i t i s based. Zoning r e g u l a t i o n s were f i r s t designed f o r use i n built-up areas.  The main k i n d s of zoning r e g u l a t i o n s c r e a t e d  f o r use i n these areas were 'use' r e g u l a t i o n s t o separate c o n f l i c t i n g l a n d uses, and  l o t and  building-dimension  r e g u l a t i o n s to c o n t r o l p o p u l a t i o n d e n s i t i e s .  These r e g u l a t i o n s  have been shaped t o promote urban o b j e c t i v e s and have become a p a r t of standard laws and t r a d i t i o n s .  With the development of  a mobile p o p u l a t i o n and a t r e n d towards suburban l i v i n g , i t became obvious t h a t areas o u t s i d e the urban c e n t r e s r e q u i r e d some s o r t of p l a n n i n g c o n t r o l , e s p e c i a l l y a g r i c u l t u r a l a r e a s . I n response  to t h i s , an a g r i c u l t u r a l zone was  a d d i t i o n to the other zones. a g r i c u l t u r a l zone was  The p r i n c i p a l f u n c t i o n of t h i s  t o prevent  i n d i s c r i m i n a t e urban-sized  l o t development, and t o d i r e c t new areas.  established i n  urban growth i n t o  specific  As w e l l as d e f i n i n g an a r e a as an a g r i c u l t u r a l zone,  42  a d d i t i o n a l l i m i t a t i o n s were p l a c e d restricting  on the land by way  of  s u b d i v i s i o n s to a minimum p r e s c r i b e d acreage,  popular l i m i t being  five  That zoning  the  acres.  can be  used i n t h i s context  with a  fair  degree of success i s i n d i c a t e d by the experience i n Richmond, a m u n i c i p a l i t y adjacent Columbia.  In 195&,  to the C i t y of Vancouver i n B r i t i s h  Richmond enacted a zoning  by-law which  r e s t r i c t e d s u b d i v i s i o n of farm land t o a minimum of f i v e In the three years that f o l l o w e d , new  development took p l a c e  l e s s than two  percent  acres. of  the  i n the a g r i c u l t u r a l zone which had  a  f i v e acre minimum l o t s i z e . 7 T h i s i s only one  instance  i n which zoning  has  been  s u c c e s s f u l l y used t o prevent the premature s u b d i v i s i o n of farm land.  There are many i n s t a n c e s where the l o c a l a u t h o r i t i e s  have s i m i l a r zoning  by-laws, but due  t o v a r i o u s r e a s o n s , such  as the l a c k of a d m i n i s t r a t i v e  c o n t r o l , the by-laws have not  been s u c c e s s f u l i n p r e v e n t i n g  premature s u b d i v i s i o n s or  premature c o n v e r s i o n  the  of farm land t o non-farm uses.  C o n v e n t i o n a l zoning urban expansion as i t has  has been unable t o d e a l w i t h  occurred  over the l a s t decade.  Zoning, w i t h i t s p r e c i s e measurements and designed to c o n t r o l the use  standards i s a t o o l  of i n d i v i d u a l p a r c e l s of l a n d  i s not a development p l a n f o r the e n t i r e m u n i c i p a l i t y . much more u s e f u l i n g u i d i n g  the c o n s t r u c t i o n on, and  vacant l o t s which l i e i n an a l r e a d y developed a r e a . be p a r t i c u l a r l y u s e f u l i n m a i n t a i n i n g  and  It is  the use Zoning  the amenity of a  of, can  43  h i s t o r i c a l p r e s e r v a t i o n , but depending upon the a d m i n i s t r a t i o n it  i s g e n e r a l l y not e f f e c t i v e as a means of p r e s e r v i n g the  i n t e g r i t y of the l a n d use p l a n f o r an undeveloped  area.  By p r a c t i s i n g zoning as i t p r e s e n t l y e x i s t s , m u n i c i p a l i t i e s are approaching manner.  the  t h e i r problems i n a n e g a t i v e  Zoning i s e s s e n t i a l l y n e g a t i v e i n approach as i t  r e g u l a t e s what cannot be done i n p a r t i c u l a r a r e a s . i m p l i c a t i o n , t h i s may  By  I n d i c a t e what can be done i n other a r e a s ,  but the i m p l i c a t i o n s are o f t e n not c l e a r .  A l s o , as s t a t e d by  Marion Clawson concerning zoning i n the U n i t e d S t a t e s , but which a l s o a p p l i e s i n Canada: Zoning has been n o t o r i o u s l y s u b j e c t t o change i n the f a c e of p r e s s u r e s . I t has seldom prevented a few people, or a t any r a t e a few people w i t h wealth and p o l i t i c a l power, from doing what they wanted t o do.8 The  zoning by-law as i t e x i s t s today i s the product of  a number of h i s t o r i c a l circumstances and the l i m i t a t i o n s of zoning t o c o n t r o l land development are due another  i n one way  or  t o the f a c t t h a t the t r a d i t i o n a l form of the zoning  by-law makes i t too cumbersome and r i g i d t o perform i t s new r o l e i n the p l a n n i n g f u n c t i o n .  Zoning by-laws tend t o be  r e l a t i v e l y f i x e d and i n f l e x i b l e , and there i s seldom, i f e v e r , any b u i l t - i n mechanism f o r a d j u s t i n g t o the changing c o n d i t i o n s and needs of a dynamic s o c i e t y .  A zoning Board  e x i s t s i n Canadian m u n i c i p a l i t i e s f o r purposes making d e c i s i o n s on cases presented t o i t . t h i s Board does not reduce  of Appeal of h e a r i n g  and  The e x i s t e n c e of  the i n f l e x i b i l i t y of the zoning  by-law, s i n c e i t o n l y d e a l s w i t h appeal cases and not w i t h the  44  o v e r a l l zoning  although t h i s may  be  considered  d e c i s i o n f o r a p a r t i c u l a r p a r c e l of Subdivision  when making a  land.  Control  Land s u b d i v i s i o n r e g u l a t i o n s r e p r e s e n t technique by which p u b l i c c o n t r o l may use  of p r i v a t e l a n d .  i n Canada can be planning  The  use  be  e x e r c i s e d over  a s s o c i a t e d w i t h the s e l e c t i o n and The  new  s u b d i v i s i o n s and  c o n t r o l s used i n these  e f f o r t was  instances Once a town-  u s u a l l y made t o  regulate  i n some i n s t a n c e s , even the plans  o r i g i n a l townsite were i g n o r e d .  Despite  d i v i s i o n c o n t r o l s i n Canada, i t was the use  unofficial  l a y o u t of many  u s u a l l y a p p l i e d only to the o r i g i n a l t o w n s i t e . settled, l i t t l e  the  of land s u b d i v i s i o n r e g u l a t i o n s  t r a c e d back to the c a r e f u l , but  o r i g i n a l townsites.  s i t e was  another  not  the e a r l y use  f o r the of sub-  u n t i l the 1920's t h a t  of s u b d i v i s i o n r e g u l a t i o n s became an accepted procedure  for municipalities. S u b d i v i s i o n c o n t r o l r e g u l a t i o n s are a p p l i e d i n the same manner as zoning As w i t h zoning,  c o n t r o l , that i s , by m u n i c i p a l  by-law.  the m u n i c i p a l i t y ' s power to enact a s u b d i v i s i o n  c o n t r o l by-law i s d e r i v e d from a p r o v i n c i a l e n a b l i n g  act.  S u b d i v i s i o n r e g u l a t i o n s were o r i g i n a l l y conceived  regulate  to  the l a y o u t of i n d i v i d u a l l o t s upon which an owner would b u i l d a house or other  structure.  beyond t h i s t o the extent and  T h i s type of r e g u l a t i o n now  goes  of r e g u l a t i n g a complete s u b d i v i s i o n ,  i n cases attempting to r e g u l a t e  the areas which may  be  45  subdivided.  Many m u n i c i p a l i t i e s enacted s u b d i v i s i o n c o n t r o l  by-laws when the a u t h o r i t i e s d i s c o v e r e d was being  compelled t o provide  that the m u n i c i p a l i t y  a v a s t a r r a y of p u b l i c  s e r v i c e s f o r s c a t t e r e d and p a r t i a l l y developed  subdivisions  which o f f e r e d l i t t l e promise of ever p r o v i d i n g  s u f f i c i e n t tax  revenue t o become s e l f  supporting.  S u b d i v i s i o n c o n t r o l s vary c o n s i d e r a b l y application.  i n use and  They have been used t o prevent developments i n  areas regarded as u n h e a l t h f u l because of f l o o d h a z a r d s , improper d r a i n a g e , or other  conditions.  They have a l s o been  used t o r e g u l a t e the o v e r a l l s t r e e t d e s i g n and t o s e t r i g i d s p e c i f i c a t i o n s f o r l o t s i z e , s t r e e t c o n s t r u c t i o n , and facilities  such as water supply  most important aspect  and sewer c o n n e c t i o n s .  The  of s u b d i v i s i o n c o n t r o l f o r regulating  the l o c a t i o n o f s u b d i v i s i o n s i s the requirements f o r sewer and water c o n n e c t i o n s . subdivider created.  G e n e r a l l y , m u n i c i p a l i t i e s can r e q u i r e the  t o supply  s p e c i f i c s e r v i c e s t o any l o t s  being  These s p e c i f i c s e r v i c e s may i n c l u d e the p r o v i s i o n of  sewer f a c i l i t i e s , water, pavement, sidewalks and other By doing t h i s , the g e n e r a l  l o c a t i o n o f the f u t u r e  may be c o n t r o l l e d t o a c e r t a i n extent l o c a t i o n of municipal  subdivisions  by c o n t r o l l i n g the  sewer and water mains.  S u b d i v i s i o n c o n t r o l s provide means o f d i s c o u r a g i n g  amenities.  one o f the most e f f e c t i v e  the occurrence of premature s u b d i v i s i o n s .  L o c a l governments l a c k the power t o p r o h i b i t  excessive  46  s u b d i v i s i o n s , but by e n f o r c i n g h i g h development standards the number of excess b u i l d i n g l o t s may be minimized. Although the use o f s u b d i v i s i o n c o n t r o l s can be e f f e c t i v e i n discouraging  premature s u b d i v i s i o n s , t h e i r use i s  much l e s s e f f e c t i v e i n d i s c o u r a g i n g of farm land to non-farm uses.  the premature  conversion  S u b d i v i s i o n c o n t r o l s , depending  on t h e i r a p p l i c a t i o n , may o r may not e s t a b l i s h a sound  pattern  f o r suburban growth; but u s u a l l y , s u b d i v l d e r s a r e permitted  a  wide l a t i t u d e o f a c t i o n or i n a c t i o n and t h e r e f o r e the c o n t r o l s are n o t completely r e l i a b l e . best  Subdivision regulations i n their  form can c o n t r o l p r i v a t e developments, however, they do  not guarantee that the m u n i c i p a l i t y w i l l have a p o s i t i v e development p o l i c y c o - o r d i n a t e d Thus, i f there  i s no g e n e r a l  w i t h the p r i v a t e developments.  development p l a n or c o - o r d i n a t i o n  of s e r v i c e s , s u b d i v i s i o n c o n t r o l s a r e rendered By  ineffective.  e n f o r c i n g the proper s u b d i v i s i o n c o n t r o l by-laws,  the m u n i c i p a l i t i e s can be assured o f having s u b d i v i s i o n s which meet the s p e c i f i c a t i o n s of the by-law.  T h i s means that any  new s u b d i v i s i o n must c o n t a i n adequately s i z e d and p r o p e r l y designed l o t s , s e r v i c e d by those s e r v i c e s which the m u n i c i p a l i t y can p r e s c r i b e by by-law. a d i f f e r e n t matter.  The l o c a t i o n of the s u b d i v i s i o n s i s  S e r v i c e and d e s i g n requirements do n o t  guarantee t h a t the l o c a t i o n of the s u b d i v i s i o n s w i l l be compatible w i t h the o v e r a l l o b j e c t i v e of the m u n i c i p a l i t y , nor do they prevent r e s i d e n t i a l development from surrounding and i s o l a t i n g farm l a n d .  These s p e c i f i c a t i o n s do n o t n e c e s s a r i l y  47  encourage  urban development to take p l a c e  t o be of l e s s e r v a l u e f o r farm  i n areas c o n s i d e r e d  purposes.  The b a s i c weakness of the s u b d i v i s i o n c o n t r o l by-law as a land use c o n t r o l technique i s i t s inadequacy t o c o n t r o l the type of development which has o c c u r r e d i n the l a s t decade.^ S u b d i v i s i o n r e g u l a t i o n s were designed t o r e g u l a t e of i n d i v i d u a l l o t s .  The  the  layout  technique has been c a r r i e d forward  w i t h a minimum of change and i s not adapted t o the l a r g e c o n t r o l of l a n d use because  scale  i t cannot c o n t r o l the l o c a t i o n of  subdivisions. Zoning and s u b d i v i s i o n c o n t r o l , as l a n d use c o n t r o l t e c h n i q u e s , have proven t o be inadequate t o c o n t r o l urban growth and t o prevent the premature c o n v e r s i o n of farm l a n d to non-farm uses. smaller used.  Both techniques were d e v i s e d f o r use on a  s c a l e than t h a t f o r which they are c u r r e n t l y b e i n g I t i s not proper t o condemn these two land use c o n t r o l  techniques as they can be very e f f e c t i v e when used i n the A properly  manner f o r which they were o r i g i n a l l y d e s i g n e d .  d r a f t e d and e n f o r c e d zoning by-law can ensure t h a t the m u n i c i p a l i t y w i l l have compatible land uses; and a proper s u b d i v i s i o n c o n t r o l by-law can ensure that the  subdivisions  w i l l meet the standards s e t by the m u n i c i p a l i t y .  However,  n e i t h e r c o n t r o l can prevent the premature c o n v e r s i o n of farmland t o non-farm uses.  48  Other Methods of  Control  M u n i c i p a l i t i e s and  other  a wide v a r i e t y of powers which may Eminent domain and  l e v e l s of government possess be used t o c o n t r o l land  use.  f i n a n c i a l c o n t r o l are examples of these  powers. The the s o v e r e i g n  concept of eminent domain i n v o l v e s "the power of t o take p r o p e r t y  owner's consent,"*rooted and  0  f o r p u b l i c use without  but w i t h f a i r compensation.  i n the u l t i m a t e a u t h o r i t y of the s t a t e over  i s commonly accepted and  inherent  concept i s property  e x e r c i s e d i n many c o u n t r i e s as  an  r i g h t of government. To e s t a b l i s h c o n t r o l over p r o p e r t y ,  may  The  the  eminent domain  be e x e r c i s e d alone or i n combination w i t h other  R e g a r d l e s s of how  powers.  i t i s used, i t f r e q u e n t l y p l a y s an e s s e n t i a l  r o l e i n s o c i e t y by f a c i l i t a t i n g  the o r d e r l y a c q u i s i t i o n of  the  s i t e s needed f o r highways, s t r e e t s , u t i l i t i e s , p u b l i c h o u s i n g , and  other p u b l i c improvements.  Eminent domain may  be used i n  the form of purchasing the land or purchasing the development r i g h t s of the l a n d . fair  In e i t h e r case, i t i n v o l v e s payment of a  compensation t o the land owner.  Since  i t i s very  difficult  to e s t a b l i s h a f a i r compensation, eminent domain i s g e n e r a l l y used only a f t e r purchase n e g o t i a t i o n s have f a i l e d . m u n i c i p a l i t y was means of land use  Thus, i f a  t o purchase l a n d or development r i g h t s as  a  c o n t r o l , the power of eminent domain c o u l d  employed to a i d the purchase.  be  However, land purchasing f o r the  purposes of l a r g e s c a l e land use  c o n t r o l i s beyond  the  49  comprehension of most m u n i c i p a l i t i e s , even w i t h the use  of  the  power of eminent domain, because of the compensation which must be  paid. The  power of eminent domain was  employed by  the  F e d e r a l Government t o e s t a b l i s h a 'green b e l t ' around the C i t y o f Ottawa.  T h i s was  done not t o preserve  prevent premature c o n v e r s i o n but  to f a c i l i t a t e p l a n n i n g  c i t y and  country  and  centre i n t o i t s r u r a l  farm l a n d , or t o  of farm land t o non-farm uses;  f o r the i d e a l t r a n s i t i o n between  t o enable the b l e n d i n g  of the dense urban  surroundings.  F i n a n c i a l c o n t r o l s have not been e x t e n s i v e l y used as t o o l s f o r d i r e c t guidance of suburban development, although they may  have had  e f f e c t s of t h i s k i n d .  One  of the most  e f f e c t i v e c o n t r o l s of t h i s type i s t h a t of c o n t r o l l i n g and  l o a n insurance  f o r r e s i d e n t i a l c o n s t r u c t i o n purposes.  C e n t r a l Mortgage and Housing C o r p o r a t i o n ,  a Canadian Crown  c o r p o r a t i o n charged w i t h the implementation of the Housing A c t , r e c e n t l y adopted a p o l i c y concerning insurance  for constructing d w e l l i n g s .  some e x c e p t i o n s , municipal purchasing  loans  now  The  1 1  National loan  Corporation,  with  r e q u i r e s a house to be s e r v i c e d w i t h  sewer f a c i l i t i e s before  a loan f o r constructing  the house w i l l be i n s u r e d .  T h i s p o l i c y has  or  very  p o s i t i v e e f f e c t s on the l o c a t i o n of houses f o r which the owners r e q u i r e l o a n insurance by  the C o r p o r a t i o n ,  and by proper  c o - o r d i n a t i o n w i t h other  governmental p o l i c i e s , t h i s could  be  50  a most e f f e c t i v e c o n t r o l over both l o c a t i o n and d e s i g n o f residential  subdivisions.  Another f i n a n c i a l c o n t r o l of land use i s t h a t o f taxation. chapter,  As w i l l be i l l u s t r a t e d i n the l a t t e r p a r t o f t h i s taxes may have a d i r e c t i n f l u e n c e on land use, and  t h e r e f o r e could be a p o s i t i v e technique f o r c o n t r o l l i n g l a n d use.  T h i s means of land use c o n t r o l i s not e x t e n s i v e l y used i n  Canadian: m u n i c i p a l i t i e s , except i n p r o v i n c e s  such as B r i t i s h  Columbia where the assessment o f farm land and non-farm land are on a d i f f e r e n t b a s i s .  The b e s t use o f t a x a t i o n as a means  of c o n t r o l l i n g l a n d use and land development would be i n c o n j u n c t i o n w i t h zoning  as a technique t o a i d the implementation  of a development p l a n . There a r e many l e g a l powers a t a l l l e v e l s o f government which might be used f o r the guidance o f urban development and the c o n t r o l of l a n d use. Many of these a r e p r e s e n t l y used w i t h some degree of success,  but they a r e used  without c o - o r d i n a t i o n o f one power w i t h another, o r one l e v e l of government w i t h a n o t h e r .  Many of the suburban m u n i c i p a l i t i e s  l a c k a development p l a n and without a p o s i t i v e p l a n , the land use  c o n t r o l s cannot be used e f f e c t i v e l y .  The land use c o n t r o l s  which a r e used most f r e q u e n t l y a r e enacted a t the m u n i c i p a l l e v e l and each c o n t r o l i s c o n f i n e d w i t h i n a d e f i n i t e boundary. Thus, l a n d o u t s i d e  a p a r t i c u l a r boundary may be under l e s s  c o n t r o l or under no c o n t r o l a t a l l .  This i s a serious  limitation  to a l l l a n d use c o n t r o l s which a r e a p p l i e d a t the m u n i c i p a l  level.  51  T a x a t i o n of Farm Land Land use c o n t r o l s as they a r e p r e s e n t l y a p p l i e d have very l i t t l e  e f f e c t on p r e v e n t i n g premature c o n v e r s i o n of  farm land t o non-farm uses.  However, f i n a n c i a l c o n t r o l as  e x e r c i s e d through t a x a t i o n has not been used i n t h i s context t o any a p p r e c i a b l e degree.  T h e r e f o r e , i t i s not known e x a c t l y  what r o l e a readjustment i n the tax system would p l a y i n p r e v e n t i n g farm l a n d from being prematurely converted t o nonfarm uses.  In order t o e x p l o r e the p o s s i b i l i t y of u s i n g a  tax adjustment  as an i n c e n t i v e t o encourage  farm-owners t o  keep t h e i r l a n d i n farm uses u n t i l the economic demand f o r urban land i s such t h a t the farm l a n d would not be prematurely c o n v e r t e d , i t i s n e c e s s a r y t o examine the e f f e c t of taxes on l a n d r e s o u r c e s and land use, and determine how  p r o p e r t y taxes  a f f e c t l a n d devoted t o farm use. R e l a t i o n s h i p Between Taxes and Land  Resources  Land r e s o u r c e s are a f f e c t e d both by the c o l l e c t i o n and the spending of tax revenues. reallocate  Most taxes tend to  wealth and r e s o u r c e s by t a k i n g c a p i t a l from the  taxpayer t o f i n a n c e the f u n c t i o n s of government. reallocation  In t h i s  p r o c e s s , a h i g h p r o p o r t i o n of the funds  collected  through l a n d and improvement taxes are o f t e n used f o r purposes t h a t enhance and p r o t e c t p r o p e r t y values or that b e n e f i t the taxpayer and h i s f a m i l y .  In t h i s sense, taxes f r e q u e n t l y have  52  a d i r e c t l y f a v o r a b l e e f f e c t upon land r e s o u r c e s ; but t h e measure of b e n e f i t s r e c e i v e d by the taxpayer v a r i e s from property to property. excess  Some taxpayers r e c e i v e b e n e f i t s f a r i n  o f t h e i r c o n t r i b u t i o n s , w h i l e the r e v e r s e  situation  applies with others. Land taxes r e p r e s e n t a compulsory c o n t r i b u t i o n on the p a r t o f the p r o p e r t y owner t o e i t h e r the l o c a l or p r o v i n c i a l government.  The a c t u a l e f f e c t of these taxes on  the l a n d r e s o u r c e s vary, depending upon the type of tax, the amount of tax, the l a n d use and other circumstances;  but the  i n f l u e n c e of the taxes can u s u a l l y be measured by t h e i r  effects  on the r e t u r n t o the r e s o u r c e s , l e v e l of i n t e n s i t y a t which the l a n d i s used, changes i n l a n d use and p r o p e r t y ownership, and  the l o c a t i o n o f an e n t e r p r i s e .  the most important  P r o p e r t y taxes a r e by f a r  taxes on l a n d r e s o u r c e s , even though the  l a n d r e s o u r c e s may be s u b j e c t t o s p e c i a l taxes such as a c a p i t a l gains t a x and a v a r i e t y o f l e s s d i r e c t t a x e s . t h i s t h e s i s i s only concerned  Since  w i t h p r o p e r t y t a x e s , no r e f e r e n c e  i s made t o the minor t a x e s . The p r o p e r t y tax i n v o l v e s an annual  charge l e v i e d  against a l l r e a l property located i n a taxation d i s t r i c t .  The  term ' r e a l p r o p e r t y ' r e f e r s t o the l a n d and the improvements on the l a n d .  There a r e c e r t a i n i n s t a n c e s when r e a l p r o p e r t y i s  exempt from g e n e r a l p r o p e r t y t a x e s , but t h i s depends upon the p o l i c y o f the t a x i n g a u t h o r i t y and does n o t a f f e c t the p r i n c i p l e of g e n e r a l p r o p e r t y t a x e s .  I n g e n e r a l terms, a l l r e a l  property  53  i s valued f o r t a x a t i o n purposes a t v a r i o u s l e v e l s , depending upon the p o l i c y of the j u r i s d i c t i o n i n which the r e a l is located.  Once a value has been d e r i v e d , i t i s then  m u l t i p l i e d by a uniform payments due.  tax l e v y to determine the a c t u a l tax  These payments are then charged t o the  r e s p e c t i v e r e a l p r o p e r t i e s and are commonly known as property  property  real  taxes. A l t h o u g h the tax i s l e v i e d a g a i n s t the r e a l  property  owner, i t i s not always absorbed by the person upon whom i t i s levied.  The  tax may  be  s h i f t e d forward  t o some eventual  consumer i n the form of h i g h e r p r i c e s ; or i t may  be  shifted  backward i n the form of lower wages t o employees or lower p r i c e s f o r raw  materials.  When a tax can be e a s i l y  as i n the case of an e n t e r p r i s e which has  shifted,  c o n t r o l over i t s  s e l l i n g p r i c e s , an i n c r e a s e i n the tax does not s u b s t a n t i a l l y a f f e c t the e n t e r p r i s e . or cannot be  When the tax i s o n l y p a r t i a l l y  s h i f t e d at a l l ,  the taxpayer  invariably suffers a  r e d u c t i o n of income.  T h i s r e d u c t i o n of income may  consequences.  cause an operator  I t may  i n t e n s i v e l y ; i t may lower-taxed  cause him  a r e a , or i t may  which the operator  shifted  have v a r i o u s  to use h i s l a n d more  to move h i s e n t e r p r i s e to a  even lower income to a p o i n t a t  f i n d s i t u n p r o f i t a b l e to continue  his  operations. Taxes on p r o p e r t y used f o r p e r s o n a l or f a m i l y consumption uses such as owner-occupied homes, are u s u a l l y considered n o n - s h i f t a b l e .  T h i s s i t u a t i o n e x i s t s because  54  i n d i v i d u a l home owners are seldom able to s h i f t t h e i r taxes i n the form of higher wages for t h e i r s e r v i c e s or higher p r i c e s for the products they s e l l .  With productive p r o p e r t i e s such  as i n d u s t r i a l p l a n t s and commercial establishments,  the  extent  to which the r e a l property tax can be s h i f t e d u s u a l l y depends upon the u n i v e r s a l i t y of the tax and the degree of c o n t r o l the operator has over the market p r i c e s .  Under perfect competitive  conditions product p r i c e s are set by the i n t e r p l a y of supply and demand and g e n e r a l l y respond to an increase or decrease i n the productive c o s t .  Thus, any r e a l property tax that has  almost a u n i v e r s a l e f f e c t on a l l p r o p e r t i e s used for the same purpose can be s h i f t e d to the ultimate users of the product. In the case of r e a l property taxes on farm l a n d , the extent to which^ they can be s h i f t e d a l s o l a r g e l y depends on the u n i v e r s a l i t y of the t a x .  Since the tax r a t e i s e s t a b l i s h e d  at the l o c a l government l e v e l , the r e a l property tax i n one p a r t i c u l a r tax d i s t r i c t bears no r e l a t i o n s h i p to the r e a l property tax i n a d i f f e r e n t tax d i s t r i c t even though the farm produce from the d i f f e r e n t d i s t r i c t s competes on the same market.  Therefore, any increase i n r e a l property taxes i n a  p a r t i c u l a r tax d i s t r i c t w i l l f a l l d i r e c t l y on the farm operator i n that d i s t r i c t as he cannot increase the p r i c e of h i s products due to competitive a c t i o n from areas where there was no increase i n t a x e s .  This means that farm operators l o c a t e d i n  areas near urban centres, i n which r e a l property taxes are i n c r e a s i n g , cannot s h i f t the increased amount and must employ  55  other methods to escape the  taxes.  The E f f e c t of Property Taxes on Farm Land Since the farm operators u s u a l l y cannot s h i f t r e a l property taxes, these taxes have a very d i r e c t upon the use of farm l a n d .  the  effect  Taxation modifies the a l l o c a t i o n of  land between farm and non-farm uses as w e l l as modifying the p a t t e r n and i n t e n s i t y of i t s use In a g r i c u l t u r e . ^  2  Property taxes can be used to force a conversion of land to more i n t e n s i v e uses, when s u i t a b l e demand a r i s e s  for  these uses and when the land i n question i s s u i t e d to the i n t e n s i v e use.  When these conditions do not e x i s t , taxes can  have an i n j u r i o u s effect i n b r i n g i n g about the waste of land that comes w i t h premature developments."^  When land i s used In  i t s highest c a p a c i t y , property taxes g e n e r a l l y do not p r o h i b i t t h i s use.  The tax i s a f i x e d charge and therefore  does not  influence production d e c i s i o n s i n regard to e i t h e r the method or the i n t e n s i t y of use.  An exception occurs when the land i s  not used i n i t s most productive c a p a c i t y .  In t h i s case, a  property tax and the r e s u l t i n g reduction i n income place a d d i t i o n a l pressure on the owner to u t i l i z e the land more e f f e c t i v e l y or to s e l l i t .  Farm uses are g e n e r a l l y considered  to be low c a p a c i t y uses and therefore  an increase i n property  taxes on farm land tends to reduce the farm land income, and to encourage the owner to convert the land to a higher capacity use.  With the demand for land for urban development  56  i n the suburban a r e a s ,  i t i s o n l y n a t u r a l t h a t the farm l a n d  i s converted t o non-farm uses.  Thus, when the p r o p e r t y  taxes  on a p a r t i c u l a r p a r c e l o f farm l a n d absorb a s i z e a b l e p o r t i o n of the n e t r e t u r n t o the l a n d , or exceed i t , the operator can o n l y s e l l the land or convert  the use of the land to non-farm  uses. Property  Taxes and S e r v i c e s Received As mentioned i n Chapter I , one of the consequences o f  the premature c o n v e r s i o n increase  i n property  of farm l a n d t o non-farm uses i s the  taxes w i t h i n the j u r i s d i c t i o n i n which  the premature c o n v e r s i o n  i s occurring.  A large proportion of  the c o s t of s e r v i c e s t o the ne\7 s c a t t e r e d s u b d i v i s i o n s  falls  on the m u n i c i p a l i t y , which i n t u r n d i s t r i b u t e s the c o s t among the r e a l p r o p e r t y municipality.  owners w i t h i n the j u r i s d i c t i o n of the  The s c a t t e r e d urban development i s the g r e a t e s t  cause of i n c r e a s i n g expenditures i n suburban m u n i c i p a l i t i e s , and  a l a r g e p o r t i o n o f these expenditures f a l l on farm  i n the form of p r o p e r t y conducted i n Ontario  taxes.  property  T h i s i s borne out i n s t u d i e s  and B r i t i s h Columbia.  In a study conducted i n Westminster Township,  Ontario,  i t was concluded t h a t "the average suburban person r e c e i v e s township s e r v i c e s t o twice as great a value as the average farm person, but pays only h a l f as much as the average farm person towards p r o v i s i o n o f those s e r v i c e s . " " 1 4  Ralph Krueger  conducted a study i n a d i f f e r e n t township i n Ontario t o  57  determine i f t h e s e c o n c l u s i o n s c o u l d be a p p l i e d t o a l l r u r a l urban f r i n g e a r e a s , or i f W e s t m i n s t e r Township was m e r e l y a unique c a s e .  From h i s s t u d y i n L o u t h Township, O n t a r i o , he  c o n c l u d e d t h a t the average non-farm u n i t r e c e i v e s e i g h t y - t w o d o l l a r s more i n s e r v i c e s  approximately  than i t y i e l d s i n taxes  and t h a t the average farm u n i t p a i d a p p r o x i m a t e l y d o l l a r s more than i t r e c e i v e d i n s e r v i c e s . " ^  sixty-five  Krueger a l s o  found t h a t the t a x y i e l d s of farms tend t o be p r o p o r t i o n a l t o t h e i r costs of s e r v i c e s ,  whereas the t a x y i e l d s of non-farm  u n i t s tend t o be i n v e r s e l y p r o p o r t i o n a l t o t h e i r c o s t of services. A s i m i l a r study conducted i n the Lower M a i n l a n d R e g i o n of B r i t i s h Columbia produced s i m i l a r f i n d i n g s . ^  This  s t u d y , done i n 1954, showed t h a t a t t h a t time farm a r e a s p a i d more i n t a x e s t h a n t h e y r e c e i v e d i n s e r v i c e s .  The s t u d y a r e a  was d i v i d e d i n t o t h r e e c a t e g o r i e s and when the revenues e x p r e s s e d as a p e r c e n t a g e o f the e x p e n d i t u r e s , averages f o r the c a t e g o r i e s w e r e : t h i r t y - s i x percent,  areas f e l l  surplus  sprawl areas s e v e n t y - s i x  of revenues  statistical  farm a r e a s one hundred and  suburban a r e a s n i n e t y - s i x p e r c e n t . considerable  the  were  p e r c e n t and  The farm a r e a s produced a  over e x p e n d i t u r e s ,  the s p r a w l  s h o r t of p a y i n g f o r the m u n i c i p a l e x p e n d i t u r e s  they  r e q u i r e d , and the suburban a r e a s , on t h e a v e r a g e , came c l o s e t o p a y i n g t h e i r own way. J . W . W i l s o n , E x e c u t i v e D i r e c t o r of the Lower M a i n l a n d R e g i o n a l P l a n n i n g B o a r d , s t a t e s t h a t the s t u d y conducted i n the  58  Lower Mainland Region shows that two assumptions which a r e made when using land as a b a s i s f o r t a x a t i o n a r e n o t p r o p e r l y a p p l i c a b l e i n areas such as the Lower Mainland Region.  One  assumption i s t h a t land i s a proper index of tax-paying a b i l i t y f o r both the u r b a n i t e and the farmer. t h a t land area i s a proper index of m u n i c i p a l "Obviously,  The other i s costs.  land should not be used as p a r t of the t a x base  without due c o n s i d e r a t i o n f o r the t y p i c a l areas i n v o l v e d . " ' ' 1  Summary and Restatement of Hypothesis The  t r e n d towards i n c r e a s i n g urban p o p u l a t i o n i s  i n c r e a s i n g the demand f o r urban l a n d . i s p l a c i n g pressure  on farm land owners to convert  from farm uses t o non-farm uses. techniques,  T h i s i n c r e a s i n g demand  The present  their  land  land use c o n t r o l  of which zoning and s u b d i v i s i o n c o n t r o l a r e  predominantly used, have proven, i n a m a j o r i t y of cases,  t o be  i n e f f e c t i v e i n c o n t r o l l i n g the expanding urban development. As a r e s u l t , acres of farm land a r e being t o non-farm uses.  prematurely  converted  T h i s , combined w i t h the sprawl development  which has taken p l a c e on both farm and non-farm l a n d , has r e s u l t e d i n i n c r e a s e d s e r v i c e c o s t s f o r the l o c a l governments. The  i n c r e a s e d s e r v i c e c o s t s have i n t u r n r e s u l t e d i n i n c r e a s e d  property these  taxes and the farm land i s b e a r i n g  the m a j o r i t y of  taxes. Since an i n c r e a s e i n farm taxes reduces the n e t  r e t u r n to the farm l a n d , t h i s a c t i o n f o r c e s the farm l a n d t o be  59  u t i l i z e d more i n t e n s i v e l y .  I n order t o do t h i s , the farm land  i s converted t o a d i f f e r e n t use such as r e s i d e n t i a l use. I f t h i s c o n v e r s i o n process o c c u r r e d o n l y when there was a d e f i n i t e need f o r more l a n d f o r urban uses, the problems r e s u l t i n g from the c o n v e r s i o n would be reduced.  However, the  removal of farm l a n d from farm uses has u s u a l l y o c c u r r e d w e l l i n advance o f the a c t u a l need  f o r the l a n d f o r urban uses.  The purpose o f t h i s t h e s i s i s t o examine what e f f e c t a r e d u c t i o n i n farm taxes would have i n p r e v e n t i n g the premature c o n v e r s i o n o f farm l a n d t o non-farm  uses.  Rather than reduce  farm taxes by an a r b i t r a r y f i g u r e , the r e d u c t i o n i n taxes i s based on the theory that p r o p e r t y taxes should be r e l a t e d t o the municipal services provided. o r d i n a t e d urban development  A d m i t t e d l y , c e s s a t i o n o f unco-  would r e s u l t i n lowering m u n i c i p a l  expenditures and r e d u c i n g taxes on farm l a n d ; but t h i s does n o t remove the problem of farm land c o n t r i b u t i n g more i n taxes than i t receives i n services.  The r o o t o f t h i s problem l i e s i n the  i n d i s c r i m i n a t e use of l a n d as one of the two bases f o r m u n i c i p a l t a x assessment.  The present use seems a reasonable  enough b a s i s i n a f a i r l y homogeneous a r e a , whether urban or r u r a l , but i t does not seem j u s t i f i e d when a p p l i e d without d i s c r i m i n a t i o n t o both urban and farm land w i t h i n one t a x a t i o n district.  Thus, w i t h the assumption that r e a l p r o p e r t y taxes  should be based on the s e r v i c e s r e c e i v e d , c o n s i d e r a t i o n i s g i v e n t o the two main types o f l a n d use, that i s , farm use and  60  non-farm use.  This assumption i s l i m i t e d i n that i t i s not  c a r r i e d through to the d i f f e r e n t types of land use w i t h i n the farm category and the non-farm category, but refers only to farm and non-farm use. The property taxes l e v i e d on the two types of property could be r e l a t e d to the cost of s e r v i c e s provided for the r e s p e c t i v e property e i t h e r by e s t a b l i s h i n g a d i f f e r e n t l e v e l of assessment or a separate tax r a t e .  Since the  assessment system i s u s u a l l y very d e t a i l e d and complicated, the e a s i e s t method of obtaining t h i s r e l a t i o n s h i p i s by accepting the present assessment system and adjusting the tax r a t e to r e l a t e the property taxes to the cost of s e r v i c e s provided. Accepting the assumption that farm property taxes should be r e l a t e d t o the cost o f s e r v i c e s provided for such property, and the fact that high farm taxes may cause the premature conversion of farm land to non-farm uses, then i t i s proposed:  THAT A TAX RATE RELATED TO THE COST OF SERVICES  PROVIDED FOR FARM PROPERTY WOULD REDUCE FARM TAXES AND THEREBY PROTECT FARM LAND FROM PREMATURE CONVERSION TO NON-FARM USES.  REFERENCES 1  J . B . M i l n e r , "An I n t r o d u c t i o n to Zoning E n a b l i n g L e g i s l a t i o n , " The Canadian B a r R e v i e w . X L , No. 11 ( M a r c h , 1 9 6 2 ) , 8 6 .  Ibid.  2  3 c a n a d a , S t a t u t e s a t L a r g e . 31 V i c t o r i a , " B r i t i s h North America A c t . "  c.3  (1867),  i l n e r , 86. - ' E a r l L e v i n , " Z o n i n g i n C a n a d a , " Community P l a n n i n g R e v i e w ? V I I , No. 2 ( J u n e , 1957) ,~W. ^ R a l e i g h B a r l o w e , Land Resource Economics (Englewood P r e n t i c e - H a l l , I n c . , 1958), p . 495.  Cliffs:  ^ A . D . C r e r a r , "Land f o r Our F u t u r e , " Community P l a n n i n g R e v i e w . I X , N o . 2 ( J u n e , 1 9 5 9 ) , 44. ^ M a r i o n C l a w s o n , "Suburban Development D i s t r i c t s , " J o u r n a l of The A m e r i c a n I n s t i t u t e o f P l a n n e r s . X X V I , N o . 2 (May, I 9 6 0 ) , 7 1 . " ™~ ^American S o c i e t y o f P l a n n i n g O f f i c i a l s , New Techniques f o r Shaping Urban E x p a n s i o n , I n f o r m a t i o n R e p o r t No. 160. P r e p a r e d by The A . S . P . O . P l a n n i n g A d v i s o r y S e r v i c e (Chicago: American S o c i e t y of P l a n n i n g O f f i c i a l s , 1962), p. 2. 1G  Barlowe,  11  517, q u o t i n g J u l i u s Sackman and R u s s e l l Van B r u n t , The Law of Eminent Domain (New Y o r k : Matthew Bender and Company, 1 9 5 0 ) , V o l . I , p . 2 .  C e n t r a l Mortgage and Housing C o r p o r a t i o n . B u i l d e r s ' B u l l e t i n . Number 113 (Ottawa: C e n t r a l Mortgage and Housing Corporation, i960).  IP  ^ F r e d r i c k D . S t o c k e r , "How Taxes A f f e c t the Land and F a r m e r s , " L a n d . The Yearbook of A g r i c u l t u r e . 1958 (Washington: The U n i t e d S t a t e s Department of A g r i c u l t u r e , 1 9 5 8 ) , p . 240. •^Barlowe,  546. 61  62  Ralph Krueger, "The Rural-Urban F r i n g e T a x a t i o n Problem: A Case Study of Louth Township," Land Economics XXXIII, No."3 (August, 1 9 5 7 ) , 264, quoting A . J . B a r k e r , Urban Drones i n R u r a l H i v e s (London: London Suburban P l a n n i n g Board, 1 9 4 9 ) 7 " X r u e g e r , 268. 'Lower Mainland R e g i o n a l P l a n n i n g Board of B r i t i s h Columbia, Economic Aspects o f Urban Sprawl (New Westminster: The Lower Mainland R e g i o n a l P l a n n i n g Board of B r i t i s h Columbia, 1 9 5 6 ) , 4 5 pp. James W. W i l s o n , "Some Thoughts on Sprawl," Urban Land. XV, No. 7 (July-August, 195&), 7.  CHAPTER I I I FARM PROPERTY TAXATION: To t e s t the hypothesis:  COSTS AND BENEFITS that a tax r a t e r e l a t e d to the  cost of services provided for farm property would reduce farm taxes and thereby protect farm land from premature conversion to non-farm uses, a case study was conducted using s t a t i s t i c s c o l l e c t e d from The Corporation of the Township of Richmond, a suburban m u n i c i p a l i t y adjacent to the C i t y of Vancouver i n B r i t i s h Columbia.  Richmond was selected for the case study  f o r two main reasons.  F i r s t , the m u n i c i p a l i t y was  predominantly r u r a l i n c h a r a c t e r , but due to i t s proximity to the C i t y of Vancouver (Figure 2, page 64) i t has r a p i d l y become urbanized during the past ten years.*-  As shown i n  Figure 3 , page 6 5 , a large percentage of the s o i l i n the m u n i c i p a l i t y i s very f e r t i l e and extremely s u i t a b l e for farm use.  With the development of the urban areas i n the  m u n i c i p a l i t y , acres of the f e r t i l e s o i l used for  farming  purposes have been converted to non-farm uses, e s p e c i a l l y r e s i d e n t i a l use.  In 1 9 6 l , approximately t h i r t y - n i n e  percent  of the land i n the m u n i c i p a l i t y was c l a s s i f i e d as farm land f o r assessment p u r p o s e s .  2  Therefore,  Richmond represents a t y p i c a l  m u n i c i p a l i t y i n t r a n s i t i o n from a r u r a l to an urban character and i s h i g h l y subject to the premature conversion of farm land 63  RICHMOND,  Source^  BRITISH  COLUMBIA, IN T H E METROPOLITAN  COMPLEX  Technical Committee for Metropolitan Highway Planning, A Study on Highway Planning, Part 2 , A Report Prepared by the City Engineering Department (Vancouver; Technical Committee for Metropolitan Highway Planning, 1958-1959) p. I.  TYPES  OF  SOIL  AND  URBANIZED A R E A , RICHMOND, BRITISH  COLUMBIA  Source: Lower Mainland Regional Planning Board of British Columbia, Land For Forming. (New Westminster- Lower Mainland Regional Planning Board 67 British Columbia, 1962.) p. 7.  66  to non-farm uses. The second reason f o r the s e l e c t i o n of Richmond over other r u r a l - u r b a n m u n i c i p a l i t i e s located near Vancouver was that the t a x a t i o n system used i n t h i s m u n i c i p a l i t y , and the assessment records kept by the municipal o f f i c i a l s , were such that the r e q u i r e d s t a t i s t i c s could be e x t r a c t e d and processed w i t h i n the time a v a i l a b l e f o r the study and w i t h a l i m i t e d knowledge of the municipal accounting p r a c t i c e s . The time a v a i l a b l e f o r the case study excluded the p o s s i b i l i t y of using data representing a s e r i e s of y e a r s . Thus, one p a r t i c u l a r year was selected as a b a s i s for the study.  The year 1961 was s e l e c t e d because of the a v a i l a b i l i t y  of p o p u l a t i o n s t a t i s t i c s , and the f a c t that the assessment f i g u r e s could be obtained from the 1961 assessment r o l l without causing undue inconvenience f o r the municipal concerned.  officials  Since i t was impossible to e s t a b l i s h a trend i n the  l e v e l of farm t a x a t i o n over a number of years, the representative q u a l i t y of t h i s data i s unknown. In t h i s chapter, the t a x a t i o n system used i n B r i t i s h Columbia i s examined to i l l u s t r a t e the r e l a t i o n s h i p between farm and non-farm property t a x a t i o n .  A f t e r e s t a b l i s h i n g the  b a s i s of the farm t a x a t i o n , the municipal revenues and expenditures f o r Richmond are apportioned to the farm and nonfarm p r o p e r t y .  The purpose of these c a l c u l a t i o n s i s to  determine whether the municipal revenues r e c e i v e d from the farm property exceeded the municipal expenditures which could  be a t t r i b u t e d to the farm property.  The r e s u l t s of these  c a l c u l a t i o n s w i l l then be used as a b a s i s f o r e s t a b l i s h i n g a tax rate r e l a t e d to the cost of s e r v i c e s provided for the farm property w i t h i n the m u n i c i p a l i t y . Functions of M u n i c i p a l Government The c o n s t i t u t i o n a l basis for l o c a l or municipal government i n Canada i s contained i n The B r i t i s h North America A c t , 1867.3  S e c t i o n 92 of the Act assigns municipal  i n s t i t u t i o n s i n Canada to the j u r i s d i c t i o n of the p r o v i n c e s . The municipal i n s t i t u t i o n s are instruments of l o c a l  self-  government, and the exercise of t h e i r powers l i e s w i t h the e l e c t e d r e p r e s e n t a t i v e s of the l o c a l p o p u l a t i o n , but they receive a l l t h e i r c o n s t i t u t i o n a l powers from p r o v i n c i a l authority. M u n i c i p a l i t i e s i n Canada perform functions and provide s e r v i c e s which are both mandatory and permissive under Provincial legislation.  In B r i t i s h Columbia, the general  powers and functions of the m u n i c i p a l i t i e s are defined i n the 4 cr ' M u n i c i p a l A c t ' and the 'Vancouver Incorporations A c t , and f >  a d d i t i o n a l duties are imposed upon them by such l e g i s l a t i o n as the ' P u b l i c Schools A c t , ' the ' H e a l t h A c t , Act,  1  the ' J u v e n i l e Courts A c t ,  1  1  the  'Hospitals  and various other A c t s .  The functions which are mandatory for B r i t i s h Columbia m u n i c i p a l i t i e s , r e l a t e p r i n c i p a l l y to matters which are of wider than l o c a l concern, which require c e r t a i n minimum  68  standards and which are financed both by the Province and the municipalities.  These matters are education, s o c i a l w e l f a r e ,  h e a l t h and h o s p i t a l i z a t i o n , and the a d m i n i s t r a t i o n of j u s t i c e . The permissive functions u s u a l l y cover the p r o v i s i o n of s e r v i c e s which are of p e c u l i a r l y l o c a l concern and which are g e n e r a l l y considered the proper r e s p o n s i b i l i t y of l o c a l government, to be exercised as desired by the l o c a l i n h a b i t a n t s and as required by l o c a l c o n d i t i o n s .  These  s e r v i c e s include the p r o t e c t i o n of persons and property, enforcement and s u p e r v i s i o n of s a n i t a r y r e g u l a t i o n s ,  the  the  c o n s t r u c t i o n and maintenance of p u b l i c parks, s t r e e t s , s i d e walks, and s t r e e t l i g h t s , the c o l l e c t i o n and d i s p o s a l of sewage and garbage, the operation of municipal u t i l i t i e s , the l i c e n c i n g of trades and p r o f e s s i o n s , and the p r o v i s i o n of other s e r v i c e s to protect s a f e t y , h e a l t h , property, and morals of the  inhabitants. M u n i c i p a l expenditures are determined p a r t i a l l y by the  l o c a l i n h a b i t a n t s and p a r t i a l l y as a r e s u l t of mandatory r e s p o n s i b i l i t i e s imposed on the m u n i c i p a l i t y by p r o v i n c i a l statutes.  The province shares i n f i n a n c i n g c e r t a i n s e r v i c e s  of more than l o c a l i n t e r e s t by way of per c a p i t a grants and special grants.  To meet the l e v e l of municipal expenditures  r e q u i r e d , the m u n i c i p a l i t i e s have been granted c e r t a i n powers to r a i s e revenues.  Under these powers, the p r i n c i p a l sources  of municipal revenue are the t a x a t i o n of land and improvements trade l i c e n c e s , s p e c i a l fees and r e n t a l s , f i n e s and p e n a l t i e s ,  69  and miscellaneous taxes such as a road t a x , a dog t a x , a l i b r a r y t a x , a v e h i c l e t a x , and a p o l l t a x .  Additional  sources  of revenue f o r the m u n i c i p a l i t i e s are obtained from P r o v i n c i a l and Federal government g r a n t s , and i n some cases, p r o f i t s from m u n i c i p a l l y owned u t i l i t i e s .  Table 2 i l l u s t r a t e s that the r e a l  property tax i s the l a r g e s t source of municipal revenue i n B r i t i s h Columbia, while Figure 4 , page 70, shows the sources of revenue and the d i s t r i b u t i o n of the expenditures for Richmond f o r the f i s c a l year ending December 31, 1961. TABLE 2 GENERAL REVENUE FOR BRITISH COLUMBIA MUNICIPALITIES,  Type of M u n i c i p a l i t y  I96I  Source of Revenue Property,Taxes  %  Other Sources  %  Cities  59-5  40.5  Districts  71.7  28.3  Towns  55.2  44.8  Villages  60.8  39.2  C i t y of Vancouver  66.9  33.1  Source: M u n i c i p a l S t a t i s t i c s f o r the Year Ended December 31? 196l> Department of M u n i c i p a l A f f a i r s , Province of B r i t i s h Columbia, V i c t o r i a .  70  RICHMOND, REVENUE  BRITISH  COLUMBIA  AND EXPENDITURE  For the Year Ending December 31,  Revenue  MUNICIPAL SCHOOL LEVY  GOVERNMENT  GRANTS  GENERAL MUNICIPAL LEVY  (%)  (%)  Expenditure  33.4  33.4  MUNICIPAL SCHOOL GRANT  8.5  GENERAL GOVERNMENT  8.7  PROTECTION TO PERSONS AND PROPERTY  16.3  PUBLIC  3.9  HEALTH AND SANITATION  9.4  SOCIAL  4.1  RECREATION  5.8  DEBT CHARGES  6.1  UTILITIES AND LOAN FUND  1.2 2.6  MISCELLANEOUS  17.0  38.7  SPECIAL ASSESSMENTS LICENCES AND PERMITS  2.0 3.8  INTEREST AND FINES MISCELLANEOUS  3.3  TOTAL Source  :  1961  100.0  100.0  WORKS  WELFARE  RESERVE FUND TOTAL  Richmond Financial Statements and Annual Reports, 1961 > pp. 6 and 7.  Figure 4  71  Assessment and T a x a t i o n L e g i s l a t i o n i n B r i t i s h Columbia The E v o l u t i o n of Assessment Taxation L e g i s l a t i o n The  first  and  act providing  f o r the i n c o r p o r a t i o n  m u n i c i p a l i t i e s i n B r i t i s h Columbia and powers of the m u n i c i p a l i t i e s was  of  s e t t i n g f o r t h the  passed i n 1872.  This  Act  granted the m u n i c i p a l i t i e s the power t o l e v y a r a t e on c e r t a i n property  f o r the purpose of meeting the expenses of  municipality.  S e c t i o n 24,  sub-section  the  6 reads:  The c o u n c i l may i n each and every year a f t e r the f i n a l r e v i s i o n of the r o l l pass a by-law f o r l e v y i n g a r a t e on a l l the r e a l and p e r s o n a l p r o p e r t y on the s a i d r o l l , to provide f o r a l l the n e c e s s a r y expenses of s a i d m u n i c i p a l i t y , and a l s o f o r such sum or sums of money as may be found expedient.7 Under t h i s A c t ,  the m u n i c i p a l i t i e s d i d not have  power to exempt improvements and  the land and  the  improvements  g which were exempt were s p e c i f i e d i n the A c t . t h i s A c t passed i n 1873  and  1874  Amendments t o  s t i l l d i d not grant any  to the m u n i c i p a l i t i e s to exempt improvements. Municipal granting  Act  of 1891?  a d e c i s i v e step was  t h i s power to the m u n i c i p a l i t i e s .  However, by  taken towards S e c t i o n 121  t h i s A c t c o n t a i n s the f o l l o w i n g : Notwithstanding any law t o the c o n t r a r y , i t s h a l l be l a w f u l f o r the C o u n c i l of any m u n i c i p a l i t y to pass a by-law d e c l a r i n g t h a t a d i s t i n c t i o n , f o r the purpose of assessment, w i t h i n the m u n i c i p a l i t i e s , s h a l l be made between ' l a n d and 'improvements!;9 1  power  of  the  72  Sub-section  (a) of the same S e c t i o n grants power t o the  m u n i c i p a l i t i e s t o pass by-laws f o r the a s s e s s i n g of l a n d a t i t s a c t u a l cash v a l u e , as i t would be a p p r a i s e d i n payment of a j u s t debt from a s o l v e n t d e b t o r .  In s u b - s e c t i o n (b) of the  same S e c t i o n , power i s granted t o pass by-laws f o r the purpose of  a s s e s s i n g improvements not i n excess  of f i f t y percent  of  t h e i r a c t u a l cash v a l u e , or to exempt a l l improvements from assessment and  taxation.  I n I 8 9 6 , an important of  change w i t h r e g a r d t o assessment  improvements came w i t h the p a s s i n g of the  Clauses A c t '  (now  the  'Municipal A c t ) . 1  1 0  'Municipal  T h i s A c t was  made to  apply t o a l l m u n i c i p a l i t i e s except where c l a u s e s of a s p e c i a l act of  were repugnant to i t . l a n d and  The A c t p r o v i d e s f o r the assessment  improvements at a c t u a l cash v a l u e , ". . . a s  they  would be a p p r a i s e d i n payment of a j u s t debt from a s o l v e n t debtor, but l a n d and separately'';i  11  improvements s h a l l be  assessed  Power i s g i v e n to the m u n i c i p a l c o u n c i l to pass  a by-law f o r the t a x i n g of p r o p e r t y as i n the assessment r o l l , but the tax on improvements must not be l e v i e d on more than f i f t y percent of t h e i r assessed v a l u e , and  improvements may  t o t a l l y exempt at the d i s c r e t i o n of the c o u n c i l . * A c t was  2  In 1932,  passed to i n c r e a s e the l e v e l at which improvements  c o u l d be taxed from f i f t y percent Farm land and treatment  to s e v e n t y - f i v e  percent.*^  improvements have r e c e i v e d s p e c i a l  with regard to t a x a t i o n .  In 1 9 3 ° , the P r o v i n c i a l  be an  73  government enacted l e g i s l a t i o n which s t a t e d that farm l a n d s h a l l be assessed at the value which i t has purposes.*-  4  During the 1948  f o r farm  s e s s i o n , the P r o v i n c i a l  L e g i s l a t u r e enacted l e g i s l a t i o n which granted a f i v e  thousand  d o l l a r exemption f o r t a x a t i o n purposes to farm improvements, excluding  the farm residence.*-5  farm land i n 1961 one  An  w i t h the passing  thousand d o l l a r exemption per  exemption was  granted  of a c l a u s e p e r m i t t i n g 'farm u n i t ' f o r  to a  school  t a x a t i o n purposes. *-^ Legislation in As  196l  of I 9 6 I ,  the M u n i c i p a l A c t  s t a t e s t h a t land  and  improvements s h a l l be assessed at t h e i r a c t u a l v a l u e . degree t o which the improvements may  be taxed i s a t  the  d i s c r e t i o n of the l o c a l a u t h o r i t y , w i t h the e x c e p t i o n they are not to be taxed a t a value percent  of the assessed  exceeding  The  that  seventy-five  value.  A l l assessment and  t a x a t i o n procedures which apply  the m u n i c i p a l i t i e s i n B r i t i s h Columbia, e x c l u d i n g  to  the C i t y of  Vancouver, are o u t l i n e d i n d e t a i l i n the M u n i c i p a l Act.*-? When a s s e s s i n g may  l a n d and  improvements, the M u n i c i p a l  give c o n s i d e r a t i o n to the present  use,  Assessor  location, original  c o s t , c o s t of replacement, r e n t a l v a l u e , the p r i c e which the property  might be expected to b r i n g i f s o l d , and  circumstances which may  a f f e c t the value.*-  8  to any  Certain  other  properties  w i t h i n the m u n i c i p a l i t i e s r e c e i v e s p e c i a l c o n s i d e r a t i o n  and  74  these p r o p e r t i e s , as l i s t e d i n the M u n i c i p a l A c t , may  be  p a r t i a l l y or w h o l l y e x e m p t . ^ Farm improvements r e c e i v e s p e c i a l exemption as o u t l i n e d i n S e c t i o n 327 of the M u n i c i p a l  Act:  ( i ) A l l improvements (other than d w e l l i n g s and those f i x t u r e s , machinery, and s i m i l a r t h i n g s mentioned i n sub-clause ( i i ) of t h i s c l a u s e ) e r e c t e d upon or a f f i x e d to farm lands and used e x c l u s i v e l y i n the o p e r a t i o n of a farm, up to but not exceeding a value of f i v e thousand dollars: ( i i ) The f i x t u r e s , machinery, and s i m i l a r t h i n g s l o c a t e d on farm land which, i f e r e c t e d or p l a c e d i n , upon, or under or a f f i x e d to l a n d , thereon, or thereunder, would, as between l a n d l o r d and tenant, be removable by the tenant.20 As p r e v i o u s l y mentioned, land which i s c l a s s i f i e d farm land i s assessed on the b a s i s of i t s value purposes o n l y .  The  as  f o r farming  c r i t e r i a used t o c l a s s i f y land as farm  land i s o u t l i n e d i n d e t a i l i n the M u n i c i p a l A c t and  includes  c o n s i d e r a t i o n of the p o r t i o n of land under c u l t i v a t i o n or used f o r a g r i c u l t u r a l purposes, the time devoted to the use land by the owner or tenant, and value  of the products and  p a r c e l s of f i v e a c r e s  may  be  acres  the  the r e l a t i o n s h i p between the  the area  of the l a n d .  A l l land i n  or more i s c l a s s i f i e d as farm l a n d i f  these requirements are land of two  of  satisfied.  or more, and  In the case of a p a r c e l of  l e s s than f i v e a c r e s  i n size, i t  c l a s s i f i e d as farm land i f the owner or o c c u p i e r  receives  the g r e a t e r p a r t of h i s t o t a l annual income from the p a r c e l . In Richmond, where the case study was t a x a t i o n on a l l taxable  land i s l e v i e d on one  2 1  conducted, l o c a l hundred percent  of  75  the assessed land v a l u e :  the assessed value being f i f t y  cent of the f u l l l a n d v a l u e .  The percentage  per-  of the assessment  upon which taxes f o r m u n i c i p a l purposes may be l e v i e d on improvements i s e s t a b l i s h e d a t the d i s c r e t i o n o f the c o u n c i l , but i s a c t u a l l y a p p l i e d a t the maximum of s e v e n t y - f i v e p e r c e n t . The  assessed value o f the improvements, i n c l u d i n g equipment, i s  equal t o f i f t y percent of t h e market v a l u e . purposes,  the percentage  For school  o f the assessed value which may be  s u b j e c t t o t a x a t i o n i s mandatory a t s e v e n t y - f i v e p e r c e n t . a d d i t i o n t o t h i s , there are exemptions f o r farm The  In  improvements.  farm d w e l l i n g i s s u b j e c t t o t a x a t i o n as a r e a l l other  d w e l l i n g s i n the m u n i c i p a l i t y , but there i s a maximum exemption of  f i v e thousand d o l l a r s f o r improvements used e x c l u s i v e l y i n  the o p e r a t i o n o f a farm.  Farm l a n d i s a l s o granted an  exemption f o r s c h o o l t a x a t i o n purposes w i t h a maximum exemption of  one thousand d o l l a r s per 'farm u n i t '  value  2 2  from the assessed  allowed. Apportionment o f M u n i c i p a l Revenue and Expenditure The  aim o f t h i s study i s t o determine the r e l a t i o n s h i p  between the farm p r o p e r t y taxes and the c o s t of s e r v i c e s p r o v i d e d f o r farm p r o p e r t y by a l l o t t i n g the m u n i c i p a l revenue and  expenditure  t o two types o f p r o p e r t y ; farm and non-farm.  In order t o a p p o r t i o n the revenue and expenditure  t o the farm  and non-farm p r o p e r t y i t was necessary t o separate the revenue and  expenditure  i n t o two c a t e g o r i e s ; one, t h a t which c o u l d be  76  d i r e c t l y r e l a t e d t o t h e farm and non-farm p r o p e r t y and the second,  t h a t w h i c h had t o be r e l a t e d i n d i r e c t l y by a p p o r t i o n i n g  i t on a per c a p i t a b a s i s .  To d i s t r i b u t e t h e revenue  and  e x p e n d i t u r e on a per c a p i t a b a s i s n e c e s s i t a t e s a b a s i c assumption t h a t t h e s e revenues t o t h e s i z e o f the p o p u l a t i o n .  and e x p e n d i t u r e s  are p r o p o r t i o n a l  B e f o r e any d i s t r i b u t i o n c o u l d be  made, i t was n e c e s s a r y t o e s t i m a t e b o t h the t o t a l farm p o p u l a t i o n and t h e number of farm c h i l d r e n a t t e n d i n g Population  school.  Estimates  There were no r e c o r d s r e v e a l i n g t h e 1961 farm p o p u l a t i o n i n Richmond and t h e r e f o r e the a v a i l a b l e  i t was n e c e s s a r y t o  use  i n f o r m a t i o n t o e s t i m a t e the farm p o p u l a t i o n .  The t o t a l p o p u l a t i o n f o r the m u n i c i p a l i t y and a d i s t r i b u t i o n o f t h i s p o p u l a t i o n i n t o t h i r t y - f i v e census enumeration was a v a i l a b l e . farms,  districts  The t o t a l number o f d w e l l i n g s , the number o f  and the average f a m i l y s i z e f o r each enumeration  d i s t r i c t was a l s o a v a i l a b l e . 3 2  An e s t i m a t e o f the  total  number of farm d w e l l i n g s was o b t a i n e d , by d e t e r m i n i n g the number of f a r m d w e l l i n g s a s s e s s e d and l i s t e d i n the assessment roll,2^  By making a p r o p o r t i o n a l adjustment  t o compensate f o r  the d i s c r e p a n c y between the 489 farms as d e f i n e d by the Dominion B u r e a u o f S t a t i s t i c s 2 ^  and the 418 c l a s s i f i e d  farm  26  u n i t s as d e f i n e d by the M u n i c i p a l A c t  i t was p o s s i b l e  e s t i m a t e the number of farm d w e l l i n g s as d e f i n e d i n t h i s i n each census enumeration d i s t r i c t .  to study,  77  The c a l c u l a t e d number of farm d w e l l i n g s i n each enumeration d i s t r i c t was then m u l t i p l i e d by the average number of persons per dwelling u n i t i n each enumeration d i s t r i c t to give the farm p o p u l a t i o n for each d i s t r i c t .  Since  the average family s i z e i n f i v e census enumeration d i s t r i c t s which were predominantly farm areas was smaller than the average family s i z e of the m u n i c i p a l i t y , an adjustment was made to the average number of persons per dwelling i n each census enumeration d i s t r i c t .  This adjustment was made on the  assumption that the average farm family was smaller than the average non-farm f a m i l y , and therefore the number of persons per farm d w e l l i n g would be l e s s than the number of persons per non-farm d w e l l i n g .  The t o t a l 1961 farm p o p u l a t i o n f o r the  m u n i c i p a l i t y was estimated to be  1,373<>  The same method was employed to estimate the number of farm c h i l d r e n attending s c h o o l . c h i l d r e n i n the m u n i c i p a l i t y i n  The average number of school 1961  was  9,5&3»  By  c a l c u l a t i n g the average number of school c h i l d r e n per dwelling and again making an adjustment to allow f o r the smaller farm family s i z e , i t was p o s s i b l e to estimate the number of farm c h i l d r e n i n each enumeration d i s t r i c t attending s c h o o l .  The  number of farm c h i l d r e n attending school was estimated at 315»  78  Allotment of the M u n i c i p a l Revenue and Expenditure M u n i c i p a l Revenue The only municipal revenue included i n the c a l c u l a t i o n s i s that derived from d i r e c t t a x a t i o n on r e a l property and from a Federal Government grant i n l i e u of property t a x e s .  All  other revenues were excluded i n order to reduce the e r r o r which a r i s e s when apportioning revenue and expenditure on a per capita basis.  The 1961 municipal revenue for Richmond was  apportioned to farm and non-farm property i n the f o l l o w i n g manner. Farm land assessments for municipal t a x a t i o n purposes and for school t a x a t i o n purposes, as w e l l as the assessments on farm improvements, were obtained from the municipal assessment roll.  These t o t a l s were then subtracted from the t o t a l  assessments for the m u n i c i p a l i t y to determine the assessments on the non-farm p r o p e r t y .  The d i f f e r e n t assessments were then  m u l t i p l i e d by the 1961 tax r a t e to determine the m u n i c i p a l revenue derived from t a x a t i o n of the farm and non-farm p r o p e r t y . Since the municipal tax rate was greater than the school tax r a t e , separate c a l c u l a t i o n s were made for each.  The Federal  Government grant i n l i e u of taxes was included w i t h the non-farm taxes as a l l Federal Government property i n the m u n i c i p a l i t y i s non-farm p r o p e r t y .  The r e s u l t s of apportioning the m u n i c i p a l  revenue are shown i n Table 3, page 79.  79  TABLE 3 APPORTIONMENT OF MUNICIPAL TAX REVENUES RICHMOND, I96I  Total Revenue Dollars Taxes - M u n i c i p a l Land Improvements  Farm Share % of Dollars Total  502,101 1,307,721 1,809,822  68,749 50,398 119,147  14 4  365,732 1,1?4,329 1,560,061  T o t a l Taxes  3,369,883  Grant i n l i e u of Taxes  57,093 3,426,976  - School Land Improvements  Municipal  Non-Farm Share % of Dollars Total  86 96  7  433,352 1,257,323 1,690,675  42,781 37,570 80,351  12 3 5  322,951 1,156,759 1,479,710  88 97 95  119,498  6  3,170,385  94  — -  0 6  57,093 100 3,227,478 94  119,49U  93  Expenditure  From an examination  o f the m u n i c i p a l e x p e n d i t u r e s i t  became e v i d e n t t h a t e d u c a t i o n and w e l f a r e were the o n l y m u n i c i p a l expenditures which c o u l d be f a i r l y apportioned t o farm and non-farm p r o p e r t y a c c o r d i n g t o the a c t u a l value of the services received.  The value of the remaining  expenditures  i n c l u d e d i n the c a l c u l a t i o n s have been a p p o r t i o n e d on a per capita basis.  By a p p o r t i o n i n g these e x p e n d i t u r e s i n t h i s  manner, the s e r v i c e c o s t s to i n d u s t r y and commercial  80  e s t a b l i s h m e n t s are i n c l u d e d w i t h the non-farm e x p e n d i t u r e s . T h i s was  done because of the d i f f i c u l t y of determining  the  exact s e r v i c e c o s t s of i n d u s t r i a l and commercial e s t a b l i s h m e n t s . A l t h o u g h t h i s does not a f f e c t the t o t a l expenditures  as  a p p o r t i o n e d t o the farm and non-farm p r o p e r t y , i t does i n t r o d u c e a s l i g h t e r r o r when the expenditures t o the non-farm p r o p e r t y are expressed as a d w e l l i n g u n i t c o s t . The m u n i c i p a l expenditures a p p o r t i o n e d are e q u i v a l e n t to the amount which had  t o be made up by the taxpayers of the  m u n i c i p a l i t y a f t e r government g r a n t s and other  miscellaneous  income were s u b t r a c t e d from the t o t a l m u n i c i p a l e x p e n d i t u r e . T h i s was  done i n order t o reduce  the e r r o r i n t r o d u c e d by  a p p o r t i o n i n g c e r t a i n m u n i c i p a l expenditures on a per  capita  b a s i s and does not i n f l u e n c e the o v e r a l l r e l a t i o n s h i p s i n c e the a d d i t i o n a l revenue and expenditure would be a p p o r t i o n e d on the same per c a p i t a b a s i s .  A l l expenditures which c o u l d be  i d e n t i f i e d w i t h l o c a l improvements were excluded because, i n such cases, each user pays f o r the s e r v i c e s r e c e i v e d . of s o c i a l w e l f a r e was as o n l y two  The c o s t  charged d i r e c t l y to the non-farm p r o p e r t y  of the approximately  s i x hundred w e l f a r e cases i n  the m u n i c i p a l i t y were c l a s s i f i e d as farm people by the Welfare Department.  Since the Welfare Department could not r e l e a s e the  names or addresses determine  of these people, i t was  impossible to  whether they would be c l a s s i f i e d as p a r t of the  farm  p o p u l a t i o n a c c o r d i n g t o the d e f i n i t i o n of a farm as used i n this  study.  81  The method used t o a p p o r t i o n the v a r i o u s between farm and non-farm p r o p e r t y was  expenditures  as f o l l o w s :  EducationNumber of farm p u p i l s T o t a l number of p u p i l s Remaining  x  Actual municipal cost  =  F  a  r  m  share  Expenditures-  Farm p o p u l a t i o n Total population  Expenditures  x  =  Farm share  By exchanging the word 'non-farm' f o r 'farm,' e x a c t l y the same procedure apportioned  was  used to determine the  to the non-farm p r o p e r t y .  s o c i a l w e l f a r e charged  The  expenditures  expenditures f o r  to the non-farm p r o p e r t y were only  c o s t s i n c u r r e d by the m u n i c i p a l i t y , t h a t i s , t o t a l  those  social  w e l f a r e c o s t s minus the P r o v i n c i a l Government s o c i a l a s s i s t a n c e grant. The r e s u l t s of a p p o r t i o n i n g the m u n i c i p a l are shown i n Table 4,  expenditures  page 8 2 .  A summary of the apportioned m u n i c i p a l revenue and expenditure  i s presented  i n T a b l e 5, page 8 2 .  Table 5 shows t h a t the taxes on farm  property  c o n t r i b u t e d 5*8 percent of the t o t a l tax revenue and o n l y 3*1 percent of the same sum farm p r o p e r t y .  The  of expenditures  are apportioned to the  t a b l e a l s o shows t h a t the farm  s u b s i d i z e d the non-farm p r o p e r t y by approximately in  1961.  property 92,753  dollars  82  TABLE 4 APPORTIONMENT OF MUNICIPAL EXPENDITURES, RICHMOND, 1961  Total Expenditure  Farm Share  Dollars Education  Dollars  1,562,114  Social  Welfare  123,686  Other  Expenses  1,741,176  % of Total  Dollars  3  1,510,564  97  -  123,686  100  3 3  1,685,981 3,320,231  97 97  51,550  — 55,195 106,745  3,426,976"  Non-farm Share  % of Total  TABLE 5 SUMMARY OF MUNICIPAL REVENUE AND EXPENDITURE APPORTIONED TO FARM AND NON-FARM PROPERTY, RICHMOND, I 9 6 I  Total Apportioned  Farm Dollars  Dollars  % of Total  Non-Farm Dollars  % of Total  Revenue  3,426,976  199,498  5.8  3,227,478  94.2  Expenditure  3,426,976  106,745  3.1  3,320,231  96.9  83  E v a l u a t i o n of the Revenue and Expenditure D i s t r i b u t i o n In I96I, Richmond contained 727 p a r c e l s of land which were c l a s s i f i e d as farm land under the M u n i c i p a l A c t . C a l c u l a t i n g the l e v i e d taxes on farm property on a per p a r c e l b a s i s , there was an average tax levy of 274- d o l l a r s per p a r c e l . The average cost of s e r v i c e s apportioned to the farm property was 146 d o l l a r s per p a r c e l .  Thus, f o r the year 1961, each  p a r c e l of farm land i n Richmond subsidized the non-farm property by an average of 128 d o l l a r s . These f i g u r e s i n d i c a t e a general r e l a t i o n s h i p r e s u l t i n g from apportioning the municipal tax revenues and an equal sum of expenditures between two types of property: and non-farm property.  farm property,  A further breakdown apportioning the  revenues and expenditures among the various types of property w i t h i n the two broad groups should r e s u l t i n the same general trend.  I f the apportionment to the non-farm property were  c a r r i e d one stage f u r t h e r , i t would probably r e v e a l that the commercial and i n d u s t r i a l property i n the m u n i c i p a l i t y paid more taxes i n r e l a t i o n to s e r v i c e s received than the r e s i d e n t i a l property.  P o s i t i v e data regarding the non-farm  revenue and expenditures i s not a v a i l a b l e , but the general r e l a t i o n s h i p i s i l l u s t r a t e d by municipal records which show that each residence i n Richmond requires an average of 127 d o l l a r s per year subsidy from other tax sources. 27  84  In t h i s study, only a p o r t i o n of the municipal revenue and expenditure was included i n the c a l c u l a t i o n s .  I f the t o t a l  municipal revenue and expenditure were i n c l u d e d , the amount of revenue and expenditure a l l o t t e d to the farm and non-farm property would be g r e a t e r , but the r e l a t i o n s h i p would remain the same since, the a d d i t i o n a l revenue and expenditure would be apportioned on a per c a p i t a b a s i s . I t i s e s t a b l i s h e d that the farm property i s paying more i n r e l a t i o n to the cost of s e r v i c e s r e c e i v e d than the non-farm property.  I n Chapter I V , a tax r a t e r e l a t e d to the cost of  s e r v i c e s provided f o r the farm and non-farm property i s calculated.  This tax r a t e i s then used to determine the taxes  which would be l e v i e d on a f i v e percent random sample of the 727 p a r c e l s of farm land i f the tax rate were r e l a t e d to the cost of s e r v i c e s provided for farm p r o p e r t y .  An attempt i s  then made to determine the effect t h i s tax r a t e has on farm land income as measured by farm land r e n t a l v a l u e s .  REFERENCES Lower M a i n l a n d R e g i o n a l P l a n n i n g Board of B r i t i s h C o l u m b i a , Land F o r Farming (New W e s t m i n s t e r : Lower M a i n l a n d R e g i o n a l P l a n n i n g Board of B r i t i s h C o l u m b i a , 1962), P . 39. p  C a l c u l a t e d from d a t a c o l l e c t e d from the assessment r o l l , C o r p o r a t i o n of The Township of Richmond, 1963.  The  ^Canada, S t a t u t e s a t L a r g e . 31 V i c t o r i a , c . 3 (1867), " B r i t i s h North America A c t . " ^ B r i t i s h Columbia, Revised Statutes at Large. 9 E l i z a b e t h c . 255 ( I 9 6 0 ) , " M u n i c i p a l A c t . "  II,  5The Vancouver I n c o r p o r a t i o n A c t i s a s p e c i a l a c t under w h i c h the C i t y of Vancouver i s i n c o r p o r a t e d . ^ B r i t i s h C o l u m b i a , S t a t u t e s a t L a r g e , 35 V i c t o r i a , No. 35 (1872), " A n A c t R e s p e c t i n g M u n i c i p a l i t i e s . " 7  I b i d . , Section  24.  8  I b i d . , Section  27.  9Br i t i s h C o l u m b i a , S t a t u t e s a t L a r g e . 54 V i c t o r i a , c . 29, S e c t i o n 121 ( I 8 9 D , " A n A c t R e s p e c t i n g M u n i c i p a l i t i e s . " 1 0  B r i t i s h C o l u m b i a , S t a t u t e s a t L a r g e . 59 V i c t o r i a , c . (I896), "The M u n i c i p a l C l a u s e s A c t . "  1 1  Ibid.,  Section  112.  1 2  I b i d . . Section  136.  37  13 B r i t i s h Columbia, S e c t i o n 14 • ^ B r i t i s h Columbia, S e c t i o n 10 1 ^ B r i t i s h Columbia, S e c t i o n 10  S t a t u t e s a t L a r g e , 22 George V , c . 39, (1932), " A n A c t to Amend the M u n i c i p a l A c t . " S t a t u t e s a t L a r g e , 20 George V , c . 4 8 , (1930), " A n A c t t o Amend the M u n i c i p a l A c t . " S t a t u t e s a t L a r g e . 12 George V I , c . 6 l , (1948, " A n A c t t o Amend the M u n i c i p a l A c t . "  86  l - ^ B r i t i s h C o l u m b i a , S t a t u t e s a t L a r g e , 10 E l i z a b e t h I I , c . 4 3 , S e c t i o n 10 (1948), "An A c t t o Amend t h e M u n i c i p a l A c t . " " ^ B r i t i s h Columbia, Revised Statutes a t Large, c . 255 ( I 9 6 0 ) , " M u n i c i p a l A c t . " I b i d . , S e c t i o n 33O, s u b s e c t i o n 1 9  9 Elizabeth I I ,  (1).  I b i d . . S e c t i o n 327.  20 I b i d . , S e c t i o n 327, s u b s e c t i o n 2 1  (1).  I b i d . . S e c t i o n 332.  F a r m u n i t means a n y p a r c e l o r g r o u p o f p a r c e l s o f l a n d c o n t i g u o u s o r n o t , m a k i n g up a t r a c t o f l a n d owned o r o c c u p i e d by a p e r s o n s i n g l y o r j o i n t l y w i t h any o t h e r person o r persons and operated as an i n t e g r a t e d farming e n t e r p r i s e . ^ C a n a d a Census, T e n t h Census o f Canada ( U n p u b l i s h e d D a t a , Ottawa, 1961).  2 2  2  ecause o f t h e d i f f i c u l t y o f d e t e r m i n i n g w h i c h farms having an improvement assessment over f i v e thousand d o l l a r s had a r e s i d e n c e , t h i s e s t i m a t e i s s u b j e c t t o a c e r t a i n error. 2  5canada Census, T e n t h Census o f Canada ( U n p u b l i s h e d Ottawa, I 9 6 I ) .  Data,  26Above, P. 7 3 . 2  7[Che C o r p o r a t i o n o f The T o w n s h i p o f R i c h m o n d , R i c h m o n d I n d u s t r i a l D e v e l o p m e n t B y - L a w , R i c h m o n d , 1961. Promotion Pamphlet.  CHAPTER IV THE EFFECT ON FARM LAND RENTALS OF A TAX RATE RELATED TO SERVICES PROVIDED TO FARM LAND In Chapter I I I i t was shown that i n 19&1, the farm property i n Richmond subsidized the non-farm property by 92,753 d o l l a r s .  The purpose of t h i s Chapter i s to further  examine the hypothesis:  that a tax rate r e l a t e d to the cost of  s e r v i c e s provided for farm property would reduce farm taxes and thereby protect farm land from premature conversion to non-farm uses.  This w i l l be done by e s t a b l i s h i n g a tax rate  which i s r e l a t e d to the cost of s e r v i c e s provided for farm land.  An attempt i s a l s o made to determine the e f f e c t  that  t h i s would have on income from farm l a n d , as measured by farm land r e n t a l v a l u e s . The i d e a l measure to be used to determine the e f f e c t a r e d u c t i o n i n farm property taxes would have on the prevention of premature conversion of farm land to non-farm uses, would be net farm income, p r o v i d i n g a l l other expenditures remained constant.  To use t h i s measure, d e t a i l e d data on net farm  income would be r e q u i r e d , and a l l data would have to be on a comparable b a s i s .  Due to the s c a r c i t y of s t a t i s t i c a l data  r e v e a l i n g the farm income for a s p e c i f i c area and a l s o the f a c t that farm enterprises do not have a standardized system of accounting which would enable a f a i r comparison of net 87  88  income, t h i s measure i s not s u i t a b l e for use. In view of t h i s s i t u a t i o n , an a l t e r n a t i v e measure i s employed.  This measure i s the r e n t a l value of farm l a n d , that  i s , the income or y i e l d from the land as opposed to the income or y i e l d from the farm e n t e r p r i s e .  Since a non-operating farm  land owner i s w i l l i n g to grant the r i g h t to farm the land to an operating farmer for an annual charge, t h i s annual charge may be used as an i n d i c a t i o n of the a c t u a l r e t u r n to the farm land,  1  and i n t u r n i n d i c a t e s the i n t e r e s t on the c a p i t a l which  i s invested i n the farm l a n d . C a l c u l a t i o n of a Tax Rate Related to the Services Provided The f i r s t step of t h i s f i n a l a n a l y s i s i s to c a l c u l a t e a tax r a t e which w i l l levy r e a l property taxes on farm property and on non-farm property which are p r o p o r t i o n a l to the cost of s e r v i c e s provided to the r e s p e c t i v e p r o p e r t i e s as c a l c u l a t e d i n Chapter I I I .  Table 6, page 89, i l l u s t r a t e s the  proposed tax rates derived from these c a l c u l a t i o n s . By r e l a t i n g the tax r a t e to the cost of s e r v i c e s the tax r a t e f o r farm and non-farm property i s reduced approximately f i f t y percent, while the tax r a t e for non-farm property i s increased approximately four percent i n order to provide the m u n i c i p a l i t y w i t h the same t o t a l tax revenue.  The  tax r a t e r e l a t e d to the cost of s e r v i c e s would r e s u l t i n l e s s taxes l e v i e d on farm property and more taxes l e v i e d on  89  non-farm p r o p e r t y .  This would increase the amount of tax  l e v i e d on the scattered r e s i d e n t i a l developments, but i t would a l s o increase the amount of tax l e v i e d on commercial and i n d u s t r i a l property. TABLE 6 PROPOSED TAX RATE RELATED TO SERVICES PROVIDED FOR FARM AND NON-FARM PROPERTY, RICHMOND, I 9 6 I  Proposed Tax Rate  T o t a l Land and Imp. Assessment (dollars)  Cost of Services Provided (dollars)  Farm Property M u n i c i p a l Purposes School Purposes  4,332,650 3,919,560  55,195 51,550  27.5 20.5  12.74 13.15  Non-Farm Property M u n i c i p a l Purposes School Purposes  6l,479,060 72,180,968  1,809,667 1,510,564  27.5 20.5  29.43 • 20.93  Type of Property and Purpose of Tax  a  1961  Tax Rate (mills)  (mills)  a  b  A m i l l i s equivalent to one thousandth, i . e . $ 0 , 0 0 1  ^ T o t a l assessment m u l t i p l i e d by the tax r a t e equals the amount of taxes i n d o l l a r s . S e l e c t i o n of a Random Sample f o r D e t a i l e d A n a l y s i s To proceed w i t h the study i t was necessary to s e l e c t a random sample from the 727 parcels of farm land i n the Municipality.  A f i v e percent sample was selected on the b a s i s  that i t would y i e l d a number of parcels which could e a s i l y be  90  employed i n t h e d e t a i l e d a n a l y s i s and s t i l l represent  adequately  t h e t o t a l number o f p a r c e l s .  The  original listing  of a l l r e a l property  assessments  in  the M u n i c i p a l i t y appears i n t h e assessment r o l l .  is  arranged  survey as  i n numerical  sequence w i t h r e s p e c t  The  roll  t o the l e g a l  w i t h i n t h e m u n i c i p a l i t y and a l l assessments a r e r e c o r d e d  they a r e encountered.  Thus, the i n d i v i d u a l assessments f o r  the farm p r o p e r t y a r e i n t e r m i x e d w i t h assessments f o r non-farm property, w i t h a l l farm property p r e f i x t o the r o l l  number.  assessments i d e n t i f i e d by a  A l l of the farm  property  a s s e s s m e n t s were i d e n t i f i e d and e x t r a c t e d f r o m t h e r o l l and recorded  f o r sampling Of  purposes.  t h e 727 p a r c e l s o f f a r m l a n d r e c o r d e d  a s s e s s m e n t r o l l , 378 c o n t a i n a f a r m r e s i d e n c e contain a residence. so i t was n e c e s s a r y represent without  a n d 349 d o n o t  The f a r m l a n d p a r c e l s a l s o v a r y  i n size  t o s e l e c t a random sample w h i c h w o u l d  t h e v a r i o u s s i z e d p a r c e l s and t h e p a r c e l s w i t h and  a residence.  classified  i n the  To do t h i s , a l l p a r c e l s w e r e g r o u p e d a n d  e i t h e r with a residence  or without  a residence.  S i n c e many o f t h e f a r m p a r c e l s a p p e a r e d t o be l e s s t h a n t e n acres  i n s i z e , t h i s was s e l e c t e d a s t h e m a j o r d i v i s i o n f o r  grouping.  I n order  t h a t t h e d i f f e r e n t s i z e d p a r c e l s c o u l d be  c o m p a r e d i n t h e a n a l y s i s , a f u r t h e r d i v i s i o n was made a n d t h e p a r c e l s were c l a s s i f i e d  i n t o f o u r groups a c c o r d i n g  shown i n T a b l e 7, page 91»  t o s i z e as  91  Each of these groups was d i v i d e d i n t o . t w o sub-groups, A and B , w i t h sub-group A containing the p a r c e l s without a residence and sub-group B containing the parcels w i t h a residence.  A f i v e percent sample was then s e l e c t e d from each  sub-group by s e l e c t i n g a number from one to twenty at random and  s e l e c t i n g every twentieth l i s t i n g .  The farm p a r c e l s  selected i n t h i s manner were used i n comparing the median farm land r e n t a l values w i t h the l e v i e d taxes using both the 1961 tax rate and the proposed tax r a t e . TABLE 7 SIZE AND DISTRIBUTION OF FARM LAND PARCELS RICHMOND, I 9 6 I  Group  S i z e of P a r c e l s ' i n Acres  I  0 to  II III IV  Number, of P a r c e l s  5.0  196  5.1 to 1 0 . 0  232  to 2 0 . 0  117  10.1  2 0 . 1 and over  182  Rental Values as a Measure of Farm Land Returns Farm Land Rental Values Farm land i n Richmond i s valued for assessment purposes by using the income approach based on p r o d u c t i v i t y as measured by farm land r e n t a l s .  2  In g e n e r a l , t h i s i n v o l v e s d e t a i l e d  92  a n a l y s i s of e x i s t i n g information on a c t u a l farm r e n t a l s by r e l a t i n g the r e n t a l value to the d i f f e r e n t classes of s o i l and applying a c a p i t a l i z a t i o n r a t e to the median r e n t a l v a l u e s . This approach shows a r e l a t i v e l y constant value per a c r e , w i t h a tendency towards lower r e n t a l values for smaller p a r c e l s .  3  . Farm land has been c l a s s i f i e d by the M u n i c i p a l Assessor i n t o three s o i l types for assessment c a l c u l a t i o n s , namely, Ladner Clay Loam s o i l s , mixed s o i l s and peat s o i l s . Out of 35 r e n t a l cases which were analysed to y i e l d the median r e n t a l v a l u e s , 31 were r e n t a l values for land c o n s i s t i n g of Ladner Clay Loam s o i l s and 4 were r e n t a l values for land c o n s i s t i n g of mixed s o i l s .  There were no r e n t a l s of farms  located on peat s o i l s i n the m u n i c i p a l i t y .  The A s s e s s o r ' s  a n a l y s i s of r e n t a l s based on Ladner Clay Loam s o i l s showed that the r e n t a l value v a r i e s w i t h the type of farming and the s i z e of the p a r c e l as i l l u s t r a t e d i n Table 8 below and Table 9, page 93? ° u t the r e n t a l value for each p a r c e l remained r e l a t i v e l y constant from year to year. * 4  TABLE 8 MEDIAN ANNUAL RENT VALUE ACCORDING TO TYPE OF FARM USE FOR LADNER CLAY LOAM SOILS, RICHMOND  Median of a l l Rentals  Median of Mixed Farm Rentals  $30 per acre  $35 per acre  Sources  Median of Pasture Land Rentals $25 per acre  Assessment Department F i l e s , Richmond, 1963.  93  TABLE 9 MEDIAN ANNUAL RENT VALUE ACCORDING TO FARM SIZE FOR LADNER CLAY LOAM SOILS, RICHMOND  S i z e i n Acres  Rental per Acre  4 to 10 i n c l u s i v e  $25  12 to 20 i n c l u s i v e  35  21 to 30 i n c l u s i v e  30  31 to 40 i n c l u s i v e  35  Source:.  Assessment Department F i l e s , Richmond, 19&3*  For the mixed s o i l s , the median r e n t a l value was found to be twenty d o l l a r s per a c r e , however, the r e n t a l value  varies  w i t h the composition of the mixed s o i l s . 5 L i m i t a t i o n s and A p p l i c a t i o n of Rental Values The r e n t a l value of farm land as p r e v i o u s l y o u t l i n e d represents the annual payments made by a farm operator to a farm land owner f o r the r i g h t to use the land for farming activities.  The r e a l property taxes are the r e s p o n s i b i l i t y of  the land owner and represent a f i x e d annual charge against the property.  G e n e r a l l y , t h i s i s the only charge which the land  owner i s responsible f o r , but depending upon the  rental  agreement between the tenant and the owner, other charges may occur.  Thus, the r e n t a l charges represent a form of i n t e r e s t  94  on the investment i n the land r a t h e r than a p r o f i t from the farming e n t e r p r i s e .  I f the market value of farm land was  r e l a t e d to the value for farming purposes and no other  factors  contributed to i t s v a l u e , the annual r e n t a l charges would be a p r e c i s e measurement of the r e t u r n from the l a n d .  However, as  i l l u s t r a t e d i n Figure 5, page 95, there are various other factors i n a d d i t i o n to the p r o d u c t i v i t y of the land which combine to form the market value of the l a n d .  These other  factors include a value as a home s i t e , a value a t t r i b u t e d to the p r e s t i g e attached to land ownership and a speculative value.  Thus, the r e n t a l charges for farm land do not  fully  represent the economic r e t u r n to the c a p i t a l invested i n the land as the land owners a t t r i b u t e a value to the i n t a n g i b l e returns.  A farm land owner may accept a low r e t u r n on the  c a p i t a l invested i n the land as the land supplies the i n t a n g i b l e elements o u t l i n e d above.  Since i t i s impossible to evaluate  these i n t a n g i b l e r e t u r n s , i t i s necessary to assume that any increase or decrease i n farm property taxes w i l l d i r e c t l y a f f e c t the r e t u r n to the farm land as measured by r e n t a l v a l u e s . The E f f e c t of the Proposed Tax Rate on Farm Land Returns The r e n t a l values c a l c u l a t e d by the Assessor for Richmond were adjusted f o r use i n t h i s study.  In order to  evaluate the r e n t a l values of the i n d i v i d u a l parcels of farm l a n d , the parcels selected for d e t a i l e d a n a l y s i s should have  1961  MEDIAN  FARM  LAND  V A L U E S FOR A L L SOILS , RICHMOND, BRITISH COLUMBIA  Ul  5  10  15  20  25  30  35  40  45  50  55  60  65  70  75  80  85  90  95- 100  SIZE OF FARM PARCEL IN ACRES LEGEND  Sources  Productivity Value  Residential Value  Assessment Records, Richmond, British Columbia, 1963.  Speculative Value  96  been r e l a t e d to the types of s o i l and the r e n t a l values a p p l i e d on t h i s b a s i s .  This would have involved endless hours  of work r e l a t i n g the l e g a l d e s c r i p t i o n of the i n d i v i d u a l parcels of land to a s o i l map of the m u n i c i p a l i t y as w e l l as causing undue inconvenience to the M u n i c i p a l concerned.  Officials  In view of t h i s , a median r e n t a l value was  c a l c u l a t e d and used as a b a s i s for a l l p a r c e l s .  The r e n t a l  value a l s o v a r i e s w i t h the type of farming a c t i v i t y and the s i z e of the p a r c e l s , and since i t was impossible to i d e n t i f y the type of farming for each p a r c e l of land i n the selected sample, an adjustment was made on the b a s i s of the median e s t a b l i s h e d f o r the various s i z e d parcels located on Ladner Clay Loam s o i l s .  The median r e n t a l values used as a measure  of the r e t u r n to the farm land are 22.50 d o l l a r s per acre for parcels of land under 10 acres i n s i z e and 27-50 d o l l a r s per acre f o r p a r c e l s of land 1 0 . 1 acres i n s i z e or l a r g e r . D e t a i l e d c a l c u l a t i o n s were made f o r each of the p a r c e l s of farm land i n the f i v e percent sample to determine the  taxes  l e v i e d on the land i n 1961 (tax r a t e A) and the taxes which would have been l e v i e d on the land i f the taxes were r e l a t e d to the s e r v i c e s provided to the farm land (tax r a t e B ) .  It  was assumed that a l l farm property should be subject to the same tax r a t e even i f the property d i d not r e c e i v e equal services.  Improvement assessments were excluded when  c a l c u l a t i n g the taxes l e v i e d on the farm land as the r e n t a l values used do not include payment for improvements.  97  The net r e t u r n per a c r e , that i s , the r e n t a l charge minus the l e v i e d taxes, was c a l c u l a t e d for each p a r c e l using tax r a t e A and tax rate B and from t h i s , the increase i n a c t u a l r e t u r n per acre was d e r i v e d .  Table 11, page 98> shows  the r e s u l t s of these c a l c u l a t i o n s . The medians f o r the net r e t u r n using tax r a t e A , the net r e t u r n using tax r a t e B , and the increase i n the net r e t u r n for each of the four s i z e groups are presented i n Table 10. TABLE 10 MEDIAN NET RETURN PER ACRE USING I96I AND PROPOSED TAX RATES, RICHMOND  S i z e of parcels  Tax Rate A  Tax Rate B  Increase  Percent Increase  $15.2-9  $6.93  82.7  0 -  5.0  Ac.  5.1 -  10.0  Ac.  13.04  17.85  4.72  36.2  20.0  Ac.  14.34  20.56  6.21  43.3  21.14  24.08  2.94  13.9  10.1  -  20.1  and over A c .  $  8.36  This t a b l e shows that by r e l a t i n g the tax r a t e to the cost of s e r v i c e s provided to farm property, a r e d u c t i o n i n the taxes l e v i e d on farm land occurs and r e s u l t s i n an increase i n the net r e t u r n to the l a n d .  The increase i n net r e t u r n ranges  from 1.10 d o l l a r s to 11.14 d o l l a r s per acre f o r the 37 p a r c e l s  TABLE 11 LEVIED TAX AND NET RETURN PER ACRE USING 1961 AND PROPOSED TAX RATES, RICHMOND L e v i e d Taxes Land Assessment Acreage  General  School  Total  '  $1,520 700 750 1,900 1,650  • $ 520 700  $ 52.46 33.60  4.6  G R  2.2  U P  5.0 5.0 4.6  0  I  G R  0  U P  4.3  5.0  2.0  5.0  5.0 5.2 10.0 6VL-  8.0  5.9 5.1 5.8 II 6.5 5.3 6.8 5.4 G •.13.4 17.0 R 0 19.5 12.1 U P 11.2 . III G' R 0  u p rv  Tax Rate A  19.6 15.9  33.7 30.0  93.6 21.6 153.2  4o.o  24.0  48.1  32.9 a  900  1,600  1,340 1,900  1,900 •$1,080 1,100 1,050 2,200 2,200  940  1,570 1,430 .1,600 • 2,530 1,820  $4,100 4,930 2,630  4,84o 1,780  5,500 4,8oo $ 1,680 5,700  nil  900 650  .  nil 1,500 340 900 900  $  80  770 1,050 1,200 2,200  nil  570 430 600 1,530 820  $3,100 4,510  3,800 4,4oo  4,110  20,930  3,490 6,500  7,400  24.75 74.75 43.82 70.70 70.70  $ 31.34 46.04 50.41 85.10 105.60  24.85 54.87 48.15 56.30 100.95 66.86 $176.30  229.27 122.15 2,430 4,080 • 216.74 780 64.94  4,500 3,800 $ 1,680 5,330 11,640 3,350  12,200  20.63 70.70 58.71  19,930  2,490 6,200  6,400  243.50  209.90  $ 80.64 266.02 574.12  173.18  984.15 205.26  147.03 305.85 334.70  T a x r a t e A was used i n 1 9 6 1 .  a  Net R e t u r n ( r e n t - t a x e s )  Tax Rate B  b  Per Acre  Total  Per Acre  $11.40 15.27  $ 26.26 18.13 9.56  $ 5.70 8.24  4.80  14.14  36.05  11.74 . 4.95  29.57 11.47  21/91  21.54  16.25 14.14 14.14  $ 6.03 4.60 8.26 10.64 17.89 5.07 '9.46 7.41 10.62 14.85 12.38  $13.16 13.49 6.26  36.05  36.05  $ 14.81 24.14 27.19 -  43.81  56.96  11.98  27.50 23.87 28.27  52.35 33.97 $ 93.00 122.91  65.46  115.31  12.42  129.25 111.12  13.20 $ 2.39 8.87  6.13 8.02 6.42  5.13  .6.13  6.36  IO.17  . 7.21 5.91  40.11  17.91  5.80  2.22-  32.94  $ 43.49 142.70 308.50  92.46 528.73  110.11  77.20 164.34 178.44  2.29  8.92 10.77 7.21 7.21 $ 2.85 2.41  4.46 5.48 9.65 2.35 4.74 3.67 5.33 7.70 6.29  $ 6.94 7.23 3.36 • 9.53 2.94 6.59  .6.99 $ 1.29 4.76-  3.30 4.28 . 3.45 . 2.75 3.22 3.42 5.42  Tax Rate A  Tax Rate B  Increase  Per Acre  Per Acre  Per Acre  $11.10 7.23 17.70  $16.80 14.26  10.76  16.59  $ 5.70 7.03 2.58 6.93 5.83 2.66 7.53  8.36  17.55 6.25  .59 8.36 8.36 $16.47 17.90 14.24  11.86 4.61 • 17.43 13.04 15.09  11.88 7.65 10.12  $14.34  14.01 . 21.24  9-59  21.70 15.08  14.30  $25.11 18.63  21.37 19.48  21.08  22.37 21.37 21.14  17.33  20.28 15.29 20.21 '  13.78 11.73  11.14  15.29 15.29  6.93 6.93 $ 3.18  $19.65  2.19  20.09  18.04  3.80 5.16 8.24  17.02  12.85  2.72  20.15 17.76  4.72 3.74 5.29 7.15  18.83  17.17 •  14.80  16.21  6.09  $ 6.22  $20.56  6.26 2.90 8.38 2.86  20.27 24.14  17.97  24.56 20.91 20.51  5.83  6.21 $ 1.10  $26.21 22.74  4.11  24.20 23.22 24.05  2.83  3.74  24.75 '•  24.28 24.08 22.08  •  PTax r a t e B i s r e l a t e d t o t h e c o s t o f s e r v i c e s p r o v i d e d .  2.97 2.38 2.91 2.94  4.75  99  i  represented i n the sample, w i t h a median increase of 4.75 d o l l a r s per a c r e .  The increase i n net r e t u r n per acre i s  s i g n i f i c a n t i n a l l cases but i s greater for farms 20 acres or less i n s i z e than i t i s f o r farms over 20 acres i n s i z e . The net r e t u r n per acre i s expressed as a percentage of the t o t a l c a p i t a l invested i n the land and i s shown i n Table 12.  This was done to determine the s i g n i f i c a n c e of the  increase i n net r e t u r n as an economic investment.  The median  market value per acre f o r farm land was obtained from the values expressed i n Figure 5, page 95. TABLE 12 PERCENT NET RETURN ON FARM LAND INVESTMENT RICHMOND, 1961  S i z e of P a r c e l s 0 -  5.0 A c .  5.1 - 10.0 A c . 10.1 - 20.0 A c . 20.1 and over A c .  Median Market Value per acre  % Return Tax Rate A  % Return Tax Rate B  $1280  0.7  1.2  1180  1.1  1.5  1080  1.6  1.9  770  2.7  3.1  Table 12 shows that the percent r e t u r n on c a p i t a l invested i n farm land i s extremely low for farms of 20 acres or l e s s i n s i z e , but increases for farms over 20 acres i n s i z e . The net r e t u r n on the c a p i t a l invested i n farm land does not  100  appear to be as s i g n i f i c a n t a f a c t o r i n farm land ownership as the i n t a n g i b l e returns obtained from the value as a r e s i d e n t i a l s i t e , the prestige attached to land ownership, and the p o s s i b i l i t y of a c a p i t a l g a i n . By r e l a t i n g the tax r a t e to the cost of s e r v i c e s provided f o r farm property, i t was found that the farm property taxes would be reduced by an average of 4 . 2 5 d o l l a r s per a c r e . C a l c u l a t i o n s using a f i v e percent random sample of the 727 parcels of farm land i n the m u n i c i p a l i t y showed that the r e d u c t i o n i n taxes would r e s u l t i n an increase i n net  return  to the farm land ranging from 1.10 d o l l a r s to 11.14 d o l l a r s per a c r e . When the net r e t u r n c a l c u l a t e d by using the proposed tax r a t e i s expressed as a percentage r e t u r n on the c a p i t a l invested i n farm l a n d , the r e t u r n ranges from 1.2 percent for farm parcels 5*0 acres or l e s s i n s i z e to 3*1 percent for farm parcels 2 0 . 1 acres or l a r g e r i n s i z e .  This r e t u r n to c a p i t a l  i s extremely low when compared to the 4 to 10 percent or higher return^ on c a p i t a l from other economic  investments.  Thus, the farm land owners must receive some i n t a n g i b l e r e t u r n . The i n t a n g i b l e returns such as the r e t u r n as a value for a homesite, the p o s s i b i l i t y of a c a p i t a l g a i n , and the of land ownership appear to outweigh the economic  prestige  returns,  e s p e c i a l l y f o r - p a r c e l s of farm land 20 acres or l e s s i n s i z e .  101  The effect which t h i s increase i n r e t u r n to farm land may have on p r o t e c t i n g farm land from premature conversion to non-farm uses i s further explored i n Chapter V .  A brief  summary of the i n d i v i d u a l chapters i s presented and the r e s u l t s of the study are c o r r e l a t e d i n an attempt to determine i f  the  reduction i n farm taxes a r i s i n g from r e l a t i n g the tax r a t e to the cost of services provided for such property would protect farm land from premature conversion to non-farm uses.  REFERENCES x  W i l s o n Gee, The S o c i a l Economics of A g r i c u l t u r e , 3 r d E d i t i o n (New York: The Macmillan C o . , 1 9 5 4 ) , p . 172.  2  The Corporation of The Township of Richmond, "I963 Assessments of Farm Lands i n Richmond," A Report Prepared by the Assessment Department, 19&3 ( i n the f i l e s of the Assessment Department).  3  Ibid.  4  Ibid.  ^Ibid. Interview w i t h a member of the sales s t a f f , James Richardson and Sons, March, 1 9 6 3 .  102  CHAPTER V TAXATION AS A TECHNIQUE TO PROTECT FARM LAND FROM PREMATURE CONVERSION TO NON-FARM USES Summary Canadian and American population forecasts i n d i c a t e that the p o p u l a t i o n of North America can be expected to increase r a p i d l y i n the f u t u r e .  Coupled w i t h the increase i n  population i s a trend towards urban and suburban l i v i n g .  By  1980, i t i s expected that seventy-nine percent of Canada's population w i l l be c l a s s i f i e d as urban i n c h a r a c t e r . United States i t i s estimated that by the year  2000,  I n the eighty  percent or more of the t o t a l p o p u l a t i o n w i l l r e s i d e i n urban communities.  A l a r g e p o r t i o n of the urban p o p u l a t i o n i s  a t t r a c t e d to a r e l a t i v e l y small number of metropolitan areas. Within these metropolitan areas there i s a trend towards suburban l i v i n g i n s i n g l e family homes, w i t h the r e s u l t that the land requirements per person are i n c r e a s i n g .  This i s  c o n t r i b u t i n g to an i n c r e a s i n g demand for land f o r urban uses, which i n t u r n i s p l a c i n g greater pressure on owners of farm land near the urban centres to convert t h e i r land to urban uses. 103  104  Farm land use i s g e n e r a l l y considered to be a l e s s i n t e n s i v e use than r e s i d e n t i a l , commercial, or i n d u s t r i a l uses, as the land resources can u s u a l l y y i e l d a higher r e t u r n when devoted to the l a t t e r uses.  Because of t h i s low  i n t e n s i t y of use, there i s a tendency for farm land w e l l located f o r the higher i n t e n s i t y uses to be converted to these uses.  I f t h i s conversion were to occur only when there  was a d e f i n i t e need for land f o r urban uses, the problem investigaged i n t h i s t h e s i s would not e x i s t .  However, t h i s  i s not the case, as farm land tends t o be removed from farm use p r i o r to the demand f o r the land for urban uses.  This  phenomenon takes place i n s e v e r a l ways and i s i l l u s t r a t e d by r e s i d e n t i a l development occurring on 'good' farm l a n d , while there are s u b s t a n t i a l areas of non-farm land s u i t a b l e f o r t h i s type of development; by the occurrence of r e s i d e n t i a l s u b d i v i s i o n 'booms' on farm land which leave a large number of r e s i d e n t i a l l o t s vacant for many years; by farm land being removed from production and remaining vacant because the nonoperating owner i s holding the land for speculative and by farm land being i s o l a t e d by r e s i d e n t i a l  purposes;  developments.  The cost of the premature conversion of farm land to non-farm uses may be measured i n economic and s o c i a l terms. The economic costs include l o s s of income f o r the h i g h cost of services f o r the residents  farmer,  of the premature  s u b d i v i s i o n s , more expensive a g r i c u l t u r a l products, and higher  105  i  property taxes i n the suburban m u n i c i p a l i t i e s . The s o c i a l costs include l a c k of s e r v i c e s and other amenities f o r the homeowner, incomplete r e s i d e n t i a l s u b d i v i s i o n s , and the l a c k of a s a t i s f a c t o r y urban environment. I n view of the i n c r e a s i n g demand f o r urban land and the c o s t l i n e s s of the premature conversion of farm land to non-farm uses, i t i s i n the i n t e r e s t of the p u b l i c that some technique be employed to protect the farm land from premature conversion. The problems a r i s i n g from the premature conversion of farm land are evident i n many suburban m u n i c i p a l i t i e s . As the M u n i c i p a l A u t h o r i t i e s have become aware of the c o s t l i n e s s of premature s u b d i v i s i o n s and unco-ordinated developments, many have adopted some form of regulatory measure i n an attempt to c o n t r o l the land development and land uses.  The  two measures commonly used are zoning and s u b d i v i s i o n regulations.  These r e g u l a t i o n s were o r i g i n a l l y designed as  a means of c o n t r o l l i n g the land development and land use i n compact urban c e n t r e s .  As the development problems became  prominent i n the suburban m u n i c i p a l i t i e s , the two r e g u l a t i o n s were enacted by the l o c a l a u t h o r i t i e s t o c o n t r o l the development. I n a d d i t i o n to these r e g u l a t o r y c o n t r o l s , more p o s i t i v e techniques have been employed i n an attempt to reduce the premature conversion of farm land t o non-farm uses  106  and to c o n t r o l the l o c a t i o n and type of r e s i d e n t i a l development. The most i l l u s t r a t i v e example of a p o s i t i v e c o n t r o l technique i s f i n a n c i a l c o n t r o l e x e r c i s e d through r i g i d r e s t r i c t i o n s on c o n s t r u c t i o n loans and c o n s t r u c t i o n loan insurance. The process of premature conversion of farm land continues because of a l a c k of p o s i t i v e c o n t r o l s and comprehensive development p l a n s , and despite the use of regulatory controls.  Thus, there i s a need f o r an e a s i l y  implemented technique which w i l l protect farm land from premature conversion to non-farm uses. The property tax represents a compulsory c o n t r i b u t i o n on the part of a property owner to some l e v e l of government, g e n e r a l l y the municipal government.  The a c t u a l e f f e c t of the  property tax on land resources v a r i e s , depending upon the amount of t a x , the land use, and other circumstances; but the influence of the tax can u s u a l l y be measured by the e f f e c t on land income, l e v e l of i n t e n s i t y at which the land i s used, and changes i n land use and property ownership.  Depending upon  the type of a c t i v i t y , a property tax may be s h i f t e d from the property owner i n the form of higher p r i c e s .  I n the case of  farm property t a x e s , there i s l i t t l e or no opportunity f o r the owner to s h i f t the t a x .  This means that any increase i n farm  property taxes w i l l reduce the income r e c e i v e d from the farm enterprise. When land i s used i n I t s highest c a p a c i t y , property taxes g e n e r a l l y do not a f f e c t t h i s use.  However, when land i s  107  not used i n i t s most productive c a p a c i t y , an increase i n the property tax and the r e s u l t i n g decrease i n income place a d d i t i o n a l pressure on the owner to u t i l i z e the land more e f f e c t i v e l y or to s e l l the l a n d .  Thus, when the farm property  taxes absorb a l a r g e p o r t i o n of the farm income, the property owner must e i t h e r s e l l the land or convert i t to non-farm uses. Accompanying the i n c r e a s i n g r e s i d e n t i a l development i n the suburban m u n i c i p a l i t i e s i s an increase i n municipal expenditures necessary to finance and maintain the s e r v i c e s required for the new developments.  As v e r i f i e d by studies  conducted i n suburban m u n i c i p a l i t i e s i n Canada, farm property i s s u b s i d i z i n g the r e s i d e n t i a l a r e a s , that i s , the farm property taxes exceed the cost of s e r v i c e s provided to such property.  Assuming that property taxes l e v i e d on the various  kinds of property should be r e l a t e d to the cost of s e r v i c e s provided for the r e s p e c t i v e property, then a tax rate r e l a t e d to the cost of s e r v i c e s provided f o r farm property would reduce the property taxes on farm l a n d .  Since h i g h farm property  taxes encourage the premature conversion of farm land to nonfarm uses, then t h i s r e d u c t i o n i n farm taxes may protect farm land from premature c o n v e r s i o n . A b r i e f study of the municipal governments i n Canada showed that the m u n i c i p a l i t i e s are e n t i t l e d to perform functions which are both mandatory and p e r m i s s i v e .  The mandatory  functions r e l a t e p r i n c i p a l l y to matters which are of wider than  108  l o c a l concern, while the permissive functions u s u a l l y cover the p r o v i s i o n of s e r v i c e s which are of l o c a l concern.  To meet the  expenditures encountered while performing the functions of municipal government, the m u n i c i p a l i t i e s have been granted c e r t a i n powers to r a i s e revenues.  Under these powers, the  l a r g e s t source of revenue for the m u n i c i p a l i t i e s i s r e a l property  taxation. Property taxes i n m u n i c i p a l i t i e s i n B r i t i s h Columbia  are comprised of taxes l e v i e d on l a n d , improvements, and equipment.  Each type of property i s valued according to  P r o v i n c i a l Government procedures and t h i s assessed value i s m u l t i p l i e d by a tax r a t e to determine the tax l e v i e d on each property.  When d e r i v i n g the assessed value of the property,  c o n s i d e r a t i o n may be given to the use, l o c a t i o n , o r i g i n a l c o s t , cost of replacement, r e n t a l v a l u e , market v a l u e , and any other circumstances which may a f f e c t the v a l u e .  In Richmond,  l o c a l , t a x a t i o n on a l l taxable non-farm land i s l e v i e d on one hundred percent of the assessed v a l u e : being f i f t y percent of the market v a l u e .  the assessed value The non-farm  improvements are assessed at f i f t y percent of the market value and seventy-five percent of t h i s value i s t a x a b l e .  A l l farm  land i s assessed on the basis of i t s value for farming purposes and the t a x a t i o n i s l e v i e d on f i f t y percent of t h i s v a l u e . Farm land i s granted an exemption for school t a x a t i o n purposes, w i t h a maximum exemption of one thousand d o l l a r s per farm u n i t .  109  The farm dwellings are assessed and taxed i n the same manner as a l l other d w e l l i n g s , w h i l e the improvements used e x c l u s i v e l y i n the operation of a farm receive a maximum exemption of f i v e thousand d o l l a r s .  The t a x a t i o n system employed i n Richmond  recognizes that land cannot he used i n d i s c r i m i n a t e l y as a b a s i s f o r t a x a t i o n without some form of m o d i f i c a t i o n .  The  system tends to b r i n g a c l o s e r r e l a t i o n s h i p between the taxes l e v i e d on farm property and the cost of s e r v i c e s provided f o r farm property by using d i f f e r e n t l e v e l s of assessment rather than d i f f e r e n t tax r a t e s for the farm and non-farm l a n d . On the assumption that t h i s system does not  fully  r e l a t e farm property taxes to the s e r v i c e s r e c e i v e d , a case study was conducted to determine the r e l a t i o n s h i p of taxes to the cost of s e r v i c e s f o r farm and non-farm p r o p e r t y .  By  apportioning the 1961 revenues and expenditures for Richmond, d i r e c t l y and on a per c a p i t a b a s i s , to farm and non-farm property, i t was found that the farm property subsidized the non-farm p r o p e r t y .  When apportioning the municipal expenditures  on a per c a p i t a b a s i s , i t was necessary to assume that these expenditures were p r o p o r t i o n a l to the s i z e of the p o p u l a t i o n . Only the revenues derived from property t a x a t i o n and a p r o p o r t i o n a l amount of expenditures were apportioned i n order to minimize the e r r o r which may have been introduced by making the above assumption.  110  The r e s u l t s of the apportioning show that the taxes l e v i e d on farm property contributed 5«8 percent of the t o t a l tax revenue and that only 3.1 percent of the same t o t a l of expenditures could be apportioned to the farm property.  When  placed on a farm p a r c e l b a s i s , each farm p a r c e l had an average tax levy of 129 d o l l a r s more than the average cost of s e r v i c e s , that i s , each p a r c e l of farm land subsidized the non-farm property by an average of 129 d o l l a r s .  From t h i s i t may be  concluded that a tax rate r e l a t e d to the cost of s e r v i c e s provided f o r farm property i n Richmond f o r the year  I96I  would  have reduced the farm t a x e s . From these c a l c u l a t i o n s i t was found that the increase i n net r e t u r n ranged from 1.10 d o l l a r s to 11.14 d o l l a r s per acre for the 37 p a r c e l s represented i n the sample, w i t h a median increase of 4.75 d o l l a r s per a c r e .  By r e l a t i n g the  median net r e t u r n per acre for four s i z e groups of farm land to the median market value per a c r e , i t was found that the land r e n t a l represents a minor part of the r e t u r n to the l a n d . The net r e t u r n per acre ranged from 1.2 to 3.1 percent of the t o t a l investment, w i t h the parcels over 20 acres i n s i z e having the l a r g e s t r e t u r n .  Therefore, i t i s evident that f o r farm  parcels 20 acres or l e s s i n s i z e the i n t a n g i b l e returns such as the r e t u r n as a r e s i d e n t i a l s i t e , the p r e s t i g e attached  to  land ownership and the p o s s i b i l i t y of a c a p i t a l g a i n make up a greater part of the net r e t u r n to c a p i t a l invested i n the farm  Ill  land.  For p a r c e l s of farm land l a r g e r than 20 acres i n s i z e ,  the i n t a n g i b l e returns make up a smaller p o r t i o n of the t o t a l net r e t u r n to c a p i t a l i n v e s t e d . Assumptions and L i m i t a t i o n s of the Study In order to t e s t the hypothesis:  that a tax rate  r e l a t e d to the cost of s e r v i c e s provided for farm property would reduce farm taxes and thereby protect farm land from premature conversion to non-farm uses, i t was necessary to accept c e r t a i n assumptions and use median d a t a .  The  assumptions and the use of median data caused c e r t a i n l i m i t a t i o n s to the v a l i d i t y of the study and therefore  warrant  discussion. One assumption accepted was that farm property taxes should be r e l a t e d to the cost of s e r v i c e s provided f o r such property.  This assumption accepts the present t a x a t i o n system,  and r e l a t e s the cost of s e r v i c e s to farm property as a group rather than to the i n d i v i d u a l p a r c e l s .  This means that a l l  farm property receives the same s e r v i c e s , or i f n o t , then the farm property should contribute p r o p o r t i o n a l l y to the cost of s e r v i c e s provided to any farm p r o p e r t y .  To r e l a t e the taxes  to the cost of s e r v i c e s provided for the i n d i v i d u a l farm p r o p e r t i e s would make the t a x a t i o n system unmanageable. . In order to apportion the municipal expenditures to farm and non-farm property, i t was necessary to estimate  the  112  farm population and the number of school c h i l d r e n r e s i d i n g on farms.  These estimates were made using data from Richmond  and the Dominion Bureau of S t a t i s t i c s .  Because of the  difference i n the two d e f i n i t i o n s of farm l a n d , an e r r o r may have appeared when r e l a t i n g the two sets of data for the population estimates.  The population estimates were then  used to apportion the expenditures on a per c a p i t a b a s i s .  To  do t h i s , i t was assumed that the expenditures were p r o p o r t i o n a l to the s i z e of the p o p u l a t i o n .  This may not be true since the  non-farm population may receive more s e r v i c e s per person than the farm p o p u l a t i o n . The use of the 1961 municipal revenues and  expenditures  f o r Richmond may a l s o prove to be a l i m i t a t i o n to the v a l i d i t y of the c o n c l u s i o n s .  Although Richmond represents a suburban  m u n i c i p a l i t y i n t r a n s i t i o n from a r u r a l to an urban  character,  the p r o p o r t i o n of farm and non-farm property i s l i k e l y to be d i f f e r e n t than the p r o p o r t i o n i n other suburban m u n i c i p a l i t i e s . I f there was a greater percentage of farm property, t h i s may influence the r e l a t i o n s h i p between the l e v i e d taxes and the services received. The s e l e c t i o n of a p a r t i c u l a r year for the b a s i s of the study may a l s o influence the r e s u l t s .  Since no information was  a v a i l a b l e to e s t a b l i s h the farm t a x a t i o n t r e n d s , i t i s not known whether the 1961 farm property taxes f a i r l y represent the taxes l e v i e d over a period of y e a r s .  Any change i n assessment since  113  1961 would change the e n t i r e s i t u a t i o n , unless the change was on a p r o p o r t i o n a l b a s i s for both farm and non-farm property. An a d d i t i o n a l e r r o r may be i n c u r r e d by using the median r e n t a l values as a measure of farm land income.  Since  r e l a t i n g each p a r c e l of farm land to the type of s o i l and the type of farming was beyond the scope of t h i s study, the median r e n t a l values were a p p l i e d to a l l p a r c e l s .  Thus, the r e n t a l  values are low for farm land c o n s i s t i n g of Ladner Clay Loam s o i l s and h i g h f o r farm land c o n s i s t i n g of peat s o i l s .  To  avoid further e r r o r , only the median r e n t a l values for each s i z e group were used i n further c a l c u l a t i o n s .  The same  r e l a t i o n s h i p occurred when using the market v a l u e s .  However,  there would be a tendency for the e r r o r s to cancel one another s i n c e , i f the farm p a r c e l were located on peat s o i l , both the r e n t a l and market value would be h i g h . Conclusions A tax r a t e r e l a t e d to the s e r v i c e s provided for farm property i n Richmond for the year 1961 would reduce the farm property taxes by an average of 129 d o l l a r s per farm p a r c e l . A reduction i n farm property taxes would mean that some a l t e r n a t i v e source of revenue i s r e q u i r e d for the m u n i c i p a l i t y to maintain the same t o t a l tax revenue.  Assuming that the non-  tax revenue remains constant, i t would be necessary to increase the non-farm property taxes i n order to derive the same amount of t o t a l revenue.  The major components of non-farm property  114  are r e s i d e n t i a l , commercial, and i n d u s t r i a l property, w i t h other types of property present i n minor q u a n t i t i e s .  An  increase i n the tax r a t e on non-farm property would r e s u l t i n an increase i n the amount of taxes l e v i e d on r e s i d e n t i a l property, which i s g e n e r a l l y the property r e q u i r i n g a subsidy, but would a l s o increase the amount of taxes l e v i e d on commercial and i n d u s t r i a l p r o p e r t y .  Depending upon the amount  of the i n c r e a s e , the a d d i t i o n a l taxes may overburden the commercial and i n d u s t r i a l property w i t h the net r e s u l t of discouraging i n d u s t r y to l o c a t e i n the m u n i c i p a l i t y . To r e l a t e the tax r a t e to the s e r v i c e s r e c e i v e d for every type of property i n a m u n i c i p a l i t y would r e q u i r e a very complex t a x a t i o n system and i s therefore considered u n p r a c t i c a l . As i l l u s t r a t e d i n Figure 5> page 95» the market value of farm land includes the p r o d u c t i v i t y v a l u e , a r e s i d e n t i a l v a l u e , and other values r e f e r r e d to as s p e c u l a t i v e v a l u e s . The r e s i d e n t i a l and s p e c u l a t i v e values make the market value much higher than the p r o d u c t i v i t y v a l u e .  This r e s u l t s i n the  p r i c e of farm land exceeding the l e v e l that many operating farmers can reach i n order to expand t h e i r operations.  When  an operating farm land owner i s ready to cease operations and s e l l the l a n d , the s e l l i n g p r i c e cannot be met by someone i n t e r e s t e d i n farming, but only by investment firms and i n d i v i d u a l s with speculative motives.  The median r e d u c t i o n of  4.75 d o l l a r s per acre i n taxes would not lead to a r e d u c t i o n of the market v a l u e .  In f a c t , the lowering of property taxes  115  g e n e r a l l y causes the market value of land to i n c r e a s e . Table 1 3 , page 116, shows that when using the farm land r e n t a l value as a measure of the r e t u r n to c a p i t a l Invested i n the l a n d , the r e t u r n i s extremely low, e s p e c i a l l y for farm p a r c e l s 20 acres or l e s s i n s i z e .  The reduction i n  taxes which r e s u l t e d from r e l a t i n g the tax r a t e to s e r v i c e s provided f o r farm property leads to a very small increase i n the net r e t u r n to the c a p i t a l invested i n farm l a n d .  Therefore,  t h i s a c t i o n would have l i t t l e or no effeet i n preventing the premature conversion of farm land i n p a r c e l s of 20 acres or l e s s i n s i z e to non-farm uses.  The net r e t u r n to c a p i t a l  invested i n l a r g e r s i z e d p a r c e l s of farm land would be Increased almost to an equal l e v e l w i t h other low r i s k investments.  The greater net r e t u r n may encourage non-  operating owners to i n v e s t i n farm land since they would r e c e i v e a higher r e t u r n on t h e i r money while w a i t i n g f o r a capital gain.  This type of land owner i s more l i k e l y to  convert the land prematurely and i s a l s o h e s i t a n t to make improvements to the land to increase i t s p r o d u c t i v i t y . I t i s assumed that there are various f a c t o r s which encourage farm land owners to s e l l t h e i r land or to convert the land to other uses, w i t h t a x a t i o n included as one of these factors.  Although the taxes may be a c o n t r i b u t i n g f a c t o r i n  encouraging the premature conversion of farm land to non-farm uses, they do not absorb a l l the land income and therefore  are  TABLE 13 SUMMARY TABLE MEDIAN RENT AND NET RETURN PER ACRE, AND PERCENT RETURN ON FARM LAND INVESTMENT, RICHMOND, I96I  S i z e of Parcels  Median Rent Per Acre  Median Net Return Per A c r e Proposed In1961 Tax Rates Tax R a t e c r e a s e b  c  Median Percent R e t u r n Market Proposed Value 1961 Per, A c . Tax Rate Tax Rate e  3,  a  ;  5.0 A c .  22.50  8.36  15.29  6.93  1280  0.7  1.2  5.1 - 10.0 A c .  22.50  13.04  17.85  4.72  1180  1.1  1.5  10.1 - 20.0 A c .  27.50  14.34  20.56  6.21  1080  1.6  1.9  20.1 and over A c .  27.50  21.14  24.08  2.94  770  2.7  3.1  0 -  a  N e t r e t u r n i s equal to the t o t a l rent minus the  taxes.  ^Tax rate used i n the M u n i c i p a l i t y of Richmond f o r 1961. c  of  Proposed tax r a t e i s r e l a t e d to the cost of services provided.  ^Increase i n net r e t u r n r e s u l t i n g from r e l a t i n g the tax rate to the cost services.  P e r c e n t r e t u r n i s the net r e t u r n expressed as a percent of the t o t a l investment. e  117  not the dominating f a c t o r .  Thus, a reduction i n farm property  taxes w i l l increase the farm land income, but w i l l not protect the farm land from premature conversion to non-farm uses. The monetary r e t u r n to farm land i s extremely low when compared to returns from other economic investments.  Since  the farm land owner does not i n v e s t the c a p i t a l i n other economic ventures, there must be some i n t a n g i b l e r e t u r n which i s not measured i n economic terms.  This r e t u r n may include  r e s i d e n t i a l b e n e f i t , p r e s t i g e of land ownership, and the p o s s i b i l i t y of a c a p i t a l g a i n .  For farm land i n p a r c e l s of  20 acres or l e s s i n s i z e the i n t a n g i b l e r e t u r n out-weighs the monetary r e t u r n , while f o r parcels l a r g e r than 20 acres i n s i z e , the monetary r e t u r n i s probably equal to the i n t a n g i b l e return. The r e d u c t i o n i n farm land taxes and the r e s u l t i n g increase i n net r e t u r n to the farm land which a r i s e s from r e l a t i n g the tax r a t e to the s e r v i c e s provided for farm property produces a median increase of 0.4 percent i n the net r e t u r n expressed as a percent of the t o t a l farm land investment. This net r e t u r n remains extremely low, and the i n t a n g i b l e r e t u r n remains dominant. In view of the above f a c t o r s , i t i s concluded:  that a  tax r a t e r e l a t e d to the cost of services provided for farm property WOULD reduce farm taxes, but WOULD NOT protect farm land from premature conversion to non-farm uses.  118  The hypothesis:  that a tax rate r e l a t e d to the cost of  services provided f o r farm property would reduce farm taxes and thereby p r o t e c t farm land from premature conversion to nonfarm uses, does not hold true f o r farm land i n Richmond because of the i n t a n g i b l e returns derived from farm land ownership. Although the t a x a t i o n system would be on a more equitable b a s i s , the reduction i n taxes would not p r o t e c t farm land from premature conversion to non-farm uses.  The same conclusion  would be equally a p p l i c a b l e to other m u n i c i p a l i t i e s i n B r i t i s h Columbia because of the P r o v i n c i a l L e g i s l a t i o n which s t a t e s that farm land must be assessed at the value i t has for farm purposes.  This l e g i s l a t i o n operates to r e l a t e p a r t i a l l y  the  farm property taxes to the cost of services provided for such property by using a d i f f e r e n t land rather than a d i f f e r e n t  l e v e l of•assessment f o r farm tax r a t e .  This prevents the taxes  on farm land from i n c r e a s i n g w i t h an increase i n the market value of the l a n d , as other land assessments do. I n suburban areas outside of B r i t i s h Columbia, farm land assessments may be determined on a d i f f e r e n t  b a s i s and the  farm land taxes may absorb a greater proportion of the farm land income.  In such cases, a tax r a t e on farm property  r e l a t e d to the cost of s e r v i c e s provided to such property may reduce the taxes and increase the farm land r e t u r n enough to be a s i g n i f i c a n t factor i n discouraging the premature conversion of farm land to non-farm uses.  However, the reduction i n taxes and  the r e s u l t i n g increase i n net r e t u r n w i l l not p r o t e c t the farm  119  land from premature conversion to non-farm uses because of the i n t a n g i b l e r e t u r n derived from the farm land and the various motivating f a c t o r s which encourage farm land owners to s e l l t h e i r land or convert i t to non-farm uses. A p a r t i a l s o l u t i o n to the problem of premature conversion of farm land would be to create a tax s t r u c t u r e which would make the r e s i d e n t i a l developments s e l f that i s , pay for the s e r v i c e s r e c e i v e d .  sustaining,  This would increase  the taxes on r e s i d e n t i a l developments and may be more e f f e c t i v e i n p r o t e c t i n g farm land from premature conversion to non-farm uses.  With t h i s type of tax s t r u c t u r e ,  the farm land owners  would be h e s i t a n t to convert the land to non-farm uses u n t i l the demand f o r urban land would ensure prompt development. This i s only a p a r t i a l s o l u t i o n since i t would not insure that non-farm land would be developed f o r urban use p r i o r to farm land.  In f a c t , i t may discourage development on non-farm land  as these areas are g e n e r a l l y more c o s t l y to s e r v i c e and the taxes would be h i g h e r . A s i n g l e tax or land tax system may be e f f e c t i v e i n inducing b e t t e r development of under-used areas and r e l i e v i n g some of the pressure from farm l a n d . • This type of tax should reduce the land s p e c u l a t i o n , but i t s effectiveness would l i k e l y depend upon the t a x a t i o n base w i t h i n a m u n i c i p a l i t y . One l i n e of a c t i o n which might be e f f e c t i v e i n p r o t e c t i n g farm land from premature conversion to non-farm uses  120  could be to reduce the element of s p e c u l a t i o n from farm land ownership.  Since the p o s s i b i l i t y of c a p i t a l gain appears to  be one of the main motivating f a c t o r s i n farm land ownership by non-operating owners, an e l i m i n a t i o n of t h i s would make the reward i n farm land ownership f u l l y dependent upon the economic r e t u r n to the land and the value as a r e s i d e n t i a l s i t e .  This  would discourage non-operating ownership and reduce the market value of farm land to a l e v e l at which the land could be purchased by i n d i v i d u a l s i n t e r e s t e d i n farming. The most e f f e c t i v e a c t i o n which could be taken to protect farm land from premature conversion to non-farm uses would be the adoption of p o s i t i v e planning p o l i c i e s .  The  preparation of a development p l a n and the proper use of the various t o o l s for i t s implementation would ensure co-ordinated developments.  R e s i d e n t i a l s u b d i v i s i o n s could be encouraged i n  predetermined areas by the p r o v i s i o n of s e r v i c e s .  Financial  c o n t r o l s exercised through loan insurance and other means would a l s o a i d i n c o n t r o l l i n g the l o c a t i o n and design of r e s i d e n t i a l developments.  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