Substitution (agricultural land)

Introduction

All provinces implement legislation equivalent to Quebec

Regional municipalities designate urban growth boundaries

New Edge communities designed for food production (including agrihoods)

Changes to municipal property taxation and other financing instruments

Easements and public land ownership

 

Introduction

Given political economy and agroecological frameworks, a number of instruments used in other jurisdictions are not part of this analysis.  For example, Transfer of Development Rights is used in the US.  It is a market mechanism that somewhat protects agricultural land, but also contributes   to urban sprawl, effectively redirecting the sprawl, but not necessarily reducing it. It also fits with an investor capital approach to land development, in that private capital typically pays for the transfer rights, and therefore has to recoup the investment in the urban development scheme.  It is also complex to set up and administer (cf. Center for Land Use Education, 2005). Also minimized are strategies that generate additional revenue for municipalities from agricultural land.  For example, agricultural land conversion taxes are applied in some jurisdictions, but the rate has to be very high to discourage developers and such taxes increase revenues for municipalities.

All provinces implement legislation equivalent to Quebec

To some extent, the strength of provincial approaches to agricultural land protection reflects the degree of pressure from the development industries and urban, suburban and peri-urban encroachment.  Ideological differences regarding private vs. public interests also explain some of the variability, as do differences in government resources.

Quebec's Act respecting the preservation of agricultural land and agricultural activities and associated requirements of provincial and municipal entities represents the strongest approach to agricultural land protection in Canada (Connell et al., 2019).  The Loi sur l'aménagement et l'urbanisme sets out the obligations of local governments but the Act preserving agricultural land takes precedence.  Local and regional municipalities must have land use plans that are conformity with the Act. Severances are significantly restricted in agricultural zones, adding another layer of protections beyond those discussed under Efficiency.  Working together they provide strong protection to areas zoned agricultural, with restrictive conditions for exemptions.

This does not mean the Quebec system is perfect. Some believe it contributes to farm consolidation and restricts access to land for small producers.  The Union Paysanne believes municipalities should levy a tax on agricultural lands with absentee owners and the land left uncultivated for three years (Dale, 2017).  This suggests the need for integration of land protection measures with some of the other proposals on this site to disperse ownership (see for example Goal 3, Reducing corporate concentration).

Exemptions should not be permitted before an Agricultural Impact Assessment is undertaken (see Efficiency).

Regional municipalities designate urban growth boundaries

"Urban containment boundaries that are enacted through legislation are one of the most important indirect tools to protect farmland" (Connell et al., 2019:148). Consistent application is important (ie., no regular shifting of the boundary) and they have been used in other jurisdictions to positive effect (e.g., the Netherlands, see Tatebe et al., 2018). No provinces require them.  They are also not widely used by Canadian municipalities. As discussed under Efficiency, Waterloo Region has relatively recently imposed growth boundaries. Saanich BC is a long term exception, with a boundary in place since 1968 and minimal expansion over that period. Expansion requires a positive vote from electors in a plebiscite (Tatebe et al, 2018).

A selective approach to urban growth boundaries is warranted.  With measures in place comparable to Quebec across the country, provinces can require them in specific circumstances where agricultural lands are particularly threatened.  Amendments to provincial planning legislation are required.

New Edge communities designed for food production (including agrihoods)

See Goal 1, Equitable access to the food distribution system, Substitution.  Instruments used to protect urban land for farming are also pertinent here, including Agro-parks and Agricultural Entreprise zones (see Efficiency).

Changes to municipal property taxation and other financing instruments

Municipal revenues typically come from a mix of property taxes, development charges, user fees and transfers from provinces/territories and the federal government. Significant financial pressures for many municipalities call into question this financing model. Property taxes are particularly central to how municipalities finance themselves, and this provides perverse incentives to convert agricultural land to other uses with higher tax revenue. Canada is one of the most reliant countries in the world on property taxes for municipal financing (Slack and Bird, 2015). Consequently, municipalities often favour non-farm uses because of the additional revenue it can generate.  While this is often true,  what is frequently missed is how other uses, particularly residential ones, require significant investments in services, especially expensive if densities are too low.  The net result can be a revenue loss because the servicing costs exceed the property tax revenues.  Agricultural land, although generating lower tax revenue, is very inexpensive to service, usually resulting in a net gain for the municipality. At least part of the problem is Market Value Assessment, which helps set tax rates based on the market value of the property, rather on what it costs to service it.  Farm properties typically are assessed differentially, at lower rates, which adds to the revenue challenge (see also Instruments, Taxes, Municipalities).  The lower rate of taxation on farm properties doesn't necessarily protect them from development pressures because the tax savings are relatively small compared to the profit from selling at future, rather than current, market value.  Low thresholds for farm activity in many provinces, such as BC, make it easy for properties to be considered agricultural, and receive tax reduction, when the property is really residential or industrial.  This adds to the revenue challenges. The changing nature of work, particularly industrial and commercial land use, is changing municipal revenues from property taxes (Johal et al., 2019).

So, there are two central aspects to the changes required, one related to the broad approach to financing municipalities, and the second related to how agricultural lands are treated. With more robust and stable funding, in theory there will be less pressure to develop agricultural landscapes. Johal et al. (2019) have reviewed a number of proposals to improve municipal finances, including (somewhat adapted):

  • Progressive property tax rates within categories (much as with income tax), with the possibility of deferrals until a house is sold for low income people. Provinces would have to mandate this to avoid competition between municipalities;
  • A 1% increase in PST/HST with the increase reallocated by the provinces to the municipalities
  • Optimizing development and redevelopment charges by developing better growth forecasting models that better link to servicing requirements and associated costs.
  • User charges related to automobiles including parking charges, shared gas tax revenues (Ontario does this currently, but not all provinces)
  • Accommodation taxes for visitors, hotels and private rentals such as airbnb
  • Provinces sharing a portion of the cannabis excise tax with municipalities
  • Large municipalities across the country should have the same powers (not all them currently implemented) as the revised City of Toronto Act, including the authority to implement a  Municipal Land Transfer Tax (MLTT), Personal Vehicle Tax  and Third Party Sign Tax, an alcoholic beverage tax, Entertainment and Amusement Tax, Parking Levy, Road Pricing and Tobacco Tax

For agricultural land, which already benefits from differential taxation, the key question is the level of agricultural activity that warrants designation for tax reduction.  The threshold should be high enough that significant activity is happening, but not so high as to disfavour many small operations.  BC's level appears to be too low for rural landscapes.  Metro Vancouver' s proposal (see Tatebe et al., 2018), if modified, is interesting because it creates the possibility of a differentiated approach depending on whether the farm is rural or urban, and which province the farm is located in with what levels of development pressures. In the Metro Van proposal, farms with sales over $10000 would qualify for a full exemption and those with sales over $3500 would qualify for a partial exemption.  If extended to farms within urban boundaries (see Goal 1, Self-provisioning and Goal 5 Sustainable food), it could encourage more commercial production within cities of a small and part time nature. Many properties not really being farmed would pay more in property tax.  Other provinces might shift the upper threshold. Ontario's currently sits at $7000 and Quebec's at $5000.  They could retain that threshold and have a partial threshold at half that level.

However, for an urban property to be eligible for tax relief (currently set at 25% of the residential rate in Ontario), other processes have to happen (see MacRae et al., 2012). Although a city  collects property taxes, farm designation for property tax purposes is usually provincial jurisdiction. In Ontario, the Farm Property Class Tax Rate is offered through the Ontario Ministry of Agriculture, Food and Rural Affairs (OMAFRA), and the Municipal Property Assessment Corporation (MPAC) is responsible for determining the property classification. To obtain a farm designation, the property must be assessed as farmland. A landowner (who must be a Canadian citizen or permanent resident) must request a designation reconsideration by MPAC and an eligibility determination from OMAFRA and approval for the Farm Property Class Tax Rate. The owner must have a Farm Business Registration Number and the farm must generate at least $7,000 in gross annual income. The owner is responsible for ensuring that any tenant who farms the land has a valid Farm Business Registration Number. The farm rate applies only on the part of the land under cultivation.

Many cities have larger farms on the edges of the borders with a Farm Business Registration Number that are taxed at the agricultural rate. An urban location may not then, per se, be an obstacle to reduced tax rates. But small-scale urban farms may have more difficulty obtaining a Farm Business Registration Number. Exemptions from the normal requirements may be needed, depending on provincial rules. Agriculture Departments and property assessment bodies should examine whether small-scale urban farms might need a different minimum gross annual income for eligibility for a farm business registration number, and  also study the implications of establishing a small-scale urban farm designation.  Municipalities will also need to study the revenue implications of pursuing options such as those proposed by Metro Vancouver.

Easements and public land ownership

See Goal 3, Reducing corporate concentration, Substitution, Land