County looks at a buyers market
David Czurak

If Kent County commissioners agree this week to purchase options for the development rights of six farms, they’ll get a bargain — at least compared to what they’ve paid in the past.

The average per-acre price for the 631.5 acres they’re considering is $1,786.

Through its Purchase of Development Rights program, the county has preserved 758 acres since 2003 at a total cost of $3,805,352, making the average per-acre price $5,020 — $3,234 per acre more than the current price tag.

The difference in the two prices reflects the difference between real estate values before and after September 2008, when the stock market took a tumble.

“The appraisals are that much lower. It’s all based on comparable sales. We hire an independent state-certified appraiser and he tries to find comparable sales, and that’s what the sales are coming back as,” said Kendra Wills, of the Kent/MSU Extension Office and the county’s consultant to its PDR program.

Commissioners will decide Thursday whether to spend up to $1.13 million for options on the acres. Four of the six farms are in Vergennes Township, and one each in Courtland and Lowell townships.

Almost half the option price, $519,000, is expected to come via a grant from the USDA Farmland Preservation Program with the rest to come from local sources that may include the $275,000 the county set aside in December for such purchases. It would mark the first time that county tax dollars would be spent on the program.

“The other thing is the development value has gone down. We caught it before and after appraisal. He had to appraise the farm at what it would sell for on the open market today with no restrictions, based on the best comparable sales he could find,” said Wills.

“Then the after-value is what the farm is worth if sold as a preserved land. Because the owners still retain the farms — the ownership rights — and can sell the farms, we have to try to find that value.”

Wills said the appraiser was able to find a preserved farm that sold in Grattan Township, one the township gave an agricultural easement to, and two other farms that sold, one near Lansing and one in Washtenaw County. Those three sales gave the appraiser much of the pricing information he needed to appraise the development value of the six farms in Kent County.

“The difference between the before-value sold today on the open market and the after-value — what the property is worth as a preserved land — is the development-rights value,” said Wills.

Although the price of development rights has fallen, the taxable value of agricultural land here is expected to remain fairly steady this year, with a projected dip of only four-tenths of 1 percent for the year. In contrast, the taxable value of homes in the county is on pace to go down by 4.7 percent for 2010. So why has the development price dropped while the value of farmland is stable?

“That’s because we’re not buying the land and the farm,” said Wills. “We’re just buying the development rights. But even as a preserved farm, it’s holding value. It’s still on the tax rolls, still in private ownership, no maintenance costs.”

The current market condition means the county can buy more for less and stretch its PDR dollars further than it could before.

“Yeah, it’s a bum deal for the sellers because it’s a buyers market,” said Wills.

If commissioners agree to buy the options, then the amount of acreage preserved in the county will rise by 83 percent, from 758 to 1,389.5 acres. Wills has until Feb. 17 to submit the grant application to the U.S. Department of Agriculture. For her to do that, commissioners have to approve the purchase options.

Commissioners will also have to decide whether to have Wills file an application for a PDR grant from the Grand Rapids Community Foundation for $300,000 over three years. Some Finance Committee members were hesitant about doing so. They were uncertain whether the county would have to provide matching dollars if the grant was approved.

“This is an application,” said Commissioner Jim Talen, trying to alleviate that fear. “It doesn’t mean we would have to provide funds. But they may encumber us to do so.”

Even if GRCF approves the grant, the county commission would still have to decide whether to accept the funding and the agreement’s terms.

Preservation shopping list

Of the 34 farms that applied to the Purchase of Development Right program last year, the Kent County Agricultural Preservation selected six for county commissioners to consider.

Township Vergennes Vergennes Vergennes Vergennes Courtland Lowell Totals

Acres 74.5 60 228 138 116 15 631.5

Total Price $134,000 $126,000 $319,000 $276,000 $228,000 $45,000 $1,128,000

Price Per Acre $1,799 $2,100 $1,399 $2,000 $1,965 $3,000 $1,786

Source: Kent/MSU Extension Office, January 2009