Current Use Valuation Programs: Property Tax Incentives for Preserving Local Benefits of Forests

Summary

• This paper explores current use valuation programs as one tool for conserving and fostering sustainable management of southern U.S. forests under private ownership. The brief identifies key constraints on existing programs and suggests measures that could be implemented to enhance program effectiveness.

• As a result of rising property taxes on lands under development pressure, nonindustrial private forestland owners in the South often resort to selling all or a portion of their properties to pay tax bills. Rising property taxes also reduce the profitability of timber production and induce corporate and industry landowners to engage in real estate sales as an alternative activity.

• Current use valuation programs are one way that states and counties in the South are encouraging landowners to forgo unwanted development sales. Under these programs, enrolled forest and agricultural lands are assessed not at their fair market value but at their value for current uses. This lowers the tax bill for landowners, improves the profitability of timber production, and helps reduce development pressure.

• Though current use valuation programs in one form or another are authorized by statute in all southern states, the programs’ general implementation and programmatic effectiveness is often limited by perceived negative fiscal impacts, minimal economic benefits to landowners relative to conversion, land speculation, and lack of promotion of sustainable forest management.

• With respect to fiscal impacts, research shows that while current use valuation programs may cause a short-term loss of revenue, preserving these lands can actually result in positive, long-term fiscal benefits. This is because the cost of providing community services and public infrastructure on lands converted to residential use often exceeds the property tax revenues generated. Making counties more aware of this fact can help overcome reluctance to offer current use valuation.

• Changes that can increase the overall implementation and programmatic effectiveness of current use valuation programs include state reimbursement funds for short-term reductions in tax revenues, longer covenant terms, allowances for ecosystem service management, and the inclusion of marginal or idle cropland transitioning into forest.

• With these modifications, current use valuation programs can be a tool for not only keeping forest as forest but also stimulating a wide range of beneficial management activities, such as reforestation and management of ecosystem services.

• This brief is designed to inform state, county, and municipal decisionmakers; land-use planners; and other stakeholders working to conserve and sustainably manage forests.