Maryland Governor O’Malley’s PlanMaryland continues to bite the hand that feeds us.

Last week, Maryland Senate Bill 236 passed and with Governor Martin O’Malley’s signature it will soon become law. Otherwise known as the Septic Ban Boondoggle, the Sustainable Growth and Agricultural Preservation Act of 2012 is part of PlanMaryland, which MacRo Report has covered before.

This latest nifty piece of “anti-sprawl” legislation will supposedly cut way down on nitrogen pollution that seeps into the Chesapeake Bay from rural septic systems. This seems like a whole lot of trouble for nothing when you consider that according to the Chesapeake Bay Foundation, only 4-6% of nitrogen pollution is caused by Maryland septic system leaks. Such statistical information coming from this group is more than likely a real stretch in and of itself.

This so called six percent is a whole lot less than say, the millions of gallons of raw sewage that routinely spill into our streams, rivers, and bay when municipal water treatment plants fai, which they do far more often than the O’Malley administration cares to admit.

Remember when “enough raw sewage to fill 388 large gasoline tanker trucks” flowed into Frederick’s Carroll Creek just this past December?

According to State Senator David Brinkley in his newsletter on Friday, April 13, 2012: This “bill requires counties to divide their jurisdictions into ‘tiers’ of development and incorporate them into their comprehensive plans before any major subdivisions served by septic systems can be approved.”

To learn more do a Google search to find the approved “Maryland Senate Bill 236.”  The definitions for the four tiers start on page 46, and the (ahem) development “guidelines” for each tier can be found starting on page 13.

Brinkley served on the “Septic Task Force” that came about due to Mr. O’Malley’s failure to get a tougher septic ban approved during the 2011 legislative session. The group met 10 times last year and produced a 13 page report. Despite those efforts, Brinkley states that “the Governor ignored the recommendations of the task force and introduced a bill that was far more egregious than what eventually passed.”

This very objectionable part of the original draft was amended to take land planning veto powers out of the hands of the state and put them back into the hands of county governments.  However, the state has made it clear that counties who “don’t play by the rules” could pay the price in terms of losses in discretionary state funding and programs.

In what Brinkley calls a “one size fits all approach” to the perceived problem, the amended bill prohibits development on most, if not all, lands that have been zoned as agricultural; lands designated resource protection, preservation, or conservation; and “areas dominated by agricultural lands, forest lands, or other natural areas.”

It is the part about prohibiting future development on agriculturally zoned land that worries the farming community. Yes, a majority of those affected object to SB236!

Frederick County has a proud and strong heritage of agriculture and farming. It might seem counter-intuitive to state that prohibiting development on land that has been zoned agricultural will save our farmers, but it’s the truth.

Having spent a significant part of my youth growing up and working on the family farm and knowing the local agricultural community as well as I do, farming can be (and please pardon the pun) a feast and famine way of life.

There are good years, with cooperation from Mother Nature, high commodity values and healthy livestock. And then there are the bad years when extreme weather, insect infestation, rising fuel costs and vet bills devastate margins and then some.

Luck is not often a lady. Any farmer can tell you that.

Those who make a living working the land in Central and Western Maryland typically do not sit on a pile of excess cash. Land is the asset that enables farmers to finance replacement equipment, to improve farming practices, and to expand operations. In any business, if you aren’t moving forward, you’re falling behind.

In many cases, land values and development rights are the crutch that gets a farmer through the lean years. Without that leverage, it isn’t possible to borrow money when it doesn’t rain more than ½ inch during the entire growing season.

The “one size fits all” mentality that the O’Malley administration has crafted in this legislation makes the blatant assumption that all agricultural land is the same when it comes to yield per acre.

In the mid-western part of the United States, there are vast amounts of flat and very fertile lands as far as the eye can see. This is where one finds what is known as the much more profitable “Corporate Farms” consisting of thousands of acres under single control. Due to economies of scale and high crop yields, the value of farmland often far exceeds that of land development value.

In our little part of the world, the typical farm consists of one to three hundred acres at best. A rolling topography often contains a moderate productive acre factor of no more than 60% of the total real estate. With rural low density development being a long standing option for value enhancement, the removal of this right by our government effectively and dramatically “downzones” the value of farmland.  Stagnation and bankruptcy become a continually looming threat for many of the families who are putting food on our tables (not to mention supplying the delightful restaurants that bring so many tourists to our beloved downtown).

With such limited use options, who wants to spend their lives playing Russian Roulette with their future?

Is it reasonable for us to ask that of the very people who are feeding us?

Apparently, Martin O’Malley thinks so.

In the end despite the fact that our state offers a very limited and competitive source of land easement programs, such a move by our Governor will accelerate the pace of the loss of our family farm ownership into the hands of non-productive uses usually only affordable to the very wealthy.

So, to put it another way, could it be said that our Governor believes that returning the family farmers to a state of serfdom is the price that must paid for stopping so-called sprawl?

Rocky Mackintosh, President, MacRo, Ltd., a Land and Commercial Real Estate firm based in Frederick, Maryland. He is an appointed member of the Frederick County Charter Board. He also writes forTheTentacle.com and Want2Dish.com.

Billed as one of the most beautiful rivers on the planet earth; will the powers to be actually say “Dam It”?

Okay, so this title and subtitle may disturb some of my readers and surprise others, but read on!

During my nearly 40 years of riding the economic roller coaster of the land and commercial real estate business, like many, I sometimes seek a break from the things that are vital to success in any field: phone calls, meetings, negotiations and (in the last 20 years) a never ending stream of emails and now text messages.

I love what I do and those that I serve, but for me there is one escape that always seems to literally throw cold water on all of that bustle for a while.

It’s the kind of vacation that replaces the day to day stress of the business world with a terrific physical workout within a serene environment full of Nature’s glory.

Typically my wonderful wife Nancy accompanies me on such adventures, but this time a college buddy, Sidney Gunst (a seasoned real estate developer from Richmond, Virginia), and I trekked a mere 7,000 miles south of Washington, D.C. into the rain forests of Patagonia, Chile.

The goal: To experience the incredibly steely blue and raging Class V whitewaters of the Rio Futaleufu, affectionately known as the “FU”.

The inspiration for this trip came about while enjoying the challenges of a couple of weeks through the Grand Canyon along the mighty Colorado River in 2009 with my bride. We heard that there are actually two rivers in the world that some claim are rated as more spectacular and very challenging:  The Zambezi River in Victoria Falls National Park, Zimbabwe, Africa, and Chile’s FU.

Instantly, Africa and Chile made the bucket list.

Taking one river at a time and being a tad bit closer than central Africa, we opted for a journey into the waning summer months of Patagonia.

The travel literature describes the area as “some of the rarest and most beautiful wilderness left on the planet” with deep green forests shadowed by the rigid snow capped peaks of the Andes Mountains.  It’s a place full of wonder so lush with mosses, ferns, endless waterfalls bellowing out of granite canyons and gorges.

With giant condors circling the skies, one might think that he is on the movie set of Lord of the Rings.

The river itself was no less spectacular.  From a steely blue calmness, the heavy water of the rapids turn a stunning turquoise mixed with white caps and waves boiling in every direction. The mire often seems to swallow the paddler whole, only to spit him/her out into another cauldron of excitement. All the while there is only one focus: Respond to the commands of your guide: Forward! Back! Right Forward! Left Back! High Side! Stop!

A thrill a second!

Are there more challenging adventures in this world? Sure. One could solo kayak through this stuff or skydive from 20,000 feet… but give me an experienced river guide with a commanding voice, and one who will laugh at the half baked jokes of a couple of 60 year old has-beens… nothing is more fun.

The real estate in this part of the world is exceptional, but the people of Patagonia are also very special. They seem to live a simple and content way of life, despite the tragedy of an occasional volcanic eruption, as was the case in 2008 when the small town of Chaiten was blanketed with 10 feet of ash followed by the flood from a backed up nearby river.

Fortunately there were no deaths, but over the last 160 years this cultural blend of the native Tehuelche people with immigrants of Spanish and German descent has learned the value of community, and it is visible in their amicable ways.

While in this magical place, we learned of a looming threat to the river itself and the many who benefit from the forceful waters of the Futaleufu and all its tributaries.

Seems the Chilean government in a collaborative effort with Argentina has proposed a hydroelectric plant in the southern region of Patagonia that will dam two rivers below the FU. Being as far south as it will be from “civilization”, the Chinese government has been in talks to construct an 1,860 mile power transmission line to send the power north and east.

The talks of damming have not stopped with Rio Baker and Rio Pascua, but there are strong hints that Rio Futaleufu is also in the future sights of this mega billion dollar project.

It is a rare thing that the average North American pays much attention to such things in the hemisphere to the south, but this has become a very contentious issue.  Chilean President Sebastian Piñera says that generating more power is critical to the economic vitality and expected growth of the country, but an overwhelming majority of Chilean citizens who will be affected by the project have shown strong opposition with marches and protests demanding “Sin Represas de Patagonia!” (Stop the Dams of Patagonia).

It comes as no surprise that a number of U.S. environmental groups have joined forces with native protestors to bolster the anti-dam effort, which has engendered a reasonable war of words within the pages of the Wall Street Journal and across the web.

Yes, I am often one of those people who has been known to take up a community or political cause or two, but this time Patagonia will have to fend for itself.

All I can say is that it would be a terrible shame to see such a pristine area — one of a kind in this world — be blemished.

The author: Rocky Mackintosh, President, MacRo, Ltd., a Land and Commercial Real Estate firm based in Frederick, Maryland. He also writes for TheTentacle.com and Want2Dish.com

Appraiser Six states building lot values continue to drop at 1% per month.

It has been over five years since the real estate bubble burst, and the lot and land sector of the real estate market has undeniably been hit the hardest.

The bottom line is the rural lot and land sector of the real estate market remains anemic.

Sales of rural building lots are slowly recovering, with 65 sales on pace for 2011 (up from 60 in 2010 and 44 in 2009).  However, that is mainly because prices for lots and land have dropped by almost 50% since 2005.

But there are always exceptions, even in a down market.  Premium residential lots in prime locations are in short supply in Frederick County and continue to receive strong interest.  Overall, however, demand continues to be soft and buyers are extremely price conscious.

The worst pressure on this segment is coming from over saturated inventory.  The number of lots currently listed (plus our best guess at “shadow inventory” of lots that are being held off the market due to low prices or lender intervention) equates to a 9-10 year supply of lots remaining to be sold.

“Selling lots right now is like driving down to the Eastern Shore on a busy summer weekend,” said Wayne Six, veteran real estate appraiser at Six and Associates, Inc. “We are all sitting in a traffic jam waiting to cross the Bay Bridge.  Once we get over the bridge, though, there is very little traffic behind us. It’s going to be like June 2005, when there weren’t enough lots on the market to meet builder and investor demand.”

Great news, but when are we going to get across that bridge?!

According to Six, lot appraisal values are still on the downswing, dropping about 1% per month.  “Anyone holding lots is like a little kid with an ice cream cone on a hot August afternoon—we are watching land values just melt away.”

Six agrees that it will take nearly a decade to chisel away at current inventory and bring the market back into balance.  “Housing starts are improving slightly, so the market for residential lots should bottom out soon.  But we will stay flat for a while before prices begin to rise again.  The last flat market lasted from 1992-1997.”

“We have another 8-10 years before there is going to be another lot shortage like 2005,” predicted Six.  (There were only 30 lots listed for sale that year.)

The general market has dried up as smaller, local home builders who are still in business are now focusing on additions and foreclosure rehabs to stay profitable.  In fact, they are selling their lots and pumping up the inventory of properties for sale.

According to Six, Frederick-area home builders are not the only players running scared from the land market—developers have all but suspended activity as well.

“There are very few lots in the county pipeline right now for approval because requirements have become so stiff.  The Forest Resource Ordinance is a huge problem because no one is sure how to interpret it,” stated Six. And it has increased development costs so much.  I spoke with a surveyor today who told me he hasn’t done a subdivision survey in two years.  It’s pretty much impossible, between regulatory fees and soft prices, for developers and builders to do anything but break even in this market.”

“I have lots in my own portfolio I would love to sell right now,” shared Six.  “I had to make a decision whether to sell them at 50 cents on the dollar or hold on.  I decided to hold them in my pension plan.”

According to Six, lot prices change dramatically in a short time and predicting when that will happen is a matter of watching housing starts and knowing what is in the development pipeline. “It’s like watching the Weather Channel—you can see the rain or the sun coming a day ahead.”

No matter how one looks at it, from a purchaser’s perspective this is an excellent time to consider buying a rural building lot for a new home now or into the future.

This article presented by Dave Wilkinson. Dave is a licensed Realtor and brokers many of MacRo’s real estate building lot listings, using his knowledge of zoning and subdivision regulations, real estate market conditions, and land development options to help MacRo’s clients achieve their goals. Contact Dave at 301-748-5670 or dave@macroltd.com

Montgomery County Maryland is on the forefront of land preservation efforts with a new and innovative tool – the Building Lot Termination (“BLT”) Program.

The BLT program piggy backs on the 30 year old Transferable Development Right (“TDR”) program. For a basic understanding of the TDR program you may want to refer back to our previous blog postings Saving Farmland with Transferable Development Rights and 13 Components of a Successful Transferable Development Right Program.

While the County’s TDR program has been very successful in reducing development in the Rural Reserve, some feel that even less (zero?) homes should be allowed. In the past, some have pushed to ban the use of sand mound septic systems and or “child lots”. Those efforts weren’t successful probably because they took value from land owners without any compensation.

The adopted BLT program is different:  it’s a voluntary program which is market driven and offers compensation. Under the existing TDR program many land owners have sold their “excess” development rights (TDR’s) but retained the subdivision potential of their land. For example a 200 acre farm in the Rural Reserve has 40 development rights (1 per 5 acres) but can only be subdivided into 8 lots (1 lot per 25 acres). Typically a land owner would sell 32 TDR’s and retain 8 development rights for potential subdivision of the land owned. When the market was at its peak in 2005 TDR’s were selling for as high as $40,000, but lots were worth around $400,000. Not many people would sell a TDR for $40k if it meant sacrificing the potential for a $400k lot sale.

As a way to encourage owners to eliminate their right to subdivide their land the county came up with the BLT program. A BLT is kind of like a TDR on steroids. While the TDR’s are purchased by residential developers which allows them to increase residential densities in designated areas, the buyer’s for BLT’s are commercial developers who can gain increases in the number of square feet built in designated commercial districts.

The county has a $5 million fund for the purchase BLT’s and will pay around $250,000 for each BLT this year. This isn’t a bad option for a landowner since lot values aren’t worth much more than that. The land owner can sell the BLT and still own the land and not have to worry about marketing the lot, having a new neighbor etc.

That’s all for this week, all this talk of BLT’s has made me hungry – I’m going to get lunch. If you have any questions about subdivision or land preservation, feel free to contact Rocky or me anytime.

This article was written by MacRo, Ltd. Vice President, Dave Wilkinson. Dave is a licensed Realtor and brokers most of MacRo’s real estate listings, using his knowledge of zoning and subdivision regulations, real estate market conditions, and land development options to help MacRo’s clients achieve their goals. Contact Dave at 301-748-5670 or dave@macroltd.com

It’s called PlanMaryland – It is a comprehensive state wide land use plan presented beautifully on a website that gives the visitor a real warm and fuzzy feeling of protection from evil real estate development interests.

Dig into it deeper and it’s all about our state government being granted the powers to usurp the land use authority of county, city and town officials in the name of protecting the land and its citizens against “stupid decisions” that they may make (as our Governor has said).

This is especially important in rural counties west of Baltimore and on the Eastern Shore of Maryland.

Once again the elitism of the environmental and land conservation forces are showing their true colors by dressing up a proposed state wide land use plan that essentially says “Big Brother” knows better than those “Stupid” hicks in the sticks.

The MacRo Report Blog raised a red flag over PlanMaryland back on October 4, 2010 in a piece entitled Does Mr. O’Malley have a Septic Problem? While we outlined the entire “Plan” as it was developed at that point, the focus was on what we saw as a means of declaring rural septic systems to be bad for the environment — all in the name stopping sprawl in rural areas.

Then in February of this year, this prediction became reality as we discussed in Farmland and Rural Building Lots face new threats from EPA. O’Malley revealed at that time his vision to ban septic systems throughout much of the state as a means of saving the Chesapeake Bay from excessive amounts of nitrogen that leach into the soil through septic drain fields.  With the aide of the EPA it was declared that Maryland must be put on a “Pollution Diet.”

Of course many local community and government leaders, as well as state representatives came to the conclusion that this radical plan was nothing more than the state seeking a method to take control of land use planning throughout the state.

The proposed legislation that was released stated that despite the state’s efforts in 1997 to direct “growth in and around existing cities and towns … 78% of statewide acreage associated with residential development has been located out of [these] Priority Funding Areas.”

To put it another way, former Governor Parris Glendening’s highly touted Smart Growth Plan that attempted to socially engineer the type and location of housing that people should live in throughout Maryland, didn’t have enough teeth in it.  Not to mention the fact that while it was often attempted in the non-metropolitan counties of Maryland, it was almost always rejected by neighboring communities made up of single family residents who claimed NIMBY (Not In My Back Yard) to such high density land development projects.

But the dream lives on within the core of the Maryland’s land planning and environmental bureaucracies.

So after the defeat of Republican Governor Erhlich, O’Malley decided to dust off the failed Smart Growth initiative, change the name and find a way to give Big Brother more teeth and cloak him in sheep’s clothing – thus PlanMaryland was born.

Over the last couple of weeks, Mr. O’Malley has now revealed those teeth with the full revelation of his grand plan.

In an article entitled Land Grab, the Editors of the Frederick News Post quoted our state leader as saying if the State doesn’t like land use decisions of local communities, it may retaliate by withholding funding for schools, roads and other essential services unless the community complies.  “This is not a law that prohibits counties from making ‘Stupid’ decisions,” said the Governor. “But we’re not going to subsidize it anymore.”

Why would such ‘Stupid’ people ever want to make a decision on their own without first receiving the blessings from the Higher Power of the all wise and all knowing Governor and His people?

Forgive us, O-Wise One!

The desire to preserve rural lands is a worthy one for sure, and such efforts are vital to a well balanced community.  But aren’t these decisions best left to local governments that are most intimately familiar with the people,  the land and the comprehensive plan it lays out for itself?

In speaking with BOCC (Frederick County Commissioner) member C. Paul Smith, he stated that at last week’s Maryland Association of Counties (MACO) meeting the Governor through deliberate vagueness made very clear his determination to have the state control land use.

When asked by Board President Blaine Young if this was Mr. O’Malley’s intention, he consistently avoided a direct answer, said Smith.  “They kind of really went at it … but in a professional way,” he said.  Young ended by saying to the Governor, “You never really answered the question.”

“And he never did,” said Smith.

Not only is this vagueness apparent in Mr. O’Malley’s verbal presentation, but also in the written plan according to Smith.

Keeping language vague leaves things open for interpretation — and that is great for bureaucrats!

The commissioner drafted a five page memorandum outlining his concerns about the PlanMaryland proposal on August 16th.  From his interpretation it seems pretty clear that the ultimate goal is for the state to eventually eliminate the use of private septic systems throughout the state and lock down all rural lands (zoned agricultural, conservation, rural reserve, etc.) as no longer usable for any residential or other commercial developable uses.

“With another one million people expected to move in to the state in the 25 years, the Governor is saying rural lands are off limits … leaving the only way to accommodate that kind of growth by promoting new multifamily housing (apartments, condos and town houses)  in and around the cities and towns,” said Smith. “A future for new single family housing within Maryland is clearly not part of his plan.”

In addition this could conveniently wipe out the need for any state and local agricultural and land preservation funding programs – no longer will there be a difference in values between farm or rural use and subdivision potential.

Since last week’s meeting, a number of the county leaders – as many as 19 out of the 23 in Maryland – have been in touch with each other in an effort to form a possible coalition against O’Malley’s plan according to Commissioner Billy Shreve.  Other organizations like the Maryland Farm Bureau and possible municipal leaders are also ready to jump on board against this “Wacky Idea” said Shreve.

There is no question that the Governor is relentlessly pursuing a Big Brother approach to controlling the planning and zoning decisions made at a local level.

Obviuosly the Gov is not happy with the results of the last legislative session where most of  his “key environmental initiatives — including legislation to limit septic systems and build an offshore wind farm — failed to win approval in the General Assembly,” according to the Baltimore Sun.  So why not just repackage all this and give it a warm and fuzzy presentation.

One would have to be really “Stupid” to fall for that one!

Rocky Mackintosh, President, MacRo, Ltd., a Land and Commercial Real Estate firm based in Frederick, Maryland. He is an appointed member of the Frederick County Charter Board. He also writes forTheTentacle.com and Want2Dish.com.

Real estate tax rates will not be increasing anytime soon, but tempers are rising, that’s for sure… and where did our farmland preservation money go?

“Heartless”, “inhumane” and “cruel” are just a few of the words used to describe the Frederick County Board of County Commissioners as they have come closer to finalizing the budget for fiscal year 2012.

Without a doubt, our community has not seen the likes of this kind of crew for as long as I can remember.

Standing in the face of an $11.8 million deficit and a $31 million base structural deficit, they knew that they were destined to disappoint more than a few people.

Within one week after being sworn into office they went right to work with the leadership team of county staff in a two-day retreat at Pinecliff Park to identify goals and craft a strategic plan for their four-year terms.  This effort resulted in six key goals:

1. Job growth
2. Predictability for business
3. Public safety
4. Traffic
5. Agricultural preservation/land use
6. Privatization and sharing of government services

These core priorities have set the framework for a fundamental redefinition of the role of government in Frederick County… at least for this board, which is determined to get the County’s financial house in order.

In the five months since this board took office they have been able to slash the structural deficit by $12 million dollars, leaving a trail of unhappy people at Head Start, over 100 county staff members who have been laid off through a massive departmental reorganization among others.

Over the last ten years the structural deficit has averaged about $16 million.  This is about $11 million more than the county is comfortable planning for according to County Budget Officer Mike Gastley in a presentation he made to the County Commissioners at their April 5, 2011 public hearing on the Fiscal Year 2012 Budget at Catoctin High School in Thurmont.

…But haven’t we always had balanced budgets?

In a conversation last week with County Commissioner Billy Shreve, he said while past boards have delivered balanced budgets over the last 10 years, each time the expenses have exceeded expected revenues.  These negative scenarios have all been offset by raiding several of the county’s special “savings accounts” such as the Fire & Rescue Tax District, Open Space and the County’s Bond Enhancement Fund.

In the case of the latter the balance dropped over the last several years from $4 million to about $100,000.  Ironically, this is the fund that Frederick County established to prove to the bond agencies that it is capable of saving money.

… and the local farming community has been wondering where their local agricultural land preservation dollars went out the Open Space Fund from recordation taxes.

“Even though county revenues were rising each year for most of the last ten, past boards still approved budgets with higher spending levels,” Shreve said, “and today we don’t have any more funds in those savings accounts to cover the excesses.”

For Shreve, and the majority of his four comrades, the decisions on how to reign in the exponential rise in the structural deficit are tied directly to their campaign promises of no new taxes and restoring fiscal responsibility to government.

While it took less than 5 months to cut the projected 2012 structural deficit from $31 million to $19 million, numbers will not drop as fast from this point on.  Projections into F.Y. 2013 show a $16 million deficit and $15 million in F.Y. 2014.

In addition to keeping the General Fund balanced, those raided savings accounts have to be replenished, or in the case of the Fire & District Tax Districts it is likely that a major reorganization will have to be considered to make its fund sound, according to Shreve.

Redefining the role of government

With all the cutting and reorganization that is going on, one thing has been made clear, this board of commissioners is not about proportionality.   Their focus is based upon those six core priorities that they established back in December.

For many local non-profit and religious based human service organizations in Frederick County, they’re finding themselves being left high and dry.

Philosophically, while County Commissioner Blaine Young stated that the 2012 budget provides about $11 million to the low income population of the county, he does not believe that the Frederick County Government should be in the business of using taxpayer money to fund private non-profit organizations such as the Community Action Agency, Mental Health Association, Heartly House and other such groups.

In an April 26th workshop, Commissioner Paul Smith with support from David Gray made an unsuccessful plea to provide about $150,000 in the budget for the Community Action Agency.  Young made it clear if the board is going to consider funding one such organization, then in order to be fair “we should have one day for a ‘beg-a-thon’ where all non-profits can come in here and make their cases.”

Heartless, inhumane and cruel?

Like it or not when there are limited funds and a multitude of demands for services, government must make tough choices, and Young and his slate are holding firm to their convictions.

The good news is that they are a rare breed of politicians who have the guts to tackle a serious financial problem rather than avoid them.

The bad news is that some terrific people, groups and causes that have depended upon Frederick County Government for human services funding for the needy of our community are left looking elsewhere for financial assistance.

The author: Rocky Mackintosh, President, MacRo, Ltd., a Land and Commercial Real Estate firm based in Frederick, Maryland. He is an appointed member of the Frederick County Charter Board.  He also writes for TheTentacle.com and Want2Dish.com.

Update on the Maryland Governor O’Malley’s plan to ban septic systems for building lots on farmland and rural areas

Tom LoBianco submitted this article to the Associated Press on March 8, 2011:

ANNAPOLIS — Gov. Martin O’Malley has encountered opposition from both parties in his push to require high-end septic systems for new developments, but he’s drafted a compromise to salvage the bill and even plans to wade into a polluted lake midweek to draw attention to the issue.

O’Malley’s plan to require new developments in rural Maryland to install top-grade septics systems hit a bump last week after rural lawmakers protested and a House leader suggested studying the issue for a year before passing any legislation. While the measure is targeted largely at developers, who rely on septic systems which leach nitrogen into the Chesapeake Bay, it also would limit how farmers peel off parcels of their land.

The septics bill would only allow farmers to divide their land into parcels once — a measure environmentalists say is designed to keep developers from skirting septic requirements by getting farmers to gradually sell them land over time.

However, amendments crafted by the governor would allow farmers to split their land four times, but only for family members, not for sale to developers.

It would also allow farmers to divide their land for other, non-residential means, like building a winery or dairy operation. A document outlining the amendments was obtained by The Associated Press. O’Malley met for more than an hour Thursday morning with farmers, farm credit analysts and Agriculture Secretary Earl “Buddy” Hance.

The governor distributed copies of the amendments to the group and told them they would have much of the summer to talk about the issue, said Val Connelly, lobbyist for the Maryland Farm Bureau who attended the meeting.

“The impression the farm community got was we have time to discuss our concerns,” she said.

O’Malley would like to see the bill passed this year, to start addressing nitrogen runoff into the Bay, but has always said he wants an open debate on the issue, said Hance.

“What matters is it’s done right, not done quickly,” Hance said.

House Environmental Matters Committee Chairwoman Maggie McIntosh told O’Malley last week she wants to send the bill to a summer study committee.

While Republican lawmakers have largely lambasted the proposal, a group of rural Democrats also filed their concerns with McIntosh last month.

Getting caught between a bad economy and an effort to complete  farmland conservation and/or preservation easements  has really put the squeeze on some in the agricultural community.

On January 30, 2011, the Frederick News Post ran a front page story entitled Frederick County studies $824,000 option on family farm.  It described the plight of the Blickenstaff family, and their struggle to sell a land preservation easement on their farm.

This article reveals some of the pitfalls to landowners and local governments in their efforts to preserve land.

In Frederick County the government funded programs used to preserve land include the Maryland Agricultural Land Preservation Foundation (“MALPF”), Rural Legacy, the Installment Purchase Program and the Critical Farms program.  Typically, the landowner will sell the government an easement which restricts their right to subdivide, develop or use their land except for agricultural or similar uses.

Some land owners enter their property into a program such as the Maryland Historic Trust without receiving monetary compensation; instead a tax benefit is usually the incentive.

Governments fund these programs with transfer and recordation taxes collected from property sales, and with general funds.  When times are good, properties sell and money flows into land preservation programs.

Unfortunately, times haven’t been good for several years now – tax collections are way down and all government budgets are extremely tight. As a result, land preservation efforts have stalled.  For example, MALPF did not preserve any land in Frederick County in 2010 and is likely to purchase only one property in 2011.

It’s Complicated!

The Blickenstaff case is complicated.  The family purchased their farm in 2008 with a little over 50% of the price being funded via Frederick County’s “Critical Farm” preservation program.  There are two aspects of this program that make it unique and important.

Cash for Experienced Farmers

First, Critical Farms provides cash for the purchase of farmland by experienced farmers.  When a farm is “on the market” for sale, this program can subsidize the purchase price for buyers if they are experienced farmers and agree to preserve the farm.

The Critical farms program provides incentive to keep farms in production versus being sold for other uses.  It also helps farmers obtain farmland at lower prices than the market will bear, giving them a chance to compete.

The other preservation programs tend to move more slowly and aren’t able to provide funding at the settlement table.  Critical farms targets farms that are being sold – providing incentive to keep the farm in agricultural production instead of being sold for other uses.

A Revolving Fund

Secondly, Critical Farms is a county administered “revolving fund”.  The county provides cash at settlement, reducing the purchase price to the farmer-purchaser.  In exchange, the farmer agrees to apply for preservation funding from other programs, usually MALPF or Rural Legacy for a five year period.

If the farm is accepted into one of the programs then the county is ‘paid back’ the investment it made at settlement.  This replenishes the revolving fund which can then be used to help another farmer purchase a farm.

If the funding received exceeds the county’s investment, the extra funds are kept by the farmer further reducing the net purchase price.  If the farmer is not able to obtain funding from a preservation program within the five year period, then the county has the right to record its own preservation easement to prevent development of the farm.  This is in keeping with the original intent of preserving the farm, but since ‘outside’ funding isn’t provided, the county’s revolving fund is not replenished.

Where’s the beef?

Due to the sour real estate market, MALPF and Rural Legacy don’t have sufficient funds to purchase an easement on the Blickenstaff farm.  If at the end of the five year option period the Blickenstaff’s haven’t paid back the county, then a county preservation easement automatically takes effect.

Unfortunately the News Post article incorrectly indicated that the county would take ownership of the farm, similar to a foreclosure.  In fact, the property owner will not suffer any additional loss – they were able to acquire the farm at a greatly reduced price due to the county’s subsidy.

The property owner agreed to preserve the farm when they entered into the program at settlement, and that’s exactly what will happen.  It’s a shame that current economic conditions have emptied the government’s pockets for funding voluntary land preservation efforts.  However we expect that this to shall pass, and conditions will improve.

MacRo, Ltd. has wealth of experience assisting landowners with land preservation.  If you have any questions your land holdings and the potential for preservation please give us a call.

Dave Wilkinson has been a licensed Realtor and Vice President of MacRo, Ltd. since 1992.   He specializes in commercial property and rural land sales.  He also provides real estate consulting services for land conservation.

It’s called “The Sustainable Growth and Agricultural Preservation Act or 2011” — aka “The Ban Rural Building Lots and Reduce the Value of Agricultural Easement Dollars Act of 2011″

The proposal that Maryland Governor O’Malley introduced in his speech last week has been released.  Through the courtesy of  Dusty Rood, AICP, LEED AP, Senior Principal with Rodgers Consulting, Inc. the  private Septic Ban Bill_021011 is summarized as follows:

1. After July 1, 2011, disallow the approval or recordation of residential subdivisions of 5 or more lots that use septic
2. After July 1, 2011, require that minor subdivisions (less than 5 residential lots) on septic utilize Nitrogen Removal Technology.

There is a grandfather provision that exempts certain new projects from the proposal if:

1. A subdivision application has been “made before January 1, 2011; and the subdivision plat is recorded before July 1, 2012; or”
2. A subdivision application has been “made on or after January 1, 2011; and the subdivision plat is recorded before June 1, 2011.”

The Maryland Home Builders Association recently put on some information regarding the proposed septic ban bill.  It’s worth reading.

Meg Tully, staff writer for the  Frederick News Post reported on February 17, 2011 that Most Frederick County lawmakers oppose bill limiting septic systems.

For more detail on what lead up to this read the MacRo Report Blog post: Farmland and Rural Building Lots face new threats from EPA

The latest announcement from Maryland Governor O’Malley over his proposed ban on septic systems is just scratching the surface of threats to the value of farms and rural real estate.

After doing my research for this post, I feel like I have stepped into a fresh cow pie … literally!  Having spent much of my childhood working and playing on the family farm, that is something not unusual for me.

There is more depth to this issue than meets the eye.

America’s rural and agricultural land has been under pressure for years by the Environmental Protection Agency (EPA) to play an increasingly larger role in saving our waterways.

Using the Clean Water Act (1972) and the Chesapeake Bay as justification for laying down the law for excessive nitrogen and phosphorus runoff into the bay’s tributaries, the agency recently tightened the screws even more just sixty days ago with the introduction of its Total Maximum Daily Load (TMDL) program.

Affectionately know as the Pollution Diet, the EPA has calculated what they consider “acceptable” levels of nitrogen, phosphates and sediment that can enter the waterways and tributaries in the 64,000 square mile watershed region encompassing Virginia, West Virginia, Maryland, Pennsylvania and New York.

I had considered titling this post the EPA’s Nitrogen Bomb on Farmland; however in doing my research I came across a very educational 2001 article in Discover Magazine entitled The Nitrogen Bomb.  This piece provides a historical perspective on how synthetic nitrogen came to be in Europe in the late 1800’s as a fertilizer to save the continent from the prospects of mass starvation.  It goes on to explain how this product has grown from a life saver to one that when used excessively has become a major pollutant to our waterways.

With that stated, I am not aware of any fair and reasonable person who is not in favor of cleaning up the Chesapeake Bay and other waterways across the nation. The reality is, however, that the business of agriculture and the use of rural lands should not be pushed to comply with such radical changes to the detriment of their ability to conform at the cost of their livelihood and investment.  Such changes require time, diligence and the cooperation of all stakeholders.

Carrying this matter further are the serious questions raised by many in and outside of the agricultural community as to whether the EPA actually has the legal authority to exercise these mandates.

Of equal concern is the validity of the calculations used to establish the TMDL program.  A fellow writer for TheTentacle.com, Farrell Keough, authored an excellent piece on this topic in December 2010 entitled The Devil’s in the Details.

It is not only he who has expressed concerns.  Just last month the American Farm Bureau (AFB) along with the Pennsylvania Farm Bureau filed a lawsuit against the EPA on the grounds stated above.

These bureau’s and others are also very concerned that the bay region is being used as a launch pad to take this TMDL effort nationwide to protect the Mississippi River watershed and other areas … before facts are truly established and stakeholder cooperation is achieved.

As AFB President Bob Stallman put it, “this diet threatens to starve agriculture out” of the region.  He also is quoted as saying that it is important to note that: “Like all Americans, farmers want a clean Chesapeake Bay.  They are already working throughout the Chesapeake Bay region and across the nation to implement real, on-the-ground conservation measures, to improve water.”

While all this is going on, Maryland’s Governor Martin O’Malley announced last week that in the state’s effort to do it’s part, he is beckoning the call of the Chesapeake Bay Foundation to call on the Maryland Department of Environment to ban the use of private septic systems (referred to by the state as Onsite Sewage Disposal Systems or OSDS) for any subdivision greater than 4 lots.   The claim here is that the average OSDS discharges as much as 32 pounds of excessive nitrogen and phosphates into the ground water each year, which eventually ends up polluting the Bay.

For the last few years the state has offered septic tank users the ability to trade in their old ones for a new BAT (Best Available Technology) model fully paid for and installed by the government.   These BATs are installed with a costly electronic devise that deals with these pollutants.  I am not aware of how actively the program has been promoted and what level of success it has experienced.  Furthermore, I was not able to find any studies that validated the claim that the 420,000 systems in Maryland dump the claimed 5 million pounds of these pollutants in the bay each year.

Many question whether O’Malley and his team at MDE and the Maryland Department of Planning under guise of a new chapter of Smart Growth program, called PlanMaryland, is using this OSDS issue as a means of stepping up its vision to rid the state of private septic systems altogether.

In the words of Frederick County Farm Bureau President Tom Browning, he simply asks that with all the studies and numbers thrown around “What is truth?”

Fellow member and past bureau president Chuck Fry said that as much as the government says they want to help agriculture, the costs of one regulation on top of the other and the theft of our property rights is like saying to farmers “watch my right hand wiggle, while I rob your wallet with my left hand!”

One can only imagine how all of this commotion will impact the value of farmland and other rural real estate.  As with any looming governmental action, the market tends to hesitate and err on the side of extreme caution … which does not bode well for land sale prices in the near future.  One thing for sure is that the value of farmland and agricultural preservation easement dollars are sure to drop as the development potential of rural lands erode away.

The author: Rocky Mackintosh, President, MacRo, Ltd., a Land and Commercial Real Estate firm based in Frederick, Maryland. He also writes for TheTentacle.com and Want2Dish.com